EXHIBIT A-3
SHAREHOLDERS' AGREEMENT
BY AND AMONG
PROGRESS ENERGY, INC.,
ALBEMARLE PAMLICO ECONOMIC DEVELOPMENT CORPORATION,
AND
EASTERN NORTH CAROLINA NATURAL GAS COMPANY
DATED JANUARY 5, 2001
TABLE OF CONTENTS
Page
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SECTION 1 - DEFINITIONS........................................................1
1.1. DEFINITIONS............................................................1
SECTION 2 - FORMATION..........................................................2
2.1 FORMATION...............................................................2
2.2 NAME....................................................................2
2.3 PURPOSES; POWERS........................................................2
2.4 TERM....................................................................3
2.5 ASSIGNMENT OF OTHER AGREEMENTS..........................................3
SECTION 3 - REPRESENTATIONS AND WARRANTIES.....................................3
3.1 APEC REPRESENTATIONS AND WARRANTIES.....................................3
3.2 CP&L REPRESENTATIONS AND WARRANTIES.....................................5
SECTION 4 - MANAGEMENT-RELATED MATTERS.........................................6
4.1 ANNUAL BUDGET...........................................................6
4.2 ACCOUNTING; BOOKS AND RECORDS; FINANCIAL STATEMENTS.....................6
4.3 INSURANCE...............................................................7
4.4 OTHER ACTIVITIES OF THE SHAREHOLDERS AND THEIR AFFILIATES...............7
4.5 BOARD OF DIRECTORS; COMMITTEES..........................................8
SECTION 5 - SIZE AND CONSTRUCTION OF THE FACILITIES............................9
5.1 SIZE AND CONSTRUCTION OF THE FACILITIES.................................9
5.2 GOVERNMENTAL APPLICATIONS...............................................9
SECTION 6 - FINANCIAL MATTERS..................................................9
6.1 SYSTEM DEVELOPMENT COSTS................................................9
6.2 CAPITALIZATION.........................................................10
6.3 NO RELIANCE BY PARTIES EXTENDING CREDIT................................10
SECTION 7 - RESTRICTIONS ON TRANSFER..........................................11
7.1 GENERAL................................................................11
7.2 RESTRICTIONS ON TRANSFER BY SHAREHOLDERS...............................11
7.3 OTHER SHAREHOLDER'S RIGHT OF FIRST OFFER...............................11
7.4 CERTAIN AMENDMENTS.....................................................13
7.5 OTHER PROVISIONS APPLICABLE TO PERMITTED TRANSFERS.....................13
7.6 ATTEMPTED TRANSFERS IN CONTRAVENTION...................................13
7.7 TRANSFERS RESULTING FROM CHANGE OF CONTROL.............................13
SECTION 8 - EVENTS OF DISSOCIATION; WITHDRAWAL; DISSOLUTION...................14
8.1 NO SHAREHOLDER ACTION TO DISSOLVE THE COMPANY..........................14
8.2 DISSOLUTION EVENTS.....................................................14
SECTION 9 - CONFIDENTIALITY...................................................14
9.1 CONFIDENTIAL INFORMATION...............................................14
9.2 REMEDIES...............................................................15
9.3 DISCLOSURE OF CERTAIN INFORMATION......................................15
9.4 SURVIVAL...............................................................15
SECTION 10 - EXCULPATION AND INDEMNIFICATION..................................15
10.1 EXCULPATION...........................................................15
10.2 INDEMNIFICATION BY COMPANY............................................16
10.3 NONEXCLUSIVITY........................................................16
10.4 INDEMNIFICATION BY SHAREHOLDERS.......................................16
10.5 AUTHORIZATION.........................................................17
10.6 SURVIVAL..............................................................17
SECTION 11 - AMENDMENTS.......................................................17
SECTION 12 - DISPUTE RESOLUTION...............................................17
12.1 BINDING ARBITRATION...................................................17
12.2 SOLE AND EXCLUSIVE REMEDY.............................................19
12.3 APPLICABILITY.........................................................19
SECTION 13 - MISCELLANEOUS....................................................20
13.1 NOTICES...............................................................20
13.2 BINDING EFFECT........................................................20
13.3 CONSTRUCTION..........................................................20
13.4 TIME..................................................................20
13.5 HEADINGS..............................................................20
13.6 SEVERABILITY..........................................................20
13.7 INCORPORATION BY REFERENCE............................................20
13.8 FURTHER ACTION........................................................21
13.9 GOVERNING LAW.........................................................21
13.10 WAIVER OF ACTION FOR PARTITION.......................................21
13.11 THIRD-PARTY BENEFICIARIES............................................21
13.12 EXPENSES.............................................................21
13.13 COUNTERPART EXECUTION................................................21
13.14 REMEDIES.............................................................21
EXHIBIT 1.1 - DEFINITIONS......................................................1
EXHIBIT 4.3 - INSURANCE........................................................1
EXHIBIT 6.1(A) - SYSTEM DEVELOPMENT COSTS......................................1
EXHIBIT 6.2(C) - FORM OF PROMISSORY NOTE.......................................1
SHAREHOLDERS' AGREEMENT
This Shareholders' Agreement (this "Agreement") is made and entered
into as of the 5th day of January, 2001, by and among PROGRESS ENERGY, INC., a
North Carolina corporation ("PROGRESS ENERGY"), ALBEMARLE PAMLICO ECONOMIC
DEVELOPMENT CORPORATION, a North Carolina corporation ("APEC"), and EASTERN
NORTH CAROLINA NATURAL GAS COMPANY, a North Carolina corporation (the
"Company"). Each of Progress Energy and APEC is a Shareholder and together are
all of the Shareholders of the Company.
BACKGROUND INFORMATION
The Clean Water and Natural Gas Critical Needs Act of 1998 was passed
by the North Carolina Legislature in 1998 to provide additional funds ("Bond
Funds") for the funding of projects to extend natural gas infrastructure into
unserved areas of North Carolina.
APEC desires to conduct and support projects and activities necessary
for the construction of natural gas transmission and distribution lines and
associated infrastructure within the currently fourteen (14) unserved counties
in Eastern North Carolina ("Service Territory") as set forth in Section 2.3 of
this Agreement.
APEC seeks Progress Energy's expertise and resources to design the
natural gas system, draft and submit necessary applications before the North
Carolina Utilities Commission ("NCUC"), and construct and operate the natural
gas system.
APEC and Progress Energy wish to enter into a business arrangement that
expands natural gas service into the Service Territory.
Progress Energy and APEC wish to establish the Company in the form of a
business corporation under the North Carolina Business Corporation Act (the
"Act" (defined below)) for the purposes described herein.
In consideration of mutual promises and agreements set forth herein,
the parties hereto intending to be legally bound, hereby agree as follows:
SECTION 1
DEFINITIONS
1.1 Definitions. The capitalized words and phrases set forth on
Exhibit 1.1 hereto, and the capitalized words and phrases defined elsewhere in
this Agreement, have the indicated meanings for purposes of this Agreement.
SECTION 2
FORMATION
2.1 Formation. The Company was formed on January 5, 2001, by filing
the Articles of Incorporation (the "Articles") with the North Carolina Secretary
of State.
2.2 Name. The name of the Company shall be "Eastern North Carolina
Natural Gas Company," and all business of the Company shall be conducted in such
name or in any other name or names that are selected by the Board.
2.3 Purposes; Powers. The purposes of the Company shall be to operate
as a Local Distribution Company in North Carolina to plan, design, develop,
construct, own and provide for the operation and maintenance of the Facilities,
to market the services related thereto, and to conduct such business activities
as are necessary or incidental in connection therewith. The Company shall also
encourage and support economic development throughout eastern North Carolina.
The Company shall have the power to do any and all acts necessary, appropriate,
proper, advisable, incidental or convenient to or for the furtherance of the
purposes described herein and for the protection and benefit of the Company, and
shall have, without limitation, any and all of the powers allowed under the Act.
Specifically, the Company will provide natural gas service to the following
eastern North Carolina counties: Camden, Carteret, Currituck, Chowan, Dare,
Gates, Hyde, Jones, Pamlico, Pasquotank, Xxxxxx, Perquimans, Xxxxxxx, and
Washington (the "Service Territory"). To further this end, the parties agree
that, among other things:
(a) Natural Gas Transmission and Distribution Systems.
(1) Progress Energy's subsidiary, Carolina Power & Light
Company ("CP&L"), will design, construct, operate, maintain and administer the
transmission and distribution systems necessary to serve the Service Territory
(the "Facilities"), including but not limited to procuring natural gas supply
and capacity, metering, billing, finance, administration, customer care,
marketing, and planning, pursuant to the terms of the Construction, Operation
and Maintenance Agreement between the Company and CP&L of even date herewith
(the "CO&M Agreement"). The compensation to be paid by the Company to CP&L for
performance of its duties under the CO&M Agreement shall, in addition to
allowing CP&L to recover all just and reasonable expenses incurred in providing
such services, allow CP&L to recover its just and reasonable system design,
engineering and market analysis costs incurred prior to the execution of the
CO&M Agreement and this Agreement. All of the functions undertaken by CP&L
pursuant to the CO&M Agreement may be undertaken by, or assigned to, Company
employees or Third Parties as CP&L may determine from time to time.
(2) APEC shall be responsible for studying and determining
the potential for business expansion and economic development in, as well as
recommending proposed natural gas facility expansions to serve new load in, the
Service Territory, and to that end will perform the specific duties set forth in
the terms of the Services Agreement between the Company and APEC of even date
herewith (the "Services Agreement"). For performance of its duties under the
Services Agreement, APEC will be reimbursed as follows (as more fully set
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forth in the Services Agreement): (i) APEC shall submit to the Company an annual
budget and cash flow statement demonstrating APEC's total costs as well as a
justification on an activity basis of those costs (to facilitate NCUC standards
of prudence). From January 1, 2001 through December 31, 2004 APEC's proposed
annual budget shall be no greater than $330,660.00. Subsequent to December 31,
2004, APEC may increase its annual budget of $330,660.00 by an amount equal to
the total increase in the "Consumer Price Index" prepared by the U.S. Department
of Labor, Bureau of Labor Statistics (often known as the "cost of living index")
or its equivalent, from January 1, 2001 to December 31, 2004 and from January
1st to December 31st each year thereafter. For example, assuming the index was
100 on January 1, 2001 and the index adjusted to the same basis was 120 on
December 31, 2004, the annual budget for the year beginning January 1, 2005
could be increased by twenty (20%) percent over and above the annual budget for
the year beginning January 1, 2001. Provided, however, that the Board of
Directors of the Company, may, with the vote of at least one (1) Progress Energy
Director approve payment to APEC in excess of the amounts established by this
subsection. The parties agree that should the NCUC fail to allow the recovery of
all or a portion of the budgeted expenses associated with the services to be
provided by APEC pursuant to the Services Agreement, Progress Energy and APEC
shall renegotiate this provision.
(3) Construction of the system will be phased in, beginning
with Camden, Chowan, Pasquotank, Perquimans, Gates and Currituck counties, and
will proceed in accordance with any applicable NCUC orders.
(b) Financing. As stated in the NCUC Application, financing of
the Facilities will be accomplished primarily from the Bond Funds. Pursuant to
Section 6.2 of this Agreement, additional funds will be made available to the
Company. The Company may also elect to enter into additional credit facilities
as deemed necessary by the Board.
2.4 Term. The Company commenced on the date of the filing of the
Articles with the North Carolina Secretary of State and shall continue in
existence until such date as the Company may be dissolved as provided in this
Agreement.
2.5 Assignment of Other Agreements. Subject to the approval by the
Company of such assignment, each Shareholder agrees upon request by the Board to
assign to the Company all rights under any agreement which such Shareholder has
entered into or enters into in connection with, or related to, the Facilities
(other than this Agreement or any Related Agreement).
SECTION 3
REPRESENTATIONS AND WARRANTIES
3.1 APEC Representations and Warranties. In order to induce Progress
Energy to enter into this Agreement and to perform its obligations hereunder,
APEC represents and warrants to Progress Energy and to the Company that:
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(a) APEC is a corporation duly organized, validly existing and
in good standing under the laws of the State of North Carolina; and it has all
corporate power and authority necessary to carry on its business as it is now
being conducted, to enter into this Agreement, and to perform its obligations
hereunder.
(b) All corporate and other proceedings required to be taken by
or on behalf of APEC to authorize it to enter into and carry out this Agreement
have been duly taken; and this Agreement has been duly executed and delivered
by, and constitutes a legal, valid and binding obligation of APEC, enforceable
against APEC in accordance with its terms, except (i) as such enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws, now or hereafter in effect, affecting the enforcement of
creditors' rights generally, and (ii) to the extent that equitable remedies,
such as injunctive relief or specific performance, are within the discretion of
courts of competent jurisdiction.
(c) The execution and delivery of this Agreement, the
performance by APEC of its terms, and the consummation of the transactions
contemplated hereby, will not result in any violation of, or default or loss of
a benefit under, or permit the acceleration of any obligation under, (i) the
articles of incorporation or bylaws of APEC, (ii) any contract, agreement or
commitment of APEC, or (iii) any permit, concession, grant, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to APEC or to its properties, other than such conflicts, violations, defaults or
losses which do not and will not, individually or in the aggregate, have a
material adverse effect on the business or financial condition of APEC or on the
ability of APEC to perform its obligations hereunder.
(d) Except as mentioned herein, and subject to NCUC approval, no
consent, approval, order or authorization of, or registration, declaration or
filing with, any Governmental Authority remains to be obtained or made in
connection with the execution and delivery of this Agreement by APEC or the
consummation by APEC of the transactions contemplated hereby.
(e) There is no litigation, claim, proceeding or investigation
of any nature pending or, to APEC's knowledge, threatened against or affecting
APEC or any of its Affiliates that would materially interfere with its ability
fully to perform its obligations under this Agreement. As used in this Section
3.1(e), a litigation claim, proceeding or investigation shall be "threatened" if
a specific potential claimant has overtly manifested to APEC an awareness of and
present intention to assert or commence such litigation, claim, proceeding or
investigation on the basis of specified facts and theories.
(f) All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by APEC or its Affiliates
directly with Progress Energy or Affiliates thereof and without the intervention
of any Person who, either as a result of any act of APEC or otherwise to the
knowledge of APEC, has or will have a valid claim against any of the Company,
APEC, CP&L or their Affiliates for a finder's fee, brokerage commission or other
like payment with respect to this Agreement or such transactions.
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3.2 Progress Energy Representations and Warranties. In order to
induce APEC to enter into this Agreement and to perform its obligations
hereunder, Progress Energy represents and warrants to APEC and to the Company
that:
(a) Progress Energy is a corporation duly organized, validly
existing and in good standing under the laws of the State of North Carolina; and
it has all corporate power and authority necessary to carry on its business as
it is now being conducted, to enter into this Agreement, and to perform its
obligations hereunder.
(b) All corporate and other proceedings required to be taken by
or on behalf of Progress Energy to authorize it to enter into and carry out this
Agreement have been duly taken; and this Agreement has been duly executed and
delivered by, and constitutes a legal, valid and binding obligation of Progress
Energy, enforceable against Progress Energy in accordance with its terms, except
(i) as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws, now or hereafter in effect,
affecting the enforcement of creditors' rights generally, and (ii) to the extent
that equitable remedies, such as injunctive relief or specific performance, are
within the discretion of courts of competent jurisdiction.
(c) The execution and delivery of this Agreement, the
performance by Progress Energy of its terms, and the consummation of the
transactions contemplated hereby, will not result in any violation of, or
default or loss of a benefit under, or permit the acceleration of any obligation
under, (i) the certificate of incorporation or bylaws of Progress Energy, (ii)
any contract, agreement or commitment of Progress Energy, or (iii) any permit,
concession, grant, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Progress Energy or to its
properties, other than such conflicts, violations, defaults or losses which do
not and will not, individually or in the aggregate, have a material adverse
effect on the business or financial condition of Progress Energy or on the
ability of Progress Energy to perform its obligations hereunder.
(d) Except as mentioned herein, and subject to NCUC approval, no
consent, approval, order or authorization of, or registration, declaration or
filing with, any Governmental Authority remains to be obtained or made in
connection with the execution and delivery of this Agreement by Progress Energy
or the consummation by Progress Energy of the transactions contemplated hereby.
(e) There is no litigation, claim, proceeding or investigation
of any nature pending or, to Progress Energy's knowledge, threatened against or
affecting Progress Energy or any of its Affiliates that would materially
interfere with its ability to fully perform its obligations under this
Agreement. As used in this Section 3.2(e), a litigation claim, proceeding or
investigation shall be "threatened" if a specific potential claimant has overtly
manifested to Progress Energy an awareness of and present intention to assert or
commence such litigation, claim, proceeding or investigation on the basis of
specified facts and theories.
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(f) All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by Progress Energy or its
Affiliates directly with APEC or Affiliates thereof and without the intervention
of any Person who, either as a result of any act of Progress Energy or otherwise
to the knowledge of Progress Energy, has or will have a valid claim against any
of the Company, APEC, Progress Energy or their Affiliates for a finder's fee,
brokerage commission or other like payment with respect to this Agreement or
such transactions.
SECTION 4
MANAGEMENT-RELATED MATTERS
4.1 Annual Budget. For each Fiscal Year of the Company, CP&L shall
submit to the Board operating and capital budgets and a projected cash flow
statement for the Company's Fiscal Year, in such form as may be determined by
the Board from time to time (the "Annual Budget").
4.2 Accounting; Books and Records; Financial Statements.
(a) The books and records of the Company shall be kept on an
accrual basis for tax return preparation purposes and kept in accordance with
GAAP and any applicable NCUC or FERC requirements, consistently applied, for
management reporting and financial statement purposes.
(b) At all times during the continuance of the Company, the
Directors and Officers shall keep or cause to be kept, at the principal offices
of CP&L, full and complete books of account. The books of account shall be
maintained in a manner that provides sufficient assurance that:
(i) transactions of the Company are executed in
accordance with the general or specific authorization of the Board
consistent with the provisions of this Agreement;
(ii) transactions of the Company are recorded in such
form and manner as will (A) permit preparation of federal, state and
local income and franchise tax returns and information returns in
accordance with this Agreement and as required by law, (B) permit
preparation of the Company's financial statements in accordance with
GAAP, (C) maintain accountability for the Company's assets, (D) in
connection with all debt permit (1) the preparation of such reports,
(2) the submission of such information and (3) the performance of any
additional duties as may be required of the Company by the debt
agreements, and (E) support preparation and filing of all reports as
may be required by any regulatory agency having jurisdiction over the
Company;
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(iii) access to assets is permitted only in accordance with
the general or specific authorization of the Board; and
(iv) the recorded accountability for assets is compared
with the existing assets at reasonable intervals and appropriate
action is taken with respect to any difference.
(c) In addition to any other rights which may be provided under
the Act, each Shareholder and each Director shall have the right at all
reasonable times during usual business hours to (i) audit, examine and make
copies of the books and records of the Company, (ii) visit the facilities
of the Company and (iii) discuss the affairs of the Company with its Officers,
agents, customers and suppliers. Such right may be exercised through any agent
or employee of such Shareholder designated by it or by independent certified
public accountants or counsel designated by such Shareholder. Each Shareholder
shall bear its expenses incurred in any examination made for such Shareholder's
account.
(d) On or before the twenty-fifth (25th) Business Day of each
calendar month, the Company shall furnish or cause to be furnished to each
Shareholder all financial statements for the calendar month immediately
preceding such calendar month, including a balance sheet, an income statement, a
statement of cash flows, and a budget report (to include a comparison of actual
to budget expenses on a month-to-month and year-to-date basis with an
explanation of any material variances from budgeted entries). On or before the
twenty-fifth (25th) Business Day of each January, April, July and October, the
Company shall furnish or cause to be furnished to each Shareholder a balance
sheet, an income statement, a statement of cash flows, and a budget report (to
include a comparison of actual to budget expenses on a month-to-month and
year-to-date basis with an explanation of any material variances from budgeted
entries) for, or as of the end of, the fiscal quarter immediately preceding such
calendar month. On or before the twenty-fifth (25th) Business Day of each April,
the Company shall furnish or cause to be furnished to each Shareholder audited
financial statements, including a balance sheet, an income statement and a
statement of cash flows for the immediately preceding calendar year. Annual
financial statements must be prepared in accordance with GAAP and any applicable
NCUC or FERC requirements and audited by the Company's independent auditor.
(e) The Accountants shall be selected by resolution of the
Directors.
4.3 Insurance. The Shareholders shall comply with the provisions of
Exhibit 4.3 hereto with respect to insurance.
4.4 Other Activities of the Shareholders and Their Affiliates.
(a) Any Shareholder, and any Affiliate of any Shareholder, may,
subject to the terms of this Agreement, provide goods or services to, or
otherwise transact business with, the Company and derive and retain benefits
therefrom. A Shareholder or any Affiliate of any Shareholder shall be obligated
to present or offer to the Company investment opportunities known to the
Shareholder or its Affiliate if such opportunity would be beneficial to the
Company
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and can reasonably be taken advantage of by the Company and will be beneficial
to the Company. However, in the event that such opportunity could also be
beneficial to the Shareholder or its Affiliate and such opportunity could
reasonably be taken advantage of by the Shareholder or its Affiliate, the
Shareholder or Affiliate shall not be obligated to present or offer to the
Company such investment opportunity.
(b) Nothing in this Section 4.4 is intended, or shall be deemed,
to permit (i) access to, or use of, Confidential Information in violation of the
terms of this Agreement, or (ii) conduct that, notwithstanding the terms of this
Agreement and the status of the Person that engages in such conduct as a
Shareholder (or an Affiliate thereof), otherwise would be actionable by any
Shareholder (or any of its Affiliates) or the Company.
4.5 Board of Directors; Committees.
(a) The business and affairs of the Company shall be conducted
by a Board of Directors (the "Board") that shall consist of nine (9) directors
chosen as follows: four (4) directors designated by Progress Energy and four (4)
directors designated by APEC (collectively, the "Shareholder-Designated
Directors") and a ninth director elected by vote of a majority of the
Shareholder-Designated Directors (the "Independent Director"). The
Shareholder-Designated Directors may vote on every matter before the Board;
however, the Independent Director shall vote only when necessary to break a tie
vote among the Shareholder-Designated Directors. Except as otherwise provided
herein, a majority vote of the directors entitled to vote shall control on all
issues.
(b) For organizational purposes, the Board may form one or more
committees by majority vote of the directors entitled to vote. Except for an
Executive Committee, each committee so formed shall consist of three (3)
delegates chosen as follows: one (1) delegate appointed by Progress Energy and
one (1) delegate appointed by APEC (collectively, the "Shareholder-Appointed
Delegates"), and a third delegate selected by the Shareholder-Appointed
Delegates (the "Independent Delegate"). The Shareholder-Appointed Delegates may
vote on every matter before such committee; however, the Independent Delegate
shall vote only when necessary to break a tie vote among the
Shareholder-Appointed Delegates. The Shareholder-Appointed Delegates of each
Shareholder shall be given the authority by such Shareholder to vote on behalf
of the Shareholder on any issue within the committee's responsibility. In the
deliberations of each such committee, a majority vote of the delegates entitled
to vote shall control on all issues to be decided by the committee. If the Board
creates an Executive Committee, it shall consist of not less than four
directors, two selected by Progress Energy and two selected by APEC, plus the
President of the Company.
(c) The Board and each committee will take action on behalf of
the Shareholders. Each Shareholder shall have the right, at any time, with or
without cause, to designate, redesignate, replace and remove any
Shareholder-Designated Director or Shareholder-Appointed Delegate, to fill any
Shareholder-Designated Director or Shareholder-Appointed Delegate vacancy, and
to appoint an alternate Shareholder-Designated Director or Shareholder-Appointed
Delegate to serve when any Shareholder-Designated Director or
Shareholder-
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Appointed Delegate of such Shareholder is temporarily unavailable. Appointment
and removal by a Shareholder of any of its Shareholder-Designated Directors or
Shareholder-Appointed Delegates shall be by written notice to all Shareholders.
The Independent Director may be removed at any time, with or without cause, by
the vote of any four (4) Shareholder-Designated Directors. If a vacancy occurs
in the position of the Independent Director, by removal as provided above or
otherwise, a successor Independent Director shall be elected by majority vote of
the Shareholder-Designated Directors. An Independent Delegate may be removed at
any time, with or without cause, by either of the Shareholder-Appointed
Delegates. If a vacancy occurs in the position of Independent Delegate, by
removal as provided above or otherwise, a successor Independent Delegate shall
be elected by majority vote of the Shareholder-Appointed Delegates.
SECTION 5
SIZE AND CONSTRUCTION OF THE FACILITIES
5.1 Size and Construction of the Facilities. The Company will
construct the Facilities as quickly as reasonably possible, contingent upon the
availability of sufficient Bond Funds. The size of, and the construction
schedule for, the Facilities shall be as determined by the NCUC, subject to the
availability of Bond Funds. The Shareholders currently estimate that the total
capital cost of the Facilities will be approximately $199,500,000.
5.2 Governmental Applications. Each Shareholder agrees to support
the Company in securing the Necessary Regulatory Approvals.
SECTION 6
FINANCIAL MATTERS
6.1 System Development Costs.
(a) Set forth on Exhibit 6.1(a) are the amounts of System
Development Costs incurred or expected to be incurred by CP&L during the
development phase of this project and the design of Facilities. If Progress
Energy or any Affiliate of Progress Energy, has incurred System Development
Costs during the period immediately preceding the date of this Agreement that
are not set forth on Exhibit 6.1(a), Progress Energy shall have the right to
request approval thereof by the Board as soon as practicable after the date
hereof (but not later than 90 days after the date hereof).
(b) After all System Development Costs to be considered
under Section 6.1(a) have been approved or disapproved by the Board, Progress
Energy shall receive reimbursement from Company equal to the amount of such
System Development Costs subject to any NCUC order.
(c) The assets, if any, acquired by means of the System
Development Costs of Progress Energy shall be and are hereby assigned to the
Company. Progress Energy agrees to execute and deliver any and all assignment
instruments and conveyances as may be necessary or appropriate to evidence such
assignment.
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6.2 Capitalization.
(a) Simultaneously with the execution and delivery hereof, in
order to fund the Shareholders' estimate of the Company's construction and
operation expenditures remaining after the expenditure of all Bond Funds,
Progress Energy will pay in to the capital of the Company such amounts as
identified in the NCUC Application in exchange for 500 shares of the Company's
Series A Preferred Stock. The Shareholders acknowledge that, except for the
capital paid in pursuant to this Section 6.2(a) and except as set forth in
Section 6.1(b) and 6.1(c), no Shareholder is paying in any capital to the
Company. Should paid-in capital and financing pursuant to Section 2.3(b) of this
Agreement be insufficient, neither APEC nor Progress Energy is obligated to pay
in additional capital; however, should the Shareholders choose to pay in
additional capital and issue preferred stock therefor, then APEC shall attempt
to raise funds and pay in such funds, net of expenses, in exchange for such
preferred stock to be issued by the Company.
(b) No Shareholder shall pay in, or be required to pay in, any
additional capital in exchange for the Company's stock, except such
subscriptions as are approved by the Board or are otherwise expressly required
by this Agreement.
(c) During the period from the Formation Date until such time as
the Board determines that the Company is no longer operating at a loss (the
"Interim Period"), the financial requirements for the business of the Company
shall be obtained, in the discretion of the Board, through Bond Funds, share
subscriptions by the Shareholders, loans from the Shareholders or their
Affiliates in accordance with the terms of a promissory note in substantially
the form of Exhibit 6.2(c) hereto ("Shareholder Loans") or a combination of such
Bond Funds, share subscriptions and Shareholder Loans. Following the Interim
Period, each Shareholder acknowledges and agrees that, unless the Board
determines otherwise, it is its intent that the financial requirements for the
business of the Company, as reflected in each year's Annual Budget, shall be
obtained through the following sources and in the following order: (i) funds
generated by the business of the Company, (ii) Bond Funds, (iii) short-term
borrowing from the Shareholders or any of their Affiliates, if in any such case
the Shareholder (or such Affiliate), in its sole discretion, has agreed to lend
such funds to the Company and the other Shareholder and the Board has approved
the terms thereof, (iv) short-term borrowing from Third Parties, if approved by
the Board, and (v) long-term borrowing, if approved by the Board.
6.3 No Reliance by Parties Extending Credit. Without limiting
the generality of Section 13.11, the provisions of Section 6.2 are hereby
expressly stated not to be for the benefit of any Person other than the
Shareholders, including without limitation, any Person now or hereafter
extending credit to the Company; and it is the intent of the Shareholders that
reliance by any such Person other than the Shareholders should be deemed
unreasonable for purposes of the Act.
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SECTION 7
RESTRICTIONS ON TRANSFER
7.1 General. The terms and conditions upon which each Shareholder
shall (or shall not) be permitted to Transfer all or any part of its Shares are
set forth in this Section 7. Any such Transfer which is permitted by, and
effected in accordance with, this Agreement is referred to herein as a
"Permitted Transfer"; and any Person who acquires all of a Shareholder's Shares
in a Permitted Transfer is referred to herein as a "Permitted Transferee." Every
certificate representing Shares of the Company shall bear the following legend
prominently displayed:
The shares represented by this certificate, and the
transfer thereof, are subject to the provisions of that
certain Shareholders' Agreement, dated as of January 5, 2001,
a copy of which is on file in, and may be examined at, the
principal office of the Company.
Any Shares of stock of the Company subsequently acquired by a Shareholder shall
also be subject to the requirements of this Section.
7.2 Restrictions on Transfer by Shareholders.
(a) Except as otherwise expressly provided in this Section 7, a
Shareholder may not Transfer all or any part of its Shares to any Person or
Persons without the prior written consent of the other Shareholder or
Shareholders.
(b) Subject to Section 7.6, a Shareholder shall, at any
time, without the consent of the other Shareholder or Shareholders, have the
right to Transfer all (but not less than all) of its Shares to any Wholly-Owned
Subsidiary of the Shareholder, to the Shareholder's Parent or to any
Wholly-Owned Subsidiary of the Shareholder's Parent.
(c) If, at any time or from time to time, a Shareholder
desires to Transfer all (but not less than all) of its Shares to any Person or
Persons (other than in accordance with Section 7.2(b)), then the other
Shareholder or Shareholders shall have a right of first offer to purchase all
(but not less than all) of the Shares of the Selling Shareholder (as defined in
Section 7.3) on the terms and conditions set forth in this Section 7.
7.3 Other Shareholder's Right of First Offer.
(a) As used herein, (i) "Selling Shareholder" shall mean the
Shareholder proposing to enter into a Transfer pursuant to Section 7.2, (ii)
"Other Shareholder" shall mean each Shareholder other than the Selling
Shareholder, (iii) "Offered Shares" shall mean the Shares that the Selling
Shareholder desires to Transfer pursuant to Section 7.2(c), as the case may be,
(iv) "Acquiror" shall mean the transferee or transferees of the Offered Shares,
and (v) "Right of First Offer" shall mean the Other Shareholder's right of first
offer pursuant to Section 7.2(c) and this Section 7.3.
(b) The Selling Shareholder shall give written notice to the
Other Shareholder
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(an "Offer Notice") of any proposed Transfer pursuant to Section 7.2(c), as the
case may be, and shall set forth in the Offer Notice the proposed price at which
the Selling Shareholder desires to sell the Offered Shares (the "Offer Price").
Within ninety (90) days after receipt of the Offer Notice, the Other Shareholder
shall notify the Selling Shareholder in writing (a "Response Notice") whether
the Other Shareholder elects to exercise the Right of First Offer or does not
elect to exercise such right. If the Other Shareholder fails to deliver a
Response Notice to the Selling Shareholder within the aforesaid period, or the
Response Notice is given within such period and the Other Shareholder does not
elect to exercise the Right of First Offer, then, subject to Section 7.6 (and
Section 7.2(c), as the case may be), the Selling Shareholder shall be free to
consummate the proposed Transfer at any time thereafter with any Acquiror;
provided, however, that the Selling Shareholder must consummate such Transfer at
a price which is equal to or greater than the Offer Price and subject to terms
and conditions that are substantially equivalent to those offered to the Other
Shareholder or terms and conditions that are more favorable to the Selling
Shareholder than those offered the Other Shareholders; and provided, further,
that if the Selling Shareholder desires to consummate such Transfer at a price
which is less than the Offer Price, or if the Selling Shareholder desires to
consummate such Transfer but has not done so within nine months after the Other
Shareholder receives the Offer Notice, then the Other Shareholder shall again
have the right to exercise the Right of First Offer with respect to such
Transfer in accordance with the procedures set forth in this Section 7.3(b).
(c) If the Other Shareholder delivers a Response Notice in
accordance with Section 7.3(b) in which it elects to exercise the Right of First
Offer, then the Selling Shareholder may not consummate the Transfer referred to
in the Response Notice until the time, if any, that it is expressly permitted to
do so pursuant to Section 7.3(d). Nothing herein shall be deemed to prevent or
otherwise restrict the Selling Shareholder or any of its Affiliates from
negotiating, or entering into any agreement, with any potential Acquiror with
respect to such Transfer prior to, during or after the other Shareholder's
exercise of the Right of First Offer, provided that the consummation of such
Transfer is subject to the Other Shareholder's rights herein.
(d) If the Other Shareholder exercises the Right of First Offer
in accordance with Section 7.3(b), then the Other Shareholder shall pay to the
Selling Shareholder the Offer Price, in cash, upon the closing (the "First Offer
Closing") of a definitive sale agreement with respect to the Offered Shares,
which agreement shall be negotiated by the parties as promptly as practicable
after the Selling Shareholder's receipt of the Response Notice and shall contain
a provision allowing the Selling Shareholder (in addition to exercising any
other applicable legal remedies) to terminate the agreement if (without fault of
the Selling Shareholder) the First Offer Closing does not occur within eight
months after the Selling Shareholder's receipt of the Response Notice. If the
Other Shareholder fails to purchase the Offered Shares during such eight-month
period, then, subject to Section 7.6, the Selling Shareholder shall be free to
Transfer the Offered Shares to any Acquiror at such time, at the Offer Price.
Should Selling Shareholder seek to Transfer the Offered Shares at a price less
than the Offer Price, Selling Shareholder must repeat the steps set forth in
this Section 7.3 to again afford the Other Shareholder a Right of First Offer at
the new Offer Price.
7.4 Certain Amendments. Notwithstanding anything herein to the
contrary, in
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connection with any Permitted Transfer by Progress Energy, or any Permitted
Transfer by APEC, the other Shareholder shall consider and negotiate in good
faith with the transferor Shareholder relative to any proposal by the transferor
Shareholder to amend this Agreement in order to facilitate or effectuate such
Permitted Transfer. Each Shareholder agrees that it shall not unreasonably
withhold its consent to any such proposal which does not have any material
adverse tax, legal or other business consequences to such Shareholder, its
Affiliates or the Company. Notwithstanding the foregoing, if a Shareholder
Transfers its entire Shares pursuant to Section 7.2(b), this Agreement shall be
amended as may be necessary to reflect the substitution of the new Shareholder
for the transferor Shareholder, as the case may be.
7.5 Other Provisions Applicable to Permitted Transfers.
(a) Each of Progress Energy and APEC, in connection with any
Permitted Transfer by it, shall be entitled to assign to its Permitted
Transferee any or all of its rights under this Agreement.
(b) Notwithstanding anything herein to the contrary, it shall be
a condition to any Permitted Transfer that the Permitted Transferee shall have
delivered to each non-transferor Shareholder an agreement, in form and substance
reasonably satisfactory to such non-transferor Shareholder, pursuant to which
such Permitted Transferee shall agree to become a party to and be bound by this
Agreement.
(c) Upon any Permitted Transfer of all of a Shareholder's
Shares, such Shareholder shall cease to be responsible for the payment or
performance of any of the obligations or liabilities of a Shareholder under this
Agreement; provided, however, that notwithstanding anything herein to the
contrary, no Permitted Transfer shall relieve the transferor Shareholder of any
of its obligations or liabilities under this Agreement arising prior to the
consummation of such Permitted Transfer.
7.6 Attempted Transfers in Contravention. Any attempted Transfer
in contravention of this Section 7 shall be void and of no effect and shall not
bind or be recognized by the Company. In the case of an attempted Transfer not
permitted hereby, the parties attempting to engage in such Transfer shall
indemnify and hold harmless (and hereby agree to indemnify and hold harmless)
the Company and the other Shareholder from all costs, liabilities, and damages
that any of such indemnified Persons may incur (including, without limitation,
incremental tax liability and attorneys' fees and expenses) as a result of such
attempted Transfer and efforts to enforce the indemnity granted hereby.
7.7 Transfers Resulting from Change of Control. If a Shareholder or a
Shareholder's Parent undergoes a change of control which directly or indirectly
results in a transfer of the Shareholder's Shares, such transfer shall not give
rise to the other Shareholder's Right of First Offer. For purposes of this
Section 7.7, change of control shall mean a merger or consolidation of the
Shareholder or its Parent with another corporation or the sale of all or
substantially all of the Shareholder's or Parent's assets, provided, however, a
change of control shall not include any circumstance in which (i) the
Shareholder has been formed for the principal purpose of holding
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the Shares and/or the Shareholder's Parent has been formed for the principal
purpose of directly controlling the Shareholder or (ii) the transfer or change
of control constitutes a financing or corporate structure technique designed to
avoid the reach of the other Shareholder's Right of First Offer.
SECTION 8
EVENTS OF DISSOCIATION;
WITHDRAWAL; DISSOLUTION
8.1 No Shareholder Action to Dissolve the Company. No Shareholder
shall take any action to dissolve the Company except as expressly contemplated
by this Agreement. Each Shareholder covenants not to apply to any court for a
decree of dissolution of the Company, under Section 55-14-30 of the Act or
otherwise.
8.2 Dissolution Events. The Company may dissolve and commence winding
up and liquidating upon, and only upon, the first to occur of the following
events ("Dissolution Events"):
(a) The unanimous determination of the Shareholders that the
Company shall be dissolved; or
(b) An adverse regulatory or other governmental ruling has been
issued that materially affects the Company's ability to construct, operate,
control or manage the Facilities.
(c) A ruling from the Internal Revenue Service finding that the
receipt of gas bond revenues by Company is a taxable event.
SECTION 9
CONFIDENTIALITY
9.1 Confidential Information. The Shareholders acknowledge that, from
time to time, they may receive information from or regarding the Company, its
customers or any other Shareholder or its Affiliates in the nature of trade
secrets or secret or proprietary information or information that is otherwise
confidential, the release of which may be damaging to the Company or the
Shareholder or its Affiliates, as applicable, or Persons with whom they do
business ("Confidential Information"). Each Shareholder shall hold in strict
confidence any such information it receives and may not disclose such
information to any Person other than another Shareholder, except for disclosures
(i) to comply with any applicable laws or regulations; (ii) to Affiliates,
advisors or representatives of the Shareholder or Persons to which that
Shareholders' Shares may be Transferred as permitted by this Agreement, but only
if the recipients of such information have agreed to be bound by the provisions
of this Section 9.1; (iii) of information that a Shareholder also has received
from a source independent of the Company and that such Shareholder reasonably
believes such source obtained without breach of any obligation of
confidentiality; (iv) of information obtained prior to the formation of the
Company, provided that this clause (iv) shall not relieve any Shareholder or any
of its Affiliates from any obligations it may have to any other Shareholder or
any of its Affiliates under any existing confidentiality
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agreement; (v) to lenders, accountants and other representatives of the
disclosing Shareholder with a need to know such information, provided that the
disclosing Shareholder shall be responsible for such representatives' use and
disclosure of any such information; (vi) of information relating solely to the
Company (and not relating to the other Shareholder) to any prospective acquiror
of the assets or securities of a Shareholder or any of its Affiliates (including
without limitation such Shareholders' Shares), whether by purchase, merger,
consolidation or otherwise, so long as prior to such disclosure such prospective
acquiror agrees to be bound by confidentiality restrictions which are at least
as restrictive as the provisions of this Section 9; or (vii) of public
information.
9.2 Remedies. The Shareholders acknowledge that a breach of the
provisions of this Section 9 may cause irreparable injury to the Company or
another Shareholder for which monetary damages are inadequate, difficult to
compute, or both, Accordingly, the Shareholders agree that the provisions of
this Section 9 may be enforced by injunctive action or specific performance.
Notwithstanding the foregoing provisions of this Section 9, each Shareholder
hereby agrees that it will not disclose (i) reserve data submitted to the
Company by producers or shippers seeking transportation services from the
Company or (ii) confidential information submitted to the Company by potential
or existing transportation customers, to any Person other than another
Shareholder, its advisors or representatives.
9.3 Disclosure of Certain Information. The Shareholders acknowledge
that, from time to time, the Company may need information from any or all of
such Shareholders for various reasons, including, without limitation, for
complying with various federal and state regulations. Each Shareholder shall
provide to the Company all information reasonably requested by the Company
within a reasonable amount of time from the date such Shareholder receives such
request; provided, however, that no Shareholder shall be obligated to provide
such information to the Company to the extent such disclosure (i) could
reasonably be expected to result in the breach or violation of any contractual
obligation (if a waiver of such restriction cannot reasonably be obtained) or
applicable law or regulations or (ii) involves secret, confidential or
proprietary information.
9.4 Survival. The obligations of each Shareholder under this
Section 9 shall survive (i) any Transfer by a Shareholder of its entire interest
in the Company pursuant to Section 7 and (ii) any dissolution and winding-up of
the Company pursuant to Section 8.
SECTION 10
EXCULPATION AND INDEMNIFICATION
10.1 Exculpation. No Shareholder shall have any personal liability
whatsoever to the Company or any other Shareholder on account of such
Shareholder's status as a Shareholder or by reason of such Shareholder's acts or
omissions in connection with the conduct of the business of the Company;
provided, however, that nothing contained herein shall protect any Shareholder
against any liability to the Company or the Shareholders to which such
Shareholder would otherwise be subject by reason of (i) any act or omission of
such Shareholder or its directors that involves actual fraud or willful
misconduct or (ii) any transaction from which such directors derived improper
personal benefit.
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10.2 Indemnification by Company. The Company shall indemnify and hold
harmless each Shareholder and the Affiliates of any Shareholder, their
directors, and the managers, officers, employees and agents of the Company, any
of the Shareholders or any Affiliates of the Shareholders (each an "Indemnified
Person") against any and all losses, claims, damages, expenses and liabilities
(including, but not limited to, any investigations, legal and other reasonable
expenses incurred in connection with, and any amounts paid in settlement of, any
action, suit, proceeding or claim) of any kind or nature whatsoever that such
Indemnified Person may at any time become subject to or liable for by reason of
the formation, operation or dissolution of the Company (including, without
limitation, indemnification against negligence, gross negligence or breach of
duty); provided however, that no Indemnified Person shall be entitled to
indemnification if and to the extent that the liability otherwise to be
indemnified for results from (i) any act or omission of such Indemnified Person
that is absent appropriate authority or involves actual fraud or willful
misconduct or (ii) any transaction from which such Indemnified Person derived
improper personal benefit. The indemnities provided hereunder shall survive
termination of the Company and this Agreement. Each Indemnified Person shall
have a claim against the property and assets of the Company for payment of any
indemnity amounts from time to time due hereunder, which amounts shall be paid
or properly reserved for prior to the making of distributions by the Company to
Shareholders. Costs and expenses that are subject to indemnification hereunder
shall, at the request of any Indemnified Person, be advanced by the Company to
or on behalf of such Indemnified Person prior to final resolution of a matter,
so long as such Indemnified Person shall have provided the Company with a
written undertaking to reimburse the Company for all amounts so advanced if it
is ultimately determined that the Indemnified Person is not entitled to
indemnification hereunder.
10.3 Nonexclusivity. The contract rights to indemnification and to the
advancement of expenses conferred in this Section 10 shall not be exclusive of
any other right that any Person may have or hereafter acquire under any statute,
agreement, vote of the Shareholders or otherwise.
10.4 Indemnification by Shareholders. The Shareholders hereby agree
that each Shareholder shall, to the fullest extent permitted by applicable law,
indemnify and hold harmless each Person who is or was a director, officer or
employee of such Shareholder or any of its Affiliates (excluding the Company),
including, without limitation, those Persons who at any time on or after the
date of this Agreement shall be or have been a director or officer, while acting
in their capacity as such or claimed against them solely by reason of their
being a director or officer, from and against any and all losses, claims,
damages, expenses and liabilities that may be incurred by each such Person in
connection with or by reason of any action, suit or proceeding in which such
Person may be involved, or threatened to be involved, by reason of any of his
actual or alleged Errors or Omissions as a director or officer, or as a
director, officer or employee of such Shareholder or any of its Affiliates
(excluding the Company); provided, however, that this Section 10.4 shall not
apply to any such losses resulting from (i) any Error or Omission of such Person
that involves actual fraud or willful misconduct or (ii) any transaction from
which such Person derived improper personal benefit.
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10.5 Authorization. Except as provided in Section 10.4 above, the
Company may, to the extent authorized from time to time by the Board, grant
rights to indemnification and to advancement of expenses to any employee or
agent of the Company to the fullest extent of the provisions of this Section 10
with respect to the indemnification and advancement of expenses of Shareholders
of the Company.
10.6 Survival. The agreements contained in this Section 10 shall
survive (i) any Transfer by a Shareholder of all of its Shares in the Company
pursuant to Section 7 and (ii) any dissolution and winding-up of the Company
pursuant to Section 8.
SECTION 11
AMENDMENTS
Notwithstanding any contrary provision of the Act, any amendments to
this Agreement, the Bylaws or the Articles may be adopted only with the
unanimous written consent of the Shareholders.
SECTION 12
DISPUTE RESOLUTION
12.1 Binding Arbitration. Any dispute, controversy or claim arising
under this Agreement that has not otherwise been resolved by discussions between
the Shareholders (a "Claim") shall be resolved by binding arbitration as
provided herein, and judgment on an award rendered therein may be entered in any
court having jurisdiction.
(i) Arbitration shall be initiated by the delivery of a
written demand for arbitration by the demanding Shareholder to
the other Shareholder. The demand shall set out the nature of
the dispute and the resolution sought by the demanding
Shareholder.
(ii) The respondent Shareholder shall have thirty (30)
days (the "Response Period") to respond to the demand, in
writing, setting out its answer and/or counterclaims.
(iii) After the arbitration demand and response have been
exchanged, an arbitrator shall be selected as follows:
(1) The parties shall request that the American
Arbitration Association provide them with a list of
names of arbitrators with substantial experience in the
substantive matter at issue. No person may be selected
or serve as an arbitrator who at the outset is employed
by, or under the control or management of, either
Shareholder;
(2) Each Shareholder shall, within ten (10) days
after the list of names is provided, select five names
from that list in the order of
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preference. If either Shareholder fails or refuses to
select during the period for doing so, only the
selections of the other Shareholder shall be considered.
(3) The arbitrator jointly selected by both
Shareholders shall be appointed. If more than one
arbitrator is jointly selected, order of preference of
both parties, using five points for the first preference
and one point for the fifth preference shall determine
the selection. If the Shareholders did not jointly
select an arbitrator, the selection shall be made by the
American Arbitration Association.
(iv) In addition to its authority to hear the dispute
presented by the Shareholders, the arbitrator may, subject to
the terms of this Section, make rulings in connection with the
procedures and timetable to be followed by the Shareholders
hereunder.
(v) Within thirty (30) days after the appointment of
arbitrator, the arbitration hearing shall proceed, subject to
the following requirements and procedures:
(1) The arbitration hearing shall be held at a
location mutually agreed by the Shareholders, or failing
such agreement, at a location determined by the
arbitration panel;
(2) Strict rules of evidence shall not be applied in
the arbitration hearing. The parties may offer such
evidence as they desire and the arbitrators shall accept
such evidence and accord it such weight as the
arbitrators deem appropriate. Cross-examination of
witnesses and rebuttal testimony shall be permitted; and
(3) Each Shareholder may, but is not required to,
submit one (1) prearbitration hearing brief (of not more
than ten (10) pages (excluding exhibits)) no later than
five (5) days prior to commencement of the arbitration
hearing, and may also submit one (1) postarbitration
hearing brief (of not more than ten (10) pages
(excluding exhibits)) no later than ten (10) days after
the close of the arbitration hearing. The prearbitration
hearing brief shall contain each Shareholder's detailed
proposal for resolution of the claim. A copy of any
brief submitted to the arbitration panel shall also be
served on the other Shareholder.
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(vi) After submission of any postarbitration hearing
briefs and within thirty (30) days after the close of the
arbitration hearing, the arbitrator shall select one of the
proposals submitted by the Shareholders as a full and final
resolution of the Claim subject to the following requirements
and procedures.
(1) The arbitrator shall weigh evidence and make its
award, taking into account, to the extent it deems
applicable, custom and usage of the industry;
(2) The arbitrator award shall be issued in writing
and shall state the factual bases and reasoning of the
award; and,
(3) The arbitrators may award costs of the
arbitration proceeding, excluding attorneys' fees and
also excluding the costs apportioned pursuant to clause
(vii) below.
(vii) Each Shareholder shall pay the reasonable expense
of the arbitrator of its selection. The amount or rate to be
paid by the selecting Shareholder shall be disclosed to the
other Shareholder upon engagement of the arbitrator. The
Shareholders shall jointly and equally pay the expense of the
arbitrators' selected arbitrator.
(viii) Neither Shareholder may disclose the progress,
content, findings or award of any arbitration commenced or
completed hereunder without the prior written consent of the
other Shareholder. Nor may the arbitrators disclose such
information without the written consent of both Shareholders.
(ix) All time limits stated in this Section are
for the convenience of the Shareholders and may be altered
upon mutual agreement of the parties.
12.2 Sole and Exclusive Remedy. The procedures specified in this
Section shall be the sole and exclusive procedures for the resolution of any
Claim between the parties arising out of or relating to this Agreement;
provided, however, that a Shareholder may seek a preliminary injunction or other
preliminary judicial relief if in its judgment such action is necessary to avoid
irreparable damage. Despite such action the Shareholders will continue to
participate in good faith in the procedures specified in this Section. All
applicable statutes of limitation shall be tolled while the procedures specified
in this Section are pending. The Shareholders will take such action, if any,
required to effectuate such tolling.
12.3 Applicability. Notwithstanding anything to the contrary contained
herein, the provisions of this Section 13 shall not apply to any matters that
pursuant to the provisions of this Agreement are to be voted upon by the
Shareholders or the Directors or to any other business decisions to be made by
the Shareholders or the Directors in connection with this Agreement.
-19-
SECTION 13
MISCELLANEOUS
13.1 Notices. Any notice, payment, demand, or communication required
or permitted to be given pursuant to any provision of this Agreement shall be in
writing and shall be (i) delivered personally (ii) sent by postage prepaid,
certified mail, (iii) transmitted by telecopy, or (iv) delivered by nationally
recognized overnight courier, addressed as follows, or to such other address as
such Person may from time to time specify by notice to the Shareholders:
(a) If to APEC, to APEC at 000 Xxxxx Xxxxx Xxxxxx, Xxxxxxxxx
Xxxx, Xxxxx Xxxxxxxx, 00000; Telecopy No.: (000) 000-0000, Attention: Xxxxxx X.
Xxxx, XX; and
(b) If to Progress Energy, to Progress Energy, Inc. at 000
Xxxxxxxxxxxx Xxxxxx, Xxxxxxx, Xxxxx Xxxxxxxx, 00000; Telecopy No.: (919)
546-3208, Attention: Xxx Xxxxx.
Any such notice, payment, demand, or communication shall be deemed to be
delivered, given, and received for all purposes hereof (x) on the date of
receipt if delivered personally or by courier, (y) five (5) days after posting
if transmitted by mail, or (z) the date of transmission by telecopy, provided
that the Person to whom the telecopy was sent acknowledges that such telecopy
was received by such Person in legible form, or that such Person responds to the
telecopy without indicating that any part of it was received in illegible form,
whichever shall first occur.
13.2 Binding Effect. Except as otherwise provided in this Agreement,
every covenant, term, and provision of this Agreement shall be binding upon and
inure to the benefit of the Shareholders and their respective successors,
transferees and (subject to the limitations in Section 7 hereof) assigns.
13.3 Construction. Every covenant, term, and provision of this
Agreement shall be construed simply according to its fair meaning and not
strictly for or against any Shareholder.
13.4 Time. Time is of the essence with respect to this Agreement.
13.5 Headings. Section and other headings contained in this Agreement
are for reference purposes only and are not intended to describe, interpret,
define, or limit the scope, extent, or intent of this Agreement or any provision
hereof.
13.6 Severability. Every provision of this Agreement is intended to be
severable. If any term or provision hereof is illegal or invalid for any reason
whatsoever, such illegality or invalidity shall not affect the validity or
legality of the remainder of this Agreement.
13.7 Incorporation by Reference. Every Exhibit referred to herein is
hereby incorporated in this Agreement by reference.
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13.8 Further Action. Each Shareholder, upon the request of the
Board, agrees to perform all further acts and execute, acknowledge and deliver
any documents which may be reasonably necessary, appropriate or desirable to
carry out the provisions of this Agreement.
13.9 Governing Law. The laws of the State of North Carolina (without
giving effect to the conflict of law's principles thereof) shall govern the
validity of this Agreement, the construction of its terms, and the
interpretation of the rights and duties of the Shareholders.
13.10 Waiver of Action for Partition. Each of the Shareholders
irrevocably waives any right that it may have to maintain any action for
partition with respect to any of the Company's assets.
13.11 Third-Party Beneficiaries. Except as otherwise expressly
provided in this Agreement, (a) this Agreement is for the benefit solely of, and
shall inure solely to the benefit of, each of the Shareholders and (b) this
Agreement is not enforceable by any Person other than the Shareholders and the
Company.
13.12 Expenses. Except as expressly set forth herein, each party
hereto shall assume and pay its own expenses incident to the negotiation and
execution of this Agreement, the preparation for carrying it into effect and the
consummation of the transactions contemplated hereby. Without limiting the
generality of the foregoing, except as expressly set forth herein or in any
Related Agreement, each Shareholder shall pay all legal and accounting fees, and
other fees to consultants and advisers, incurred by it, including, if any,
brokers' or investment banking fees relating to this Agreement and such
transactions and shall indemnify and hold the Company and the other Shareholder
free and harmless from any of such expenses and fees.
13.13 Counterpart Execution. This Agreement may be executed in any
number of counterparts with the same effect as if all of the Shareholders had
signed the same document. All counterparts shall be construed together and shall
constitute one agreement.
13.14 Remedies. Except as expressly provided herein, the rights,
obligations and remedies created by this Agreement are cumulative and in
addition to any other rights, obligations or remedies otherwise available at law
or in equity. Other than the obligation to arbitrate pursuant to Section 13, in
lieu of seeking judicial remedies, nothing herein shall be considered an
election of remedies. In addition, any successful Shareholder is entitled to
costs related to enforcing this Agreement, including, without limitation,
attorneys' fees, and arbitration expenses.
NOTWITHSTANDING ANYTHING TO THE CONTRARY, THE MEMBERS WAIVE ANY AND ALL
RIGHTS, CLAIMS OR CAUSES OF ACTION ARISING UNDER THIS AGREEMENT FOR INCIDENTAL,
CONSEQUENTIAL, PUNITIVE OR EXEMPLARY DAMAGES AS BETWEEN AND AMONG EACH OTHER.
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement under seal as of the date first above written.
PROGRESS ENERGY, INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
ALBEMARLE PAMLICO ECONOMIC
DEVELOPMENT CORPORATION
By:
-------------------------------------
Name: Xxxxxx Xxxxx, Xx.
----------------------------------
Title: Chairman
----------------------------------
EASTERN NORTH CAROLINA
NATURAL GAS COMPANY
By each of its Shareholders:
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
By:
-------------------------------------
Name: Xxxxxx Xxxxx, Xx.
-----------------------------------
Title: Chairman
----------------------------------
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EXHIBIT 1.1
DEFINITIONS
"Accountants" shall mean the independent certified public
accountants of the Company.
"Acquiror" is defined in Section 7.3(a).
"Act" means the North Carolina Business Corporation Act
(Chapter 55 of the North Carolina General Statues) as amended from time to time
(and any corresponding provisions of succeeding law).
"Affiliate" means, with respect to any Person, (i) any Person
directly or indirectly controlling, controlled by, or under common control with,
such Person, (ii) any officer, director, or employee of such Person, or (iii)
any Person who is an officer, director, or employee of any Person described in
clause (i) of this definition. As used herein, the term "control" (including its
derivatives and similar terms) means owning or holding, directly or indirectly,
the power (i) to vote 20% or more of the voting stock of any such relevant
Person, or (ii) to direct or cause the direction of the management policies of
any such relevant Person.
"Agreement" means this Agreement, as amended from time to
time. Words such as "herein," "hereinafter," "hereof," "hereto," and
"hereunder," refer to this Agreement as a whole, including all Exhibits, Annexes
and Schedules hereto unless the context otherwise requires.
"Annual Budget" is defined in Section 4.3.
"Articles" means the Articles of Incorporation of the Company,
filed with the Secretary of State of the State of North Carolina on January 5,
2001.
"Board" shall mean the Board of Directors of the Company as
provided for in the Bylaws.
"Bond Funds" is defined under the heading "Background
Information."
"Business Day" shall mean any day except a Saturday, Sunday or
other day on which commercial banks in New York, New York are authorized by law
to close.
"Bylaws" shall mean the Bylaws of the Company as adopted
January 5, 2001.
"Claim" is defined in Section 12.1.
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"CO&M Agreement" is defined in Section 2.3(a)(1).
"Company" means Eastern North Carolina Natural Gas Company.
"Confidential Information" is defined in Section 9.1.
"Director" shall mean a director of the Company as provided
for in the Bylaws.
"Dissolution Events" is defined in Section 8.2.
"Distribution Facilities" means facilities installed by the
Company to provide natural gas services to Customers in the Service Territory.
"Dollar" or "$" shall mean lawful currency of the United
States of America.
"Errors or Omissions" means any actual or alleged breach of
duty, neglect, error, misstatement, misleading statement or omission actually or
allegedly caused, committed or attempted by any of the directors, officers or
employees of any Shareholder, while acting in their capacity as such on behalf
of the Company, or claimed against them solely by reason of their being a
Director or Officer of the Company.
"Facilities" is defined in Section 2.3(a)(1).
"FERC" means the Federal Energy Regulatory Commission or any
commission, agency or other governmental body succeeding to the powers of such
commission.
"First Offer Closing" is defined in Section 7.3(d).
"Fiscal Year" shall mean the fiscal year of the Company, which
shall be the calendar year.
"GAAP" means generally accepted accounting principles.
"Governmental Authority" means any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality.
"Indemnified Person" is defined in Section 10.2.
"Interim Period" is defined in Section 6.2(c).
"Local Distribution Company" means those companies in North
Carolina and Virginia identified in this Agreement or related Agreements, whose
primary purpose is to distribute natural gas to end-user customers.
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"Necessary Regulatory Approvals" means all consents,
approvals and other authorizations as may be required from Governmental
Authorities (but excluding consents, approvals and authorizations of a nature
not customarily obtained prior to commencement of construction of facilities
such as the Facilities) in connection with (a) the construction and operation of
the Facilities, (b) the formation of the Company and (c) the conduct of the
business of the Company.
"NCUC" means the North Carolina Utilities Commission.
"NCUC Application" means the filing, as amended, by Progress
Energy (or one of its affiliates) and APEC as Eastern North Carolina Natural Gas
Company of an Application for Bond Funds, a Certificate of Public Convenience
and Necessity and a request for the Exclusive Franchise of the Service
Territory.
"Offer Notice" is defined in Section 7.3(b).
"Offer Price" is defined in Section 7.3(b).
"Offered Shares" is defined in Section 7.3(a).
"Officer" shall mean an officer of the Company as provided for
in the Bylaws.
"Operator" is defined in the CO&M Agreement.
"Other Shareholder" is defined in Section 7.3(a).
"Parent" means a company that owns or controls one or more
Subsidiaries through the ownership of voting Stock.
"Permitted Transfer" is defined in Section 7.1.
"Permitted Transferee" is defined in Section 7.1.
"Person" means any individual, corporation, limited liability
company, partnership, trust, or other entity.
"Related Agreement" means the CO&M Agreement, the Services
Agreement, any promissory note representing a Shareholder loan and each other
agreement between the Company, on the one hand, and any Shareholder or any
Affiliate of any Shareholder, on the other hand.
"Response Notice" is defined in Section 7.3(b).
"Response Period" is defined in Section 12.1(ii).
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"Right of First Offer" is defined in Section 7.3(a).
"Selling Shareholder" is defined in Section 7.3(a).
"Services Agreement" is defined in Section 2.3 (a)(2).
"Service Territory" is defined in Section 2.3.
"Shareholder" means APEC or CP&L Energy.
"Shareholder Loan" is defined in Section 6.2(c).
"Shares" means all shares of the Company's common or preferred
stock, whether currently issued and outstanding or subsequently issued by the
Company, as applicable.
"Subsidiary" shall mean, with respect to any specified Person,
each of (i) any other Person not less than a majority of the overall economic
equity in which is owned, directly or indirectly through one of more
intermediaries, by such specified Person, (ii) any other Person in respect of
which such specified Person has the power, directly or indirectly through one or
more intermediaries, to elect a majority of the board of directors or other
persons performing similar functions (it being understood that such other
persons performing similar functions may include, for example and without
limitation, the board of directors of the sole, or managing, corporate general
partner of a limited partnership or the Shareholders of a management committee
of a partnership, limited partnership or limited liability company performing
functions similar to that of a board of directors) and (iii) without limitation
of clauses (i) and (ii), any other Person who or which, directly or indirectly
through one or more intermediaries, is controlled by such specific Person.
"System Development Costs" means expenditures made by Progress
Energy or any of its Affiliates prior to the date of this Agreement, if approved
by the Board pursuant to Section 6.1 if required to be so approved, including,
but not limited to, expenditures made in the course of activities reasonably
related to planning and designing the Facilities, acquiring rights of way,
preparing the NCUC Application and obtaining the Necessary Regulatory Approvals.
"Third Party" means any Person other than a Shareholder or
any of its Affiliates.
"Transfer" means, as a noun, any voluntary or involuntary
transfer, sale, assignment, pledge, hypothecation, or other disposition and, as
a verb, voluntarily or involuntarily to transfer, sell, assign, pledge,
hypothecate, or otherwise dispose of; provided that Transfer shall not include
the acquisition by merger, consolidation, purchase or otherwise by any person,
entity or group of a majority of the outstanding voting shares of Progress
Energy or the sale of all or substantially all of the assets of Progress Energy.
"Wholly-Owned Subsidiary" shall mean, with respect to any
specified Person, any other Person (i) as to which such specified Person owns,
directly or indirectly, of record and
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beneficially, (x) all of the voting power and (y) (A) if such other Person is a
corporation, all of the outstanding capital stock, and (B) if such other Person
is not a corporation, all of the equity and profits interests at the time any
determination thereof is being made, in the case of both sub-clauses (x) and (y)
other than director's qualifying (or other similar) shares, and (ii) which such
specified Person in any event controls.
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EXHIBIT 4.3
INSURANCE
(A) For so long as the Board agrees and Progress Energy in its sole
discretion, consents, Progress Energy (or any of its Affiliates (excluding the
Company)) shall provide insurance coverage for the Company under its own
insurance policies. For such insurance purposes, Progress Energy shall treat the
Facilities as 100% owned by Progress Energy and insure the Facilities and the
risk associated therewith in a manner consistent with the insuring of its other
facilities and assets. In the event that the Board does not agree or Progress
Energy does not consent to the provision of insurance coverage under Progress
Energy's own insurance policies, the Company shall obtain such insurance
coverage as is directed by the Board.
Each Shareholder (including Progress Energy acting in the capacity of
Manager or Operator as set forth in the Shareholders' Agreement or Construction,
Operation and Maintenance Agreement, respectively), its Affiliates and its and
their respective officers, directors and employees, including those serving as
directors and Officers of the Company shall be named as additional insureds on
all liability policies provided on behalf of the Company.
The Company shall be responsible for bearing its portion of any costs,
including premiums, deductibles, self-insured retentions and uninsured losses
associated with the insurances being provided by Progress Energy for the
Company.
(B) If required, Progress Energy shall arrange for Builder's Risk
Insurance to be applicable to the construction and testing phases of the
Facilities. If such insurance is purchased, it may be purchased in the name of
the Company or shall be required to be provided by the construction contractor.
Progress Energy shall furnish the Board and APEC with information relative to
this insurance.
(C) The Company shall maintain directors' and officers' liability
insurance policy to cover its Directors, Officers and employees. The Company
shall pay for all premiums, deductibles, self-insured retentions, coinsurance
and uninsured losses associated with such insurance.
(D) After a Shareholder learns of any event, condition, circumstance,
or a claim relating thereto, that has resulted, or may result in a claim,
liability, or cause of action of any kind against the Company, or if any
Shareholder is sued or receives notice of a suit on an alleged claim or cause of
action arising out of the Company's operations, such Shareholder shall give
prompt notice to the Company and the other Shareholder.
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EXHIBIT 6.1(A)
PROGRESS ENERGY SYSTEM DEVELOPMENT COSTS
EXHIBIT 6.2(C)
FORM OF PROMISSORY NOTE
Raleigh, North Carolina [DATE]
FOR VALUE RECEIVED, EASTERN NORTH CAROLINA NATURAL GAS COMPANY, (the "Borrower")
hereby promises to pay to Progress Energy, Inc. (the "Payee"), in lawful money
of the United States of America, on demand, the principal sum of $ _____________
, or the outstanding balance of principal shown on the attached schedule that is
made a part hereof for all purposes, whichever is less. The Borrower hereby
promises to pay interest on such principal amounts outstanding hereunder on the
first business day of each month. The interest rate will reset monthly. Interest
will be charged on the daily outstanding principle balance at the Prime Rate.
Prime Rate is the rate in effect on the first day of each month as published in
the Money Rates section of the Wall Street Journal. If the first day of the
month is not a business day, the rate published on the first business day of the
month will be used.
The calculation of interest will be based on the actual number of days in the
month divided by 360 days.
The outstanding balance of principal under this note may be repaid in whole or
in part, together with accrued interest to the date of such repayment, without
premium or penalty. However, any amounts repaid may not be reborrowed under this
note.
All principal and interest payments hereunder are to be made in immediately
available funds to Payee's bank account as designated in writing by Payee's
Treasurer.
By acceptance of this note, Payee agrees to record on the attached schedule the
date and principal amount of the borrowing and the date and amount of any such
prepayment. The failure to accurately record any transaction on the attached
schedule shall in no way affect the obligation of the Borrower to repay any
amounts due hereunder.
EASTERN NORTH CAROLINA NATURAL GAS COMPANY
By:
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Name:
Title:
