UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Exact name of registrants as specified in their
Commission charters, state of incorporation, address of principal I.R.S. Employer
File Number executive offices, and telephone number Identification Number
1-15929 Progress Energy, Inc. 56-2155481
410 South Wilmington Street
Raleigh, North Carolina 27601-1748
Telephone: (919) 546-6111
State of Incorporation: North Carolina
1-3382 Carolina Power & Light Company 56-0165465
410 South Wilmington Street
Raleigh, North Carolina 27601-1748
Telephone: (919) 546-6111
State of Incorporation: North Carolina
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Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Progress Energy, Inc.:
Common Stock (Without Par Value) New York Stock Exchange
Pacific Stock Exchange
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Progress Energy, Inc.: None
Carolina Power & Light Company: $100 par value Preferred Stock, Cumulative
$100 par value Serial Preferred Stock, Cumulative
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in PART III of this Form 10-K or any amendment to this Form 10-K. [X]
This combined Form 10-K is filed separately by two registrants: Progress Energy, Inc. (Progress Energy) and Carolina Power & Light Company (CP&L). Information contained herein relating to either individual registrant is filed by such registrant solely on its own behalf.
As of February 28, 2002, the aggregate market value of the voting and non-voting common equity of Progress Energy, Inc. held by non-affiliates was $9,757,790,063. All of the common stock of Carolina Power & Light Company is owned by Progress Energy, Inc. As of February 28, 2002, each registrant had the following shares of common stock outstanding:
Registrant Description Shares
------------------------------ -------------------------------- ------------------------------
Progress Energy, Inc. Common Stock (Without Par Value) 218,727,139
Carolina Power & Light Company Common Stock (Without Par Value) 159,608,055 (all of which were
held by Progress Energy, Inc.)
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Portions of the Progress Energy and CP&L definitive proxy statements dated April 1, 2002 are incorporated into PART III, ITEMS 10, 11, 12 and 13 hereof.
TABLE OF CONTENTS
GLOSSARY OF TERMS
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS
PART I
ITEM 1. BUSINESS
ITEM 2. PROPERTIES
ITEM 3. LEGAL PROCEEDINGS
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
EXECUTIVE OFFICERS OF THE REGISTRANTS
PART II
ITEM 5. MARKET FOR THE REGISTRANTS COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
ITEM 7A. QUANTITIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K
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GLOSSARY OF TERMS
The following abbreviations or acronyms used in the text of this combined Form 10-K are defined below:
TERM DEFINITION
---- ----------
AFUDC Allowance for funds used during construction
APEC Albemarle-Pamlico Economic Development Corporation
ASLB Atomic Safety and Licensing Board
Bain Bain Capital, Inc. and affiliates
BellSouth Carolinas PCS BellSouth Carolinas, PCS L.P.
Btu British thermal units
Caronet Caronet, Inc.
CERCLA or Superfund Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended
Code Internal Revenue Service Code
CP&L Carolina Power & Light Company
CP&L Energy CP&L Energy, Inc., now known as Progress Energy, Inc.
CR3 Crystal River Unit No. 3
CVO Contingent value obligation
DEP Florida Department of Environment and Protection
D&D Decommissioning and decontamination
DOE Department of Energy
dt Dekatherm
DWM North Carolina Department of Environment and Natural Resources, Division of
Waste Management
EasternNC Eastern North Carolina Natural Gas Company, formerly referred to as ENCNG
EPS Earnings per share
EPA United States Environmental Protection Agency
EPA of 1992 Energy Policy Act of 1992
ESOP Employee Stock Ownership Plan
FASB Financial Accounting Standards Board
FERC Federal Energy Regulatory Commission
Florida Power Florida Power Corporation
FPC Florida Progress Corporation
FPSC Florida Public Service Commission
Harris Plant Shearon Harris Nuclear Plant
Interpath Interpath Communications, Inc.
IRS Internal Revenue Service
kWh Kilowatt-hour
kV Kilovolt
kVA Kilovolt-ampere
LIBOR London Inter Bank Offering Rate
LNG Liquefied natural gas
MEMCO MEMCO Barge Line, Inc.
MGP Manufactured Gas Plant
Monroe Power Monroe Power Company
MW Megawatt
NCNG North Carolina Natural Gas Corporation
NCUC North Carolina Utilities Commission
NEIL Nuclear Electric Insurance Limited
NOx SIP Call EPA rule which requires 22 states including North and South Carolina to further
reduce nitrogen oxide emissions.
NRC United States Nuclear Regulatory Commission
NSP Northern States Power
Nuclear Waste Act Nuclear Waste Policy Act of 1982
OPEB Contributory postretirement benefits
Pine Needle Pine Needle LNG Company, LLC
PLR's Private Letter Rulings
Pollution control bonds Pollution control revenue refunding bonds
Power Agency North Carolina Eastern Municipal Power Agency
Progress Capital Progress Capital Holdings, Inc.
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Progress Energy Progress Energy, Inc.
Progress Rail Progress Rail Services Corporation
Progress Telecom Progress Telecommunications Corporation
Progress Ventures Business segment of Progress Energy primarily made up of merchant energy
generation, coal and synthetic fuel operations and energy marketing and
trading, formerly referred to as Energy Ventures
Progress Ventures, Inc. Legal entity of Progress Ventures (formerly referred to as CPL Energy
Ventures, Inc.)
PSSP Performance Share Sub-Plan
PSVA Price sensitive volume adjustment
PUHCA Public Utility Holding Company Act of 1935, as amended
PURPA Public Utilities Regulatory Policies Act of 1978
PWR Pressurized water reactor
QF Qualifying facilities
RSA Restricted Stock Awards program
RTO Regional Transmission Organization
SCE&G South Carolina Electric & Gas
SCPSC Public Service Commission of South Carolina
SEC United States Securities and Exchange Commission
SFAS No. 71 Statement of Financial Accounting Standards No. 71, Accounting for the
Effects of Certain Types of Regulation
SFAS No. 121 Statement of Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of
SFAS No. 133 Statement of Financial Accounting Standards No. 133, Accounting for
Derivative and Hedging Activities
SFAS No. 138 Statement of Financial Accounting Standards No. 138, Accounting for Certain
Derivative Instruments and Certain Hedging Activities - an Amendment of
FASB Statement No. 133
SFAS No. 141 Statement of Financial Accounting Standards No. 141, Business Combinations
SFAS No. 142 Statement of Financial Accounting Standards No. 142, Goodwill and Other
Intangible Assets
SFAS No. 143 Statement of Financial Accounting Standards No. 143, Accounting for Asset
Retirement Obligations
SO2 Sulfur dioxide
SPSP Stock Purchase-Savings Plan
SRS Strategic Resource Solutions Corp.
the Company Progress Energy, Inc. and subsidiaries
Transco Transcontinental Gas Pipeline Corporation
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SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS
The matters discussed throughout this Form 10-K that are not historical facts are forward-looking and, accordingly, involve estimates, projections, goals, forecasts, assumptions, risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements.
In addition, examples of forward-looking statements discussed in this Form 10-K, PART II, ITEM 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" include, but are not limited to, statements under the following headings: 1) "Liquidity and Capital Resources" about operating cash flows, estimated capital requirements through the year 2004 and future financing plans, 2) "Future Outlook" about Progress Energy's future earnings potential, and 3) "Other Matters" about the effects of new environmental regulations, nuclear decommissioning costs and the effect of electric utility industry restructuring.
Any forward-looking statement speaks only as of the date on which such statement is made, and neither Progress Energy nor CP&L undertakes any obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made.
Examples of factors that you should consider with respect to any forward-looking statements made throughout this document include, but are not limited to, the following: governmental policies and regulatory actions (including those of the Federal Energy Regulatory Commission, the Environmental Protection Agency, the Nuclear Regulatory Commission, the Department of Energy, the Securities and Exchange Commission under the Public Utility Holding Company Act of 1935, as amended, the North Carolina Utilities Commission, the Public Service Commission of South Carolina and the Florida Public Service Commission), particularly legislative and regulatory initiatives that may impact the speed and degree of the restructuring of the electricity industry and the results of negotiations related to the expiration of Florida Power's rate stipulation; the outcome of legal and administrative proceedings, including proceedings before our principal regulators; risks associated with operating nuclear power facilities, availability of nuclear waste storage facilities, and nuclear decommissioning costs; terrorist threats and activities, particularly with respect to our facilities, economic uncertainty caused by recent terror attacks on the United States, and potential adverse reactions to United States anti-terrorism activities; changes in the economy of areas served by CP&L, Florida Power or NCNG; the extent to which we are able to obtain adequate and timely rate recovery of costs, including potential stranded costs arising from the restructuring of the electricity industry; weather conditions and catastrophic weather-related damage; general industry trends, increased competition from energy and gas suppliers, and market demand for energy; inflation and capital market conditions; the extent to which we are able to realize the potential benefits of our acquisition of Florida Progress Corporation and successfully integrate it with the remainder of our business; the extent to which we are able to realize the potential benefits of the conversion of Carolina Power & Light Company to a non-regulated holding company structure and the success of our direct and indirect subsidiaries; the extent to which we are able to use tax credits associated with the operations of the synthetic fuel facilities; the extent to which we are able to reduce our capital expenditures through the utilization of the natural gas expansion fund established by the North Carolina Utilities Commission; and unanticipated changes in operating expenses and capital expenditures.
All such factors are difficult to predict, contain uncertainties that may materially affect actual results, and may be beyond the control of Progress Energy and CP&L. New factors emerge from time to time, and it is not possible for management to predict all such factors, nor can it assess the effect of each such factor on Progress Energy and CP&L.
PART I
Progress Energy, Inc. (Progress Energy, or the Company, which term includes consolidated subsidiaries unless otherwise indicated), is a registered holding company under the Public Utility Holding Company Act (PUHCA) of 1935. Both the Company and its subsidiaries are subject to the regulatory provisions of PUHCA. Progress Energy was initially formed as CP&L Energy, Inc. (CP&L Energy), which became the holding company for Carolina Power & Light Company (CP&L) on June 19, 2000. All shares of common stock of CP&L were exchanged for an equal number of shares of CP&L Energy common stock.
On July 1, 2000, CP&L distributed its ownership interest in the stock of North Carolina Natural Gas Corporation (NCNG), Strategic Resource Solutions Corp. (SRS), Monroe Power Company (Monroe Power) and Progress Ventures, Inc. to CP&L Energy. As a result, those companies became direct subsidiaries of CP&L Energy and are not included in CP&L's results of operations and financial position since that date.
Subsequent to the acquisition of Florida Progress Corporation (FPC) (see "Significant Transactions" below), the Company changed its name from CP&L Energy to Progress Energy, Inc. on December 4, 2000.
Through its wholly owned regulated subsidiaries, CP&L, Florida Power Corporation (Florida Power) and NCNG, Progress Energy is primarily engaged in the generation, transmission, distribution and sale of electricity in portions of North Carolina, South Carolina and Florida; and the transport, distribution and sale of natural gas in portions of North Carolina. Through the Progress Ventures business segment, Progress Energy is involved in merchant energy generation, coal and synthetic fuel operations and energy marketing and trading. Through other business units, Progress Energy engages in other non-regulated business areas including energy management and related services, rail services and telecommunications.
Progress Energy is a regional energy company focusing on the high-growth Southeast region of the United States. The Company has more than 20,000 megawatts of electric generation capacity and serves approximately 2.9 million electric and gas customers in portions of North Carolina, South Carolina and Florida. CP&L's and Florida Power's utility operations are complementary: CP&L has a summer peaking demand, while Florida Power has a winter peaking demand. In addition, CP&L's greater proportion of commercial and industrial customers combined with Florida Power's greater proportion of residential customers creates a more balanced customer base. The Company is dedicated to expanding the region's electric generation capacity and delivering reliable, competitively priced energy.
Progress Energy revenues for the year ended December 31, 2001, were $8.5 billion, and assets at year-end were $20.7 billion. Its principal executive offices are located at 410 South Wilmington Street, Raleigh, North Carolina 27601, telephone number (919) 546-6111. The Progress Energy home page on the Internet is located at http://www.progress-energy.com, the contents of which are not a part of this document. Progress Energy was incorporated on August 19, 1999.
The operations of Progress Energy and its subsidiaries are divided into five major segments: two electric utilities (CP&L and Florida Power), Progress Ventures, Rail Services and Other. Progress Energy's legal structure is not currently aligned with the functional management and financial reporting of its segments. Whether, and when, the legal and functional structures will converge depends upon legislative and regulatory action, which cannot currently be anticipated. The Other segment primarily includes natural gas operations, telecommunication services, energy management services, miscellaneous non-regulated activities, holding company operations and elimination entries. For information regarding the revenues, income and assets attributable to the Company's business segments, see Note 3 to the Progress Energy consolidated financial statements.
Florida Progress Acquisition
On November 30, 2000, the Company completed its acquisition of FPC for an aggregate purchase price of approximately $5.4 billion. The Company paid cash consideration of approximately $3.5 billion and issued 46.5 million common shares valued at approximately $1.9 billion. In addition, the Company issued 98.6 million
contingent value obligations (CVO) valued at approximately $49.3 million. See Note 2A to the Progress Energy financial statements for additional discussion of the FPC acquisition.
FPC is a diversified, exempt electric utility holding company. Florida Power, FPC's largest subsidiary is a regulated public utility engaged in the generation, transmission, distribution and sale of electricity. FPC also has diversified non-utility operations owned through Progress Capital Holdings, Inc. Included in diversified operations are Progress Fuels Corporation, an energy and transportation company, and Progress Telecommunications Corporation, a wholesale telecommunications service provider. As of the acquisition date, the primary segments of Progress Fuels were energy and related services, rail services, and inland marine transportation. During 2001, Progress Energy sold the inland marine transportation segment to AEP Resources, Inc., as more fully discussed below.
The FPC acquisition was accounted for using the purchase method of accounting and, accordingly, the results of operations for FPC have been included in the Company's consolidated financial statements since the date of acquisition. Identifiable assets acquired and liabilities assumed have been recorded at their fair values of $6.7 billion and $4.9 billion, respectively. The excess of the purchase price over the fair value of the net identifiable assets and liabilities acquired has been recorded as goodwill. The goodwill, of approximately $3.6 billion, was being amortized on a straight-line basis over a period of 40 years. Effective January 1, 2002, goodwill is no longer subject to amortization.
Sale of MEMCO Barge Line, Inc.
On July 23, 2001, Progress Energy announced the disposition of the Inland Marine Transportation segment of FPC, which was operated by MEMCO Barge Line, Inc. Inland Marine provided transportation of coal, agricultural and other dry-bulk commodities as well as fleet management services. On November 1, 2001, the Company completed the sale of the Inland Marine Transportation segment to AEP Resources, Inc., a wholly owned subsidiary of American Electric Power. See Note 4 to the Progress Energy consolidated financial statements for additional discussion of this transaction.
LG&E Energy Corp. Acquisition
During February 2002, Progress Ventures, Inc. completed the acquisition of two electric generating projects totaling nearly 1,100 megawatts in Georgia. See Item 7, "Other Matters" for additional discussion of this transaction.
Westchester Gas Company Acquisition
On January 11, 2002, Progress Energy announced that it had entered into a letter of intent with Westchester Gas Company to acquire approximately 215 producing natural gas wells, 52 miles of intrastate gas pipeline and 170 miles of gas-gathering systems. See Item 7, "Other Matters" for additional discussion of this transaction.
In recent years, the electric utility industry has experienced a substantial increase in competition at the wholesale level, caused by changes in federal law and regulatory policy. Several states have also decided to restructure aspects of retail electric service. The issue of retail restructuring and competition is being reviewed by a number of states and bills have been introduced in past sessions of Congress that sought to introduce such restructuring in all states.
Allowing increased competition in the generation and sale of electric power will require resolution of many complex issues. One of the major issues to be resolved is who would pay for stranded costs. Stranded costs are those costs and investments made by utilities in order to meet their statutory obligation to provide electric service, but which could not be recovered through the market price of electricity following industry restructuring. The amount of such stranded costs that the Company might experience would depend on the timing of, and the extent to which, direct competition is introduced, and the then-existing market price of energy. If both electric utilities and the gas utility were no longer subject to cost-based regulation and it was not possible to recover stranded costs, the financial position and results of operations of the Company could be adversely affected.
Several electric industry restructuring bills introduced during the 106th Congress died upon adjournment in 2000. During the 107th Congress, attention has turned more toward a comprehensive energy policy as opposed to restructuring of the electric industry. However, restructuring could eventually become part of any legislation and/or
specific electric industry restructuring legislation could be introduced and considered by Congress. The Company cannot predict the outcome of this matter.
As a result of the Public Utilities Regulatory Policies Act of 1978 (PURPA) and the Energy Policy Act of 1992 (EPA of 1992), competition in the wholesale electricity market has greatly increased, especially from non-utility generators of electricity. In 1996, the Federal Energy Regulatory Commission (FERC) issued new rules on transmission service to facilitate competition in the wholesale market on a nationwide basis. The rules give greater flexibility and more choices to wholesale power customers.
On December 20, 1999, FERC issued Order No. 2000 on Regional Transmission Organizations (RTO), which sets forth four minimum characteristics and eight functions for transmission entities, including independent system operators and transmission companies, that are required to become FERC-approved RTOs. The rule stated that public utilities that own, operate or control interstate transmission facilities had to have filed, by October 15, 2000, either a proposal to participate in an RTO or an alternative filing describing efforts and plans to participate in an RTO. The order provided guidance and specified minimum characteristics and functions required of an RTO and also stated that all RTOs should be operational by December 15, 2001. During 2001, the deadline for RTO's to be operational was extended. See PART I, ITEM 1, "Competition" of CP&L Electric and Florida Power Electric for a discussion of the development activities for the GridSouth RTO and GridFlorida RTO, respectively.
To date, many states have adopted legislation that would give retail customers the right to choose their electricity provider (retail choice) and most other states have, in some form, considered the issue.
The developments described above have created changing markets for energy. As a strategy for competing in these changing markets, the Company is becoming a total energy provider in the region by providing a full array of energy-related services to its current customers and expanding its market reach. The Company took a major step towards implementing this strategy through its acquisition of FPC.
See PART I, ITEM 1, "Competition" discussion under Electric-CP&L, Electric-Florida Power and Other for further discussion of competitive developments within these segments.
As a result of the acquisition of FPC, Progress Energy is now a registered holding company subject to regulation by the Securities and Exchange Commission (SEC) under PUHCA. Therefore, Progress Energy and its subsidiaries are subject to the regulatory provisions of PUHCA, including provisions relating to the issuance of securities, sales and acquisitions of securities and utility assets, and services performed by Progress Energy Service Company LLC.
While various proposals have been introduced in Congress regarding PUHCA, the prospects for legislative reform or repeal are uncertain at this time.
In the areas of air quality, water quality, control of toxic substances and hazardous and solid wastes and other environmental matters, the Company is subject to regulation by various federal, state and local authorities. The Company considers itself to be in substantial compliance with those environmental regulations currently applicable to its business and operations and believes it has all necessary permits to conduct such operations. Environmental laws and regulations constantly evolve and the ultimate costs of compliance cannot always be accurately estimated. The capital costs associated with compliance with pollution control laws and regulations at the Company's existing fossil facilities that the Company expects to incur from 2002 through 2004 are included in the estimates under the "Investing Activities" discussion under PART II, ITEM 7, "Liquidity and Capital Resources."
The 1990 amendments to the Clean Air Act require substantial reductions in sulfur dioxide and nitrogen oxide emissions from fossil-fueled electric generating plants. The Clean Air Act required the Company to meet more stringent provisions effective January 1, 2000. The Company meets the sulfur dioxide emissions requirements by maintaining sufficient sulfur dioxide emission allowances. Installation of additional equipment was necessary to
reduce nitrogen oxide emissions. Increased operation and maintenance costs, including emission allowance expense, installation of additional equipment and increased fuel costs are not expected to be material to the consolidated financial position or results of operations of the Company.
The U.S. Environmental Protection Agency (EPA) has been conducting an enforcement initiative related to a number of coal-fired utility power plants in an effort to determine whether modifications at those facilities were subject to New Source Review requirements or New Source Performance Standards under the Clean Air Act. Both CP&L and Florida Power were asked to provide information to the EPA as part of this initiative and cooperated in providing the requested information. The EPA has initiated enforcement actions against other unaffiliated utilities as part of this initiative, some of which have resulted in settlement agreements calling for expenditures, ranging from $1.0 billion to $1.4 billion. A utility that was not subject to a civil enforcement action settled its New Source Review issues with the EPA for $300 million. These settlement agreements have generally called for expenditures to be made over extended time periods, and some of the companies may seek recovery of the related cost through rate adjustments. The Company cannot predict the outcome of this matter.
In 1998, the EPA published a final rule addressing the issue of regional transport of ozone. This rule is commonly known as the NOx SIP Call. The EPA's rule requires 23 jurisdictions, including North Carolina, South Carolina and Georgia, but not Florida, to further reduce nitrogen oxide emissions in order to attain a pre-set state NOx emission level by May 31, 2004. CP&L is evaluating necessary measures to comply with the rule and estimates its related capital expenditures could be approximately $370 million, which has not been adjusted for inflation. The Company spent approximately $46.3 million in 2001 related to these expenditures. Increased operation and maintenance costs relating to the NOx SIP Call are not expected to be material to the Company's results of operations. Further controls are anticipated as electricity demand increases. The Company cannot predict the outcome of this matter.
The EPA published a final rule approving petitions under Section 126 of the Clean Air Act, which requires certain sources to make reductions in nitrogen oxide emissions by May 1, 2003. The final rule also includes a set of regulations that affect nitrogen oxide emissions from sources included in the petitions. The North Carolina fossil-fueled electric generating plants are included in these petitions. Acceptable state plans under the NOx SIP Call can be approved in lieu of the final rules the EPA approved as part of the Section 126 petitions. CP&L, other utilities, trade organizations and other states participated in litigation challenging the EPA's action. On May 15, 2001, the District of Columbia Circuit Court of Appeals ruled in favor of the EPA, which will require North Carolina to make reductions in nitrogen oxide emissions by May 1, 2003. However, the Court in its May 15th decision rejected the EPA's methodology for estimating the future growth factors the EPA used in calculating the emissions limits for utilities. In August 2001, the court granted a request by CP&L and other utilities to delay the implementation of the Section 126 Rule for electric generating units pending resolution by the EPA of the growth factor issue. The Court's order tolls the three-year compliance period (originally set to end on May 1, 2003) for electric generating units as of May 15, 2001. On January 16, 2002, the EPA issued a memo to harmonize the compliance dates for the Section 126 Rule and the NOx SIP Call. The new compliance date for all affected sources is now May 31, 2004, rather than May 1, 2003, subject to the completion of the EPA's response to the related court decision on the growth factor issue. The Company cannot predict the outcome of this matter.
The provisions of the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (CERCLA), authorize the EPA to require the clean up of hazardous waste sites. This statute imposes retroactive joint and several liability. Some states, including North and South Carolina, have similar types of legislation. There are presently several sites with respect to which the Company has been notified by the EPA, the State of North Carolina or the State of Florida of its potential liability, as described below in greater detail.
Various organic materials associated with the production of manufactured gas, generally referred to as coal tar, are regulated under various federal and state laws. The lead or sole regulatory agency that is responsible for a particular former coal tar site depends largely upon the state in which the site is located. There are several manufactured gas plant (MGP) sites to which both electric utilities and the gas utility have some connection. In this regard, both electric utilities and the gas utility, with other potentially responsible parties, are participating in investigating and, if necessary, remediating former coal tar sites with several regulatory agencies, including, but not limited to, the EPA, the Florida Department of Environmental Protection (DEP) and the North Carolina Department of Environment and Natural Resources, Division of Waste Management (DWM). Although the Company may incur costs at these sites
about which it has been notified, based upon current status of these sites, the Company does not expect those costs to be material to its consolidated financial position or results of operations.
Both electric utilities, the gas utility and Progress Ventures are periodically notified by regulators such as the EPA and various state agencies of their involvement or potential involvement in sites, other than MGP sites, that may require investigation and/or remediation. Although the Company's subsidiaries may incur costs at the sites about which they have been notified, based upon the current status of these sites, the Company does not expect those costs to be material to the consolidated financial position or results of operations of the Company.
On November 1, 2001, Progress Energy completed the sale of the Inland Marine Transportation segment to AEP Resources, Inc. In connection with the sale, Progress Energy entered into environmental indemnification provisions covering both unknown and known sites. Progress Energy has recorded an accrual to cover estimated probable future environmental expenditures. Progress Energy believes that it is reasonably possible that additional costs, which cannot be currently estimated, may be incurred related to the environmental indemnification provision beyond the amounts accrued. Progress Energy cannot predict the outcome of this matter.
Both electric utilities, the gas utility and Progress Ventures have filed claims with the Company's general liability insurance carriers to recover costs arising out of actual or potential environmental liabilities. Some claims have been settled and others are still pending. While management cannot predict the outcome of these matters, the outcome is not expected to have a material effect on the Company's consolidated financial position or results of operations.
As of February 28, 2002, Progress Energy and its subsidiaries employed approximately 16,200 full-time employees. Of this total, approximately 2,100 employees at Florida Power are represented by the International Brotherhood of Electrical Workers. The current union contract was ratified in December 1999 and expires in December 2002. The Company and some of its subsidiaries have a non-contributory defined benefit retirement (pension) plan for substantially all full-time employees and an employee stock purchase plan among other employee benefits. The Company and some of its subsidiaries also provide contributory postretirement benefits, including certain health care and life insurance benefits, for substantially all retired employees.
As of February 28, 2002, CP&L employed approximately 5,600 full-time employees.
CP&L is a public service corporation formed under the laws of North Carolina in 1926, and is primarily engaged in the generation, transmission, distribution and sale of electricity in portions of North and South Carolina. As of December 31, 2001, CP&L had a total summer generating capacity (including jointly-owned capacity) of approximately 12,040 megawatts (MW).
CP&L distributes and sells electricity in 57 of the 100 counties in North Carolina, and 14 counties in northeastern South Carolina. The territory served is an area of approximately 34,000 square miles, including a substantial portion of the coastal plain of North Carolina extending to the Atlantic coast between the Pamlico River and the South Carolina border, the lower Piedmont section of North Carolina, an area in northeastern South Carolina and an area in western North Carolina in and around the city of Asheville. The estimated total population of the territory served is more than 4.0 million. At December 31, 2001, CP&L was providing electric services, retail and wholesale, to approximately 1.3 million customers. CP&L is subject to the rules and regulations of FERC, the North Carolina Utilities Commission (NCUC) and the Public Service Commission of South Carolina (SCPSC).
CP&L's electric revenues billed by customer class, for the last three years, is shown as a percentage of total CP&L electric revenues in the table below:
BILLED ELECTRIC REVENUES
Revenue Class 2001 2000 1999 ------------- ---- ---- ---- Residential 34% 33% 34% Commercial 23% 22% 22% Industrial 21% 23% 24% Wholesale (a) 19% 18% 18% Other retail 3% 4% 2% |
(a) These revenues are managed by Progress Ventures on behalf of CP&L
Major industries in CP&L's service area include textiles, chemicals, metals, paper, food, rubber and plastics, wood products, and electronic machinery and equipment.
Sources of Generation
CP&L's total system generation (including the North Carolina Eastern Municipal Power Agency's (Power Agency) share) by primary energy source, along with purchased power, for the last three years is set forth below:
ENERGY MIX PERCENTAGES
2001 2000 1999
---- ---- ----
Coal 49% 48% 48%
Nuclear 41% 43% 42%
Hydro 0% 1% 1%
Oil/Gas 2% 1% 1%
Purchased Power 8% 7% 8%
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CP&L is generally permitted to pass the cost of recoverable fuel and purchased power to its customers through fuel adjustment clauses. The future prices for and availability of various fuels discussed in this report cannot be predicted with complete certainty. However, CP&L believes that its fuel supply contracts, as described below, will be adequate to meet its fuel supply needs.
CP&L's average fuel costs per million British thermal units (Btu) for the last three years were as follows:
AVERAGE FUEL COST
(per million Btu)
2001 2000 1999
---- ---- ----
Coal $1.78 $1.70 $1.70
Nuclear 0.44 0.45 0.46
Hydro -- -- --
Oil (a) 6.38 5.51 3.70
Gas (a) 4.69 5.41 3.37
Weighted Average 1.26 1.21 1.16
(a) Changes in the unit price for oil and gas are due to market
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conditions. Since these costs are primarily recovered through recovery clauses established by regulators, the fluctuation does not materially affect net income.
Coal
CP&L has short-term, intermediate and long-term agreements from which it expects to receive approximately 100% of its coal burn requirements in 2002. These agreements have expiration dates ranging from 2002 to 2006. All of the
coal that CP&L is currently purchasing under intermediate and long-term agreements is considered to be low sulfur coal by industry standards. The pending expiration of a railway contract on March 31, 2002, may result in increases in the freight rates for the shipment of coal.
Nuclear
Nuclear fuel is processed through four distinct stages. Stages I and II involve the mining and milling of the natural uranium ore to produce a concentrate and the conversion of this uranium concentrate into uranium hexafluoride. Stages III and IV entail the enrichment of the uranium hexafluoride and the fabrication of the enriched uranium hexafluoride into usable fuel assemblies.
CP&L expects to meet its future nuclear fuel requirements from inventory on hand and amounts received under contract. Although CP&L cannot predict the future availability of uranium and nuclear fuel services, CP&L does not currently expect to have difficulty obtaining uranium oxide concentrate and the services necessary for its conversion, enrichment and fabrication into nuclear fuel. For a discussion of CP&L's plans with respect to spent fuel storage, see PART I, ITEM 1, "Nuclear Matters" for CP&L Electric.
Hydro
Hydroelectric power is electric energy generated by the force of falling water. CP&L has four hydroelectric generating plants licensed by FERC: Walters, Tillery, Blewett and Marshall. The total installed capacity for these units is 218 MW.
Oil & Gas
Oil is purchased under contracts and in the spot market from several suppliers. The cost of CP&L's oil and gas is determined by market conditions. Management believes that CP&L has access to an adequate supply of oil for the reasonably foreseeable future. CP&L's natural gas supply is purchased under firm supply and delivery contracts as well as spot market purchases from numerous suppliers. CP&L believes that existing contracts for oil are sufficient to cover its requirements when natural gas is unavailable during the winter period for CP&L's combustion turbine peaker fleet.
Purchased Power
CP&L purchased 4,996,645 MWh in 2001, 4,467,802 MWh in 2000 and 4,730,657 MWh in 1999 of its system energy requirements (including Power Agency's share) and had available 1,756 MW in 2001, 1,036 MW in 2000, and 1,489 MW in 1999 of firm purchased capacity under contract at the time of peak load. CP&L may acquire purchased power capacity in the future to accommodate a portion of its system load needs.
Electric Industry Restructuring
CP&L continues to monitor progress toward a more competitive environment and has actively participated in regulatory reform deliberations in North Carolina and South Carolina. Movement toward deregulation in these states has been affected by recent developments, including developments related to deregulation of the electric industry in California and other states.
. North Carolina. On January 23, 2001, the Commission on the Future of Electric Service in North Carolina announced that it would not recommend any new laws on electricity deregulation to the 2001 session of the North Carolina General Assembly, citing the commission's determination that more research is needed. The commission's initial report to the General Assembly, issued on May 16, 2000, had contained several proposals, including a recommendation that electric retail competition should begin in North Carolina by 2006. At its January 23, 2001, meeting, the commission requested that the NCUC consider regulatory changes to facilitate the construction of wholesale generation facilities by private companies, including the elimination of requirements that such companies provide proof of a committed customer base and need for additional power in order to obtain operating licenses. Subsequently on May 21, 2001, the NCUC adopted a revised rule that streamlined the certification process for wholesale merchant generating plants. The Company cannot predict the outcome of this matter.
. South Carolina. CP&L expects the South Carolina General Assembly will continue to monitor the experiences of states that have implemented electric restructuring legislation.
Regional Transmission Organizations
In October 2000, CP&L, along with Duke Energy Corporation and South Carolina Electric & Gas Company, filed with FERC an application for approval of a for-profit transmission company, currently named GridSouth. On July 12, 2001, FERC issued an order granting GridSouth RTO status and directing that certain modifications to the RTO documents be made and filed within 90 days. In February 2002, CP&L and the other GridSouth applicants withdrew the GridSouth application from the NCUC and SCPSC for purposes of making certain revisions to the GridSouth proposal. The GridSouth applicants plan to refile their application once those changes have been made.
See PART II, Item 7, "Other Matters," for additional discussion of GridSouth
RTO.
Franchises
CP&L has nonexclusive franchises with varying expiration dates in most of the municipalities in which it distributes electric energy in North Carolina and South Carolina. Of these 239 franchises, 194 have expiration dates ranging from 2008 to 2061 and 45 of these have no specific expiration dates. All but ten of the 194 franchises with expiration dates have a term of sixty years. The exceptions include one franchise with a term of ten years, one with a term of twenty years, five with a term of thirty years, two with a term of forty years and one with a term of fifty years. However, CP&L also serves within a number of municipalities and in all of its unincorporated areas without existing franchise ordinances.
Wholesale Competition
Since passage of the EPA of 1992, competition in the wholesale electric utility industry has significantly increased due to a greater participation by traditional electricity suppliers, wholesale power marketers and brokers, and due to the trading of energy futures contracts on various commodities exchanges. This increased competition could affect CP&L's load forecasts, plans for power supply and wholesale energy sales and related revenues. The impact could vary depending on the extent to which additional generation is built to compete in the wholesale market, new opportunities are created for CP&L to expand its wholesale load, or current wholesale customers elect to purchase from other suppliers after existing contracts expire.
To assist in the development of wholesale competition, FERC, in 1996, issued standards for wholesale wheeling of electric power through its rules on open access transmission and stranded costs and on information systems and standards of conduct (Orders 888 and 889). The rules require all transmitting utilities to have on file an open access transmission tariff, which contains provisions for the recovery of stranded costs and numerous other provisions that could affect the sale of electric energy at the wholesale level. CP&L filed its open access transmission tariff with FERC in mid-1996. Several wholesale and retail customers filed protests challenging numerous aspects of CP&L's tariff and requesting that an evidentiary proceeding be held. In July 1997, CP&L filed an offer of settlement in this case which was certified by an administrative law judge in September 1997. In February 2000, FERC issued a basket order for several utilities including CP&L to file a compliance filing stating whether there were any remaining undisputed issues surrounding CP&L's open access transmission tariff. On May 1, 2000, CP&L made the compliance filing setting forth the remaining undisputed issues and a plan for settling those issues. On August 25, 2000, CP&L filed modifications to its open access transmission tariff as a result of settlement negotiations with the remaining intervenors. In November 2000 FERC approved the open access transmission tariff of CP&L with the settlement modifications.
In February 2000 CP&L filed a joint open access tariff to reflect the merger with FPC. FERC approved the joint tariff in July 2000 effective with completion of the merger, which occurred on November 30, 2000. In April 2001, CP&L and FPC each filed separate transmission tariffs as a result of FERC Order 614. FERC approved the CP&L transmission tariff in June 2001. In April 2001, CP&L filed changes to the Energy Imbalance provision of the transmission tariff. FERC has yet to issue a final order on this filing. CP&L cannot predict the outcome of this matter.
During 2001, legislation was introduced in South Carolina that would impose a moratorium on the certification and construction of merchant plants until 2003 and prohibit the transfer or sale of a merchant plant certificate. Hearings
have been held on these bills but no action has been taken. In addition, the Department of Health and Environmental Control of South Carolina has halted the issuance of any air permits for merchant plants applying for such permits. The SCPSC has contracted with a consulting firm to conduct a study on the impact of merchant plants in South Carolina which is scheduled to be completed in June of 2002. No new construction of merchant plants has begun. CP&L cannot predict the outcome of this matter.
General
CP&L is subject to regulation in North Carolina by the NCUC and in South Carolina by the SCPSC with respect to, among other things, rates and service for electric energy sold at retail, retail service territory and issuances of securities. In addition, CP&L is subject to regulation by FERC with respect to transmission and sales of wholesale power, accounting and certain other matters. The underlying concept of utility ratemaking is to set rates at a level that allows the utility to collect revenues equal to its cost of providing service including a reasonable rate of return on its equity. Increased competition, as a result of industry restructuring, may affect the ratemaking process.
Electric Retail Rates
The NCUC and the SCPSC authorize retail "base rates" that are designed to provide a utility with the opportunity to earn a specific rate of return on its "rate base", or investment in utility plant. These rates are intended to cover all reasonable and prudent expenses of utility operations and to provide investors with a fair rate of return. In its most recent rate cases in 1988, the NCUC and the SCPSC each authorized a return on equity of 12.75% for CP&L.
See Note 13B and Note 8B to the Progress Energy and CP&L consolidated financial statements, respectively, for additional discussion of CP&L's retail rate developments during 2001.
Wholesale Rate Matters
CP&L is subject to regulation by FERC with respect to rates for transmission and sale of electric energy at wholesale, the interconnection of facilities in interstate commerce (other than interconnections for use in the event of certain emergency situations), the licensing and operation of hydroelectric projects and, to the extent FERC determines, accounting policies and practices. CP&L and its wholesale customers last agreed to a general increase in wholesale rates in 1988; however, wholesale rates have been adjusted since that time through contractual negotiations.
Other Rate Matters
With approval from the NCUC and the SCPSC, CP&L accelerated the cost recovery of its nuclear generating assets beginning January 1, 2000 and continuing through 2004. Also in 2000, CP&L received approval from the commissions to further accelerate the cost recovery of its nuclear generation facilities in 2000. The accelerated cost recovery of these assets resulted in additional depreciation expense of approximately $75 million and $275 million in 2001 and 2000, respectively. Recovering the costs of its nuclear generating assets on an accelerated basis will better position CP&L for the uncertainties associated with potential restructuring of the electric utility industry.
Fuel Cost Recovery
CP&L's operating costs not covered by the utility's base rates include fuel and purchased power. Each state commission allows electric utilities to recover certain of these costs through various cost recovery clauses, to the extent the respective commission determines in an annual hearing that such costs are prudent. Costs recovered by CP&L, by state, are as follows:
. North Carolina - fuel costs and the fuel portion of purchased power;
. South Carolina - fuel costs, purchased power costs, and emission allowance expense
Each state commission's determination results in the addition of a rider to a utility's base rates to reflect the approval of these costs and to reflect any past over- or under-recovery. Due to the regulatory treatment of these costs and the method allowed for recovery, changes from year to year have no material impact on operating results.
General
CP&L owns and operates four nuclear units, which are regulated by the U.S. Nuclear Regulatory Commission (NRC) under the Atomic Energy Act of 1954 and the Energy Reorganization Act of 1974. In the event of noncompliance, the NRC has the authority to impose fines, set license conditions, or shut down a nuclear unit, or some combination of these, depending upon its assessment of the severity of the situation, until compliance is achieved. NRC operating licenses currently expire in December 2014 and September 2016 for Brunswick Units 2 and 1, respectively, in July 2010 for Robinson Unit No. 2 and in October 2026 for the Harris Plant. Plans are in place to request the extension of the Robinson and Brunswick operating licenses in 2002 and 2004, respectively. An extension will also be sought for the Harris Plant, but the submittal date has not been determined. A condition of the operating license for each unit requires an approved plan for decontamination and decommissioning. The nuclear units are periodically removed from service to accommodate normal refueling and maintenance outages, repairs and certain other modifications.
CP&L is currently evaluating and implementing power uprate projects at its nuclear facilities to increase electrical generation output. A power uprate was completed at the Harris Plant during 2001 and power uprates are in progress at the Brunswick and Robinson Nuclear Plants, which will be implemented in phases over the next several years following regulatory approval. The total increased generation from these projects is estimated to be approximately 250 megawatts.
The nuclear power industry faces uncertainties with respect to the cost and long-term availability of sites for disposal of spent nuclear fuel and other radioactive waste, compliance with changing regulatory requirements, nuclear plant operations, increased capital outlays for modifications, the technological and financial aspects of decommissioning plants at the end of their licensed lives and requirements relating to nuclear insurance.
In August 2001, the NRC issued Bulletin 2001-01, "Circumferential Cracking of Reactor Vessel Head Penetration Nozzles," requesting that all pressurized water reactors (PWR) provide their plans for inspecting the reactor vessel head for the conditions described in the bulletin. While performing this inspection, FirstEnergy Corp.'s Davis Besse plant in Ohio found three penetrations with evidence of leakage and further evidence of some wastage of the reactor vessel head around two of these penetrations. As a result of finding the wastage of the vessel head, the NRC issued Bulletin 2002-01, requesting licensees to assess previous inspections of the reactor head and determine the potential for the existence of conditions similar to that found at the Davis Besse plant.
The CP&L PWRs have completed the inspections requested by Bulletin 2001-01. Any indications of leakage have been inspected and repaired, and no wastage of the reactor vessel head has been observed at any of the plants. Based on these inspections, responses to Bulletin 2002-01 are being prepared. CP&L does not anticipate any adverse impact from this regulatory action.
Spent Fuel and Other High-Level Radioactive Waste
The Nuclear Waste Policy Act of 1982 (Nuclear Waste Act) provides the framework for development by the federal government of interim storage and permanent disposal facilities for high-level radioactive waste materials. The Nuclear Waste Act promotes increased usage of interim storage of spent nuclear fuel at existing nuclear plants. CP&L will continue to maximize the use of spent fuel storage capability within its own facilities for as long as feasible. With certain modifications and additional approval by the NRC, CP&L's spent nuclear fuel storage facilities will be sufficient to provide storage space for spent fuel generated on CP&L's system through the expiration of the current operating licenses for all of CP&L's nuclear generating units. Subsequent to the expiration of these licenses, dry storage may be necessary.
On December 21, 2000, CP&L received permission from the NRC to increase its storage capacity for spent fuel rods in Wake County, North Carolina. The NRC's decision came two years after CP&L asked for permission to open two unused storage pools at the Harris Plant. The approval means CP&L can complete cooling systems and install
storage racks in its third and fourth storage pools at the Harris Plant. Counsel for the Board of Commissioners of Orange County, North Carolina, filed a petition for review of the staff's decision by the NRC, which was rejected, and then filed an appeal of the decision with the District of Columbia Circuit Court of Appeals. On March 1, 2001, the Atomic Safety and Licensing Board (ASLB) issued its order dismissing Orange County's contention that an environmental impact statement was required for the additional storage plan at the Harris plant, and ruling in CP&L's favor to permit CP&L to proceed with the pool storage plan. On March 16, 2001, the Orange County Commissioners petitioned the NRC for review of the ASLB order and filed a request for a stay of that order. CP&L and the NRC staff responded to the petition and the request for stay. CP&L cannot predict the outcome of this matter.
See PART II, ITEM 8, footnote 15 to the CP&L consolidated financial statements for a discussion of CP&L's contract with the U.S. Department of Energy (DOE) for spent nuclear waste.
Low-Level Radioactive Waste
Disposal costs for low-level radioactive waste that result from normal operation of nuclear units have increased significantly in recent years and are expected to continue to rise. Pursuant to the Low-Level Radioactive Waste Policy Act of 1980, as amended in 1985, each state is responsible for disposal of low-level waste generated in that state. States that do not have existing sites may join in regional compacts. The States of North Carolina and South Carolina were participants in the Southeast Regional Compact and disposed of waste at a disposal site in South Carolina along with other members of the compact. Effective July 1, 1995, South Carolina withdrew from the Southeast regional compact and excluded North Carolina waste generators from the existing disposal site in South Carolina. Effective July 1, 2000, South Carolina joined with the states of Connecticut and New Jersey to form the Atlantic Compact. With this action the South Carolina law prohibiting North Carolina's access to Barnwell was repealed. The new compact allows importation of out of region waste on a limited basis until 2008. This includes access for the Company's North Carolina nuclear plants, which had not had access to Barnwell since June 1995. CP&L's nuclear plant in South Carolina has access to the existing disposal site in South Carolina. In addition, the Envirocare disposal facility in Utah continues to accept lower activity low-level waste.
Although CP&L does not control the future availability of low-level waste disposal facilities, the cost of waste disposal or the development process, it supports the development of new facilities and is committed to a timely and cost-effective solution to low-level waste disposal. Although CP&L cannot predict the outcome of this matter, it does not expect the cost of providing additional on-site storage capacity for low-level radioactive waste to be material to its consolidated financial position or results of operations.
Decommissioning
In CP&L's retail jurisdictions, provisions for nuclear decommissioning costs are approved by the NCUC and the SCPSC and are based on site-specific estimates that include the costs for removal of all radioactive and other structures at the site. In the wholesale jurisdiction, the provisions for nuclear decommissioning costs are approved by FERC. See PART II, ITEM 8, footnote 1G to the CP&L consolidated financial statements for a discussion of CP&L's nuclear decommissioning costs.
Enrichment Facilities Decontamination
CP&L and a number of other utilities are involved in litigation against the United States challenging certain retroactive assessments imposed by the federal government on domestic nuclear power companies to fund the decommissioning and decontamination of the government's uranium enrichment facilities.
On March 21, 1997, CP&L filed suit against the U.S. Government in the U.S. Court of Claims alleging breach of contract and illegal taking of property without just compensation. In the alternative, CP&L alleges that the assessments are illegally exacted in violation of the Due Process Clause of the U.S. Constitution. CP&L also alleges that the assessments result in an unconstitutional taking of its contractual benefits.
The suit arises out of several contracts under which the government provided uranium enrichment services at fixed prices. After CP&L paid for enrichment services provided under the contracts, the government, through federal legislation enacted in 1992, imposed a retroactive price increase in order to fund the decontamination and
decommissioning of the government's gaseous diffusion uranium enrichment facilities. The government is collecting this increase through an annual "special assessment" levied upon all domestic utilities that had enrichment services contracts with the government. Collection of the special assessments began in 1992 and is scheduled to continue for a fifteen-year period.
To date, CP&L has paid over $57.6 million in special assessments, including Power Agency's share of $6.7 million, and if continued throughout the anticipated fifteen-year life, the special assessments would increase the cost of CP&L's contracts by more than $97 million. CP&L seeks an order declaring that all such special assessments are unlawful, an injunction prohibiting the government from collecting future special assessments, and a refund of the special assessments.
On February 9, 1999, the government moved to dismiss CP&L's complaint. Subsequently, CP&L requested an order to stay the Claims Court action, pending resolution of another case being heard in the Southern District of New York. Following oral argument, and without benefit of any discovery, the Claims Court denied CP&L's motion to stay, converted the government's motion to a motion for summary judgment, and ordered the parties to submit additional briefing regarding the motion for summary judgment. Following oral argument, on October 17, 2000, the Claims Court issued a decision granting the government's motion for summary judgment on all counts. The Claims Court decision was appealed to the Court of Appeals for the Federal Circuit on December 26, 2000. The Federal Circuit has stayed the consideration of the case pending a decision by the Supreme Court on a petition for writ of certiorari that was filed by Commonwealth Edison in their case against the government. CP&L cannot predict the outcome of this matter.
Florida Power was incorporated in Florida in 1899, and is an operating public utility engaged in the generation, purchase, transmission, distribution and sale of electricity. At December 31, 2001, Florida Power had a total summer generating capacity (including jointly-owned capacity) of approximately 8,012 MW.
Florida Power provided electric service during 2001 to an average of 1.4 million customers in west central Florida. Its service area covers approximately 20,000 square miles and includes the densely populated areas around Orlando, as well as the cities of St. Petersburg and Clearwater. Florida Power is interconnected with 20 municipal and 9 rural electric cooperative systems. Major wholesale power sales customers include Seminole Electric Cooperative, Inc. (Seminole) and Florida Municipal Power Agency. Florida Power is subject to the rules and regulations of FERC and the Florida Public Service Commission (FPSC).
Florida Power's electric revenues billed by customer class, for 2001 and 2000, is shown as a percentage of total Florida Power electric revenues in the table below:
BILLED ELECTRIC REVENUES
Revenue Class 2001 2000(a) ------------- ---- ------- Residential 54% 53% Commercial 24% 24% Industrial 7% 8% Other retail 6% 5% Wholesale (b) 9% 10% |
(a) These figures reflect Florida Power's billed electric for the full year
ended December 31, 2000, which is generally representative of the period
Progress Energy owned Florida Power.
(b) These revenues are managed by Progress Ventures on behalf of Florida Power.
Important industries in Florida Power's territory include phosphate and rock mining and processing, electronics design and manufacturing and citrus and other food processing. Other important commercial activities are tourism, health care, construction and agriculture.
General
Florida Power's consumption of various types of fuel depends on several factors, the most important of which are the demand for electricity by Florida Power's customers, the availability of various generating units, the availability and cost of fuel and the requirements of federal and state regulatory agencies. Florida Power's energy mix for 2001 and 2000 is presented in the following table:
ENERGY MIX PERCENTAGES
Fuel Type 2001 2000 (a) --------- ---- -------- Coal (b) 33% 34% Oil 16% 15% Nuclear 15% 15% Gas 14% 14% Purchased Power 22% 22% |
(a) These figures reflect Florida Power's energy mix percentages for the full
year ended December 31, 2000, which is generally representative of the
period Progress Energy owned Florida Power.
(b) Includes synthetic fuel from unrelated third parties and petroleum coke.
Florida Power is generally permitted to pass the cost of recoverable fuel and purchased power to its customers through fuel adjustment clauses. The future prices for and availability of various fuels discussed in this report cannot be predicted with complete certainty. However, Florida Power believes that its fuel supply contracts, as described below, will be adequate to meet its fuel supply needs.
Florida Power's average fuel costs per million Btu for 2001 and 2000 were as follows:
AVERAGE FUEL COST
(per million Btu)
2001 2000 (a)
----- -------
Coal (b) (c) $2.16 $1.89
Oil (c) 3.81 4.15
Nuclear .47 .47
Gas (c) 4.52 4.32
Weighted Average 2.59 2.46
|
(a) These figures reflect Florida Power's average fuel cost for the year ended
December 31, 2000, which is representative of the period Progress Energy
owned Florida Power.
(b) Includes synthetic fuel from unrelated third parties and petroleum coke.
(c) Changes in the unit price for coal, oil and gas are due to market
conditions. Since these costs are primarily recovered through recovery
clauses established by regulators, the fluctuation does not materially
affect net income.
Coal
Florida Power anticipates a combined requirement of approximately 5.5 million to 6.0 million tons of coal and synthetic fuel in 2002. Most of the coal is expected to be supplied from the Appalachian coal fields of the United States. Approximately two-thirds of the fuel is expected to be delivered by rail and the remainder by barge. The fuel is supplied by Progress Fuels, an affiliate of Progress Energy, pursuant to contracts between Florida Power and Progress Fuels.
For 2002, Progress Fuels has medium and long-term contracts with various sources for approximately 100% of the fuel requirements of Florida Power's coal units. These contracts have price adjustment provisions. All the coal to be purchased for Florida Power is considered to be low sulfur coal by industry standards.
Oil and Gas
Oil is purchased under contracts and in the spot market from several suppliers. The cost of Florida Power's oil and gas is determined by market conditions. Management believes that Florida Power has access to an adequate supply
of oil for the reasonably foreseeable future. Florida Power's natural gas supply is purchased under firm contracts and in the spot market from numerous suppliers and is delivered under firm, released firm and interruptible transportation contracts. Florida Power believes that existing contracts for oil are sufficient to cover its requirements when natural gas transmission purchased on an interruptible basis is not available.
Nuclear
Nuclear fuel is processed through four distinct stages. Stages I and II involve the mining and milling of the natural uranium ore to produce a concentrate and the conversion of this uranium concentrate into uranium hexafluoride. Stages III and IV entail the enrichment of the uranium hexafluoride and the fabrication of the enriched uranium hexafluoride into usable fuel assemblies.
Florida Power expects to meet its future nuclear fuel requirements from inventory on hand and amounts received under contract. Although Florida Power cannot predict the future availability of uranium and nuclear fuel services, Florida Power does not currently expect to have difficulty obtaining uranium oxide concentrate and the services necessary for its conversion, enrichment and fabrication into nuclear fuel.
Purchased Power
Florida Power, along with other Florida utilities, buys and sells economy power through the Florida energy brokering system. Florida Power also purchases 1,304 MW of firm power under a variety of purchase power agreements. As of December 31, 2001, Florida Power had long-term contracts for the purchase of about 460 MW of purchased power with other investor-owned utilities, including a contract with The Southern Company for approximately 400 MW. Florida Power also purchased 831 megawatts of its total capacity from certain qualifying facilities (QFs). The capacity currently available from QFs represents about 10% of Florida Power's total installed system capacity.
Electric Industry Restructuring
Florida Power continues to monitor progress toward a more competitive environment and has actively participated in regulatory reform deliberations in Florida. Movement toward deregulation in this state has been affected by recent developments related to deregulation of the electric industry in California.
On January 31, 2001, the Florida 2020 Study Commission voted to forward a "proposed outline for wholesale restructuring" to the Florida legislature for its consideration in the 2001 session. The wholesale restructuring outline is intended to facilitate the evolution of a more robust wholesale marketplace in Florida. On December 11, 2001, the study commission issued its final report. The report covered a number of issues with recommendations in the areas of wholesale competition and reliability, efficiency, transmission infrastructure, environmental issues and new technologies. One key recommendation related to wholesale competition & reliability is to permit the transfer or sale of existing generation assets as follows:
. Sales and transfers of generation assets and the related timing are discretionary on the part of the investor-owned utility on a plant-by-plant basis.
. Transfers of generation assets are recorded at book value.
. Load-serving entities (LSE's) have the right to a 6-year cost based transition contract on all transferred capacity with unilateral cancellation rights and a share of the profits from off-system sales.
. Gains on sales of existing plants or those transferred and still under transition contracts must be shared 50/50 with customers.
. Losses on sales must be absorbed fully by shareholder.
. New units under construction and included in the company's 10-Year Site Plan are subject to 6-year transition contract requirement but not the gain/loss sharing.
. The FPSC has the authority to review LSE's decision to terminate transition contracts, including prior to actual termination.
Although the Company believes that the current system of regulation in Florida is working well, Florida Power has supported the study commission's efforts. While the Company does not see any compelling reason to change, the study commission's proposal is generally consistent with principles the Company believes any sound restructuring plan should adhere to if the state does decide to restructure.
The Florida legislature did not take any action on the proposed outline or final report during the 2001 session. There is no way for the Company to know what restructuring legislation will be enacted or if the Company would be able to support it in its final form.
Regional Transmission Organizations
In October 2000, Florida Power, along with Florida Power & Light Company and Tampa Electric Company filed with FERC an application for approval of a regional transmission organization, or RTO, for peninsular Florida, currently named GridFlorida. On March 28, 2001, FERC issued an order provisionally granting GridFlorida RTO status and directing the GridFlorida applicants to make certain changes in the RTO documents and to file such changes within 60 days. On May 29, 2001, the GridFlorida applicants made the compliance filing as directed by FERC, but FERC has not yet issued an order on that compliance filing.
See PART II, Item 7, "Other Matters," for a discussion of current developments of GridFlorida RTO.
Merchant Plants
In August 1998, Duke Energy filed a petition to build Florida's first merchant power plant, a 514-megawatt facility to be located in Volusia County, Florida. The plant would provide 30 megawatts of energy to the Utilities Commission of the City of New Smyrna Beach and the remaining capacity would be available for wholesale sales.
In a move Florida Power believes is contrary to existing state law, the Florida Public Service Commission (FPSC) granted Duke Energy's petition. Florida Power and other Florida utilities filed an appeal of the FPSC's decision with the Florida Supreme Court. In April 2000, the Florida Supreme Court ruled in favor of Florida Power and other utilities and reversed the FPSC's order. In December 2000, Duke Energy filed a petition for certiorari with the U.S. Supreme Court. On March 5, 2001, the U.S. Supreme Court denied Duke Energy's petition for certiorari.
Franchise Agreements
By virtue of municipal legislation, Florida Power holds franchises with varying expiration dates in most of the municipalities in which it distributes electric energy. However, Florida Power does serve within a number of municipalities and in all its unincorporated areas without existing franchise ordinances. The general effect of franchises is to provide for the manner in which Florida Power occupies rights-of-way in incorporated areas of municipalities for the purpose of constructing, operating and maintaining an energy transmission and distribution system.
Approximately 39% of Florida Power's total utility revenues for 2001 were from the incorporated areas of the 109 municipalities that had franchise ordinances during the year. Of the 18 franchises that expired during 2001, four municipalities have not yet renewed.
A new franchise ordinance was enacted during January 2002 with a municipality that did not previously have a franchise with Florida Power bringing the current number of existing franchises to 106. All but 17 of the existing franchises cover a 30-year period from the date enacted. The exceptions are 15 franchises each with a term of 10 years and expiring between 2011 and 2012; one 30-year franchise that was extended in 1999 for five years expiring in 2005; and one franchise with a term of 20 years expiring in 2020. Of the 106 franchises, 11 expire during 2002, 34 expire between January 1, 2003 and December 31, 2012 and 61 expire between January 1, 2013 and December 31, 2031.
Ongoing negotiations are taking place with the municipalities to reach agreement on franchise terms and to enact new franchise ordinances.
Stranded Costs
An important issue encompassed by industry restructuring is the recovery of "stranded costs." Stranded costs primarily include the generation assets of utilities whose value in a competitive marketplace would be less than their current book value, as well as above-market purchased power commitments to QFs. Thus far, all states that have passed restructuring legislation have provided for the opportunity to recover a substantial portion of stranded costs.
Assessing the amount of stranded costs for a utility requires various assumptions about future market conditions including the future price of electricity. For Florida Power, the single largest stranded cost exposure is its commitment to QFs. Since 1996, Florida Power has been seeking ways to address the impact of escalating payments from contracts it was obligated to sign under provisions of PURPA. These efforts have resulted in Florida Power successfully mitigating, through buy-outs and buy-downs of these contracts, more than 25 percent of its purchased power commitments to QFs.
General
Florida Power is subject to the jurisdiction of the FPSC with respect to, among other things, retail rates and issuance of securities. In addition, Florida Power is subject to regulation by FERC with respect to transmission and sales of wholesale power, accounting and certain other matters. The underlying concept of utility ratemaking is to set rates at a level that allows the utility to collect revenues equal to its cost of providing service plus a reasonable rate of return on its equity. Increased competition, as a result of industry restructuring, may affect the ratemaking process.
Electric Retail Rates
The FPSC authorizes retail "base rates" that are designed to provide a utility with the opportunity to earn a specific rate of return on its "rate base", or average investment in utility plant. These rates are intended to cover all reasonable and prudent expenses of utility operations and to provide investors with a fair rate of return. The FPSC has authorized a return on equity range for Florida Power of 11-13% and its retail base rates are based on the mid-point of that range - 12%.
Florida Power previously operated under an agreement committing several parties not to seek any reduction in its base rates or authorized return on equity. That agreement expired on June 30, 2001. During 2001, the FPSC required Florida Power to submit minimum filing requirements, based on a 2002 projected test year, to initiate a rate proceeding regarding its future base rates.
On September 14, 2001, Florida Power submitted its required rate filing, including its revenue requirements and supporting testimony. Florida Power filed supplemental minimum filing requirements and testimony on November 15, 2001. Hearings were scheduled to begin on March 20, 2002, but were postponed to accommodate pending settlement negotiations between the parties.
On March 27, 2002, the parties entered into a Stipulation and Settlement Agreement (the Agreement) related to retail rate matters. The Agreement is to be effective from May 1, 2002 through 2005; provided, however, that if Florida Power's base rate earnings fall below a 10% return on equity, Florida Power may petition the FPSC to amend its base rates.
The Agreement provides that Florida Power will reduce its retail revenues from the sale of electricity by $125 million annually through 2005. The Agreement also provides that Florida Power will operate under a Revenue Sharing Incentive Plan (the Plan) that establishes revenue caps and sharing thresholds for the years 2002 through 2005. The Plan provides that retail base rate revenues between the sharing thresholds and the retail base rate revenue caps will be divided into two shares - a 1/3 share to be received by Florida Power's shareholders, and a 2/3 share to be refunded to Florida Power's retail customers; provided, however, that for the year 2002 only, the refund to customers will be limited to 67.1% of the 2/3 customer share. The retail base rate revenue sharing threshold amounts for 2002, 2003, 2004 and 2005 will be $1,296 million, $1,333 million, $1,370 million and $1,407 million, respectively. The Plan also provides that all retail base rate revenues above the retail base rate revenue caps established for the years 2003, 2004 and 2005 will be refunded to retail customers on an annual basis. For 2002, the refund to customers will be limited to 67.1% of the retail base rate revenues that exceed the 2002 cap. The retail base revenue caps for 2002, 2003, 2004 and 2005 will be $1,356 million, $1,393 million, $1,430 million and $1,467 million, respectively.
The Agreement also provides that beginning with the in-service date of Florida Power's Hines Unit 2 and continuing through December 31, 2005, Florida Power will be allowed to recover through the fuel cost recovery clause a return on average investment and depreciation expense for Hines Unit 2, to the extent such costs do not exceed the Unit's cumulative fuel savings over the recovery period.
Additionally, the Agreement provides that Florida Power will effect a mid-course correction of its fuel cost recovery clause to reduce the fuel factor by $50 million for the remainder of 2002. The fuel cost recovery clause will operate as it normally does, including, but not limited to any additional mid-course adjustments that may become necessary, and the calculation of true-ups to actual fuel clause expenses.
During the term of the Agreement, Florida Power will suspend accruals on its reserves for nuclear decommissioning and fossil dismantlement. Additionally, for each calendar year during the term of the Agreement, Florida Power
will record a $62.5 million depreciation expense reduction, and may, at its option, record up to an equal annual amount as an offsetting accelerated depreciation expense. In addition, Florida Power is authorized, at its discretion, to accelerate the amortization of certain regulatory assets over the term of the Agreement.
Under the terms of the Agreement, Florida Power agreed to continue the implementation of its four-year Commitment to Excellence Reliability Plan and expects to achieve a 20% improvement in its annual System Average Interruption Duration Index by no later than 2004. If this improvement level is not achieved for calendar years 2004 or 2005, Florida Power will provide a refund of $3 million for each year the level is not achieved to 10% of its total retail customers served by its worst performing distribution feeder lines.
The Agreement also provides that Florida Power will refund to customers $35 million of the $98 million in interim revenues Florida Power has collected subject to refund since March 13, 2001. No other interim revenues that were collected during that period will continue to be held subject to refund.
The Agreement was filed with the FPSC for approval on March 27, 2002. If the FPSC approves the Agreement, the new rates will take effect May 1, 2002. Progress Energy cannot predict the outcome of this matter.
Fuel Cost Recovery
Florida Power's operating costs not covered by the utility's base rates include increases in fuel, purchased power and energy conservation expenses. The state commission allows electric utilities to recover certain of these costs through various cost recovery clauses, to the extent the respective commission determines in an annual hearing that such costs are prudent. Costs recovered by Florida Power include fuel costs, purchased power costs and energy conservation expenses.
The state commission's determination results in the addition of a rider to a utility's base rates to reflect the approval of these costs and to reflect any past over- or under-recovery. Due to the regulatory treatment of these costs and the method allowed for recovery, changes from year to year have no material impact on operating results.
Florida Power has one nuclear generating plant, Crystal River Unit No. 3 (CR3), which is subject to regulation by the NRC. The NRC's jurisdiction encompasses broad supervisory and regulatory powers over the construction and operation of nuclear reactors, including matters of health and safety, antitrust considerations and environmental impact. Florida Power has a license to operate the nuclear plant through December 3, 2016. Florida Power currently has a 91.8% ownership interest in CR3.
Spent nuclear fuel is stored at CR3 pending disposal under a contract with the DOE. At the present time, Florida Power has facilities on site for the temporary storage of spent nuclear fuel generated through the year 2011. Florida Power expanded the capacity of its facilities on site in 2001, after obtaining regulatory approval, to allow for the temporary storage of spent nuclear fuel generated through the end of the license in 2016.
In August 2001, the NRC issued Bulletin 2001-01, "Circumferential Cracking of Reactor Vessel Head Penetration Nozzles," requesting that all pressurized water reactors (PWR) provide their plans for inspecting the reactor vessel head for the conditions described in the bulletin. While performing this inspection, FirstEnergy Corp.'s Davis Besse plant in Ohio found three penetrations with evidence of leakage and further evidence of some wastage of the reactor vessel head around two of these penetrations. As a result of finding the wastage of the vessel head, the NRC issued Bulletin 2002-01, requesting licensees to assess previous inspections of the reactor head and determine the potential for the existence of conditions similar to that found at the Davis Besse plant.
Florida Power's CR3 has completed the inspections requested by Bulletin 2001-01. Any indications of leakage have been inspected and repaired, and no wastage of the reactor vessel head has been observed. Based on these inspections, responses to Bulletin 2002-01 are being prepared. Florida Power does not anticipate any adverse impact from this regulatory action.
Enrichment Facilities Decontamination
Florida Power and a number of other utilities are involved in litigation against the United States challenging certain retroactive assessments imposed by the federal government on domestic nuclear power companies to fund the decommissioning and decontamination of the government's uranium enrichment facilities.
On November 1, 1996, Florida Power filed suit against the U.S. Government in the U.S. Court of Claims alleging breach of contract and illegal taking of property without just compensation. The suit arises out of several contracts under which the government provided uranium enrichment services at fixed prices. After Florida Power paid for all services provided under the contracts, the government, through federal legislation enacted in 1992, imposed a retroactive price increase in order to fund the decontamination and decommissioning of the government's gaseous diffusion uranium enrichment facilities. The government is collecting this increase through an annual "special assessment" levied upon all utilities that had enrichment services contracts with the government. Collection of the special assessments began in 1992 and is scheduled to continue for a fifteen-year period.
To date, Florida Power has paid more than $18 million in special assessments, including its co-owner's share of approximately $1.5 million, and if continued throughout the anticipated fifteen-year life, the special assessments would increase the cost of Florida Power's contracts by more than $23 million. Florida Power seeks an order declaring that all such special assessments are unlawful, and an injunction prohibiting the government from collecting future special assessments and damages.
In June 1998, Florida Power, Consolidated Edison Co. and 15 other utilities filed an action for declaratory judgement against the United States in the Southern District Court of New York, challenging the constitutionality of the $2.25 billion retroactive assessment imposed by the federal government on domestic nuclear power companies to fund the decommissioning and decontamination of the government's uranium enrichment facilities. In August 1998, the utilities filed an amended complaint adding several additional utilities as plaintiffs.
In February 1999, the court granted Florida Power's motion to stay the Claims Court action, pending resolution of the District Court case. In April 1999, the District Court ruled that it had subject matter jurisdiction, and denied the government's motion to transfer the action to the Claims Court. The government appealed the decision to the U.S. Court of Appeals for the Federal Circuit, which ultimately reversed the District Court's denial of the motion to transfer. The matter was stayed pending the utilities' petition for a writ of certiorari to the Supreme Court. The Supreme Court denied the utilities' petition for certiorari on December 3, 2001. Consequently, on December 22, 2001, the Federal Circuit issued a mandate remanding the case to the District Court with instructions to transfer the case to the Court of Federal Claims. The Company cannot predict the outcome of this matter.
The Progress Ventures business unit was created in 2000 to manage Progress Energy's wholesale energy marketing and trading, merchant generation and fuel properties, as well as an ocean barge partnership. The operations of the Progress Ventures business unit can be broken down into three key areas: 1) fuel extraction, manufacturing and delivery; 2) merchant generation ownership; and 3) energy marketing and trading.
The Progress Ventures business unit owns an array of assets that produce, transport and deliver fuel for the open market. The Progress Ventures business unit has subsidiaries that mine coal and others that produce synthetic coal-based fuel, a chemically changed product made from waste coal and coal byproducts. Because this process is accomplished through a significant chemical reaction, the resulting product has been classified as a synthetic fuel within the meaning of Section 29 of the Internal Revenue Code. Sales of synthetic fuel therefore qualify for tax credits. See Progress Energy's PART II, ITEM 7, "Other Matters" for a discussion of the synthetic fuel tax credits.
The combined assets of Progress Ventures which are involved in fuel extraction, manufacturing and delivery include:
. Three coal-mining complexes, producing about 3 million tons per year;
. Seven synthetic fuel plants capable of producing 10 to 15 million tons
per year;
. Natural gas properties in Colorado producing about 5 billion cubic
feet per year;
. Six terminals on the Ohio River and its tributaries, part of the
trucking, rail and barge network for coal delivery;
. Part-ownership in a barge operation that moves coal from the mouth of
the Mississippi River to the Crystal River facility in Florida.
Merchant generation represents power plants whose capacity and energy are sold on the wholesale market outside the realm of retail regulation. A cornerstone of Progress Ventures' business plan is to own a portfolio of approximately 3,100 MW of merchant generation capacity by 2003. Much of this portfolio will be built by Progress Ventures. In addition, Progress Ventures is pursuing acquisitions and non-traditional ownership opportunities.
Progress Ventures had approximately 315 MW of merchant generation in commercial operation as of December 31, 2001. Construction, acquisition and transfers of generating assets from CP&L will increase this to approximately 3,100 MW over the next two years. See Progress Energy's PART I, ITEM 2, "Properties" for additional information on these planned additions. Progress Ventures has flexible plans around an additional 2,800 MW's subsequent to 2003. A newly established Progress Ventures function carefully examines competitive market data to determine the best locations for future merchant plants, including those planned subsequent to 2003.
Within this business function, the energy produced by the merchant plants as well as some capacity produced by the utility is sold under term contracts and in the spot market. This area is divided into two departments: Energy Trading and Term Marketing. Energy Trading markets and sells short-term contracts for power while Term Marketing markets and sells long-term contracts. Currently, Progress Ventures manages 5,300 MW of wholesale power contracts that primarily include those for CP&L and Florida Power.
In addition to power contracts, this business area also purchases fuel for both utility and merchant generation, and trades other sources of energy, such as natural gas, oil and, in the future, coal. Progress Ventures also uses financial instruments to manage the risks associated with fluctuating commodity prices and increase the value of the Company's power generation assets.
Progress Ventures does not operate in the same environment as regulated utilities. It operates specifically on the wholesale market, which means competition is its primary driver. Progress Venture's synthetic fuel operations, coal operations and merchant generation plants compete in the eastern United States utility and industrial coal markets. Factors contributing to the success in these markets include a competitive cost structure and strategic locations. See PART II, ITEM 7, "Other Matters" for a discussion of risks associated with synthetic fuel tax credits. There are, however, numerous competitors in each of these markets, although no one competitor is dominant in any industry. The business of Progress Ventures, taken as a whole, is not subject to significant seasonal fluctuation.
The largest component of Rail Services is led by Progress Rail Services Corporation (Progress Rail). Progress Rail is one of the largest integrated and diversified suppliers of railroad and transit system products and services in North America and is headquartered in Albertville, Alabama. Rail Services' principal business functions include the Mechanical Group, Rail and Trackwork Group, and Recycling Group.
The Mechanical Group is primarily focused on railroad rolling stock that includes freight cars, transit cars and locomotives, the repair and maintenance of these units, and the manufacturing or reconditioning of major components for these units. The Rail and Trackwork Group focuses on rail and other track components, the infrastructure which supports the operation of rolling stock, as well as the equipment used in maintaining the railroad infrastructure and right-of-way. The Recycling Group supports the Mechanical and Rail and Trackwork Groups through its reclamation of reconditionable material. In addition, the Recycling Group is a major supplier of recyclable scrap metal to North American steel mills and foundries through its processing locations as well as its scrap brokerage operations.
Rail Services' key railroad industry customers are Class 1 railroads, regional and shortline railroads, major North American transit systems, major railcar and locomotive builders, and major railcar lessors. The U.S. operations are located in 26 states and include further geographic coverage through mobile crews on a selected basis. This coverage allows for Rail Services' customer base to be dispersed throughout the U.S., Canada and Mexico.
The Other segment primarily includes the business of NCNG, SRS, Progress Telecom and Caronet.
General
NCNG transports, distributes and sells natural gas to over 107,400 residential customers, over 14,300 commercial and agricultural customers and 477 industrial and electric utility customers located in 110 towns and cities, primarily in eastern and south central North Carolina. NCNG also sells and transports natural gas to four municipal gas distribution systems that serve over 53,900 end users. Natural Gas operations are subject to the rules and regulations of the NCUC.
Natural Gas Supply
NCNG has long-term firm gas supply contracts with major producers and national natural gas marketers. During 2001, NCNG purchased 5,517,725 dekatherms (dt) of natural gas under its firm sales contracts with Transcontinental Gas Pipeline Corporation (Transco). NCNG also purchased 17,052,446 dt in the spot market or under long-term contracts with producers or natural gas marketers. Additionally, NCNG transported 29,872,334 dt of customer-owned gas in 2001. The outlook for natural gas supplies in NCNG's service area remains favorable, and many sources of gas are available on a firm basis.
Competition
The natural gas industry continues to evolve into a more competitive environment. NCNG has competed successfully with other forms of energy such as electricity, residual fuel, distillate fuel oil, propane and, to a lesser extent, coal. The principal competitive considerations have been price and accessibility. With the exception of four municipalities that operate municipal gas distribution systems within its service territory, NCNG is the sole distributor of natural gas in our franchised service territory.
Currently, NCNG's residential and commercial customers receive services under a bundled rate, which includes charges for both the cost of gas and its delivery to the customer. Unbundling of the services to commercial and residential customers could increase competition for commodity sales services, but not for the distribution of natural gas. Since NCNG does not earn any margin or income from the commodity sale of natural gas, separating the cost of gas from the cost of its delivery will not impact the operations. NCNG does not expect the NCUC to require further unbundling in the near future. NCNG has adopted a policy that requires that it have a balanced gas supply portfolio that provides security of supply at the lowest reasonable cost, as determined by the NCUC in all of the prior annual prudency reviews.
During 2001, approximately 55% of total throughput on NCNG's system was sold to customers having alternative fuel usage capabilities under interruptible rates, which allows NCNG to request that these customers discontinue gas service during periods of heavy demand so that NCNG is able to maintain its obligation to serve its firm market demand (residential and commercial). However, the purchased gas adjustment rider, which was part of NCNG's tariffs approved by the NCUC, allows NCNG to negotiate rates lower than the filed tariff rates and to recover the lost margin from the other core market customers to encourage industrial customers to remain on the system when the price of their alternative fuel is lower than the gas tariff rate. The purchased gas adjustment rider also sets forth NCNG's filing requirements with the NCUC, enables it to negotiate rates with customers and establishes the procedures governing the monthly and annual review of gas costs and corresponding rate changes.
Franchises
NCNG holds a certificate of public convenience and necessity granted by the NCUC to provide service to NCNG's current service area. Under North Carolina law, no company may construct or operate properties for the sale or distribution of natural gas without such a certificate, except that no certificate is required for construction in the ordinary course of business or for construction into territory contiguous to that already occupied by a company and not receiving similar service from another utility.
NCNG has nonexclusive franchises from 70 municipalities in which NCNG distributes natural gas. The expiration dates of those franchises that have specific expiration provisions range from 2004 to 2020. As of February 28, 2002,
NCNG is negotiating franchise agreements with two new towns, City of Whiteville and Village of Pinehurst. NCNG expects all negotiations to result in 10 or 20-year agreements. In the event that these franchise agreements cannot be negotiated, NCNG does not believe that it will experience any material adverse effect. None of the remaining franchise agreements are scheduled to expire within the next two years. The franchises are substantially uniform in nature. They contain no restrictions of a materially burdensome nature and are adequate for NCNG's business. In addition, NCNG serves 36 communities from which no franchises are required.
Regulatory Matters
The NCUC regulates NCNG's rates, service area, adequacy of service, safety standards, acquisition, extension and abandonment of facilities, accounting and sales of securities. NCNG operates only in North Carolina and is not subject to federal regulation as a "natural gas company" under the Natural Gas Act.
Retail Rates
On October 27, 1995, the NCUC issued an order that provides for a rate of return of 10.09%, but did not state separately the rate of return on common equity or the capital structure used to calculate revenue requirements. The order established several new rate schedules, including an economic development rate to assist in attracting new industry to NCNG's service area and a rate to provide standby, on-peak gas supply service to industrial and other customers whose gas service would otherwise be interrupted.
In conjunction with CP&L's acquisition of NCNG on July 15, 1999, NCNG signed a joint stipulation agreement with the NCUC in which NCNG agreed to cap margin rates for gas sales and transportation services, with limited exceptions, through November 1, 2003. The Company believes that this agreement will not have a material adverse effect on the results of operations, financial condition, or cash flows. In February 2002, NCNG filed a general rate case with the NCUC requesting an annual rate increase of $47.6 million, based upon its completion of major expansion projects. Progress Energy cannot predict the final outcome of this matter.
Expansion Projects
In March 2001, NCNG completed an 84-mile, 30-inch natural gas pipeline, named the Sandhills Pipeline, which extends from Iredell County to Richmond County in North Carolina. This pipeline cost approximately $100 million and will primarily be used to transport natural gas to an electric generating plant currently under construction in Richmond County by CP&L, an affiliate of NCNG.
In October 1999, CP&L and the Albemarle Pamlico Economic Development Corporation (APEC) announced their intention to build an 850-mile, $197.5 million, natural gas transmission and distribution system to the 14 currently unserved counties in eastern North Carolina that were previously franchised to NCNG, as discussed above. In furtherance of this project, Progress Energy and APEC formed Eastern North Carolina Natural Gas Co. (EasternNC, formerly reported as ENCNG). Progress Energy and APEC are joint owners of EasternNC, which is a public utility subject to the rules and regulations of the NCUC. EasternNC contracted with CP&L to construct, operate and maintain both the transmission and distribution systems. EasternNC contracted with APEC to provide various services as well, including but not limited to, managing all municipal and county franchise issues, marketing and economic development and ensuring that the new facilities are built in the most advantageous locations to promote development of the economic base in the region. In conjunction with this project, EasternNC filed a request with the NCUC for $186 million of a $200 million state bond package established for natural gas infrastructure to pay for the portion of the project that likely could not be recovered from future gas customers through rates. On June 15, 2000, the NCUC issued an order awarding EasternNC an exclusive franchise to all 14 counties and, in a further order issued on July 12, 2000, granted $38.7 million in state bond funding for phase one of the project. Phase one, which will cost a total of $50.5 million, will bring gas service to 6 of the 14 counties. By order issued June 7, 2001 the NCUC approved construction of phases 2-7 of the project which addresses the remaining 8 counties and awarded EasternNC an additional $149.6 million to finance the construction of the facilities associated with these phases. EasternNC has begun construction of phase one of the project and expects to complete construction of phase one in the summer of 2002. EasternNC has also begun marketing natural gas service to prospective customers in phase one. The schedule for the remaining phases calls for construction of phase two to begin in the summer of 2002, and for all phases to be completed by the summer of 2004.
Progress Energy has agreed to fund a portion of the project, which is currently estimated to be approximately $22 million.
SRS offers a comprehensive suite of innovative solutions for energy management and building automation. SRS' portfolio of systems and services provides clients with tools to integrate and centrally manage their energy usage and facility needs. SRS delivers solutions for commercial, industrial, education and government clients. Progress Energy is refocusing the SRS business on energy services in the southeastern states.
Progress Telecom has data fiber network transport capabilities that stretch from New York to Miami, Florida, with gateways to Latin America and conducts primarily a carrier's carrier business. Progress Telecom markets wholesale fiber-optic-based capacity service in the Eastern United States to long-distance carriers, internet service providers and other telecommunications companies. Progress Telecom also markets wireless structure attachments to wireless communication companies and governmental entities. Caronet, Inc. (Caronet) serves the telecommunications industry by providing fiber-optic telecommunications services. As of December 31, 2001, Progress Telecom owned and managed approximately 7,200 route miles and more than 130,000 fiber miles of fiber optic cable, which includes Caronet. In December 2001, Progress Telecom Corporation (Telecom) was formed. Assets, liabilities, and existing contracts of Progress Telecom and Caronet will be transferred to Telecom upon regulatory approval. Regulatory approval is expected during the first half of 2002.
Progress Telecom and Caronet compete with other providers of fiber-optic telecommunications services, including local exchange carriers and competitive access providers, in the Eastern United States.
Years Ended December 31
2001 2000 (e) 1999 1998 1997
---------- ---------- ---------- ---------- ----------
Energy supply (millions of kWh)
Generated - Steam 48,732 31,132 28,260 27,576 25,545
Nuclear 27,300 23,857 22,451 22,014 21,690
Hydro 245 441 520 790 799
Combustion Turbines 6,644 1,337 435 386 189
Purchased 14,469 5,724 5,132 5,675 6,318
---------- ---------- ---------- ---------- ----------
Total energy supply (Company share) 97,390 62,491 56,798 56,441 54,541
Jointly-owned share (a) 4,883 4,505 4,353 4,349 4,101
---------- ---------- ---------- ---------- ----------
Total system energy supply 102,273 66,996 61,151 60,790 58,642
========== ========== ========== ========== ==========
Average fuel cost (per million BTU)
Fossil $ 2.46 $ 1.96 $ 1.75 $ 1.71 $ 1.75
Nuclear fuel $ 0.45 $ 0.45 $ 0.46 $ 0.46 $ 0.46
All fuels $ 1.77 $ 1.30 $ 1.16 $ 1.14 $ 1.14
Energy sales (millions of kWh)
Retail
Residential 31,976 15,365 13,348 13,207 12,348
Commercial 23,033 12,221 11,068 10,646 9,910
Industrial 17,204 14,762 14,568 14,899 14,958
Other Retail 4,149 1,626 1,359 1,357 1,281
Wholesale 17,715 15,012 14,526 14,461 13,875
Unbilled (1,045) 1,098 (110) (94) 393
---------- ---------- ---------- ---------- ----------
Total energy sales 93,032 60,084 54,759 54,476 52,765
Company uses and losses 3,478 2,286 2,039 1,964 1,776
---------- ---------- ---------- ---------- ----------
Total energy requirements 96,510 62,370 56,798 56,440 54,541
========== ========== ========== ========== ==========
Natural gas sales (millions of dt) (b) 52,442 57,026 27,564 -- --
Electric revenues (in thousands)
Retail $5,461,469 $2,799,422 $2,530,562 $2,536,693 $2,428,650
Wholesale 922,719 664,847 556,079 528,253 507,720
Miscellaneous revenue 172,373 85,552 59,517 65,099 87,719
---------- ---------- ---------- ---------- ----------
Total electric revenues $6,556,561 $3,549,821 $3,146,158 $3,130,045 $3,024,089
========== ========== ========== ========== ==========
Peak demand of firm load (thousands of kW)
System (c) 19,166 18,874 10,948 10,529 10,030
Company 18,564 18,272 10,344 9,875 9,344
Total capability at year-end (thousands of kW)
Fossil plants 16,141 14,902 6,891 6,571 6,571
Nuclear plants 4,008 4,008 3,174 3,174 3,064
Hydro plants 218 218 218 218 218
Purchased 2,890 2,278 1,088 1,538 1,588
---------- ---------- ---------- ---------- ----------
Total system capability 23,257 21,406 11,371 11,501 11,441
Less jointly-owned portion (d) 668 662 593 593 690
---------- ---------- ---------- ---------- ----------
Total Company capability 22,589 20,744 10,778 10,908 10,751
========== ========== ========== ========== ==========
|
(a) Represents co-owner's share of the energy supplied from the five generating
facilities that are jointly owned.
(b) Reflects the acquisition of NCNG on July 15, 1999
(c) For 2001 and 2000, this represents the combined summer non-coincident
system net peaks for CP&L and Florida Power.
(d) Net of the Company's purchases from jointly-owned plants.
(e) Includes information for Florida Power since November 30, 2000, the date of
acquisition.
Years Ended December 31
2001 2000 1999 1998 1997
---------- ---------- ---------- ---------- ----------
Energy supply (millions of kWh)
Generated - Steam 27,913 29,520 28,260 27,576 25,545
Nuclear 21,321 23,275 22,451 22,014 21,690
Hydro 245 441 520 790 799
Combustion Turbines 802 733 435 386 189
Purchased 5,296 4,878 5,132 5,675 6,318
---------- ---------- ---------- ---------- ----------
Total energy supply (Company share) 55,577 58,847 56,798 56,441 54,541
Power Agency share (a) 4,348 4,505 4,353 4,349 4,101
---------- ---------- ---------- ---------- ----------
Total system energy supply 59,925 63,352 61,151 60,790 58,642
========== ========== ========== ========== ==========
Average fuel cost (per million BTU)
Fossil $ 1.91 $ 1.83 $ 1.75 $ 1.71 $ 1.75
Nuclear fuel $ 0.44 $ 0.45 $ 0.46 $ 0.46 $ 0.46
All fuels $ 1.26 $ 1.21 $ 1.16 $ 1.14 $ 1.14
Energy sales (millions of kWh)
Retail
Residential 14,372 14,091 13,348 13,207 12,348
Commercial 11,972 11,432 11,068 10,646 9,910
Industrial 13,332 14,446 14,568 14,899 14,958
Other Retail 1,423 1,423 1,359 1,357 1,281
Wholesale 12,996 14,582 14,526 14,461 13,875
Unbilled (534) 679 (110) (94) 393
---------- ---------- ---------- ---------- ----------
Total energy sales 53,561 56,653 54,759 54,476 52,765
Company uses and losses 2,017 2,194 2,039 1,964 1,776
---------- ---------- ---------- ---------- ----------
Total energy requirements 55,578 58,847 56,798 56,440 54,541
========== ========== ========== ========== ==========
Electric revenues (in thousands)
Retail $2,665,857 $2,608,727 $2,530,562 $2,536,693 $2,428,650
Wholesale 634,009 577,279 556,079 528,253 507,720
Miscellaneous revenue 43,854 122,209 59,518 65,099 87,719
---------- ---------- ---------- ---------- ----------
Total electric revenues $3,343,720 $3,308,215 $3,146,159 $3,130,045 $3,024,089
========== ========== ========== ========== ==========
Peak demand of firm load (thousands of kW)
System 11,376 11,157 10,948 10,529 10,030
Company 10,774 10,555 10,344 9,875 9,344
Total capability at year-end (thousands of kW)
Fossil plants (c) 8,648 7,569 6,891 6,571 6,571
Nuclear plants 3,174 3,174 3,174 3,174 3,064
Hydro plants 218 218 218 218 218
Purchased 1,586 978 1,088 1,538 1,588
---------- ---------- ---------- ---------- ----------
Total system capability 13,626 11,939 11,371 11,501 11,441
Less Power Agency-owned portion (b) 599 593 593 593 690
---------- ---------- ---------- ---------- ----------
Total Company capability 13,027 11,346 10,778 10,908 10,751
========== ========== ========== ========== ==========
|
(a) Represents Power Agency's share of the energy supplied from the four
generating facilities that are jointly owned.
(b) Net of CP&L's purchases from Power Agency.
(c) Includes Rowan units that were transferred to Progress Ventures in February
2002.
The Company believes that its physical properties and those of its subsidiaries are adequate to carry on its and their businesses as currently conducted. The Company and its subsidiaries maintain property insurance against loss or damage by fire or other perils to the extent that such property is usually insured.
As of December 31, 2001, CP&L's nineteen generating plants represent a flexible mix of fossil, nuclear and hydroelectric resources in addition to combustion turbines and combined cycle units, with a total generating capacity (including Power Agency's share) of 12,040 megawatts (MW). CP&L's strategic geographic location facilitates purchases and sales of power with many other electric utilities, allowing CP&L to serve its customers more economically and reliably. At December 31, 2001, CP&L had the following generating facilities:
-----------------------------------------------------------------------------------------------
Summer Net
No. of Capability (a)
Facility Location Units In-Service Date Fuel (in MW)
-----------------------------------------------------------------------------------------------
STEAM TURBINES
Asheville Skyland, N.C. 2 1964-1971 Coal 392
Cape Fear Moncure, N.C. 2 1956-1958 Coal 316
Lee Goldsboro, N.C. 3 1952-1962 Coal 407
Mayo Roxboro, N.C. 1 1983 Coal 745(b)
Robinson Hartsville, S.C. 1 1960 Coal 174
Roxboro Roxboro, N.C. 4 1966-1980 Coal 2,462(b)
Sutton Wilmington, N.C. 3 1954-1972 Coal 613
Weatherspoon Lumberton, N.C. 3 1949-1952 Coal 176
-- ------
Total 19 5,285
COMBINED CYCLE
Cape Fear Moncure, N.C. 2 1969 Oil 84
-- ------
Total 2 84
COMBUSTION TURBINES
Asheville Skyland, N.C. 2 1999-2000 Gas/Oil 330
Blewett Lilesville, N.C. 4 1971 Oil 52
Darlington Hartsville, S.C. 13 1974-1997 Gas/Oil 812
Lee Goldsboro, N.C. 4 1968-1971 Oil 91
Morehead City Morehead City, N.C. 1 1968 Oil 15
Richmond Hamlet, N.C. 4 2001 Gas/Oil 620
Robinson Hartsville, S.C. 1 1968 Gas/Oil 15
Rowan Salisbury, N.C. 3 2001 Gas/Oil 459(c)
Roxboro Roxboro, N.C. 1 1968 Oil 15
Sutton Wilmington, N.C. 3 1968-1969 Oil 64
Wayne County Goldsboro, N.C. 4 2000 Gas/Oil 668
Weatherspoon Lumberton, N.C. 4 1970-1971 Oil 138
-- ------
Total 44 3,279
NUCLEAR
Brunswick Southport, N.C. 2 1975-1977 Uranium 1,631(b)
Harris New Hill, N.C. 1 1987 Uranium 860(b)(d)
Robinson Hartsville, S.C. 1 1971 Uranium 683
-- ------
Total 4 3,174
HYDRO
Blewett Lilesville, N.C. 6 1912 Water 22
Marshall Marshall, N.C. 2 1910 Water 5
Tillery Mount Gilead, N.C. 4 1928-1960 Water 86
Walters Waterville, N.C. 3 1930 Water 105
-- ------
Total 15 218
TOTAL 84 12,040
-----------------------------------------------------------------------------------------------
|
(a) Represents CP&L's net summer peak rating, gross of co-ownership interest in
plant capacity
(b) Facilities are jointly owned by CP&L and Power Agency, and the capacities
shown include Power Agency's share
(c) This facility was transferred from CP&L to Progress Ventures in February
2002
(d) On January 1, 2002, a successful power uprate increased the summer net
capability of this facility to 900 MW
As of December 31, 2001, including both the total generating capacity of 12,040 MW and the total firm contracts for purchased power of approximately 1,586 MW, CP&L had total capacity resources of approximately 13,626 MW.
The Power Agency has acquired undivided ownership interests of 18.33% in Brunswick Unit Nos. 1 and 2, 12.94%, in Roxboro Unit No. 4 and 16.17% in the Harris Plant and Mayo Unit No. 1. Otherwise, CP&L has good and marketable title to its principal plants and important units, subject to the lien of its mortgage and deed of trust, with minor exceptions, restrictions, and reservations in conveyances, as well as minor defects of the nature ordinarily found in properties of similar character and magnitude. CP&L also owns certain easements over private property on which transmission and distribution lines are located.
As of December 31, 2001, CP&L had 5,894 pole miles of transmission lines including 295 miles of 500 kilovolt (kV) lines and 3,033 miles of 230 kV lines, and distribution lines of approximately 44,530 pole miles of overhead lines and approximately 15,646 miles of underground lines. Distribution and transmission substations in service had a transformer capacity of approximately 31,104,000 kilovolt-ampere (kVA) in 2,234 transformers. Distribution line transformers numbered 488,064 with an aggregate 19,535,000 kVA capacity.
As of December 31, 2001, the total summer generating capacity (including jointly-owned capacity) of Florida Power's generating facilities was 8,012 MW. Florida Power's generating plants and their summer capacities gross of co-ownership interests at December 31, 2001, are as follows:
--------------------------------------------------------------------------------------------------
Summer Net
No. of Capability (a)
Facility Location Units In-Service Date Fuel (in MW)
--------------------------------------------------------------------------------------------------
STEAM TURBINES
Anclote Holiday, FL 2 1974-1978 Gas/Oil 993
Bartow St. Petersburg, FL 3 1958-1963 Gas/Oil 444
Crystal River Crystal River, FL 4 1966-1984 Coal 2,302
Suwannee River Live Oak, FL 3 1953-1956 Gas/Oil 143
-- -----
Total 12 3,882
COMBINED CYCLE
Hines Bartow, FL 1 1999 Gas/Oil 482
Tiger Bay Fort Meade, FL 1 1997 Gas 207
-- -----
Total 2 689
COMBUSTION TURBINES
Avon Park Avon Park, FL 2 1968 Gas/Oil 52
Bartow St. Petersburg, FL 4 1958-1972 Gas/Oil 187
Bayboro St. Petersburg, FL 4 1973 Oil 184
DeBary DeBary, FL 10 1975-1992 Gas/Oil 667
Higgins Oldsmar, FL 4 1969-1970 Gas 122
Intercession City Intercession City, FL 14 1974-2000 Gas/Oil 1,029(b)
Rio Pinar Rio Pinar, FL 1 1970 Oil 13
Suwannee River Live Oak, FL 3 1980 Gas/Oil 164
Turner Enterprise, FL 4 1970-1974 Oil 154
University of Gainesville, FL 1 1994 Gas 35
Florida Cogeneration
-- -----
Total 47 2,607
NUCLEAR
Crystal River Crystal River, FL 1 1977 Uranium 834(c)
-- -----
Total 1 834
TOTAL 62 8,012
--------------------------------------------------------------------------------------------------
|
(a) Represents Florida Power's net summer peak rating, gross of co-ownership
interest in plant capacity
(b) Florida Power and Georgia Power Company ("Georgia Power") are co-owners of
a 143 MW advanced combustion turbine located at Florida Power's
Intercession City site. Georgia Power has the exclusive right to the output
of this unit during the months of June through September. Florida Power has
that right for the remainder of the year.
(c) Represents 100% gross of co-owners total plant capacity. Florida Power's
ownership percentage is approximately 91.8%.
As of December 31, 2001, including both the total generating capacity of 8,012 MW and the total firm contracts for purchased power of 1,304 MW, Florida Power had total capacity resources of approximately 9,316 MW.
Substantially all of Florida Power's utility plant is pledged as collateral for Florida Power's First Mortgage Bonds.
As of December 31, 2001, Florida Power distributed electricity through 358 substations with an installed transformer capacity of 50,800,000 kVA. Of this capacity, 37,243,000 kVA is located in transmission substations and 13,557,000 kVA in distribution substations. Florida Power has the second largest transmission network in Florida. Florida Power has 4,696 circuit miles of transmission lines, of which 2,577 circuit miles are operated at 500, 230, or 115 kV and the balance at 69 kV. Florida Power has 26,806 circuit miles of distribution lines, which operate at various voltages ranging from 2.4 to 25 kV.
The Progress Ventures business unit controls, either directly or through subsidiaries, coal reserves located in eastern Kentucky and southwestern Virginia. Progress Ventures owns properties that contain estimated coal reserves of approximately 13 million tons and controls, through mineral leases, additional estimated coal reserves of approximately 20 million tons. The reserves controlled include substantial quantities of high quality, low sulfur coal that is appropriate for use at Florida Power's existing generating units. Progress Ventures' total production of coal during 2001 was approximately 3.1 million tons.
In connection with its coal operations, Progress Venture's subsidiaries own and operate an underground mining complex located in southeastern Kentucky and southwestern Virginia. Other subsidiaries own and operate surface and underground mines, coal processing and loadout facilities and a river terminal facility in eastern Kentucky, a railcar-to-barge loading facility in West Virginia, and three bulk commodity terminals: one on the Ohio River in Cincinnati, Ohio, and two on the Kanawha River near Charleston, West Virginia. Progress Ventures and its subsidiaries employ both company and contract miners in their mining activities. Through a joint venture, Progress Ventures has four oceangoing tug/barge units.
The Progress Ventures business unit, through direct and indirect subsidiaries, owns all of the interests in five entities and a minority interest in one entity that owns facilities that produce synthetic fuel. These entities own a total of nine facilities in seven different locations in West Virginia, Virginia and Kentucky.
A subsidiary of Progress Ventures has oil and gas leases on about 20,000 acres in Garfield and Mesa Counties, Colorado, containing proven natural gas net reserves of 67.5 billion cubic feet. This subsidiary currently operates 70 gas wells on the properties. Total natural gas production in 2001 was 4.7 billion cubic feet.
Another subsidiary of Progress Ventures owns and operates a manufacturing facility at the Florida Power Energy Complex in Crystal River, Florida. The manufacturing process utilizes the fly ash generated by the burning of coal as the major raw material in the production of lightweight aggregate used in construction building blocks.
As of December 31, 2001, Progress Ventures had the following merchant plants in service, planned for construction or planned to be acquired.
----------------------------------------------------------------------------------------------
Construction Commercial Operation Configuration/Number
Project Start Date Date of Units MW (a)
----------------------------------------------------------------------------------------------
Monroe Units 1 and 2 4Q 1998/1Q 2000 1Q 2000/2Q 2001 Simple-Cycle, 2 315
-----
Total 315
Rowan Phase I (b) 1Q 2000 2Q 2001 Simple-Cycle, 3 459
Walton (c) 2Q 2000 2Q 2001 Simple-Cycle, 3 460
DeSoto Units 1 and 2 2Q 2001 2Q 2002 (d) Simple-Cycle, 2 320
-----
Total 1,239
Effingham 1Q 2001 2Q 2003 (d) Combined-Cycle, 1 480
Rowan Phase II (b) 4Q 2001 2Q 2003 (d) Combined-Cycle, 1 466
Washington (c) 2Q 2002 2Q 2003 (d) Simple-Cycle, 4 600
-----
Total 1,546
TOTAL 3,100
----------------------------------------------------------------------------------------------
|
(a) Represents Progress Venture's summer rating.
(b) Transferred from CP&L to Progress Ventures in February 2002
(c) Purchased from LG&E Energy Corp. in February 2002
(d) Expected commercial operation date
Progress Rail is one of the largest integrated processors of railroad materials in the United States, and is a leading supplier of new and reconditioned freight car parts, rail, rail welding and track work components, railcar repair facilities, railcar and locomotive leasing, maintenance-of-way equipment and scrap metal recycling. It has facilities in 26 states, Mexico and Canada.
Progress Rail owns and/or operates approximately 5,300 railcars and 100 locomotives that are used for the transportation and shipping of coal, steel and other bulk products.
NCNG owns and operates a liquefied natural gas storage plant which provides 97,200 dekatherms (dt) per day to NCNG's peak-day delivery capability.
NCNG owns approximately 1,225 miles of transmission pipelines of two to 30 inches in diameter which connect its distribution systems with the Texas-to-New York transmission system of Transco and the southern end of Columbia's transmission system. Transco delivers gas to NCNG at various points conveniently located with respect to its distribution area. Columbia delivers gas to one delivery point near the North Carolina - Virginia border. NCNG distributes natural gas through its 3,026 miles of distribution mains. These transmission pipelines and distribution mains are located primarily on rights-of-way held under easement, license or permit on lands owned by others.
In March 2001, construction of a 30-inch natural gas pipeline, named the Sandhills Pipeline, from Iredell County to Richmond County in North Carolina was completed. This 84-mile pipeline is primarily used to transport natural gas to an electric generating plant constructed in Richmond County by CP&L.
Progress Telecom provides wholesale telecommunications services throughout the Southeastern United States. Progress Telecom incorporates more than 130,000 fiber miles in its network including over 150 Points-of-Presence, which includes Caronet.
Legal and regulatory proceedings are included in the discussion of the Company's business in PART I, ITEM 1 under "Environmental", "Regulatory Matters" and "Nuclear Matters" and incorporated by reference herein.
NONE
Name Age Recent Business Experience
---- --- --------------------------
William Cavanaugh III 63 Chairman, President and Chief Executive Officer, Progress Energy, Inc.,
August 1999 to present; Chairman, Progress Energy Service Company, LLC,
August 2000 to present; Chairman, Florida Power Corporation, November 30,
2000 to present; Chairman, Progress Ventures, Inc., March 2000 to present;
Chairman, President and Chief Executive Officer, Carolina Power & Light
Company ("CP&L"), May 1999 to present; President and Chief Executive
Officer, CP&L, October 1996 to May 1999; President and Chief Operating
Officer, CP&L, September 1992 to October 1996. Member of the Board of
Directors of the Company since 1993.
William S. Orser 57 Group President, CP&L and Florida Power Corporation, November 2000 to
present; Executive Vice President, CP&L, Energy Supply, June 1998 to
November 2000; Executive Vice President and Chief Nuclear Officer, CP&L,
December 1996 to June 1998; Executive Vice President, CP&L, Nuclear
Generation, April 1993 to December 1996.
Robert B. McGehee 59 Executive Vice President, Progress Energy, Inc. and CP&L, February, 2001
to present; Executive Vice President, Florida Progress Company, December
2000 to present; President and Chief Executive Officer, Progress Energy
Service Company, LLC, from August, 2000 to present; Executive Vice
President and General Counsel, Progress Energy Inc., August, 1999 to
February, 2001; Executive Vice President and General Counsel, CP&L, May
2000 to February 2001; Executive Vice President, General Counsel, Chief
Administrative Officer and Interim Chief Financial Officer, CP&L, March 3,
2000 to May 2000; Executive Vice President, General Counsel and Chief
Administrative Officer, CP&L, March 1999 to March 3, 2000; Senior Vice
President and General Counsel, CP&L, May 1997 to March 1999. From 1974 to
May 1997, Mr. McGehee was a practicing attorney with Wise Carter Child &
Caraway, a law firm in Jackson, Mississippi. He primarily handled
corporate, contract, nuclear regulatory and employment matters. From 1987
to 1997 he managed the firm, serving as chairman of its Board from 1992 to
May 1997.
Peter M. Scott III 52 Executive Vice President and Chief Financial Officer, Progress Energy,
Inc., June 2000 to present; Executive Vice President and CFO, Florida
Power Corporation and Florida Progress Corporation, November 2000 to
present; Executive Vice President and CFO, Progress Energy Service
Company, LLC, August 2000 to present; Executive Vice President and CFO,
CP&L, May 2000 to present; Executive Vice President and CFO, NCNG,
December 2000 to present. Before joining the Company, Mr. Scott was
President of Scott, Madden & Associates, Inc., a management consulting
firm he founded in 1983. The firm advises companies on key strategic
initiatives for growing shareholder value.
|
William D. Johnson 48 Executive Vice President, General Counsel and Secretary, Progress Energy,
Inc, February 2001 to present; Executive Vice President and Corporate
Secretary, Progress Energy, Inc., June 2000 to February 2001; Senior Vice
President and Secretary, Progress Energy, Inc., August 1999 to June 2000;
Executive Vice President, General Counsel and Corporate Secretary,
Progress Energy Service Company, LLC, August 2000 to present; Executive
Vice President, General Counsel and Corporate Secretary, CP&L, November
2000 to present; Senior Vice President and Corporate Secretary, CP&L,
Legal and Risk Management, March 1999 to November 2000; Vice
President-Legal Department and Corporate Secretary, CP&L, 1997 to 1999;
Vice President, Senior Counsel and Manager-Legal Department, CP&L, 1995 to
1997.
Robert H. Bazemore, Jr. 47 Controller, Progress Energy, Inc., June 2000 to present; Controller,
Florida Power Corporation and Florida Progress Corporation, November 2000
to present; Vice President and Controller, Progress Energy Service
Company, LLC, August 2000 to present; Chief Accounting Officer and
Controller, CP&L, May 2000 to present; Chief Accounting Officer and
Controller, North Carolina Natural Gas Corporation ("NCNG"), December 2000
to present; Director, CP&L, Operations & Environmental Support Department,
December 1998 to May 2000; Manager, CP&L, Financial & Regulatory
Accounting, September 1995 to December 1998.
Donald K. Davis 56 Executive Vice President, CP&L, May 2000 to present; President and Chief
Executive Officer, NCNG, July 2000 to present; Chief Executive Officer,
Strategic Resource Solutions, June 2000 to present; Executive Vice
President, Florida Power Corporation, February 2001 to present. Before
joining the Company, Mr. Davis was Chairman, President and Chief Executive
Officer of Yankee Atomic Electric Company, and served as Chairman,
President and Chief Executive Officer of Connecticut Atomic Power Company
from 1997 to May 2000.
Fred N. Day, IV 58 Executive Vice President, CP&L and Florida Power Corporation, November
2000 to present; Senior Vice President, CP&L, Energy Delivery, July 1997
to November 2000; Vice President, CP&L, Western Region, 1995 to July 1997.
Cecil L. Goodnight 59 Senior Vice President, Progress Energy Service Company, LLC, August 2000
to present; Senior Vice President, Florida Power Corporation, June 2001 to
present; Senior Vice President, CP&L, December 1998 to present; Senior
Vice President and Chief Administrative Officer, CP&L, December 1996 to
December 1998.
*H. William Habermeyer, Jr. 59 President and Chief Executive Officer, Florida Power Corporation, November
2000 to present; Vice President, CP&L, Western Region, July 1997 to
November 2000; Vice President, CP&L, Nuclear Engineering, August 1995 to
July 1997.
*Bonnie V. Hancock 40 Senior Vice President, Progress Energy Service Company, LLC, November 2000
to present; Vice President, CP&L, Strategic Planning, February 1999 to
November 2000; Vice President and Controller, CP&L, February 1997 to
February 1999; Manager, Tax Department, CP&L, September 1995 to February
1997.
|
C.S. Hinnant 57 Senior Vice President, Florida Power Corporation, November 2000 to present;
Senior Vice President and Chief Nuclear Officer, CP&L, June 1998 to present;
Vice President, CP&L, Brunswick Nuclear Plant, April 1997 to June 1998; Vice
President, CP&L, Robinson Nuclear Plant, March 1994 to March 1997.
Tom D. Kilgore 54 Group President, CP&L, November 2000 to present; President and CEO, Progress
Ventures, Inc., March 2000 to present; Senior Vice President, CP&L, Power
Operations, August 1998 to November 2000; President and Chief Executive Officer,
Oglethorpe Power Corporation, Georgia Transmission Corporation and Georgia
Operations Corporation, July 1991 to August 1998. These three companies provide
power generation, transmission and system operations services, respectively, to
39 of Georgia's 42 customer-owned Electric Membership Corporations. From 1984 to
July 1991, Mr. Kilgore held numerous management positions at Oglethorpe.
E. Michael Williams 53 Senior Vice President, Florida Power Corporation, November 2000 to present;
Senior Vice President, CP&L, June 2000 to present. President,. Before joining
the Company, Mr. Williams held the position of Vice President, Fossil
Generation, Central and South West Corp., an investor-owned utility from March
1994 to June 2000.
|
* Indicates individual is an executive officer of Progress Energy, Inc., but not CP&L.
PART II
Progress Energy's Common Stock is listed on the New York and Pacific Stock Exchanges. The high and low stock prices for CP&L (for periods prior to the consummation of the holding company restructuring on June 19, 2000) and for Progress Energy (for periods following the consummation of the holding company restructuring on June 19, 2000) for each quarter for the past two years, and the dividends declared per share are as follows:
2001 High Low Dividends Declared ---- ------ ------ ------------------ First Quarter $49.25 $38.78 .530 Second Quarter 45.00 40.36 .530 Third Quarter 45.79 39.25 .530 Fourth Quarter 45.60 40.50 .545 2000 High Low Dividends Declared ---- ------ ------ ------------------ First Quarter $37.00 $28.25 .515 Second Quarter 38.00 31.00 .515 Third Quarter 41.94 31.50 .515 Fourth Quarter 49.38 38.00 .530 |
The December 31 closing price of the Company's Common Stock was $45.03 in 2001 and $49.19 in 2000.
As of February 28, 2002, the Company had 218,727,139 holders of record of Common Stock.
Progress Energy holds all 159,608,055 shares outstanding of CP&L common stock and, therefore, no public trading market exists for the common stock of CP&L.
The selected consolidated financial data should be read in conjunction with the consolidated financial statements and the notes thereto included elsewhere in this report.
Years Ended December 31
2001 2000 (a) 1999 (b) 1998 1997
----------- ----------- ---------- ---------- ----------
(dollars in thousands except per share data)
Operating results
-----------------
Operating revenues $ 8,461,459 $ 4,103,413 $3,364,927 $3,211,552 $3,038,159
Net income $ 541,610 $ 478,361 $ 379,288 $ 396,271 $ 382,265
Per share data
Basic earnings per
common share $ 2.65 $ 3.04 $ 2.56 $ 2.75 $ 2.66
Diluted earnings per
common share $ 2.64 $ 3.03 $ 2.55 $ 2.75 $ 2.66
Dividends declared per common
share $ 2.135 $ 2.075 $ 2.015 $ 1.955 $ 1.895
Assets $20,739,791 $20,110,701 $9,494,019 $8,401,406 $8,220,728
------
Capitalization
--------------
Common stock equity $ 6,003,533 $ 5,424,201 $3,412,647 $2,949,305 $2,818,807
Preferred stock - redemption
not required 92,831 92,831 59,376 59,376 59,376
Long-term debt, net 9,483,745 5,890,099 3,028,561 2,614,414 2,415,656
----------- ----------- ---------- ---------- ----------
Total capitalization $15,580,109 $11,407,131 $6,500,584 $5,623,095 $5,293,839
=========== =========== ========== ========== ==========
|
(a) Operating results and balance sheet data includes information for FPC since
November 30, 2000, the date of acquisition.
(b) Operating results and balance sheet data includes information for NCNG
since July 15, 1999, the date of acquisition.
The selected consolidated financial data should be read in conjunction with the consolidated financial statements and the notes thereto included elsewhere in this report.
Years Ended December 31
2001 2000 (a) 1999 (b) 1998 1997
---------- ---------- ---------- ---------- ----------
(dollars in thousands)
Operating results
-----------------
Operating revenues $3,360,161 $3,543,907 $3,357,615 $3,211,552 $3,038,159
Net income $ 364,231 $ 461,028 $ 382,255 $ 399,238 $ 388,317
Earnings for common stock $ 361,267 $ 458,062 $ 379,288 $ 396,271 $ 382,265
Assets $9,263,212 $9,239,486 $9,494,019 $8,401,406 $8,220,728
------
Capitalization
--------------
Common stock equity $3,095,456 $2,852,038 $3,412,647 $2,949,305 $2,818,807
Preferred stock - redemption
not required 59,334 59,334 59,376 59,376 59,376
Long-term debt, net 2,958,853 3,619,984 3,028,561 2,614,414 2,415,656
---------- ---------- ---------- ---------- ----------
Total capitalization $6,113,643 $6,531,356 $6,500,584 $5,623,095 $5,293,839
========== ========== ========== ========== ==========
|
(a) Operating results and balance sheet data do not include information for
NCNG, SRS, Monroe Power and Progress Ventures, Inc. subsequent to July 1,
2000, the date CP&L distributed its ownership interest in the stock of
these companies to Progress Energy.
(b) Operating results and balance sheet data includes information for NCNG
since July 15, 1999, the date of acquisition.
In this section, earnings and the factors affecting them are discussed. The discussion begins with a general overview, then separately discusses earnings by business segment.
Overview
Progress Energy, Inc. (Progress Energy or the Company) is a registered holding company under the Public Utility Holding Company Act of 1935, as amended (PUHCA). Both Progress Energy and its subsidiaries are subject to the regulatory provisions of PUHCA. Progress Energy was formed as a result of the reorganization of Carolina Power & Light Company (CP&L) into a holding company structure on June 19, 2000. All shares of common stock of CP&L were exchanged for an equal number of shares of CP&L Energy, Inc (CP&L Energy). On December 4, 2000, CP&L Energy changed its name to Progress Energy, Inc.
The Company's acquisition of Florida Progress Corporation (FPC) became effective on November 30, 2000. The acquisition was accounted for using the purchase method of accounting. As a result, the consolidated financial statements only reflect FPC's operations subsequent to November 30, 2000.
Through its wholly owned regulated subsidiaries, CP&L, Florida Power Corporation (Florida Power) and North Carolina Natural Gas Corporation (NCNG), Progress Energy is primarily engaged in the generation, transmission, distribution and sale of electricity in portions of North Carolina, South Carolina and Florida; and the transport, distribution and sale of natural gas in portions of North Carolina. Through the Progress Ventures business segment, Progress Energy is involved in merchant energy generation, coal and synthetic fuel operations and energy marketing and trading. Through other business units, Progress Energy engages in other non-regulated business areas including energy management and related services, rail services and telecommunications.
Progress Energy is a regional energy company focusing on the high-growth Southeast region of the United States. The Company has more than 20,000 megawatts of generation capacity and serves approximately 2.9 million electric and gas customers in portions of North Carolina, South Carolina and Florida. CP&L's and Florida Power's utility operations are complementary: CP&L has a summer peaking demand, while Florida Power has a winter peaking demand. In addition, CP&L's greater proportion of commercial and industrial customers combined with Florida Power's greater proportion of residential customers creates a more balanced customer base. The Company is dedicated to expanding the region's electric generation capacity and delivering reliable, competitively priced energy.
The operations of Progress Energy and its subsidiaries are divided into five major segments: two electric utilities (CP&L and Florida Power), Progress Ventures, Rail Services and Other. The Other segment includes natural gas operations, telecommunication services, energy management services, miscellaneous non-regulated activities, holding company operations and elimination entries.
In 2001, net income was $541.6 million, a 13.2% increase over $478.4 million in 2000. Net income increased in 2001 primarily due to a full year of FPC's operations being included in the 2001 results, as FPC contributed net income of $398.3 million for the year ended December 31, 2001. Other factors contributing to the increase in net income in 2001 include increases in tax credits from Progress Energy's share of synthetic fuel facilities, continued customer growth at the electric utilities and decreases in depreciation expense related to CP&L's accelerated cost recovery program. Partially offsetting these increases were impairment and one-time after-tax charges totaling $152.8 million primarily attributable to Strategic Resource Solutions Corp. (SRS) and the Company's investment in Interpath, as well as increases in interest expense and goodwill amortization related to the FPC acquisition. Basic earnings per share decreased from $3.04 per share in 2000 to $2.65 per share in 2001 due to the factors outlined above and also from an increase in the number of shares outstanding resulting from the FPC acquisition and an additional common stock issuance in August 2001.
In 2000, net income was $478.4 million, a 26.1% increase over $379.3 million in 1999. Basic earnings per share increased from $2.56 per share in 1999 to $3.04 per share in 2000. Continued customer growth, increased usage by CP&L Electric customers and tax credits from Progress Energy's share of synthetic fuel facilities positively affected earnings. Other significant events included the sale of a 10% limited partnership interest in BellSouth Carolinas PCS for a $121.1 million after-tax gain, additional accelerated depreciation of CP&L nuclear generation facilities for a
$192.5 million after-tax effect and the December operations of FPC, which contributed net income of $28.7 million for the month of December 2000.
Note 1 to the Progress Energy consolidated financial statements discusses the
Company's significant accounting policies. The most critical accounting policies
and estimates that impact the Company's financial statements are the economic
impacts of utility regulation, which are described in more detail in Note 13 and
the impact of synthetic fuel tax credits, which are described in more detail in
Note 18 to the Progress Energy consolidated financial statements.
Electric Segments
The electric segments are primarily engaged in the generation, transmission, distribution and sale of electricity in portions of North and South Carolina by CP&L and, since November 30, 2000, in portions of Florida by Florida Power. CP&L serves an area of approximately 34,000 square miles, with a population of more than 4.0 million. As of December 31, 2001, CP&L provided electricity to approximately 1.3 million customers. Florida Power serves an area of approximately 20,000 square miles, with a population of more than 5.0 million. As of December 31, 2001, Florida Power provided electricity to approximately 1.4 million customers.
The operating results of both electric utilities are primarily influenced by customer demand for electricity, the ability to control costs and the authorized regulatory return on equity. Annual demand for electricity is based on the number of customers and their annual usage, with usage largely impacted by weather. In addition, the current economic conditions in the service territories can impact the annual demand for electricity.
CP&L Electric operations contributed net income of $468.3 million, $373.8 million and $430.3 million in 2001, 2000 and 1999, respectively. Included in these amounts are energy marketing and trading activities, which are managed by Progress Ventures on behalf of CP&L, that had net income of $62.7 million, $84.0 million and $69.5 million in 2001, 2000 and 1999, respectively.
Revenues
CP&L's electric revenues for the years ended December 31, 2001, 2000 and 1999 and the percentage change by year by customer class are as follows (in millions):
----------------------------------------------------------------------------------
Customer Class 2001 % Change 2000 % Change 1999
----------------------------------------------------------------------------------
Residential $1,152 3.5% $1,113 5.3% $1,057
Commercial 785 5.9 741 4.8 707
Industrial 654 (3.7) 679 (1.7) 691
Governmental 75 (1.3) 76 -- 76
----------------------------- ------ ------ ------
Total Retail Revenues 2,666 2.2 2,609 3.1 2,531
Wholesale 634 9.9 577 3.8 556
Miscellaneous 44 (63.9) 122 106.8 59
----------------------------- ------ ------ ------
Total Electric Revenues $3,344 1.1% $3,308 5.1% $3,146
----------------------------------------------------------------------------------
|
CP&L electric energy sales for 2001, 2000 and 1999 and the percentage change by year by customer class are as follows (in thousands of mWh):
----------------------------------------------------------------------------------
Customer Class 2001 % Change 2000 % Change 1999
----------------------------------------------------------------------------------
Residential 14,372 2.0% 14,091 5.6% 13,348
Commercial 11,972 4.7 11,432 3.3 11,068
Industrial 13,332 (7.7) 14,446 (0.8) 14,568
Governmental 1,423 -- 1,423 4.7 1,359
----------------------------- ------ ------ ------
Total Retail Energy Sales 41,099 (0.7) 41,392 2.6 40,343
Wholesale 12,996 (10.9) 14,582 0.4 14,526
Unbilled (534) -- 679 -- (110)
----------------------------- ------ ------ ------
Total mWh sales 53,561 (5.5%) 56,653 3.5% 54,759
----------------------------------------------------------------------------------
|
During 2001, residential and commercial sales reflected continued growth in the number of customers served by CP&L, partially offset by mild weather. CP&L added over 30,500 new customers in 2001. Cooler-than-normal weather in the summer and milder-than-normal weather in the fourth quarter of 2001 accounted for a decrease in retail sales for the year compared to 2000. Colder-than-normal weather in the fourth quarter of 2000 accounted for
an increase in retail sales for 2000 when compared to 1999. The 2000 favorable variances over 1999 were also attributable to customer growth and usage as CP&L added over 33,000 new customers in 2000.
Downturns in the economy during 2001 impacted energy usage throughout most of the industrial customer class. Total industrial sales fell during 2001 and the number of customers decreased due to slowdowns and plant closings. The decline was primarily due to a downturn in the textile industry, with other usage decreases noted in the chemical, rubber, and plastic industries. Energy used by the industrial class was relatively flat from 1999 to 2000. Total mWh sales to wholesale customers decreased in 2001 from 2000 primarily due to mild weather. However, revenues from wholesale customers increased in 2001 over 2000 due to the establishment of new long-term contracts and the receipt of a termination payment on a long-term contract in December 2001. In 2000, sales to wholesale customers were slightly higher than 1999 due to colder-than-normal weather and competitive prices in fourth quarter of 2000.
Expenses
CP&L Electric's fuel expense increased $19.8 million in 2001 when compared to $627.5 million in 2000 primarily due to increases in the price of coal, partially offset by decreases in generation. CP&L Electric's fuel expense increased $46.2 million in 2000 when compared to $581.3 million in 1999 primarily due to increases in generation and increases in fuel prices associated with gas and oil-fired units.
For 2001, purchased power increased $28.2 million when compared to $325.4 million in 2000 mainly due to favorable market conditions in the first quarter of 2001. For 2000, purchased power decreased $40.0 million when compared to $365.4 million in 1999 primarily due to the expiration of CP&L's long-term purchase power agreement with Duke Energy in mid-1999. Additionally, 2000 reflects a decrease in purchases from cogeneration facilities when compared to 1999.
Fuel and purchased power expenses are recovered primarily through cost recovery clauses and, as such, have no material impact on operating results.
CP&L Electric's other operation and maintenance expenses decreased $24.6 million in 2001 when compared to $726.3 million in 2000 primarily due to the absence of restoration costs associated with the severe winter storm and record-breaking snowfall in January 2000, as well as cost control efforts. These amounts were partially offset by increases in planned nuclear outage costs and transmission expenses in 2001. In 2000, other operation and maintenance expense increased $57.7 million when compared to $668.6 million in 1999 due to increases in benefit plan-related expenses and emission allowances. A total of $23 million of emission allowances was expensed in 2000.
Depreciation and amortization expense decreased $176.7 million in 2001 when compared to $698.6 million in 2000 and increased $204.7 million in 2000 when compared to $493.9 million in 1999. CP&L's accelerated cost recovery program for nuclear generating assets allows flexibility in recording accelerated depreciation expense. In 2001, CP&L recorded $75 million to depreciation expense, the minimum amount of accelerated depreciation allowed under the program. In 2000, as approved by regulators, CP&L recorded $275 million to depreciation expense under this program. See Note 1G to the Progress Energy consolidated financial statements for additional information about this program.
Net interest expense increased $19.6 million in 2001 when compared to $221.9 million in 2000 and increased $38.8 million in 2000 when compared to $183.1 million in 1999 primarily due to higher debt balances. Debt balances increased over these periods in order to fund construction programs.
The results shown in the Progress Energy consolidated financial statements for the Florida Power Electric segment are not comparable to the prior year as the operating results of Florida Power have only been included in Progress Energy's results of operations since the date of acquisition, November 30, 2000. Therefore, the results of operations for 2000 only include one month of Florida Power operations and the results of operations for 2001 include a full year of Florida Power operations.
Florida Power Electric contributed net income of $309.6 million for the year ended December 31, 2001 and $21.8 million for the month of December 2000. Included in these amounts are energy marketing and trading activities, which are managed by Progress Ventures on behalf of Florida Power, that had net income of $24.0 million for the year ended December 31, 2001 and $1.7 million for the month of December 2000.
A comparison of the results of operations of Florida Power Electric for a full year 2001 compared to a full year 2000 follows.
Revenues
Florida Power's electric revenues for the years ended December 31, 2001 and 2000 and the percentage change by customer class are as follows (in millions):
---------------------------------------------------------------------
Customer Class 2001 % Change 2000/(a)/
---------------------------------------------------------------------
Residential $1,643 11.3% $1,476
Commercial 754 13.9 662
Industrial 223 5.2 212
Governmental 176 15.8 152
------------------------------------------ ------
Total Retail Revenues 2,796 11.8 2,502
Wholesale 288 4.3 276
Miscellaneous 129 37.2 94
------------------------------------------ ------
Total Electric Revenues $3,213 11.9% $2,872
--------------------------------------------------------------------
|
(a) Florida Power electric revenues are included in the Company's results of operations since November 30, 2000, the date of acquisition.
Florida Power's electric energy sales for the years ended December 31, 2001 and 2000 and the percentage change by customer class are as follows (in thousands of mWh):
---------------------------------------------------------------------
Customer Class 2001 % Change 2000/(a)/
---------------------------------------------------------------------
Residential 17,604 2.9% 17,116
Commercial 11,061 2.3 10,813
Industrial 3,872 (8.9) 4,249
Governmental 2,726 2.7 2,654
------------------------------------------ ------
Total Retail Energy Sales 35,263 1.2 34,832
Wholesale 4,719 (9.4) 5,209
Unbilled (511) -- 344
------------------------------------------ ------
Total mWh sales 39,471 (2.3%) 40,385
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(a) Florida Power electric energy sales are included in the Company's results of operations since November 30, 2000, the date of acquisition.
Residential and commercial sales increased in 2001 and reflected continued growth in the number of customers served by Florida Power, partially offset by milder-than-normal weather and a downturn in the Florida economy. Florida Power added over 35,000 new customers in 2001. Industrial sales declined due to weakness in the manufacturing sector and phosphate industry, which continue to be affected by the economic downturn. Sales to wholesale customers decreased for 2001, primarily due to the mild weather.
Expenses
Fuel used in generation and purchased power was $1.4 billion for the year ended December 31, 2001. Fuel used in generation increased $230.9 million when compared to 2000 primarily due to increases in coal prices and recovery of previously deferred fuel costs, and purchased power expense was consistent between 2000 and 2001. Fuel and purchased power expenses are recovered primarily through cost recovery clauses and, as such, have no material impact on operating results. Other operation and maintenance expense was $425.5 million for the year ended December 31, 2001 and decreased when compared to 2000 due primarily to merger-related costs recorded in the prior year. Excluding these costs, other operation and maintenance expense was consistent between years.
Depreciation and amortization expense was $453.0 million in 2001 and increased $50.3 million when compared to 2000. During 2001, Florida Power recorded additional amortization on the Tiger Bay regulatory asset, which was created as a result of the early termination of certain long-term cogeneration contracts. Florida Power amortizes the regulatory asset according to a plan approved by the Florida Public Service Commission in 1997. In 2001, $97 million of accelerated amortization was recorded on the Tiger Bay regulatory asset, of which $63 million was associated with deferred revenue from 2000 and had no impact on 2001 earnings.
Progress Ventures
The Progress Ventures segment operations include fuel extraction, manufacturing and delivery, synthetic fuels production, merchant generation, and energy marketing and trading activities on behalf of the utility operating
companies. Due to the creation of Progress Ventures in 2000 and the acquisition of Electric Fuels' subsidiaries (renamed Progress Fuels on January 2, 2002) through the FPC acquisition, the results of operations for the Progress Ventures segment are not comparable to the prior year.
Progress Ventures contributed segment income, including allocation of energy marketing and trading on behalf of the utilities, of $288.7 million, $125.6 million and $69.5 million for 2001, 2000 and 1999, respectively. Of these amounts, energy marketing and trading net income on behalf of the utilities was $86.7 million, $85.7 million and $69.5 million in 2001, 2000 and 1999, respectively.
The increase in earnings for this segment is primarily due to the tax credits generated by Progress Energy's synthetic fuel operations. The Progress Ventures segment sold 13.3 million tons of synthetic fuel for the year ended December 31, 2001, and 2.9 million tons for the year ended December 31, 2000. The production of synthetic fuel generates an operating loss and the sale of this alternative fuel qualifies for tax credits under Section 29 of the Internal Revenue Code (See "Synthetic Fuels" discussion under OTHER MATTERS below). These credits are determined by the BTU content of product sold to third parties and resulted in tax credits of $349.3 million and $83.6 million being recorded for 2001 and 2000, respectively. The Company is exploring the possible sale of an interest in its synthetic fuel facilities in order to optimize the total value of this line of business.
Progress Ventures' energy marketing and trading activities on behalf of CP&L generated net income of $62.7 million, $84.0 million, and $69.5 million for 2001, 2000 and 1999, respectively. Earnings from the term marketing operations were relatively flat across these periods. Earnings from the trading operations decreased in 2001 from 2000 primarily due to a decline in market prices and transfer of available trading volumes to long-term contracts. The fair value of the Company's open trading positions was less than $0.2 million at December 31, 2001. Earnings from the trading operations increased in 2000 from 1999 primarily due to trading profits and strong prices during periods when CP&L had unused capacity available for sale. Progress Ventures' energy marketing and trading activities on behalf of Florida Power for the year ended December 31, 2001 and month of December 2000 were $24.0 million and $1.7 million, respectively. On an annual basis, these earnings have increased over the prior year primarily due to increased term marketing sales to Seminole Electric Cooperative, Florida Power's largest wholesale customer.
The fuel extraction, manufacturing and delivery results are not comparable to the prior year due to the acquisition of FPC in November 2000. Merchant generation operations for the current year were consistent with the prior period results. Progress Energy expects earnings in merchant generation to increase in the future through the addition of a plant in Florida, transfer of generating assets in Rowan County from CP&L to Progress Ventures and additional acquisition and construction of electric generating projects. See OTHER MATTERS below for a detail of Progress Ventures' plant developments and acquisitions.
Rail Services
Rail Services' operations represent the activities of Progress Rail Services Corporation (Progress Rail) and include railcar repair, rail parts reconditioning and sales, scrap metal recycling and other rail related services. Rail Services' results for the year ended December 31, 2001, include Rail Services' cumulative revenues and net loss from the date of acquisition, November 30, 2000.
Due to the acquisition of Progress Rail through the FPC acquisition, the results of operations for the Rail Services segment are not comparable to the prior year. The current year net loss of $12.1 million was negatively affected by a decrease in rail service procurement by major railroads and the significant downturn in the domestic scrap market.
Other
Progress Energy's Other segment primarily includes the operations of NCNG, SRS, Progress Telecommunications Corporation (Progress Telecom) and Caronet, Inc. (Caronet). This segment also includes other non-regulated operations of CP&L and FPC as well as holding company results. The Other segment had a net loss of $426.2 million in 2001 and net income of $43.0 million in 2000. The decrease in earnings for 2001 when compared to 2000 is primarily due to one-time after-tax charges of $148.1 million from the assessment of the recoverability of the Interpath investment and certain assets in the SRS subsidiary, increases in after-tax interest expense for holding company debt of $159.0 million and goodwill amortization of $89.7 million resulting from the acquisition of FPC. In addition, the Other segment net income in 2000 includes a $121.1 million after-tax gain on sale of assets, as described more fully below.
In 1999, the Other segment had a net loss of $51.1 million. The increase in earnings in 2000 when compared to 1999 is primarily due to a $121.1 million after-tax gain on the sale of Caronet's 10% limited partnership interest in
BellSouth Carolinas PCS in September 2000. Caronet sold its interest for a pre-tax gain of $200 million, which was recorded as other income.
SRS is engaged in software sales and energy services to help industrial, commercial and institutional customers manage energy costs. Progress Energy is refocusing the business on energy services in the southeastern states and is consolidating remaining operations with other retail activities. SRS net losses, excluding after-tax impairments and other one-time charges discussed below, were $7.2 million, $0.8 million and $10.4 million for 2001, 2000 and 1999, respectively. Due to the historical and current year losses at SRS and the decline of the market value for technology companies, the company obtained a valuation study to help assess the recoverability of SRS's long-lived assets. Based on this assessment, the Company recorded after-tax asset impairments and other one-time charges of $40.7 million in the fourth quarter of 2001. In addition, the Company recorded after-tax investment impairments of $4.9 million for other-than-temporary declines in certain investments of SRS in the fourth quarter of 2001. These writedowns constitute a significant reduction in the book value of these assets, and the ongoing operations are expected to have a negligible impact on Progress Energy's net income.
Effective June 28, 2000, Caronet contributed the net assets used in its application service provider business to a newly formed company named Interpath Communications, Inc. (Interpath) for a 35% ownership interest (15% voting interest). Therefore, the application service provider revenues are not reflected in the Progress Energy consolidated financial statements subsequent to that date. Due to the decline in the market value for technology companies, Progress Energy obtained a valuation study to assess its investment in Interpath. Based on this valuation, the company recorded an after-tax impairment of $102.4 million for other-than-temporary declines in the fair value of its investment in Interpath.
NCNG had gross margins of $77.9 million and $70.5 million and net income of $2.5 million and $6.5 million for the years ended December 31, 2001 and 2000, respectively. The increase in margin is mainly attributable to the Sandhills pipeline that was completed in March 2001, which was partially offset by declines in industrial sales. The decrease in net income is primarily due to higher overall operating expenses. The operations from 2000 to 1999 are not comparative as NCNG was acquired on July 15, 1999. In February 2002, NCNG filed a general rate case with the North Carolina Utilities Commission (NCUC) requesting an annual rate increase of $47.6 million, based upon its completion of major expansion projects. Progress Energy cannot predict the final outcome of this matter.
Progress Telecom, acquired as part of the FPC acquisition, provides broadband capacity services, dark fiber and wireless services in Florida and the Eastern United States. Progress Telecom and certain assets and liabilities of Caronet will be combined into a new entity named Progress Telecom Corporation (Telecom) in the first half of 2002. All existing contracts for Progress Telecom and Caronet will be transferred to this entity in the first half of 2002, subject to regulatory approval. The combined operating losses for Progress Telecom and Caronet were $9.1 million in 2001.
The Other segment also includes Progress Energy's holding company results. As part of the acquisition of FPC, goodwill of approximately $3.6 billion was recorded, and amortization of $89.7 million in 2001 and $7.0 million in 2000 is included in the Other segment. See Note 1L to the Progress Energy consolidated financial statements for information on recent developments related to goodwill amortization. Interest expense of $265.1 million in 2001 and $28.0 million in 2000, primarily related to the debt used to finance the acquisition of FPC, is also included in these results.
Progress Energy issued 98.6 million contingent value obligations (CVOs) in connection with the FPC acquisition. Each CVO represents the right to receive contingent payments based on the performance of four synthetic fuel facilities owned by Progress Energy. The payments, if any, are based on the net after-tax cash flows the facilities generate. At December 31, 2001, the CVOs had a fair market value of approximately $41.9 million. Progress Energy recorded an unrealized loss of $1.5 million for the year ended December 31, 2001, and an unrealized gain of $8.9 million for the month ended December 31, 2000, to record the change in fair value of CVOs.
Overview
Progress Energy is a registered holding company and, as such, has no operations of its own. The ability to meet its obligations is primarily dependent on the earnings and cash flows of its two electric utilities and the ability of those subsidiaries to pay dividends or to advance or repay funds to Progress Energy.
Progress Energy continues to focus on its strategy of becoming a diversified electric and gas holding company. The cash requirements of Progress Energy arise primarily from the capital intensive nature of its electric utility operations as well as the expansion of its diversified businesses, primarily those of Progress Ventures.
Progress Energy relies upon its operating cash flow, commercial paper facilities and its ability to access long-term capital markets for its liquidity needs. Since a substantial majority of Progress Energy's operating costs are related to its two regulated electric utilities, a significant portion of these costs are recovered from customers through fuel and energy cost recovery clauses.
Progress Energy expects its operating cash flow to exceed its projected capital expenditures beginning in 2003. Due to the significant portion of cash flows derived from its regulated businesses and an excess of operating cash flow over capital expenditures beginning in 2003, Progress Energy expects its liquidity resources to be sufficient to fund its current business plans. Risk factors associated with commercial paper back up credit facilities and credit ratings are discussed below.
The following discussion of Progress Energy's liquidity and capital resources is on a consolidated basis.
Cash Flows from Operations
Cash from operations is the primary source used to meet operating requirements and capital expenditures. The increase in cash from operating activities for 2001 when compared with 2000 is largely the result of the November 30, 2000, acquisition of FPC. The prior year results reflected one month's cash from operations of FPC.
Progress Energy's two electric utilities produced approximately 125% of consolidated cash from operations in 2001. This is expected to continue over the next several years as its non-regulated investments, primarily generation assets, are placed into service and begin generating operating cash flows. In addition, Progress Venture's synthetic fuel operations do not currently produce positive operating cash flow primarily due to the difference in timing of when tax credits are recognized for financial reporting purposes and when tax credits are realized for tax purposes.
Total cash from operations of $1.4 billion provided the funding for approximately 86% of the Company's property additions, nuclear fuel expenditures and diversified business property additions during 2001. For 2002, it is expected that approximately 80% of capital expenditures will be funded internally, which is a decrease from 2001 due to increases in projected non-regulated capital expenditures. For 2003 and 2004, cash from operations is expected to be up to 140% of the Company's projected capital expenditures.
Investing Activities
Cash used in investing was $1.7 billion in 2001, up $603 million when compared with 2000 after adjusting for the acquisition of FPC. The increase is due primarily to the expansion of Progress Ventures' generation portfolio and the absence of proceeds from the sale in 2000 of the BellSouth Carolinas PCS limited partnership interest.
Capital expenditures for Progress Energy's regulated operations were $1.2 billion or approximately 78% of consolidated capital expenditures in 2001. As shown in the table below, the Company anticipates that the proportion of non-regulated capital spending to total capital expenditures will increase substantially in 2002, primarily due to generation and other additions at Progress Ventures (See OTHER MATTERS below for a detail of these projects). Subsequent to 2002, the Company expects its proportion of regulated capital expenditures to range between 70% and 90% of total capital expenditures.
(Amounts in millions):
Actual Forecasted
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2001 2002 2003 2004
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Regulated capital expenditures $1,216 $1,145 $1,043 $1,169
Nuclear fuel expenditures 116 62 108 60
AFUDC (18) (28) (52) (36)
Non-regulated capital expenditures 350 1,033 407 202
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Total $1,664 $2,212 $1,506 $1,395
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The table includes expenditures from 2002 through 2004 of approximately $230 million expected to be incurred at regulated fossil-fueled electric generating facilities to comply with the Clean Air Act.
All projected capital and investment expenditures are subject to periodic review and revision and may vary significantly depending on a number of factors including, but not limited to, industry restructuring, regulatory constraints, market volatility and economic trends.
Financing Activities
Cash provided by financing activities decreased approximately $3.4 billion over 2000, primarily due to the November 30, 2000 acquisition of FPC, which was funded from the sale of short-term commercial paper. This funding was converted to long-term debt during 2001. Excluding the effect of the acquisition financing, cash from financing activities increased slightly in 2001 when compared with 2000, primarily due to the expansion of Progress Energy's non-regulated operations.
In February 2001, Progress Energy issued $3.2 billion of senior unsecured notes with maturities ranging from three to thirty years. These notes were issued with a weighted-average coupon rate of 7.06%. Proceeds from the issuance were used to retire commercial paper and other short-term indebtedness issued in connection with the FPC acquisition.
In April 2001, CP&L issued $300 million of medium-term notes due 2008 with a coupon of 6.65%. Proceeds from the issuance were primarily used to retire commercial paper.
In July 2001, Florida Power issued $300 million of first mortgage bonds due 2011 with a coupon of 6.65%. Proceeds from the issuance were primarily used to retire commercial paper.
In August 2001, Progress Energy issued 12.65 million shares of common stock at $40 per share for net proceeds of $488 million. Proceeds from the issuance were primarily used to retire commercial paper, including amounts issued in connection with the FPC acquisition.
In October 2001, Progress Energy issued $400 million of senior unsecured notes due 2008 with a coupon of 5.85% and $400 million of senior secured notes due 2031 with a coupon of 7.00%. Approximately $600 million of the proceeds from this issuance were used to retire commercial paper outstanding at Progress Capital Holdings, Inc. (PCH). PCH is the holding company for certain non-regulated businesses of FPC. In November 2001, the Company terminated the PCH commercial paper program.
In November 2001, CP&L redeemed $125 million of 8.55% quarterly income capital securities at 100% of the principal amount of such securities. The redemption was funded primarily through the issuance of commercial paper.
In March 2002, Progress Ventures obtained a $440 million bank facility that will be used exclusively for expansion of its non-regulated generation portfolio. Borrowings under this facility will be non-recourse to Progress Energy; however, the Company entered into certain support and guarantee agreements to ensure performance under generation construction and operating agreements.
Progress Energy uses interest rate derivative instruments to manage the fixed and variable rate debt components of its debt portfolio. The Company's long-term objective is to maintain a debt portfolio mix of approximately 30 percent variable rate debt with the balance fixed rate. As of December 31, 2001, Progress Energy's variable rate and fixed rate debt comprised 15 percent and 85 percent, respectively.
During March 2002, Progress Energy converted $800 million of fixed rate debt into variable rate debt by executing interest rate derivative agreements with a group of five banks. This increased the amount of variable rate debt in its portfolio to 27 percent. Under the terms of the agreements, Progress Energy will receive a fixed rate of 4.87% and will pay a floating rate based on three-month LIBOR. These instruments were designated as fair value hedges for accounting purposes.
As a registered holding company under PUHCA, Progress Energy obtains approval from the SEC for the issuance and sale of securities as well as the establishment of intracompany extensions of credit. In January 2002, Progress Energy requested an increase of $2.5 billion in its authority to issue long-term securities, increasing the limit from $5 billion to $7.5 billion. Upon the approval of this increase, Progress Energy will have authority to issue approximately $3 billion of long-term securities.
At December 31, 2001, the Company and its subsidiaries had committed lines of credit totaling $1.945 billion. These lines of credit support the Company's commercial paper borrowings. The following table summarizes the Company's credit facilities:
Subsidiary Description Short-term Long-term Total
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Progress Energy 364-Day $550 $ -- $ 550
Progress Energy 3-Year (3 years remaining) -- 450 450
CP&L 364-Day -- 200 200
CP&L 5-Year (2 years remaining) -- 375 375
Florida Power 364-Day 170 -- 170
Florida Power 5-Year (2 years remaining) -- 200 200
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$720 $1,225 $1,945
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The Company's financial policy precludes issuing commercial paper in excess of its supporting lines of credit. At December 31, 2001, the total amount of commercial paper outstanding was $942 million, leaving approximately $1 billion available for issuance. The Company is required to pay minimal annual commitment fees to maintain its credit facilities.
In addition, these credit agreements contain various terms and conditions that could affect the Company's ability to borrow under these facilities. These include a maximum debt to total capital ratio, a material adverse change clause and a cross-default provision.
All of the credit facilities include a maximum total debt to total capital ratio. As of December 31, 2001, the calculated ratio for these three companies, pursuant to the terms of the agreement, was as follows:
------------------------------------------------------ Company Maximum Ratio Actual Ratio ------------------------------------------------------ Progress Energy, Inc. 70% 63.1% CP&L 65% 53.2% Florida Power 65% 44.6% ------------------------------------------------------ |
Progress Energy's and Florida Power's credit facilities include a provision under which lenders could refuse to advance funds in the event of a material adverse change in the borrower's financial condition. CP&L's credit facilities do not contain this provision.
Each of these credit agreements contains a cross-default provision for defaults of indebtedness in excess of $10 million. Under these provisions, if the applicable borrower or certain subsidiaries fail to pay various debt obligations in excess of $10 million the lenders could accelerate payment of any outstanding borrowing and terminate their commitments to the credit facility.
Additionally, certain of Progress Energy's long-term debt indentures contain cross-default provisions for defaults of indebtedness in excess of $25 million; these provisions apply only to other obligations of Progress Energy, not its subsidiaries. In the event that these provisions are triggered, debt holders could accelerate the payment of approximately $4 billion in long-term debt.
The Company has on file with the SEC a shelf registration statement under which senior notes, junior debentures, common and preferred stock and other trust preferred securities are available for issuance by the Company. As of December 31, 2001, the Company had $500 million available under this shelf registration. In 2002, the Company filed an additional shelf registration with the SEC and now has approximately $2.5 billion of senior notes, junior debentures, common and preferred stock and other trust preferred securities available for issuance.
Florida Power and PCH have two uncommitted bank bid facilities authorizing them to borrow and re-borrow, and have loans outstanding at any time, up to $100 million and $300 million, respectively. At December 31, 2001, there were no outstanding loans against these facilities.
CP&L currently has on file with the SEC a shelf registration statement under which it can issue up to $1 billion of various long-term securities. Florida Power currently has filed registration statements under which it can issue an aggregate of $700 million of various long-term debt securities.
The following table shows Progress Energy's capital structure as of December 31, 2001 and 2000:
2001 2000
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Common Stock 36.7% 34.9%
Preferred Stock 0.6% 0.6%
Total Debt 62.7% 64.5%
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The amount and timing of future sales of Company securities will depend on market conditions, operating cash flow, asset sales and the specific needs of the Company. The Company may from time to time sell securities beyond the amount needed to meet capital requirements in order to allow for the early redemption of long-term debt, the redemption of preferred stock, the reduction of short-term debt or for other general corporate purposes.
Credit Ratings
As of December 31, 2001, the major credit rating agencies rated the Company's securities as follows:
Moody's
-------
Investors Service Standard and Poor's
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Progress Energy, Inc.
Corporate Credit Rating Baa1 BBB+/A-2
Senior Unsecured Baa1 BBB
Commercial Paper P-2 A-2
Carolina Power & Light Company
Corporate Credit Rating Baa1 BBB+
Commercial Paper P-2 A-2
Senior Secured Debt A3 BBB+
Senior Unsecured Debt Baa1 BBB+
Subordinate Debt Baa2 BBB
Preferred Stock Baa3 BBB-
Florida Power Corporation
Corporate Credit Rating A2 BBB+/A-2
Commercial Paper P-1 A-2
Senior Secured Debt A1 BBB+
Senior Unsecured Debt A2 BBB+
Preferred Stock Baa1 BBB-
FPC Capital I
Preferred Stock* A3 BBB-
Progress Capital Holdings, Inc.
Senior Unsecured Debt* A3 BBB
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*Guaranteed by Florida Progress Corporation
These ratings reflect the current views of these rating agencies and no assurances can be given that these ratings will continue for any given period of time. However, the Company monitors its financial condition as well as market conditions that could ultimately affect its credit ratings. The Company is committed to maintaining its current credit ratings.
Neither the Company's debt indentures nor its credit agreements contain any "ratings triggers" which would cause the acceleration of interest and principal payments in the event of a ratings downgrade. However, in the event of a downgrade the Company and/or its subsidiaries may be subject to increased interest costs on the credit facilities backing up the commercial paper programs. The Company and its subsidiaries have certain contracts which have provisions that are triggered by a ratings downgrade. These contracts include counterparty trade agreements, derivative contracts and various types of third party purchase agreements. None of these contracts would require any action on the part of Progress Energy or its subsidiaries unless the ratings downgrade results in a rating below investment grade.
Future Commitments
The following tables reflect Progress Energy's contractual cash obligations and other commercial commitments in the respective periods in which they are due.
Contractual Cash Total Amounts Obligations Committed 2002 2003 2004 2005 2006 Thereafter ---------------------------------------------------------------------------------------------- Long-term debt $10,261 $ 688 $ 698 $1,319 $ 348 $ 909 $ 6,299 Capital Lease 53 4 4 4 4 4 33 Obligations Operating Leases 308 52 66 50 30 22 88 Purchase Obligations 498 498 -- -- -- -- -- Fuel 5,620 1,459 1,200 993 942 944 82 Purchased Power 7,525 384 391 380 393 404 5,573 ---------------------------------------------------------------------------------------------- Total $24,265 $3,085 $2,359 $2,746 $1,717 $2,283 $12,075 |
Other Commercial Total Amounts Commitments Committed 2002 2003 2004 2005 2006 Thereafter ------------------------------------------------------------------------------------ Standby Letters of $ 29 $29 $-- $-- $-- $-- $ -- Credit Guarantees and Other 245 31 28 25 22 20 119 Commitments ------------------------------------------------------------------------------------ Total $274 $60 $28 $25 $22 $20 $119 |
Information on the Company's contractual obligations at December 31, 2001, is included in the notes to the Progress Energy consolidated financial statements. Future debt maturities and lease obligations are included in Note 6 and Note 10, respectively. The Company's fuel, purchased power and purchase obligations are included in Note 20A and Note 20B to the Progress Energy consolidated financial statements.
The results of operations for the past three years are not necessarily indicative of future earnings potential. The level of Progress Energy's future earnings depends on numerous factors. See SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS for a discussion of factors to be considered with regard to forward-looking statements.
The traditional business of the electric and gas utilities is providing electricity and natural gas to customers within their service areas in the Carolinas and Florida. Prices for electricity and natural gas provided to retail customers are set by the state regulatory commissions under cost-based regulatory principles. See Note 13 to the Progress Energy consolidated financial statements for additional information about these and other regulatory matters.
Future earnings for the electric and gas utilities will depend upon growth in electric energy and gas sales, which is subject to a number of factors. These factors include weather, customer growth, competition, energy conservation practiced by customers, the elasticity of demand and the rate of economic growth in the traditional service area.
Regulatory issues facing Progress Energy are discussed in the "Current Regulatory Environment" discussion under OTHER MATTERS below.
Progress Energy's longer-term strategic focus will encompass four lines of business: Upstream Energy, Transmission, Downstream Energy and Telecom. In support of these strategic lines of business, credit quality and a strong balance sheet will remain a priority. The Company will strive to reduce consolidated leverage through asset divestitures, synergy realization, and controlled capital spending. Progress Energy's legal structure is not currently aligned with the future functional management of these lines of business. Whether, and when, the legal and functional structures will converge depends upon legislative and regulatory action, which cannot currently be anticipated.
Upstream Energy will focus on both regulated and non-regulated generation expansion, energy marketing and trading, and fuel extraction, manufacturing and delivery. The Energy Supply function of Upstream Energy will manage our regulated and non-regulated generation fleet. The Company will continue to prepare for deregulation as it grows Progress Energy's generation fleet. Additional generation capacity is planned to serve the growth expected in the Company's service territories, to increase capacity reserve margins at the regulated subsidiaries, and to take advantage of merchant generation opportunities.
The Progress Ventures business unit of Upstream Energy will manage the Company's competitive energy businesses and certain functions on behalf of the utilities, including wholesale contracts and fuel procurement. Non-regulated generation opportunities will be focused in the Southeast. Progress Ventures expects to have 3,100 MW of merchant generation by the end of 2003 and flexible plans are in place for an additional 2,800 MW of merchant generation subsequent to 2003. The energy marketing and trading activities include 5,300 MW of wholesale contracts currently, primarily on behalf of the utilities, and will include additional contracts for non-regulated generation in the future.
Transmission will focus on meeting FERC's commitment for regional transmission organizations ("RTO"). The Company has already participated in the preliminary development of the GridSouth RTO with Duke Energy and South Carolina Electric and Gas and the GridFlorida RTO with Florida Power & Light and Tampa Electric. Progress Energy continues to assess the structural options that may be available to optimize the value of the Company's transmission assets. Please refer to the "Current Regulatory Environment" section under OTHER MATTERS below for further discussion of transmission and the Company's compliance with FERC Order No. 2000.
Downstream Energy will focus on both the distribution and retail components and will continue to deliver a high level of customer service while offering products and services, both regulated and non-regulated, to the Company's customers. Progress Energy will continue to grow its customer base and focus on value-added services and technologies to enhance customer relationships. Downstream Energy will operate within the electric utilities as an integrated delivery business until any potential restructuring of the utility business occurs.
Telecom will transport voice and data for major carriers, and will focus its expansion on the "local loop" within the Company's existing service territories. While Telecom's long-haul backbone is essentially complete, it will continue its metro expansion into second and third tier cities and provide customers in those areas with access to the world's primary telecommunication centers on the East Coast.
Compliance costs related to current and future environmental laws and regulations could affect earnings if such costs are not fully recovered. The Clean Air Act and other important environmental items are discussed in "Environmental Matters" under OTHER MATTERS below.
As regulated entities, both electric utilities and the gas utility are subject to the provisions of Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting for the Effects of Certain Types of Regulation." Accordingly, the utilities record certain assets and liabilities resulting from the effects of the ratemaking process, which would not be recorded under generally accepted accounting principles for non-regulated entities. The utilities' ability to continue to meet the criteria for application of SFAS No. 71 may be affected in the future by competitive forces and restructuring in the electric utility industry. In the event that SFAS No. 71 no longer applied to a separable portion of the utilities' operations, related regulatory assets and liabilities would be eliminated unless an appropriate regulatory recovery mechanism is provided. Additionally, these factors could result in an impairment of utility plant assets as determined pursuant to SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." Effective January 1, 2002, the Company adopted SFAS No. 144, which supersedes SFAS No. 121 (See Note 1L).
Progress Ventures - Generation
In July 2001, Progress Ventures announced that it is building a plant to include two 160 MW combustion turbine peaking generators at a site in DeSoto County, Florida, about 50 miles east of Sarasota. Plant capacity has been sold to another utility through May 2005. Environmental permits and zoning have been approved for the plant site, and construction is under way. The plant is expected to be completed in June 2002.
In June 2001, the NCUC held a hearing concerning Progress Energy's application to transfer certificates granted for generating units in Rowan County, N.C., from the regulated electric utility, CP&L, to Progress Ventures. In October 2001, the NCUC approved the transfer of three combustion turbine generators and related generation infrastructure at the Rowan County facility from CP&L to Progress Ventures. These assets were transferred in February 2002. The generating units were completed in May 2001 and the majority of their output is sold under long-term wholesale contracts.
During February 2002, Progress Ventures, Inc. completed the acquisition of two electric generating projects totaling nearly 1,100 megawatts in Georgia from LG&E Energy Corp., a subsidiary of Powergen plc, for a total cash consideration of $345 million. The two projects consist of 1) the Walton project in Monroe, Georgia, a 460 MW natural gas-fired plant placed in service in June 2001 and 2) the Washington project in Washington County, Georgia,
a planned 600 MW natural gas-fired plant expected to be operational by June 2003. The transaction included a power purchase agreement with LG&E Marketing for both projects through December 31, 2004. In addition, there is a project management completion agreement with LG&E whereby Progress Ventures assumed certain liabilities to facilitate buildout of the Washington project. The estimated costs to complete the Washington project are approximately $165 million.
Progress Ventures - Fuel Acquisition
On January 11, 2002, Progress Energy announced that it had entered into a letter of intent with Westchester Gas Company to acquire approximately 215 producing natural gas wells, 52 miles of intrastate gas pipeline and 170 miles of gas-gathering systems. The properties are located within a 25-mile radius of Jonesville, Texas, on the Texas-Louisiana border. This will add 140 billion cubic feet (Bcf) of gas reserves to Progress Ventures' fuel business, which more than doubles its gas reserves and potential annual production levels. Total consideration of $153 million is expected to include $135 million in Company common stock and $18 million in cash. This transaction is expected to be completed in the first half of 2002.
Natural Gas Activities
The Eastern North Carolina Natural Gas Co. (EasternNC) is a corporation formed equally between the Albemarle Pamlico Economic Development Corporation (APEC) and Progress Energy to build an 850-mile natural gas pipeline system to serve 14 eastern North Carolina counties. EasternNC has begun surveying, designing, engineering and environmental permitting for the first phase of the project. The initial phase consists of about 125 miles of transmission (6- to 12-inch diameter) pipeline and about 75 miles of distribution (2- to 6-inch diameter) pipe. Construction of the first phase began in October 2001 and is scheduled to be completed by mid-summer 2002. The entire project is expected to be completed by the end of 2004.
Progress Energy has agreed to fund a portion of the project, currently estimated to be approximately $22 million. EasternNC plans to obtain additional capital through funding from general obligation bonds issued by the State of North Carolina. The NCUC approved $38.7 million from bond funds for Phase I of the project in July 2000. On March 20, 2001, EasternNC filed its amended application for approval of the route design for Phases 2-7 of the project and additional bond funds of $149.6 million to construct this system. By order issued June 7, 2001, the NCUC approved construction of Phases 2-7 of the project which addresses the remaining counties and awarded EasternNC an additional $149.6 million in bond funds to finance the construction of the facilities associated with these phases.
Current Regulatory Environment
General
The Company's electric and gas utility operations in North Carolina, South Carolina and Florida are regulated by the NCUC, the Public Service Commission of South Carolina (SCPSC) and the Florida Public Service Commission (FPSC), respectively. The electric businesses are also subject to regulation by the Federal Energy Regulatory Commission (FERC), the U.S. Nuclear Regulatory Commission (NRC) and other federal and state agencies common to the utility business. In addition, the Company is subject to regulation by the U.S. Securities and Exchange Commission (SEC) as a registered holding company under PUHCA. As a result of regulation, many of the fundamental business decisions, as well as the rate of return the electric utilities and the gas utility are permitted to earn, are subject to the approval of governmental agencies.
Electric Industry Restructuring
CP&L and Florida Power continue to monitor progress toward a more competitive environment and have actively participated in regulatory reform deliberations in North Carolina, South Carolina and Florida. Movement toward deregulation in these states has been affected by recent developments, including developments related to deregulation of the electric industry in California and other states.
. North Carolina. On January 23, 2001, the Commission on the Future of Electric Service in North Carolina announced that it would not recommend any new laws on electricity deregulation to the 2001 session of the North Carolina General Assembly, citing the commission's determination that more research is needed. The commission's initial report to the General Assembly, issued on May 16, 2000, had contained several proposals, including a recommendation that electric retail competition should begin in North Carolina by 2006. At its January 23, 2001, meeting, the commission requested that the NCUC consider regulatory changes to facilitate the construction of wholesale generation facilities by private companies, including the elimination of requirements that such companies provide proof of a committed customer base and need for
additional power in order to obtain operating licenses. On May 21, 2001, the NCUC adopted a revised rule which streamlined the certification process for wholesale merchant generating plants.
. South Carolina. The Company expects the South Carolina General Assembly will continue to monitor the experiences of states that have implemented electric restructuring legislation.
. Florida. On January 31, 2001, the Florida 2020 Study Commission voted to forward a "proposed outline for wholesale restructuring" to the Florida legislature for its consideration in the 2001 session. The wholesale restructuring outline is intended to facilitate the evolution of a more robust wholesale marketplace in Florida. On December 11, 2001 the study commission issued its final report. The report covered a number of issues with recommendations in the areas of wholesale competition and reliability, efficiency, transmission infrastructure, environmental issues and new technologies. A key recommendation related to wholesale competition and reliability permits the transfer or sale of existing generation at book value and on a plant-by-plant basis, with the sale and transfer being at the discretion of the investor-owned utility. The Florida legislature did not take any action on the proposed outline or final report during the 2001 session.
The Company cannot anticipate when, or if, any of these states will move to increase competition in the electric industry.
Florida Retail Rate Proceeding
Florida Power previously operated under an agreement committing several parties not to seek any reduction in its base rates or authorized return on equity. That agreement expired on June 30, 2001. During 2001, the FPSC required Florida Power to submit minimum filing requirements, based on a 2002 projected test year, to initiate a rate proceeding regarding its future base rates.
On September 14, 2001, Florida Power submitted its required rate filing, including its revenue requirements and supporting testimony. Florida Power filed supplemental minimum filing requirements and testimony on November 15, 2001. Hearings were scheduled to begin on March 20, 2002, but were postponed to accommodate pending settlement negotiations between the parties.
On March 27, 2002, the parties entered into a Stipulation and Settlement Agreement (the Agreement) related to retail rate matters. The Agreement is to be effective from May 1, 2002 through 2005; provided, however, that if Florida Power's base rate earnings fall below a 10% return on equity, Florida Power may petition the FPSC to amend its base rates.
The Agreement provides that Florida Power will reduce its retail revenues from the sale of electricity by $125 million annually through 2005. The Agreement also provides that Florida Power will operate under a Revenue Sharing Incentive Plan (the Plan) that establishes revenue caps and sharing thresholds for the years 2002 through 2005. The Plan provides that retail base rate revenues between the sharing thresholds and the retail base rate revenue caps will be divided into two shares - a 1/3 share to be received by Florida Power's shareholders, and a 2/3 share to be refunded to Florida Power's retail customers; provided, however, that for the year 2002 only, the refund to customers will be limited to 67.1% of the 2/3 customer share. The retail base rate revenue sharing threshold amounts for 2002, 2003, 2004 and 2005 will be $1,296 million, $1,333 million, $1,370 million and $1,407 million, respectively. The Plan also provides that all retail base rate revenues above the retail base rate revenue caps established for the years 2003, 2004 and 2005 will be refunded to retail customers on an annual basis. For 2002, the refund to customers will be limited to 67.1% of the retail base rate revenues that exceed the 2002 cap. The retail base revenue caps for 2002, 2003, 2004 and 2005 will be $1,356 million, $1,393 million, $1,430 million and $1,467 million, respectively.
The Agreement also provides that beginning with the in-service date of Florida Power's Hines Unit 2 and continuing through December 31, 2005, Florida Power will be allowed to recover through the fuel cost recovery clause a return on average investment and depreciation expense for Hines Unit 2, to the extent such costs do not exceed the Unit's cumulative fuel savings over the recovery period.
Additionally, the Agreement provides that Florida Power will effect a mid-course correction of its fuel cost recovery clause to reduce the fuel factor by $50 million for the remainder of 2002. The fuel cost recovery clause will operate as it normally does, including, but not limited to any additional mid-course adjustments that may become necessary, and the calculation of true-ups to actual fuel clause expenses.
During the term of the Agreement, Florida Power will suspend accruals on its reserves for nuclear decommissioning and fossil dismantlement. Additionally, for each calendar year during the term of the Agreement, Florida Power will record a $62.5 million depreciation expense reduction, and may, at its option, record up to an equal annual amount as an offsetting accelerated depreciation expense. In addition, Florida Power is authorized, at its discretion, to accelerate the amortization of certain regulatory assets over the term of the Agreement.
Under the terms of the Agreement, Florida Power agreed to continue the implementation of its four-year Commitment to Excellence Reliability Plan and expects to achieve a 20% improvement in its annual System Average Interruption Duration Index by no later than 2004. If this improvement level is not achieved for calendar years 2004 or 2005, Florida Power will provide a refund of $3 million for each year the level is not achieved to 10% of its total retail customers served by its worst performing distribution feeder lines.
The Agreement also provides that Florida Power will refund to customers $35 million of the $98 million in interim revenues Florida Power has collected subject to refund since March 13, 2001. No other interim revenues that were collected during that period will continue to be held subject to refund.
The agreement was filed with the FPSC for approval on March 27, 2002. If the FPSC approves the Agreement, the new rates will take effect May 1, 2002. Progress Energy cannot predict the outcome of this matter.
Other Retail Rate Matters
See Note 13B to the Progress Energy consolidated financial statements for additional information on the Company's other retail rate matters.
Regional Transmission Organizations
In October 2000, Florida Power, along with Florida Power & Light Company and Tampa Electric Company filed with FERC an application for approval of a regional transmission organization, or RTO, for peninsular Florida, currently named GridFlorida. On March 28, 2001, FERC issued an order provisionally granting GridFlorida RTO status and directing the GridFlorida applicants to make certain changes in the RTO documents and to file such changes within 60 days. On May 29, 2001, the GridFlorida applicants made the compliance filing as directed by FERC, but FERC has not yet issued an order on that compliance filing.
On May 16, 2001, the FPSC initiated dockets to review the prudence of the GridFlorida applicants' decision to form and participate in the GridFlorida RTO. The GridFlorida applicants have announced that they will hold GridFlorida development activities in abeyance. On June 27, 2001, the FPSC issued an order establishing a two-phase process for addressing these GridFlorida RTO issues in the context of Florida Power's pending rate case. In the first phase, the FPSC will address the general issues associated with the prudence of the GridFlorida RTO on an expedited basis. FPSC hearings were held in October 2001 on the phase one issues, and the FPSC issued an order in December 2001. The order states, among other things, that the GridFlorida applicants acted prudently in moving to establish an RTO for Florida. However, the order also directs the GridFlorida applicants to make certain changes to the proposed GridFlorida structure and refile with the FPSC within 90 days of the order. The GridFlorida applicants made the required changes to GridFlorida and refiled the application with the FPSC on March 20, 2002. The second phase will address ratemaking issues and will be decided as part of the general rate proceeding. Progress Energy cannot predict the outcome or impact of these matters.
In October 2000, CP&L, along with Duke Energy Corporation and South Carolina Electric & Gas Company filed with FERC an application for approval of a for-profit transmission company, currently named GridSouth. On July 12, 2001, FERC issued an order granting GridSouth RTO status and directing that certain modifications to the RTO documents be made and filed within 90 days.
CP&L has applied to the NCUC and the SCPSC for permission to transfer operational control of its transmission assets to GridSouth. On June 21, 2001, the Public Staff of the NCUC filed a motion asking the NCUC to hold the GridSouth docket in abeyance until the U.S. Supreme Court had ruled on the appeal of FERC's Order No. 888. That appeal addresses the scope of FERC's jurisdiction over transmission service used to serve retail customers. The appeal of Order No. 888 was heard by the Court on October 3, 2001, with a decision anticipated in the summer of 2002. The NCUC issued an order holding that CP&L's and Duke Energy Corporation's petition to transfer operational control of their transmission assets to GridSouth shall be held in abeyance pending further order. In February 2002, CP&L and the other GridSouth applicants withdrew the GridSouth application from the NCUC and
SCPSC for purposes of making certain revisions to the GridSouth proposal. The GridSouth applicants plan to refile their application once those changes have been made. Progress Energy cannot predict the outcome of this matter.
On July 12, 2001, FERC issued an order requiring certain parties, including CP&L, Duke Energy Corporation, South Carolina Electric & Gas Company, Southern Company and Entergy to engage in a mediation to develop a plan for a single RTO for the Southeast. The GridFlorida applicants and the parties to the GridFlorida docket before FERC were encouraged to participate, but were not required to do so. Florida Power and CP&L participated in the mediation. On September 10, 2001, the presiding administrative law judge of the mediation submitted a mediation report to FERC. The report, which has not yet been acted on by FERC, recommended adoption of a for-profit transmission company RTO model. FERC held a discussion on the mediation report on November 24, 2001. In January 2002, FERC stated that it would issue orders on the RTO formations for the Southeast during the first half of 2002 after the development of a standardized market design for the wholesale electricity market. Progress Energy cannot predict the outcome of these matters or the effect that it may have on the GridFlorida proceedings currently ongoing before the FERC and the FPSC or the GridSouth proceedings currently ongoing before FERC, the SCPSC or the NCUC.
Franchise Litigation
Five cities, with a total of approximately 36,000 customers, have sued Florida Power in various circuit courts in Florida. The lawsuits principally seek 1) a declaratory judgment that the cities have the right to purchase Florida Power's electric distribution system located within the municipal boundaries of the cities, 2) a declaratory judgment that the value of the distribution system must be determined through arbitration, and 3) injunctive relief requiring Florida Power to continue to collect from Florida Power's customers and remit to the cities, franchise fees during the pending litigation, and as long as Florida Power continues to occupy the cities' rights-of-way to provide electric service, notwithstanding the expiration of the franchise ordinances under which Florida Power had agreed to collect such fees. Three circuit courts have entered orders requiring arbitration to establish the purchase price of Florida Power's electric distribution facilities within three cities. One appellate court has held that one city has the right to determine the value of Florida Power's facilities within the city through arbitration. To date, no city has attempted to actually exercise the right to purchase any portion of Florida Power's electric distribution system, nor has there been any proceeding to determine the value at which such a purchase could be made. Arbitration has been scheduled for two of the cases in the third quarter of 2002. Progress Energy cannot predict the outcome of these matters.
Nuclear
In the Company's retail jurisdictions, provisions for nuclear decommissioning costs are approved by the NCUC, the SCPSC and the FPSC and are based on site-specific estimates that include the costs for removal of all radioactive and other structures at the site. In the wholesale jurisdictions, the provisions for nuclear decommissioning costs are approved by FERC. See Note 1I to the Progress Energy consolidated financial statements for a discussion of the Company's nuclear decommissioning costs.
On December 21, 2000, CP&L received permission from the NRC to increase its storage capacity for spent fuel rods in Wake County, North Carolina. The NRC's decision came two years after CP&L asked for permission to open two unused storage pools at the Shearon Harris Nuclear Plant (Harris Plant). The approval means CP&L can complete cooling systems and install storage racks in its third and fourth storage pools at the Harris Plant.
Orange County, North Carolina appealed the NRC license amendment to expand spent fuel storage capacity at the Harris Plant. On May 31, 2001, Orange County filed a petition for review in the U.S. Court of Appeals for the District of Columbia, and on June 1, 2001, filed a request for stay and expedition of the case with the court.
On June 29, 2001, U.S. Court of Appeals denied Orange County's motion for a stay and rejected the request for an expedited schedule for the appeal. The court is expected to issue a briefing schedule for the case sometime in early 2002. Progress Energy cannot predict the outcome of this matter.
As required under the Nuclear Waste Policy Act of 1982, CP&L and Florida Power each entered into a contract with the U.S. Department of Energy (DOE) under which the DOE agreed to begin taking spent nuclear fuel by no later than January 31, 1998. All similarly situated utilities were required to sign the same standard contract. See Note 20D2 to the Progress Energy consolidated financial statements for a discussion of recent spent nuclear fuel and DOE developments.
Several projects, commonly referred to as power uprate projects, are currently being evaluated and implemented at CP&L's nuclear facilities to increase electrical generation output. A power uprate was completed at the Harris Plant during 2001 and power uprates are in progress at the Brunswick and Robinson Nuclear Plants, which will be
implemented in phases over the next several years following regulatory approval. The total increased generation from these projects is estimated to be approximately 250 megawatts.
In August 2001, the NRC issued Bulletin 2001-01, "Circumferential Cracking of Reactor Vessel Head Penetration Nozzles," requesting that all pressurized water reactors (PWR) provide their plans for inspecting the reactor vessel head for the conditions described in the bulletin. While performing this inspection, FirstEnergy Corp.'s Davis Besse plant in Ohio found three penetrations with evidence of leakage and further evidence of some wastage of the reactor vessel head around two of these penetrations. As a result of finding the wastage of the vessel head, the NRC issued Bulletin 2002-01, requesting licensees to assess previous inspections of the reactor head and determine the potential for the existence of conditions similar to that found at the Davis Besse plant.
The Progress Energy PWRs have completed the inspections requested by Bulletin 2001-01. Any indications of leakage have been inspected and repaired, and no wastage of the reactor vessel head has been observed at any of the plants. Based on these inspections, responses to Bulletin 2002-01 are being prepared. The Company does not anticipate any adverse impact from this regulatory action.
Synthetic Fuels
Progress Energy, through its subsidiaries, is a majority owner in five
entities and a minority owner in one entity that own facilities that
produce synthetic fuel, as defined under the Internal Revenue Service Code
(Code). The production and sale of the synthetic fuel from these facilities
qualifies for tax credits under Section 29 of the Code (Section 29) if
certain requirements are satisfied, including a requirement that the
synthetic fuel differs significantly in chemical composition from the coal
used to produce such synthetic fuel. All entities have received private
letter rulings (PLR's) from the Internal Revenue Service (IRS) with respect
to their synthetic fuel operations. The PLR's do not limit the production
on which synthetic fuel tax credits may be claimed.
Should the tax credits be denied on future audits, and Progress Energy fails to prevail through the IRS or legal process, there could be a significant tax liability owed for previously taken Section 29 credits, with a significant impact on earnings and cash flows. In management's opinion, Progress Energy is complying with all the necessary requirements to be allowed such credits under Section 29 and believes it is probable, although it cannot provide certainty, that it will prevail if challenged by the IRS on any credits taken.
Environmental Matters
The Company is subject to federal, state and local regulations addressing air and water quality, hazardous and solid waste management and other environmental matters.
Various organic materials associated with the production of manufactured gas, generally referred to as coal tar, are regulated under federal and state laws. The lead or sole regulatory agency that is responsible for a particular former coal tar site depends largely upon the state in which the site is located. There are several manufactured gas plant (MGP) sites to which both electric utilities and the gas utility have some connection. In this regard, both electric utilities and the gas utility, with other potentially responsible parties, are participating in investigating and, if necessary, remediating former coal tar sites with several regulatory agencies, including, but not limited to, the U.S. Environmental Protection Agency (EPA), the Florida Department of Environmental Protection (FDEP) and the North Carolina Department of Environment and Natural Resources, Division of Waste Management (DWM). Although the electric utilities and gas utility may incur costs at these sites about which it has been notified, based upon current status of these sites, the Company does not expect those costs to be material to its consolidated financial position or results of operations. The Company has accrued amounts to address known costs at certain of these sites.
Both electric utilities, the gas utility and Progress Ventures are periodically notified by regulators such as the EPA and various state agencies of their involvement or potential involvement in sites, other than MGP sites, that may require investigation and/or remediation. Although Progress Energy's subsidiaries may incur costs at the sites about which they have been notified, based upon the current status of these sites, Progress Energy does not expect those costs to be material to the consolidated financial position or results of operations of the Company.
There has been and may be further proposed federal legislation requiring reductions in air emissions for nitrogen oxides, sulfur dioxide and mercury setting forth national caps and emission levels over an extended period of time. This national multi-pollutant approach would have significant costs which could be material to the Company's consolidated financial position or results of operations. Some companies may seek recovery of the related cost through rate adjustments or similar mechanisms. Progress Energy cannot predict the outcome of this matter.
The EPA has been conducting an enforcement initiative related to a number of coal-fired utility power plants in an effort to determine whether modifications at those facilities were subject to New Source Review requirements or New Source Performance Standards under the Clean Air Act. Both CP&L and Florida Power were asked to provide information to the EPA as part of this initiative and cooperated in providing the requested information. The EPA has initiated civil enforcement actions against other unaffiliated utilities as part of this initiative, some of which have resulted in settlement agreements calling for expenditures ranging from $1.0 billion to $1.4 billion. A utility that was not subject to a civil enforcement action settled its New Source Review issues with the EPA for $300 million. These settlement agreements have generally called for expenditures to be made over extended time periods, and some of the companies may seek recovery of the related cost through rate adjustments or similar mechanisms. Progress Energy cannot predict the outcome of this matter.
In 1998, the EPA published a final rule addressing the issue of regional transport of ozone. This rule is commonly known as the NOx SIP Call. The EPA's rule requires 23 jurisdictions, including North Carolina, South Carolina and Georgia, but not Florida, to further reduce nitrogen oxide emissions in order to attain a pre-set state NOx emission level by May 31, 2004. CP&L is evaluating necessary measures to comply with the rule and estimates its related capital expenditures to meet these measures in North and South Carolina could be approximately $370 million, which has not been adjusted for inflation. A portion of this amount that is committed to be spent from 2002 to 2004 is discussed in the "Investing Activities" section under LIQUIDITY AND CAPITAL RESOURCES above. Increased operation and maintenance costs relating to the NOx SIP Call are not expected to be material to Progress Energy's results of operations. Further controls are anticipated as electricity demand increases. Progress Energy cannot predict the outcome of this matter.
In July 1997, the EPA issued final regulations establishing a new eight-hour ozone standard. In October 1999, the District of Columbia Circuit Court of Appeals ruled against the EPA with regard to the federal eight-hour ozone standard. The U.S. Supreme Court has upheld, in part, the District of Columbia Circuit Court of Appeals decision. Further litigation and rulemaking are anticipated. North Carolina adopted the federal eight-hour ozone standard and is proceeding with the implementation process. North Carolina has promulgated final regulations, which will require CP&L to install nitrogen oxide controls under the State's eight-hour standard. The cost of those controls are included in the cost estimate of $370 million set forth above.
The EPA published a final rule approving petitions under Section 126 of the
Clean Air Act, which requires certain sources to make reductions in
nitrogen oxide emissions by May 1, 2003. The final rule also includes a set
of regulations that affect nitrogen oxide emissions from sources included
in the petitions. The North Carolina fossil-fueled electric generating
plants are included in these petitions. Acceptable state plans under the
NOx SIP Call can be approved in lieu of the final rules the EPA approved as
part of the 126 petitions. CP&L, other utilities, trade organizations and
other states participated in litigation challenging the EPA's action. On
May 15, 2001, the District of Columbia Circuit Court of Appeals ruled in
favor of the EPA, which will require North Carolina to make reductions in
nitrogen oxide emissions by May 1, 2003. However, the Court in its May 15th
decision rejected the EPA's methodology for estimating the future growth
factors the EPA used in calculating the emissions limits for utilities. In
August 2001, the Court granted a request by CP&L and other utilities to
delay the implementation of the 126 Rule for electric generating units
pending resolution by the EPA of the growth factor issue. The Court's order
tolls the three-year compliance period (originally set to end on May 1,
2003) for electric generating units as of May 15, 2001. On January 16,
2002, the EPA issued a memo to harmonize the compliance dates for the
Section 126 Rule and the NOx SIP Call. The new compliance date for all
affected sources is now May 31, 2004, rather than May 1, 2003, subject to
the completion of the EPA's response to the related court decision on the
growth factor issue. Progress Energy cannot predict the outcome of this
matter.
On November 1, 2001, Progress Energy completed the sale of the Inland Marine Transportation segment to AEP Resources, Inc. In connection with the sale, Progress Energy entered into environmental indemnification provisions covering both unknown and known sites. Progress Energy has recorded an accrual to cover estimated probable future environmental expenditures. Progress Energy believes that it is reasonably possible that additional costs, which cannot be currently estimated, may be incurred related to the environmental indemnification provision beyond the amounts accrued. Progress Energy cannot predict the outcome of this matter.
Both electric utilities, the gas utility and Progress Ventures have filed claims with the Company's general liability insurance carriers to recover costs arising out of actual or potential environmental liabilities. Some claims have been settled and others are still pending. While management cannot predict the outcome of these matters, the outcome is not expected to have a material effect on the consolidated financial position or results of operations.
New Accounting Standards
See Note 1L to the Progress Energy consolidated financial statements for a discussion of the impact of new accounting standards.
The information required by this item is incorporated herein by reference to the following portions of Progress Energy's Management's Discussion and Analysis of Financial Condition and Results of Operations, insofar as they relate to CP&L: RESULTS OF OPERATIONS; LIQUIDITY AND CAPITAL RESOURCES; FUTURE OUTLOOK and OTHER MATTERS.
Note 1 to the CP&L consolidated financial statements discusses its
significant accounting policies. The most critical accounting policies and
estimates that impact CP&L's financial statements are the economic impacts
of utility regulation, which are described in more detail in Note 8 to the
CP&L consolidated financial statements.
On July 1, 2000, CP&L distributed its ownership interest in the stock of NCNG, SRS, Monroe Power and Progress Ventures, Inc. to Progress Energy. Prior to that date, the consolidated operations of CP&L and Progress Energy were substantially the same. Subsequent to that date, the operations of these subsidiaries are no longer included in CP&L's results of operations and financial position.
The results of operations for CP&L and Progress Energy are substantially the same for 1999. Additionally, the results of operations for the CP&L Electric segment are identical between CP&L and Progress Energy for all periods presented. The primary difference between the results of operations of the CP&L Electric segment and the consolidated CP&L results of operations for the 1999, 2000 and 2001 comparison period relate to the non-electric operations.
CP&L's non-electric operations for 2000 include a full year of operations for Caronet. Therefore, the $121.1 million after-tax gain from the sale of the BellSouth PCS assets in September 2000 (see Note 2B to the CP&L consolidated financial statements) is included in CP&L's results of operations. However, CP&L's other segment only includes six months of operations for NCNG, SRS, Monroe Power and Progress Ventures, Inc. and therefore a comparison to the prior period is not meaningful.
CP&L's non-electric operations for 2001 include an after-tax impairment of $102.4 million for other than temporary declines in CP&L's investment in Interpath.
The statement of cash flows for CP&L does not include amounts related to NCNG, SRS, Monroe Power and Progress Ventures, Inc. after July 1, 2000. Additionally, the CP&L statement of cash flows does not include any amounts related to the acquisition of FPC and the issuance of debt to consummate the transaction.
CP&L's estimated capital requirements for 2002, 2003 and 2004 are $688 million, $676 million and $745 million, respectively, and primarily reflect construction expenditures to add regulated generation and upgrade existing facilities.
See Note 5 to the CP&L consolidated financial statements for information on CP&L's available credit facilities at December 31, 2001, and the discussion above for Progress Energy under "Financing Activities" for information regarding CP&L's financing activities.
The following tables reflect CP&L's contractual cash obligations and other commercial commitments in the respective periods in which they are due.
Contractual Cash Total Amounts Obligations Committed 2002 2003 2004 2005 2006 Thereafter ---------------------------------------------------------------------------------- Long-term debt $3,576 $ 600 $268 $300 $300 $ -- $2,108 Capital Lease 33 2 2 2 2 2 23 Obligations Operating Leases 86 19 14 10 8 6 29 Fuel 1,854 538 403 345 270 286 12 Purchased Power 1,167 95 96 96 96 96 688 ---------------------------------------------------------------------------------- Total $6,716 $1,254 $783 $753 $676 $390 $2,860 |
Other Commercial Total Amounts Commitments Committed 2002 2003 2004 2005 2006 Thereafter ------------------------------------------------------------------------------------ Standby Letters of $5 $ 5 $-- $-- $-- $-- $-- Credit Guarantees and Other 2 -- -- -- -- -- 2 Commitments ------------------------------------------------------------------------------------ Total $7 $ 5 $-- $-- $-- $-- $ 2 |
Information on the CP&L's contractual obligations at December 31, 2001, is included in the notes to the CP&L consolidated financial statements. Future debt maturities and lease obligations are included in Note 5 and Note 6, respectively. The Company's fuel and purchased power obligations are included in Note 15A to the CP&L consolidated financial statements.
Market risk represents the potential loss arising from adverse changes in market rates and prices. Certain market risks are inherent in the Company's financial instruments, which arise from transactions entered into in the normal course of business. The Company's primary exposures are changes in interest rates with respect to its long-term debt and commercial paper, and fluctuations in the return on marketable securities with respect to its nuclear decommissioning trust funds. The Company manages its market risk in accordance with its established risk management policies, which may include entering into various derivative transactions.
These financial instruments are held for purposes other than trading. The fair value of the Company's open trading positions was less than $0.2 million at December 31, 2001. The risks discussed below do not include the price risks associated with non-financial instrument transactions and positions associated with the Company's operations, such as purchase and sales commitments and inventory.
Interest Rate Risk
The Company manages its interest rate risks through the use of a combination of fixed and variable rate debt. Variable rate debt has rates that adjust in periods ranging from daily to monthly. Interest rate derivative instruments may be used to adjust interest rate exposures and to protect against adverse movements in rates.
The following tables provide information as of December 31, 2001 and 2000, about the Company's interest rate risk sensitive instruments. The tables present principal cash flows and weighted-average interest rates by expected maturity dates for the fixed and variable rate long-term debt, commercial paper, FPC obligated mandatorily redeemable securities of trust, and other short-term indebtedness. The tables also include estimates of the fair value of the Company's interest rate risk sensitive instruments based on quoted market prices for these or similar issues. For interest-rate swaps and interest-rate forward contracts, the tables present notional amounts and weighted-average interest rates by contractual maturity dates. Notional amounts are used to calculate the contractual cash flows to be exchanged under the interest-rate swaps and the settlement amounts under the interest-rate forward contracts.
December 31, 2001
----------------- Fair Value
December 31,
2002 2003 2004 2005 2006 Thereafter Total 2001/(a)/
-------------------------------------------------------------------------------------------------------------
(Dollars in millions)
Fixed rate long-term debt/(d)/ $ 188 $ 283 $ 869 $ 348 $ 909 $5,379 $7,976 $8,322
Average interest rate 6.38% 6.42% 6.67% 7.39% 6.78% 6.97% 6.90% --
Variable rate long-term debt -- -- -- -- -- $ 620 $ 620 $ 621
Average interest rate -- -- -- -- -- 1.58% 1.58% --
Commercial paper/(b)/ -- $ 415 $ 450 -- -- -- $ 865 $ 865
Average interest rate -- 2.89% 3.02% -- -- -- 2.96% --
Extendible notes $ 500 -- -- -- -- -- $ 500 $ 500
Average interest rate -
variable rate 2.83% -- -- -- -- -- 2.83% --
FPC mandatorily redeemable
securities of trust -- -- -- -- -- $ 300 $ 300 $ 291
Fixed rate -- 7.10% 7.10% --
Interest-rate swaps:
Pay fixed/receive variable/(c)/ $ 500 -- -- -- -- -- $ 500 $(18.5)
|
/(a)/ Fair value includes accrued interest
/(b)/ Excludes short-term commercial paper
/(c)/ Receives floating rate based on three-month LIBOR and pays fixed rate
of 7.17%. Designated as a hedge of interest payments on $500 million
of Extendible notes.
/(d)/ In March 2002, $800 million of fixed rate debt was converted into
variable rate debt through interest rate derivative agreements that
receives fixed rate of 4.87% and pays floating rate based on
three-month LIBOR.
December 31, 2001
----------------- Fair Value
December 31,
2002 2003 2004 2005 2006 Thereafter Total 2001/(a)/
-------------------------------------------------------------------------------------------------------------
(Dollars in millions)
Fixed rate long-term debt $ 184 $ 182 $ 282 $ 368 $ 348 $2,319 $3,683 $3,636
Average interest rate 6.84% 6.45% 6.42% 6.83% 7.40% 7.03% 6.96% --
Variable rate long-term debt -- -- -- -- -- $ 620 $ 620 $ 621
Average interest rate -- -- -- -- -- 4.72% 4.72% --
Commercial paper/(b)/ -- -- $ 986 -- -- -- $ 986 $ 986
Average interest rate -- -- 7.25% -- -- -- 7.25% --
Extendible notes -- $ 500 -- -- -- -- $ 500 $ 500
Average interest rate -
variable rate -- 6.76% -- -- -- -- 6.76% --
FPC mandatorily redeemable
securities of trust -- -- -- -- -- $ 300 $ 300 $ 272
Fixed rate 7.10% 7.10% --
Interest-rate swaps:
Pay fixed/receive variable/(c)/ -- $ 500 -- -- -- -- $ 500 $ (9.1)
Interest rate forward
contracts related to
anticipated long-term debt
issuances/(d)/ $1,125 -- -- -- -- -- $1,125 $(37.5)
|
/(a)/ Fair value includes accrued interest
/(b)/ Excludes short-term commercial paper
/(c)/ Receives floating rate based on three-month LIBOR and pays fixed rate
of 7.17%. Designated as a hedge of interest payments on $500 million
of Extendible notes.
/(d)/ Receives floating rate based on three-month LIBOR and pays
weighted-average fixed rates of approximately 6.77%
Marketable Securities Price Risk
The Company's electric utility subsidiaries maintain trust funds, pursuant to NRC requirements, to fund certain costs of decommissioning their nuclear plants. These funds are primarily invested in stocks, bonds and cash equivalents, which are exposed to price fluctuations in equity markets and to changes in interest rates. The fair value of these funds was $822.8 million and $812.0 million at December 31, 2001 and 2000, respectively. Of these amounts, $416.7 million and $411.3 million, respectively, relate to CP&L. The Company actively monitors its portfolio by benchmarking the performance of its investments against certain indices and by maintaining, and periodically reviewing, target allocation percentages for various asset classes. The accounting for nuclear decommissioning recognizes that the Company's regulated electric rates provide for recovery of these costs net of any trust fund earnings and, therefore, fluctuations in trust fund marketable security returns do not affect the earnings of the Company.
CVO Market Value Risk
In connection with the acquisition of FPC, the Company issued 98.6 million CVOs. Each CVO represents the right to receive contingent payments based on the performance of four synthetic fuel facilities purchased by subsidiaries of FPC in October 1999. The payments, if any, are based on the net after-tax cash flows the facilities generate. These CVOs are recorded at fair value and unrealized gains and losses from changes in fair value are recognized in earnings. At December 31, 2001, the fair value of these CVOs was $41.9 million. A hypothetical 10% decrease in market price would result in a $4.2 million decrease in the fair value of the CVOs.
The information required by this item is incorporated herein by reference to the Progress Energy Quantitative and Qualitative Disclosures About Market Risk insofar as it relates to CP&L.
The following tables provide information as of December 31, 2001 and 2000, about CP&L's interest rate risk sensitive instruments.
December 31, 2001
----------------- Fair Value
December 31,
2002 2003 2004 2005 2006 Thereafter Total 2001/(a)/
-----------------------------------------------------------------------------------------------------------
(Dollars in millions)
Fixed rate long-term debt $ 100 $ 7 $ 300 $ 300 -- $1,488 $2,195 $2,274
Average interest rate 6.75% 6.43% 6.87% 7.50% -- 6.88% 6.96% --
Variable rate long-term debt -- -- -- -- -- $ 620 $ 620 $ 621
Average interest rate -- -- -- -- -- 1.58% 1.58% --
Commercial paper -- $ 261 -- -- -- -- $ 261 $ 261
Average interest rate -- 3.10% -- -- -- -- 3.10% --
Extendible notes $ 500 -- -- -- -- -- $ 500 $ 500
Average interest rate -
variable rate 2.83% -- -- -- -- -- 2.83% --
Interest-rate swaps:
Pay fixed/receive variable/(b)/ $ 500 -- -- -- -- -- $ 500 $(18.5)
|
/(a)/ Fair value includes accrued interest
/(b)/Receives floating rate based on three-month LIBOR and pays fixed rate of 7.17%. Designated as a hedge on $500 million of Extendible notes.
December 31, 2001
----------------- Fair Value
December 31,
2001 2002 2003 2004 2005 Thereafter Total 2001/(a)/
-----------------------------------------------------------------------------------------------------------
(Dollars in millions)
Fixed rate long-term debt -- $ 100 $ 7 $ 300 $ 300 $1,319 $2,026 $1,996
Average interest rate -- 7.17% 6.34% 6.88% 7.50% 7.08% 7.14% --
Variable rate long-term debt -- -- -- -- -- $ 620 $ 620 $ 621
Average interest rate -- -- -- -- -- 4.72% 4.72% --
Commercial paper -- -- $ 486 -- -- -- $ 486 $ 486
Average interest rate -- -- 7.40% -- -- -- 7.40% --
Extendible notes -- $ 500 -- -- -- -- $ 500 $ 500
Average interest rate -
variable rate -- 6.76% -- -- -- -- 6.76% --
Interest-rate swaps:
Pay fixed/receive variable/(b)/ -- $ 500 -- -- -- -- $ 500 $ (9.1)
|
/(a)/ Fair value includes accrued interest /(b)/ Receives floating rate based on three-month LIBOR and pays fixed rate of 7.17%. Designated as a hedge on $500 million of Extendible notes.
The following consolidated financial statements, supplementary data and consolidated financial statement schedules are included herein:
Page
----
Progress Energy, Inc.
---------------------
Independent Auditors' Report - Deloitte & Touche LLP 65
Independent Auditors' Report - KPMG LLP 66
Consolidated Financial Statements - Progress Energy:
Consolidated Statements of Income for the Years Ended December 31, 2001, 2000, and 1999 67
Consolidated Balance Sheets as of December 31, 2001 and 2000 68
Consolidated Statements of Cash Flows for the Years Ended December 31, 2001, 2000, and 1999 69
Consolidated Statements of Changes in Common Stock Equity for the Years Ended December 31, 2001,
2000 and 1999 70
Consolidated Quarterly Financial Data (Unaudited) 70
Notes to Consolidated Financial Statements 71
Carolina Power & Light Company
------------------------------
Independent Auditors' Report - Deloitte & Touche LLP 99
Consolidated Financial Statements - CP&L:
Consolidated Statements of Income and Comprehensive Income for the Years Ended
December 31, 2001, 2000, and 1999 100
Consolidated Balance Sheets as of December 31, 2001 and 2000 101
Consolidated Statements of Cash Flows for the Years Ended December 31, 2001, 2000
and 1999 102
Consolidated Schedules of Capitalization as of December 31, 2001 and 2000 103
Consolidated Statements of Retained Earnings for the Years Ended December 31, 2001, 2000
and 1999 103
Consolidated Quarterly Financial Data (Unaudited) 103
Notes to Consolidated Financial Statements 104
Consolidated Financial Statement Schedules for the Years Ended December 31,
2001, 2000, and 1999:
II-Valuation and Qualifying Accounts - Progress Energy, Inc. 122
II-Valuation and Qualifying Account - Carolina Power & Light Company 123
|
All other schedules have been omitted as not applicable or not required or because the information required to be shown is included in the Consolidated Financial Statements or the accompanying Notes to the Consolidated Financial Statements.
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF PROGRESS ENERGY, INC.
We have audited the accompanying consolidated balance sheets of Progress Energy, Inc. and its subsidiaries (the Company) as of December 31, 2001 and 2000, and the related consolidated statements of income, changes in common stock equity and cash flows for each of the three years in the period ended December 31, 2001. Our audits also included the financial statement schedule listed in the Index at Item 8. These financial statements and the financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We did not audit the financial statements of Florida Progress Corporation (a consolidated subsidiary since November 30, 2000) for the year ended December 31, 2000, which statements reflect total assets constituting 31% of the related consolidated total assets at December 31, 2000. Those financial statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Florida Progress Corporation as of December 31, 2000, is based solely on the report of such other auditors.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of the other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors, such financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
/s/ DELOITTE & TOUCHE LLP Raleigh, North Carolina February 15, 2002 |
Independent Auditors' Report
To the Board of Directors of Florida Progress Corporation:
We have audited the consolidated balance sheet and schedule of capitalization of Florida Progress Corporation and subsidiaries as of December 31, 2000 (not separately presented herein). These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
The consolidated financial statements referred to in the introductory paragraph have been prepared based on the Company's historical cost basis and do not include any "push down" of Progress Energy, Inc.'s acquisition cost basis as a result of Progress Energy, Inc.'s acquisition of the Company on November 30, 2000.
In our opinion, the consolidated balance sheet and schedule of capitalization present fairly, in all material respects, the financial position of Florida Progress Corporation and subsidiaries as of December 31, 2000, in conformity with accounting principles generally accepted in the United States of America.
/s/KPMG LLP St. Petersburg, Florida February 15, 2001 |
Years ended December 31
(In thousands except per share data) 2001 2000 1999
-------------------------------------------------------------------------------------------------
Operating Revenues
Electric $6,556,561 $3,549,821 $3,146,158
Natural gas 321,385 324,499 98,903
Diversified businesses 1,583,513 229,093 119,866
-------------------------------------------------------------------------------------------------
Total Operating Revenues 8,461,459 4,103,413 3,364,927
-------------------------------------------------------------------------------------------------
Operating Expenses
Fuel used in electric generation 1,559,998 686,754 581,340
Purchased power 868,078 364,977 365,425
Gas purchased for resale 243,451 250,902 67,465
Other operation and maintenance 1,246,835 823,549 682,407
Depreciation and amortization 1,090,178 754,748 503,105
Taxes other than on income 383,824 165,393 142,741
Diversified businesses 1,825,320 352,992 174,589
-------------------------------------------------------------------------------------------------
Total Operating Expenses 7,217,684 3,399,315 2,517,072
-------------------------------------------------------------------------------------------------
Operating Income 1,243,775 704,098 847,855
-------------------------------------------------------------------------------------------------
Other Income (Expense)
Interest income 22,206 26,984 10,336
Impairment of investments (164,183) -- --
Gain on sale of assets -- 200,000 --
Other, net (27,018) 12,338 (41,018)
-------------------------------------------------------------------------------------------------
Total Other Income (Expense) (168,995) 239,322 (30,682)
-------------------------------------------------------------------------------------------------
Interest Charges
Long-term debt 592,477 237,494 180,676
Other interest charges 110,355 45,459 10,298
Allowance for borrowed funds used during construction (18,019) (20,668) (11,510)
-------------------------------------------------------------------------------------------------
Total Interest Charges, Net 684,813 262,285 179,464
-------------------------------------------------------------------------------------------------
Income before Income Taxes 389,967 681,135 637,709
Income Tax Expense (Benefit) (151,643) 202,774 258,421
-------------------------------------------------------------------------------------------------
Net Income $ 541,610 $ 478,361 $ 379,288
-------------------------------------------------------------------------------------------------
Average Common Shares Outstanding 204,683 157,169 148,344
-------------------------------------------------------------------------------------------------
Basic Earnings per Common Share $ 2.65 $ 3.04 $ 2.56
-------------------------------------------------------------------------------------------------
Diluted Earnings per Common Share $ 2.64 $ 3.03 $ 2.55
-------------------------------------------------------------------------------------------------
Dividends Declared per Common Share $ 2.135 $ 2.075 $ 2.015
-------------------------------------------------------------------------------------------------
|
See Notes to Progress Energy, Inc. consolidated financial statements.
(In thousands, except share amounts) December 31
Assets 2001 2000
--------------------------------------------------------------------------------------------------------
Utility Plant
Electric utility plant in service $ 19,176,021 $ 18,124,036
Gas utility plant in service 491,903 378,464
Accumulated depreciation (10,096,412) (9,350,235)
--------------------------------------------------------------------------------------------------------
Utility plant in service, net 9,571,512 9,152,265
Held for future use 15,380 16,302
Construction work in progress 1,065,154 1,043,439
Nuclear fuel, net of amortization 262,869 224,692
--------------------------------------------------------------------------------------------------------
Total Utility Plant, Net 10,914,915 10,436,698
--------------------------------------------------------------------------------------------------------
Current Assets
Cash and cash equivalents 54,419 101,296
Accounts receivable 944,753 925,911
Taxes receivable 32,325 --
Inventory 886,747 420,985
Deferred fuel cost 146,652 217,806
Prepayments 36,150 50,040
Assets held for sale, net -- 747,745
Other current assets 226,947 192,347
--------------------------------------------------------------------------------------------------------
Total Current Assets 2,327,993 2,656,130
--------------------------------------------------------------------------------------------------------
Deferred Debits and Other Assets
Regulatory assets 455,325 613,200
Nuclear decommissioning trust funds 822,821 811,998
Diversified business property, net 1,073,046 729,662
Miscellaneous other property and investments 456,880 598,235
Goodwill, net 3,690,210 3,652,429
Prepaid pension costs 489,600 373,151
Other assets and deferred debits 509,001 239,198
--------------------------------------------------------------------------------------------------------
Total Deferred Debits and Other Assets 7,496,883 7,017,873
--------------------------------------------------------------------------------------------------------
Total Assets $ 20,739,791 $ 20,110,701
--------------------------------------------------------------------------------------------------------
Capitalization and Liabilities
--------------------------------------------------------------------------------------------------------
Common Stock Equity
Common stock without par value, 500,000,000 shares authorized,
218,725,352 and 206,089,047 shares issued and outstanding, respectively $ 4,121,194 $ 3,621,610
Unearned restricted shares (674,511 and 653,344 shares, respectively) (13,701) (12,708)
Unearned ESOP shares (5,199,388 and 5,782,376 shares, respectively) (114,385) (127,211)
Accumulated other comprehensive loss (32,180) --
Retained earnings 2,042,605 1,942,510
--------------------------------------------------------------------------------------------------------
Total common stock equity 6,003,533 5,424,201
--------------------------------------------------------------------------------------------------------
Preferred stock of subsidiaries-not subject to mandatory redemption 92,831 92,831
Long-term debt 9,483,745 5,890,099
--------------------------------------------------------------------------------------------------------
Total capitalization 15,580,109 11,407,131
--------------------------------------------------------------------------------------------------------
Current Liabilities
Current portion of long-term debt 688,052 184,037
Accounts payable 709,906 828,568
Interest accrued 212,387 121,433
Dividends declared 117,857 107,645
Short-term obligations 77,529 3,972,674
Customer deposits 154,343 141,744
Other current liabilities 431,522 306,558
--------------------------------------------------------------------------------------------------------
Total Current Liabilities 2,391,596 5,662,659
--------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities
Accumulated deferred income taxes 1,434,506 1,807,192
Accumulated deferred investment tax credits 226,382 261,255
Regulatory liabilities 287,138 316,576
Other liabilities and deferred credits 820,060 655,888
--------------------------------------------------------------------------------------------------------
Total Deferred Credits and Other Liabilities 2,768,086 3,040,911
--------------------------------------------------------------------------------------------------------
Commitments and Contingencies (Note 20)
--------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $ 20,739,791 $ 20,110,701
--------------------------------------------------------------------------------------------------------
|
See Notes to Progress energy, Inc. consolidated financial statements.
Years ended December 31
(In thousands) 2001 2000 1999
-------------------------------------------------------------------------------------------------------------------------------
Operating Activities
Net income $ 541,610 $ 478,361 $ 379,288
Adjustments to reconcile net income to net cash provided by operating activities:
Impairment of assets and investments (Note 1J) 208,983 -- --
Depreciation and amortization 1,189,171 846,279 592,001
Deferred income taxes (366,490) (95,366) (32,495)
Investment tax credit (22,895) (18,136) (10,299)
Gain on sale of assets -- (200,000) --
Change in deferred fuel 72,529 (76,704) (39,052)
Net (increase) decrease in accounts receivable 210,871 (122,640) (33,322)
Net (increase) decrease in inventories (295,874) 13,726 (17,576)
Net (increase) decrease in prepaids and other current assets (2,876) 60,727 (117,250)
Net increase (decrease) in accounts payable (273,768) 242,902 24,555
Net increase (decrease) in other current liabilities 129,124 (142,551) 7,436
Other 54,614 (48,920) 75,867
-------------------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 1,444,999 937,678 829,153
-------------------------------------------------------------------------------------------------------------------------------
Investing Activities
Gross utility property additions (1,216,481) (950,198) (689,054)
Nuclear fuel additions (115,663) (59,752) (75,641)
Acquisition of Florida Progress Corporation -- (3,461,917) --
Net proceeds from sale of assets 53,010 212,825 --
Contributions to nuclear decommissioning trust (50,649) (32,391) (30,825)
Diversified business property additions (349,670) (157,628) (157,802)
Investments in non-utility activities (110) (89,351) (48,265)
-------------------------------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (1,679,563) (4,538,412) (1,001,587)
-------------------------------------------------------------------------------------------------------------------------------
Financing Activities
Issuance of common stock, net 488,290 -- --
Issuance of long-term debt 4,564,243 783,052 400,970
Net increase (decrease) in commercial paper reclassified to long-tem debt (121,880) 123,697 268,500
Net increase (decrease) in short-term indebtedness (3,896,182) 3,658,374 70,600
Net increase (decrease) in cash provided by checks drawn in excess of bank balances (45,372) 115,337 (117,643)
Retirement of long-term debt (322,207) (710,373) (113,335)
Dividends paid on common stock (432,078) (368,004) (293,704)
Other (47,127) (66) 6,169
-------------------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities 187,687 3,602,017 221,557
-------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents (46,877) 1,283 49,123
-------------------------------------------------------------------------------------------------------------------------------
Increase in Cash from Acquisition (See Noncash Activities) -- 20,142 1,876
-------------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at Beginning of Year 101,296 79,871 28,872
-------------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 54,419 $ 101,296 $ 79,871
-------------------------------------------------------------------------------------------------------------------------------
Supplemental Disclosures of Cash Flow Information
Cash paid during the year - interest $ 588,127 $ 244,224 $ 174,101
income taxes $ 127,427 $ 367,665 $ 284,535
|
Noncash Activities
. On July 15, 1999, the Company purchased all outstanding shares of
North Carolina Natural Gas Corporation (NCNG) through the issuance of
approximately $360 million in common stock.
. On June 28, 2000, Caronet, a wholly owned subsidiary of the Company,
contributed net assets in the amount of $93.0 million in exchange for
a 35% ownership interest (15% voting interest) in a newly formed
company.
. On November 30, 2000, the Company purchased all outstanding shares of
Florida Progress Corporation (FPC). In conjunction with the purchase
of FPC, the Company issued approximately $1.9 billion in common stock
and approximately $49.3 million in contingent value obligations.
See Notes to Progress Energy, Inc. consolidated financial statements.
Common Stock Outstanding
Unearned
Unearned ESOP
(In thousands except share data) Restricted Common
Shares Amount Stock Stock
---------------------------------------------------------------------------------------------
Balance, January 1, 1999 151,337,503 $1,382,524 ($8,541) ($152,979)
Net income
Issuance of shares 8,262,147 360,509
Purchase of restricted stock (2,507)
Restricted stock expense recognition 3,110
Allocation of ESOP shares 10,360 12,826
Dividends ($2.015 per share)
---------------------------------------------------------------------------------------------
Balance, December 31, 1999 159,599,650 1,753,393 (7,938) (140,153)
Net income
Issuance of shares 46,527,797 1,863,886
Purchase of restricted stock (10,067)
Restricted stock expense recognition 3,671
Cancellation of restricted shares (38,400) (1,626) 1,626
Allocation of ESOP shares 5,957 12,942
Dividends ($2.075 per share)
---------------------------------------------------------------------------------------------
Balance, December 31, 2000 206,089,047 3,621,610 (12,708) (127,211)
Net income
FAS 133 transition adjustment (net of
tax of $15,130)
Change in net unrealized losses on cash
flow hedges (net of tax of $13,268)
Foreign currency translation
Reclassification adjustment for amounts
included in net income (net of tax of
$8,739)
Comprehensive income
Issuance of shares 12,658,027 488,592
Purchase of restricted stock (7,992)
Restricted stock expense recognition 6,084
Cancellation of restricted shares (21,722) (915) 915
Allocation of ESOP shares 11,907 12,826
Dividends ($2.135 per share)
---------------------------------------------------------------------------------------------
Balance, December 31, 2001 218,725,352 $4,121,194 ($13,701) ($114,385)
=============================================================================================
Accumulated Total
Other Common
(In thousands except share data) Comprehensive Retained Stock
Income (Loss) Earnings Equity
-----------------------------------------------------------------------------------
Balance, January 1, 1999 $ -- $1,728,301 $2,949,305
Net income 379,288 379,288
Issuance of shares 360,509
Purchase of restricted stock (2,507)
Restricted stock expense recognition 3,110
Allocation of ESOP shares 23,186
Dividends ($2.015 per share) (300,244) (300,244)
-----------------------------------------------------------------------------------
Balance, December 31, 1999 -- 1,807,345 3,412,647
Net income 478,361 478,361
Issuance of shares 1,863,886
Purchase of restricted stock (10,067)
Restricted stock expense recognition 3,671
Cancellation of restricted shares --
Allocation of ESOP shares 18,899
Dividends ($2.075 per share) (343,196) (343,196)
-----------------------------------------------------------------------------------
Balance, December 31, 2000 -- 1,942,510 5,424,201
Net income 541,610 541,610
FAS 133 transition adjustment (net of
tax of $15,130) (23,567) (23,567)
Change in net unrealized losses on cash
flow hedges (net of tax of $13,268) (20,703) (20,703)
Foreign currency translation
(1,557) (1,557)
Reclassification adjustment for amounts
included in net income (net of tax of
$8,739) 13,647 13,647
-----------
Comprehensive income 509,430
-----------
Issuance of shares 488,592
Purchase of restricted stock (7,992)
Restricted stock expense recognition 6,084
Cancellation of restricted shares --
Allocation of ESOP shares 24,733
Dividends ($2.135 per share) (441,515) (441,515)
-----------------------------------------------------------------------------------
Balance, December 31, 2001 ($32,180) $2,042,605 $6,003,533
===================================================================================
|
(In thousands except per share data) First Quarter Second Quarter Third Quarter (a) Fourth Quarter (a)
(a) (a)
-------------------------------------------------------------------------------------------------------------------
Year ended December 31, 2001
Operating revenues $1,908,090 $2,315,643 (e) $2,330,547 $1,907,179
Operating income 309,855 284,075 453,518 196,327
Net income 154,003 111,702 366,443 (90,538)(d)
Common stock data:
Basic earnings per common share 0.77 0.56 1.78 (0.43)(d)
Diluted earnings per common share 0.77 0.56 1.77 (0.42)(d)
Dividends paid per common share 0.530 0.530 0.530 0.530
Price per share - high 49.25 45.00 45.79 45.60
Low 38.78 40.36 39.25 40.50
-------------------------------------------------------------------------------------------------------------------
Year ended December 31, 2000
Operating revenues $ 878,618 $ 887,748 $ 1,064,908 $1,272,139
Operating income 186,588 209,628 277,300 30,582 (c)
Net income 85,261 107,460 297,083 (b) (11,443)(c)
Common stock data:
Basic earnings per common share 0.56 0.70 1.94 (b) (0.07)(c)
Diluted earnings per common share 0.56 0.70 1.93 (b) (0.07)(c)
Dividends paid per common share 0.515 0.515 0.515 0.515
Price per share - high 37.00 38.00 41.94 49.38
Low 28.25 31.00 31.50 38.00
-------------------------------------------------------------------------------------------------------------------
|
(a) In the opinion of management, all adjustments necessary to fairly
present amounts shown for interim periods have been made. Results of
operations for an interim period may not give a true indication of
results for the year.
(b) Includes gain on sale of BellSouth Carolinas PCS Partnership interest.
(c) Includes approved further accelerated depreciation of $125 million on
nuclear generating assets.
(d) Includes impairment and other one-time charges relating to SRS and
Interpath of $152.8 million, after tax.
(e) Includes seven months of revenue related to Progress Rail Services due
to reversal of Net Assets Held for Sale accounting treatment.
See Notes to Progress Energy, Inc. consolidated financial statements.
PROGRESS ENERGY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies
A. Organization
Progress Energy, Inc. (the Company) is a registered holding company under the Public Utility Holding Company Act (PUHCA) of 1935, as amended. Both the Company and its subsidiaries are subject to the regulatory provisions of the PUHCA. The Company was formed as a result of the reorganization of Carolina Power & Light Company (CP&L) into a holding company structure on June 19, 2000. All shares of common stock of CP&L were exchanged for an equal number of shares of the Company. On December 4, 2000, the Company changed its name from CP&L Energy, Inc. to Progress Energy, Inc. Through its wholly owned subsidiaries, CP&L, Florida Power Corporation (Florida Power) and North Carolina Natural Gas Corporation (NCNG), the Company is primarily engaged in the generation, transmission, distribution and sale of electricity in portions of North Carolina, South Carolina and Florida and the transport, distribution and sale of natural gas in portions of North Carolina. Through the Progress Ventures business unit, the Company is involved in merchant energy generation, coal and synthetic fuel operations and energy marketing and trading. Through other business units, the Company engages in other non-regulated business areas, including energy management and related services, rail services and telecommunications.
The Company's results of operations include the results of Florida Progress Corporation for the periods subsequent to November 30, 2000, and of North Carolina Natural Gas Corporation for the periods subsequent to July 15, 1999 (See Note 2).
B. Basis of Presentation
The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America and include the activities of the Company and its majority-owned subsidiaries. Significant intercompany balances and transactions have been eliminated in consolidation except as permitted by Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting for the Effects of Certain Types of Regulation," which provides that profits on intercompany sales to regulated affiliates are not eliminated if the sales price is reasonable and the future recovery of the sales price through the rate making process is probable. The accounting records of CP&L, Florida Power and NCNG (collectively, "the utilities") are maintained in accordance with uniform systems of accounts prescribed by the Federal Energy Regulatory Commission (FERC), the North Carolina Utilities Commission (NCUC), the Public Service Commission of South Carolina (SCPSC) and the Florida Public Service Commission (FPSC). Certain amounts for 2000 and 1999 have been reclassified to conform to the 2001 presentation.
Unconsolidated investments in companies over which the Company does not have control, but have the ability to exercise influence over operating and financial policies (generally, 20% - 50% ownership) are accounted for under the equity method of accounting. Other investments are stated principally at cost. These investments, which total approximately $160 million at December 31, 2001, are included as miscellaneous other property and investments in the Consolidated Balance Sheets.
C. Use of Estimates and Assumptions
In preparing consolidated financial statements that conform with accounting principles generally accepted in the United States of America, management must make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements and amounts of revenues and expenses reflected during the reporting period. Actual results could differ from those estimates.
D. Inventory
Inventory is carried at average cost. As of December 31, 2001 and 2000, inventory was comprised of (in thousands):
2001 2000
-------- --------
Fuel $305,858 $150,786
Rail equipment and parts 200,697 --
Materials and supplies 354,587 269,546
Other 25,605 653
-------- --------
Inventory $886,747 $420,985
======== ========
|
E. Utility Plant
The cost of additions, including betterments and replacements of units of property, is charged to utility plant. Maintenance and repairs of property, and replacements and renewals of items determined to be less than units of property, are charged to maintenance expense. The cost of units of property replaced, renewed or retired, plus removal or disposal costs, less salvage, is charged to accumulated depreciation. Subsequent to the acquisitions of Florida Progress Corporation and NCNG, the utility plants of these entities continue to be presented on a gross basis to reflect the treatment of such plant in cost-based regulation. Generally, electric utility plant other than nuclear fuel is pledged as collateral for the first mortgage bonds of CP&L and Florida Power. Gas utility plant is not currently pledged as collateral for such bonds.
The balances of utility plant in service at December 31 are listed below (in thousands), with a range of depreciable lives for each:
2001 2000
----------- -----------
Electric
Production plant (7-33 years) $10,670,717 $10,014,635
Transmission plant (30-75 years) 2,013,243 1,964,652
Distribution plant (12-50 years) 5,767,788 5,292,134
General plant and other (8-75 years) 724,273 852,615
----------- -----------
Total electric utility plant 19,176,021 18,124,036
Gas plant (10-40 years) 491,903 378,464
----------- -----------
Utility plant in service $19,667,924 $18,502,500
=========== ===========
|
As prescribed in the regulatory uniform systems of accounts, an allowance for the cost of borrowed and equity funds used to finance utility plant construction (AFUDC) is charged to the cost of the plant. Regulatory authorities consider AFUDC an appropriate charge for inclusion in the rates charged to customers by the utilities over the service life of the property. The equity funds portion of AFUDC is credited to other income and the borrowed funds portion is credited to interest charges. The total equity funds portion of AFUDC was $10.9 million, $15.5 million and $3.9 million in 2001, 2000 and 1999, respectively. The composite AFUDC rate for CP&L's electric utility plant was 6.2%, 8.2% and 6.4% in 2001, 2000 and 1999, respectively. The composite AFUDC rate for Florida Power's electric utility plant was 7.8% in both 2001 and 2000. The composite AFUDC rate for NCNG's gas utility plant was 10.09% in 2001, 2000 and 1999.
F. Diversified Business Property
The following is a summary of diversified business property (in thousands):
2001 2000
---------- ---------
Equipment $ 184,353 $ 109,080
Land and mineral rights 154,728 96,803
Buildings and plants 291,550 231,219
Telecommunications equipment 266,603 192,727
Railcars 56,044 --
Marine equipment 78,868 73,289
Computers, office equipment and software 14,150 23,065
Construction work in progress 342,830 234,689
Accumulated depreciation (316,080) (231,210)
---------- ---------
Diversified business property, net $1,073,046 $ 729,662
========== =========
|
Diversified business property is stated at cost. Depreciation is computed
on a straight-line basis using the following estimated useful lives:
equipment, buildings and plants - 3 to 40 years; telecommunications
equipment - 5 to 20 years; computers, office equipment and software - 3 to
10 years; railcars - 3 to 20 years; and marine equipment - 3 to 35 years.
Depletion of mineral rights is provided on the units-of-production method
based upon the estimates of recoverable amounts of clean mineral.
G. Depreciation and Amortization
For financial reporting purposes, substantially all depreciation of utility plant other than nuclear fuel is computed on the straight-line method based on the estimated remaining useful life of the property, adjusted for estimated net salvage. Depreciation provisions, including decommissioning costs (See Note 1I) and excluding accelerated cost recovery of nuclear generating assets, as a percent of average depreciable property other than nuclear fuel, were approximately 4.0%, 4.1% and 3.9% in 2001, 2000 and 1999, respectively. Total depreciation provisions were $821.2 million, $721.0 million and $409.6 million in 2001, 2000 and 1999, respectively.
Depreciation and amortization expense also includes amortization of deferred operation and maintenance expenses associated with Hurricane Fran, which struck significant portions of CP&L's service territory in September 1996. In 1996, the NCUC authorized CP&L to defer these expenses (approximately $40 million) with amortization over a 40-month period, which expired in December 1999.
With approval from the NCUC and the SCPSC, CP&L accelerated the cost recovery of its nuclear generating assets beginning January 1, 2000 and continuing through 2004. Also in 2000, CP&L received approval from the commissions to further accelerate the cost recovery of its nuclear generation facilities in 2000. The accelerated cost recovery of these assets resulted in additional depreciation expense of approximately $75 million and $275 million in 2001 and 2000, respectively (See Note 13B). Pursuant to authorizations from the NCUC and the SCPSC, CP&L accelerated the amortization of certain regulatory assets over a three-year period beginning January 1997 and expiring December 1999. The accelerated amortization of these regulatory assets resulted in additional depreciation and amortization expenses of approximately $68 million in 1999.
Amortization of nuclear fuel costs, including disposal costs associated with obligations to the U.S. Department of Energy (DOE) and costs associated with obligations to the DOE for the decommissioning and decontamination of enrichment facilities, is computed primarily on the unit-of-production method and charged to fuel expense. The total of these costs for the years ended December 31, 2001, 2000 and 1999 were $130.1 million, $114.6 million and $110.8 million, respectively.
Goodwill, the excess of purchase price over fair value of net assets of businesses acquired, is being amortized on a straight-line basis over primarily 40 years. Goodwill amortization expense was $96.8 million, $16.7 million, and $4.0 million in 2001, 2000 and 1999, respectively. Accumulated amortization was $119.0 million and $24.2 million at December 31, 2001 and 2000, respectively. Effective January 1, 2002, goodwill will no longer be subject to amortization over its estimated useful life, but instead, will be subject to an annual test for impairment (See Note 1L).
H. Diversified Business Expenses
The major components of diversified business expenses for the years ended December 31, 2001, 2000 and 1999 are as follows (in thousands):
2001 2000 1999
---------- -------- --------
Cost of sales $1,403,434 $ 80,744 $100,776
Depreciation and amortization 86,741 33,139 17,051
General and administrative expenses 279,115 234,132 56,692
Impairment of assets (Note 1J) 44,800 -- --
Other 11,230 4,977 70
---------- -------- --------
Diversified Business Expenses $1,825,320 $352,992 $174,589
========== ======== ========
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I. Decommissioning and Dismantlement Provisions
In the Company's retail jurisdictions, provisions for nuclear decommissioning costs are approved by the NCUC, the SCPSC and the FPSC and are based on site-specific estimates that include the costs for removal of all radioactive and other structures at the site. In the wholesale jurisdictions, the provisions for nuclear decommissioning costs are approved by FERC. Decommissioning cost provisions, which are included in depreciation and amortization expense, were $38.5 million, $32.5 million and $33.3 million in 2001, 2000 and 1999, respectively. In January 2002, Florida Power received regulatory approval from the FPSC to decrease its retail provision for nuclear decommissioning from approximately $20.5 million annually to approximately $7.7 million annually, effective January 1, 2001.
Accumulated decommissioning costs, which are included in accumulated depreciation, were approximately $1.0 billion at both December 31, 2001 and 2000. These costs include amounts retained internally and amounts funded
in externally managed decommissioning trusts. Trust earnings increase the trust balance with a corresponding increase in the accumulated decommissioning balance. These balances are adjusted for net unrealized gains and losses related to changes in the fair value of trust assets.
CP&L's most recent site-specific estimates of decommissioning costs were developed in 1998, using 1998 cost factors, and are based on prompt dismantlement decommissioning, which reflects the cost of removal of all radioactive and other structures currently at the site, with such removal occurring shortly after operating license expiration. These estimates, in 1998 dollars, are $281.5 million for Robinson Unit No. 2, $299.6 million for Brunswick Unit No. 1, $298.7 million for Brunswick Unit No. 2 and $328.1 million for the Harris Plant. The estimates are subject to change based on a variety of factors including, but not limited to, cost escalation, changes in technology applicable to nuclear decommissioning and changes in federal, state or local regulations. The cost estimates exclude the portion attributable to North Carolina Eastern Municipal Power Agency (Power Agency), which holds an undivided ownership interest in the Brunswick and Harris nuclear generating facilities. Operating licenses for CP&L's nuclear units expire in the year 2010 for Robinson Unit No. 2, 2016 for Brunswick Unit No. 1, 2014 for Brunswick Unit No. 2 and 2026 for the Harris Plant.
Florida Power's most recent site-specific estimate of decommissioning costs for the Crystal River Nuclear Plant (CR3) was developed in 2000 based on prompt dismantlement decommissioning. The estimate, in 2000 dollars, is $490.9 million and is subject to change based on the same factors as discussed above for CP&L's estimates. The cost estimate excludes the portion attributable to other co-owners of CR3. CR3's operating license expires in 2016.
Management believes that the decommissioning costs being recovered through rates by CP&L and Florida Power, when coupled with reasonable assumed after-tax fund earnings rates, are currently sufficient to provide for the costs of decommissioning.
Florida Power maintains a reserve for fossil plant dismantlement. At December 31, 2001 and 2000, this reserve was approximately $140.5 million and $134.6 million, respectively, and was included in accumulated depreciation. The provision for fossil plant dismantlement was previously suspended per a 1997 FPSC settlement agreement, but resumed mid-2001. The current annual provision, approved by the FPSC, is $8.8 million.
The Financial Accounting Standards Board (FASB) has issued SFAS No. 143, "Accounting for Asset Retirement Obligations" that will impact the accounting for decommissioning and dismantlement provisions (See Note 1L).
J. Impairment of Long-lived Assets and Investments
SFAS No. 121 " Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to Be Disposed Of" requires review of long-lived assets and certain intangibles for impairment when events or circumstances indicate that the carrying value of an asset may not be recoverable. Any impairment losses are reported in the period in which the recognition criteria are first applied based on the fair value of the asset. Due to historical and current year losses at Strategic Resource Solutions, Inc. (SRS) and the decline in the market value for technology companies, the Company has evaluated the long-lived assets of SRS. Fair value was generally determined based on discounted cash flows. As a result of this review, the Company recorded asset impairments, primarily goodwill, and other one-time charges totaling $44.8 million on a pre-tax basis during the fourth quarter of 2001 related to SRS. Asset write-downs resulting from this review were charged to diversified business expenses on the Consolidated Statements of Income.
The Company continually reviews its investments to determine whether a decline in fair value below the cost basis is other-than-temporary. Effective June 28, 2000, a subsidiary of the Company contributed the net assets used in its application service provider business to a newly formed company (Interpath) for a 35% ownership interest (15% voting interest). The Company obtained a valuation study to assess its investment in Interpath based on current valuations in the technology sector. As a result, the Company has recorded investment impairments for other-than-temporary declines in the fair value of its investment in Interpath. Investment impairments were also recorded related to certain investments of SRS. Investment write-downs totaled $164.2 million on a pre-tax basis for the year ended December 31, 2001.
K. Other Policies
The Company recognizes electric utility revenues as service is rendered to customers. Operating revenues include unbilled electric utility revenues earned when service has been delivered but not billed by the end of the accounting period. Diversified business revenues are generally recognized at the time products are shipped or as services are rendered. Leasing activities are accounted for in accordance with SFAS No. 13, "Accounting for Leases."
Fuel expense includes fuel costs or recoveries that are deferred through fuel clauses established by the electric utilities' regulators. These clauses allow the utilities to recover fuel costs and portions of purchased power costs
through surcharges on customer rates. NCNG is also allowed to recover the costs of gas purchased for resale through customer rates.
Operations of Progress Rail Services Corporation and certain other diversified operations are recognized one-month in arrears.
The Company maintains an allowance for doubtful accounts receivable, which totaled approximately $40.7 million and $28.1 million at December 31, 2001 and 2000, respectively. Long-term debt premiums, discounts and issuance expenses for the utilities are amortized over the life of the related debt using the straight-line method. Any expenses or call premiums associated with the reacquisition of debt obligations by the utilities are amortized over the remaining life of the original debt using the straight-line method. The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents.
L. Impact of New Accounting Standards
Effective January 1, 2001, the Company adopted SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities," as amended by SFAS No.
138. SFAS No. 133, as amended, establishes accounting and reporting
standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. SFAS
No. 133 requires that an entity recognize all derivatives as assets or
liabilities in the balance sheet and measure those instruments at fair
value.
As a result of the adoption of SFAS No. 133, the Company recorded a transition adjustment as a cumulative effect of a change in accounting principle of $23.6 million, net of tax, which increased accumulated other comprehensive loss as of January 1, 2001. This amount relates to several derivatives used to hedge cash flows related to interest on long-term debt (See Note 14). The net derivative losses will be reclassified into earnings consistent with hedge designations, primarily over the life of the related debt instruments, which principally range from three to ten years. The Company estimates that approximately $15.5 million of the net losses at December 31, 2001 will be reclassified into earnings during 2002. There was no transition adjustment affecting the Consolidated Statements of Income as a result of the adoption of SFAS No. 133.
During the second quarter of 2001, the FASB issued interpretations of SFAS No. 133 indicating that options in general cannot qualify for the normal purchases and sales exception, but provided an exception that allows certain electricity contracts, including certain capacity-energy contracts, to be excluded from the mark-to-market requirements of SFAS No. 133. The interpretations were effective July 1, 2001. Those interpretations did not require the Company to mark-to-market any of its electricity capacity-energy contracts currently outstanding. In December 2001, the FASB revised the criteria related to the exception for certain electricity contracts, with the revision to be effective April 1, 2002. The Company does not expect the revised interpretation to change its assessment of mark-to-market requirements for its current contracts. If an electricity or fuel supply contract in its regulated businesses is subject to mark-to-market accounting, there would be no income statement effect of the mark-to-market because the contract's mark-to-market gain or loss will be recorded as a regulatory asset or liability. Any mark-to-market gains or losses in its non-regulated businesses will affect income unless those contracts qualify for hedge accounting treatment.
The application of the new rules is still evolving, and further guidance from the FASB is expected, which could additionally impact the Company's financial statements.
Effective January 1, 2002, the Company adopted SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets." These statements require that all business combinations initiated after June 30, 2001 be accounted for using the purchase method of accounting and clarifies the criteria for recording of other intangible assets separately from goodwill. Effective January 1, 2002, goodwill is no longer subject to amortization over its estimated useful life. Instead, goodwill is subject to at least an annual assessment for impairment by applying a fair-value based test. This assessment could result in periodic impairment charges. The Company has not yet determined whether its goodwill is impaired under the initial impairment test required.
The FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations" in July 2001. This statement provides accounting requirements for retirement obligations associated with tangible long-lived assets and is effective January 1, 2003. This statement requires that the present value of retirement costs for which the Company has a legal obligation be recorded as liabilities with an equivalent amount added to the asset cost and depreciated over an appropriate period. The Company is currently assessing the effects this statement may ultimately have on the Company's accounting for decommissioning, dismantlement and other retirement costs.
Effective January 1, 2002, the Company adopted SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 provides guidance for the accounting and reporting of impairment or disposal of long-lived assets. The statement supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." It also supersedes the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions" related to the disposal of a segment of a business. Adoption of this statement did not have a material effect on the Company's financial statements.
2. Acquisitions and Dispositions
A. Florida Progress Corporation
On November 30, 2000, the Company completed its acquisition of Florida Progress Corporation (FPC) for an aggregate purchase price of approximately $5.4 billion. The Company paid cash consideration of approximately $3.5 billion and issued 46.5 million common shares valued at approximately $1.9 billion. In addition, the Company issued 98.6 million contingent value obligations (CVO) valued at approximately $49.3 million (See Note 8). The purchase price includes $20.1 million in direct transaction costs.
FPC is a diversified, exempt electric utility holding company. Florida Power, FPC's largest subsidiary is a regulated public utility engaged in the generation, transmission, distribution and sale of electricity. FPC also has diversified non-utility operations owned through Progress Capital Holdings, Inc. Included in diversified operations are Progress Fuels Corporation, an energy and transportation company, and Progress Telecommunications Corporation, a wholesale telecommunications service provider. As of the acquisition date, the primary segments of Progress Fuels Corporation were energy and related services, rail services and inland marine transportation.
The acquisition was accounted for using the purchase method of accounting and, accordingly, the results of operations for FPC have been included in the Company's consolidated financial statements since the date of acquisition. Identifiable assets acquired and liabilities assumed have been recorded at their fair values of $6.7 billion and $4.9 billion, respectively. The excess of the purchase price over the fair value of the net identifiable assets and liabilities acquired has been recorded as goodwill. The goodwill, of approximately $3.6 billion, was being amortized on a straight-line basis over a period of 40 years. Effective January 1, 2002, goodwill is no longer subject to amortization (See Note 1L).
The fair values of FPC's rate-regulated net assets acquired were considered to be equivalent to book value since book value represents the amount that will be recoverable through regulated rates. Initially, the allocation of the purchase price included estimated amounts expected to be realized from the sale of FPC's Rail Services ("Rail Services") and Inland Marine Transportation business segments which were classified as net assets held for sale. During 2001, the Company announced its intention to retain the Rail Services segment within the allocation period and, therefore, these assets were reclassified to operating assets. Accordingly, the Company has made adjustments to the purchase price allocation to remove Rail Services from net assets held for sale and reflect the net realizable value from the disposition of FPC's Inland Marine Transportation business segment (See Note 4). An SEC order approving the merger requires the Company to divest of Rail Services and certain immaterial, non-regulated investments of FPC by November 30, 2003.
The company made adjustments during 2001 to the purchase price allocation for changes in preliminary assumptions and analyses, based on receipt of the following additional information:
. final actuarial valuations of pension plan obligations
. proceeds realized from the disposition of assets held for sale
. valuations of non-regulated businesses and individual assets and
liabilities
The original allocation of purchase price included the assumption of liabilities associated with change in control payments triggered by the acquisition and executive termination benefits, totaling approximately $50.8 million. Substantially all change in control and executive termination payments were paid as of December 31, 2000. During 2000, the Company began the implementation of a plan to combine operations of the companies resulting in an original non-executive involuntary termination cost accrual of approximately $52.2 million. Approximately $41.8 million was attributable to Florida Power employees and was reflected as part of the purchase price allocation, while approximately $10.4 million attributable to the acquiring company's employees was charged to operating results in 2000. During 2001, the Company finalized the plan to combine operations of the companies with final termination payments occurring in 2002.
The activity for the non-executive involuntary termination costs is detailed in the table below:
(in millions) 2001
------
Balance at January 1 $ 52.2
Payments (33.1)
Adjustments credited to operating results (4.8)
Adjustments credited to purchase price allocation (6.1)
------
Balance at December 31 $ 8.2
======
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Actuarial valuations resulted in adjustments to increase the other postretirement benefits liability by $16.8 million and the prepaid pension asset by $283.4 million. These adjustments were substantially offset by the establishment of a regulatory asset for other postretirement benefits of approximately $15.9 million and a pension regulatory liability of $258.4 million. In addition, an adjustment increased the supplementary defined benefit retirement plan liability by $24.4 million.
The following unaudited pro forma combined results of operations have been prepared assuming the acquisition of FPC had occurred at the beginning of each period. The pro forma results are provided for information only. The pro forma results include the effect of 2001 purchase price allocation adjustments and, therefore, differ from previously reported pro forma results for the same periods. The results are not necessarily indicative of the actual results that would have been realized had the acquisition occurred on the indicated date, nor are they necessarily indicative of future results of operations of the combined companies.
(in thousands, except per share data) 2000 1999
---------- ----------
Revenues $8,098,356 $7,083,641
Net income 575,112 451,455
Basic earnings per share 2.88 2.32
Diluted earnings per share 2.87 2.32
Average shares - Basic 199,722 194,591
Average shares - Diluted 200,177 194,966
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B. North Carolina Natural Gas Corporation
On July 15, 1999, the Company completed the acquisition of NCNG for an aggregate purchase price of approximately $364 million, resulting in the issuance of approximately 8.3 million shares. The acquisition was accounted for as a purchase and, accordingly, the operating results of NCNG were included in the Company's consolidated financial statements beginning with the date of acquisition. The excess of the aggregate purchase price over the fair value of net assets acquired, approximately $240 million, was recorded as goodwill of the acquired business and is being amortized primarily over a period of 40 years. Effective January 1, 2002, goodwill will no longer be subject to amortization (See Note 1L).
C. BellSouth Carolinas PCS Partnership Interest
In September 2000, Caronet, Inc., a wholly owned subsidiary of CP&L, sold its 10% limited partnership interest in BellSouth Carolinas PCS for $200 million. The sale resulted in an after-tax gain of $121.1 million.
3. Financial Information by Business Segment
The Company currently provides services through the following business segments: CP&L Electric, Florida Power Electric, Progress Ventures, Rail Services and Other. Prior periods have been restated to reflect the current operating segments.
FPC's operations are not included in the Company's results of operations prior to the acquisition date of November 30, 2000.
The CP&L Electric and Florida Power Electric segments are engaged in the generation, transmission, distribution, and sale of electric energy in portions of North Carolina, South Carolina and Florida. Electric operations are subject to the rules and regulations of FERC, the NCUC, the SCPSC and the FPSC.
The Progress Ventures segment is primarily engaged in merchant energy generation and coal and synthetic fuel operations. Management reviews the operations of this segment after allocating energy marketing and trading activity to Progress Ventures. The energy marketing and trading activity is currently performed by Progress Ventures on behalf of the regulated utilities, CP&L and Florida Power, and includes wholesale sales on behalf of
these utilities. Electric wholesale operations are subject to the rules and regulations of FERC, the NCUC, the SCPSC and the FPSC.
The Rail Services segment operations include railcar repair, rail parts reconditioning and sales, railcar leasing and sales, providing rail and track material, and scrap metal recycling.
The Other segment is primarily made up of natural gas, other diversified businesses and holding company operations, which includes the transportation, distribution and sale of natural gas in portions of North Carolina, telecommunication services, energy management services, miscellaneous non-regulated activities and elimination entries.
For reportable segments presented in the accompanying table, segment income includes intersegment revenues accounted for at prices representative of unaffiliated party transactions. Intersegment revenues that are not eliminated represent natural gas sales to the CP&L Electric and the Florida Power Electric segments.
Florida
CP&L Power Progress Rail Consolidated
(In thousands) Electric Electric Ventures Services(b) Other Totals
-------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED 12/31/01
Revenues
Unaffiliated $3,343,720 $3,212,841 $ 526,200 $944,985 $ 415,063 $ 8,442,809
Intersegment -- -- 398,228 1,174 (380,752) 18,650
-----------------------------------------------------------------------------
Total Revenues 3,343,720 3,212,841 924,428 946,159 34,311 8,461,459
Depreciation and Amortization 521,910 452,971 40,695 36,053 125,290 1,176,919
Net Interest Charges 241,427 113,707 24,085 40,589 265,005 684,813
Income Taxes 264,078 182,590 (421,559) (6,416) (170,336) (151,643)
Net Income (Loss) 468,328 309,577 201,989 (12,108) (426,176) 541,610
Segment Income (Loss) After Allocation 405,661 285,566 288,667 (12,108) (426,176) 541,610
(a)
Total Segment Assets 8,918,691 4,998,162 1,018,875 602,597 5,201,466 20,739,791
Capital and Investment Expenditures 823,952 323,170 265,183 12,886 141,070 1,566,261
========================================================================================================================
FOR THE YEAR ENDED 12/31/00
Revenues
Unaffiliated $3,308,215 $ 241,606 $ 108,739 $ -- $ 438,956 $ 4,097,516
Intersegment -- -- 15,717 -- (9,820) 5,897
-----------------------------------------------------------------------------
Total Revenues 3,308,215 241,606 124,456 -- 429,136 4,103,413
Depreciation and Amortization 698,633 28,872 17,020 -- 43,362 787,887
Net Interest Charges 221,856 9,777 5,714 -- 24,938 262,285
Income Taxes 227,705 13,580 (109,057) -- 70,546 202,774
Net Income (Loss) 373,764 21,764 39,816 -- 43,017 478,361
Segment Income (Loss) After Allocation 289,724 20,057 125,563 -- 43,017 478,361
(a)
Total Segment Assets 8,839,720 4,997,728 644,234 -- 5,629,019 20,110,701
Capital and Investment Expenditures 805,489 49,805 38,981 -- 302,902 1,197,177
========================================================================================================================
------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED 12/31/99
Revenues
Unaffiliated $3,146,158 $ -- $ 225 $ -- $ 217,527 $ 3,363,910
Intersegment -- -- -- -- 1,017 1,017
-----------------------------------------------------------------------------
Total Revenues 3,146,158 -- 225 -- 218,544 3,364,927
Depreciation and Amortization 493,938 -- 93 -- 26,125 520,156
Net Interest Charges 183,099 -- -- -- (3,635) 179,464
Income Taxes 275,769 -- 38 -- (17,386) 258,421
Net Income (Loss) 430,295 -- 56 -- (51,063) 379,288
Segment Income (Loss) After 360,821 -- 69,530 -- (51,063) 379,288
Allocation (a)
Total Segment Assets 8,501,273 -- 98,429 -- 894,317 9,494,019
Capital and Investment Expenditures 671,401 -- 90,678 -- 133,042 895,121
========================================================================================================================
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(a) Includes allocation of energy trading and marketing net income managed by Progress Ventures on behalf of the electric utilities.
(b) Amounts for the year ended December 31, 2001 reflect cumulative operating results of Rail Services since the acquisition date of November 30, 2000. As of December 31, 2000, the Rail Services segment was included as Net Assets Held for Sale and therefore no assets are reflected for this segment as of that date.
Segment totals for depreciation and amortization expense include expenses related to the Progress Ventures, Rail Services and the Other segment that are included in diversified business expenses on the Consolidated Statements of Income. Segment totals for interest expense exclude immaterial expenses related to the Progress Ventures, Rail Services and the Other segment that are included in other, net on the Consolidated Statements of Income.
4. Net Assets Held for Sale
The estimated amounts reported for the expected sale of FPC's Rail Services and Inland Marine Transportation business segments, $679.1 million and $68.6 million, respectively, were classified as net assets held for sale as of December 31, 2000. During 2001, the Company announced its intention to retain the Rail Services segment within the allocation period and, therefore, reclassified Rail Services' to operating assets. During 2001, the Company recorded an after-tax charge of $3.2 million reflecting the reversal of net assets held for sale accounting.
During 2001, the Company completed the sale of the Inland Marine Transportation segment and related investments to AEP Resources, Inc., a wholly owned subsidiary of American Electric Power, for a sales price of $270 million. Of the $270 million purchase price, $230 million was used to pay early termination of certain off-balance sheet arrangements for assets leased by the business segment. In connection with the sale, the Company entered into environmental indemnification provisions covering both known and unknown sites (See Note 20D).
The Company adjusted the FPC purchase price allocation to reflect a $15.0 million negative net realizable value of the Inland Marine business segment (See Note 2A). The Company's results of operations exclude Inland Marine Transportation segment net income of $9.1 million for 2001 and $1.8 million for the month of December 2000. These earnings were included in the determination of net realizable value for purchase price allocation. As a result of the change in net realizable value, the Company recorded interest expense in 2001, net of tax, of $0.3 million to reverse the interest allocated during 2000.
5. Related Party Transactions
Prior to the acquisition of FPC, the Company purchased a 90% membership interest in two synthetic fuel related limited liability companies from a wholly owned subsidiary of FPC. Interest expense incurred during the pre-acquisition period was approximately $3.3 million. Subsequent to the acquisition date, intercompany amounts have been eliminated in consolidation.
NCNG sells natural gas to both CP&L and Florida Power. For the years ended December 31, 2001, 2000 and 1999 sales of natural gas to CP&L and Florida Power that were not eliminated in consolidation were $18.7 million, $5.9 million and $1.0 million, respectively.
The Company and its subsidiaries have guarantees, surety bonds and stand by letters of credit of approximately $140.0 million at December 31, 2001 relating to prompt performance payments, lease obligations, self-insurance and other payments subject to certain contingencies. As of December 31, 2001, management does not believe conditions are likely for performance under these agreements.
6. Debt and Credit Facilities
At December 31, 2001 and 2000 the Company's long-term debt consisted of the following (maturities and weighted-average interest rates as of December 31, 2001):
(in thousands) 2001 2000
------------------------
Progress Energy, Inc.:
Senior unsecured notes, maturing 2004-2031 6.93% $4,000,000 --
Commercial paper reclassified to long-term debt 3.02% 450,000 --
Unamortized premium and discount, net (29,708) --
------------------------
4,420,292 --
------------------------
Carolina Power & Light Company:
First mortgage bonds, maturing 2003-2023 7.02% 1,800,000 1,800,000
Pollution control obligations, maturing 2009-2024 2.22% 707,800 713,770
Unsecured subordinated debentures, maturing 2025 -- 125,000
Extendible notes, maturing 2002 2.83% 500,000 500,000
Medium-term notes, maturing 2008 6.65% 300,000 --
Commercial paper reclassified to long-term debt 3.10% 260,535 486,297
Miscellaneous notes 6.43% 7,234 8,360
Unamortized premium and discount, net (16,716) (12,407)
------------------------
3,558,853 3,621,020
------------------------
Florida Power Corporation:
First mortgage bonds, maturing 2003-2023 6.83% 810,000 510,000
Pollution control revenue bonds, maturing 2014-2027 6.59% 240,865 240,865
Medium-term notes, maturing 2002-2028 6.73% 449,100 531,100
Commercial paper reclassified to long-term debt 2.54% 154,250 200,000
Unamortized premium and discount, net (2,935) (2,849)
------------------------
1,651,280 1,479,116
------------------------
Florida Progress Funding Corporation (Note 7):
Mandatorily redeemable preferred securities, maturing 2039 7.10% 300,000 300,000
Purchase accounting fair value adjustment (30,413) --
Unamortized premium and discount, net (8,922) --
------------------------
260,665 300,000
------------------------
Progress Capital Holdings:
Medium-term notes, maturing 2002-2008 6.74% 273,000 374,000
Commercial paper reclassified to long-term debt -- 300,000
Miscellaneous notes 7,707 --
------------------------
280,707 674,000
------------------------
Current portion of long-term debt (688,052) (184,037)
------------------------
Total Long-Term Debt, Net $9,483,745 $5,890,099
========================
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At December 31, 2001, the Company had committed lines of credit totaling $1.945 billion, all of which are used to support its commercial paper borrowings. The Company is required to pay minimal annual commitment fees to maintain its credit facilities. The following table summarizes the Company's credit facilities:
Subsidiary Description Short-term Long-term Total
-----------------------------------------------------------------------------
Progress Energy 364-Day $550 $ -- $ 550
Progress Energy 3-Year (3 years remaining) -- 450 450
CP&L 364-Day -- 200 200
CP&L 5-Year (2 years remaining) -- 375 375
Florida Power 364-Day 170 -- 170
Florida Power 5-Year (2 years remaining) -- 200 200
-------------------------------
$720 $1,225 $1,945
===============================
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As of December 31, 2001, there were no loans outstanding under these facilities. CP&L's 364-day revolving credit agreement is considered a long-term commitment due to an option to convert to a one-year term loan at the expiration date.
Based on the available balances on the long-term facilities, commercial paper of approximately $865 million has been reclassified to long-term debt at December 31, 2001. Commercial paper of approximately $986 million was reclassified to long-term debt at December 31, 2000. As of December 31, 2001 and 2000, the Company had an
additional $78 million and $4 billion, respectively, of outstanding commercial paper and other short-term debt classified as short-term obligations. The weighted-average interest rates of such short-term obligations at December 31, 2001 and 2000 were 2.95% and 7.40%, respectively.
Florida Power and Progress Capital Holdings, Inc. (Progress Capital), subsidiaries of FPC, have two uncommitted bank bid facilities authorizing them to borrow and re-borrow, and have loans outstanding at any time, up to $100 million and $300 million, respectively. These bank bid facilities were not drawn as of December 31, 2001.
The combined aggregate maturities of long-term debt for 2002 through 2006 are approximately $688 million, $698 million, $1.3 billion, $348 million, and $909 million, respectively.
7. FPC-Obligated Mandatorily Redeemable Preferred Securities of a Subsidiary Holding Solely FPC Guaranteed Notes
In April 1999, FPC Capital I (the Trust), an indirect wholly owned subsidiary of FPC, issued 12 million shares of $25 par cumulative FPC-obligated mandatorily redeemable preferred securities (Preferred Securities) due 2039, with an aggregate liquidation value of $300 million and a quarterly distribution rate of 7.10%. Currently, all 12 million shares of the Preferred Securities that were issued are outstanding. Concurrent with the issuance of the Preferred Securities, the Trust issued to Florida Progress Funding Corporation (Funding Corp.) all of the common securities of the Trust (371,135 shares) for $9.3 million. Funding Corp. is a direct wholly owned subsidiary of FPC.
The Preferred Securities are included in long-term debt on the Consolidated Balance Sheets (See Note 6). During 2001, an adjustment was recorded to the book value of the preferred securities resulting from fair value adjustments recorded under the purchase method of accounting. The fair value adjustment decreased the carrying value of these securities by $30.5 million.
The existence of the Trust is for the sole purpose of issuing the Preferred Securities and the common securities and using the proceeds thereof to purchase from Funding Corp. its 7.10% Junior Subordinated Deferrable Interest Notes (subordinated notes) due 2039, for a principal amount of $309.3 million. The subordinated notes and the Notes Guarantee (as discussed below) are the sole assets of the Trust. Funding Corp.'s proceeds from the sale of the subordinated notes were advanced to Progress Capital and used for general corporate purposes including the repayment of a portion of certain outstanding short-term bank loans and commercial paper.
FPC has fully and unconditionally guaranteed the obligations of Funding Corp. under the subordinated notes (the Notes Guarantee). In addition, FPC has guaranteed the payment of all distributions required to be made by the Trust, but only to the extent that the Trust has funds available for such distributions (Preferred Securities Guarantee). The Preferred Securities Guarantee, considered together with the Notes Guarantee, constitutes a full and unconditional guarantee by FPC of the Trust's obligations under the Preferred Securities.
The subordinated notes may be redeemed at the option of Funding Corp. beginning in 2004 at par value plus accrued interest through the redemption date. The proceeds of any redemption of the subordinated notes will be used by the Trust to redeem proportional amounts of the Preferred Securities and common securities in accordance with their terms. Upon liquidation or dissolution of Funding Corp., holders of the Preferred Securities would be entitled to the liquidation preference of $25 per share plus all accrued and unpaid dividends thereon to the date of payment.
8. Contingent Value Obligations
In connection with the acquisition of FPC during 2000, the Company issued 98.6 million CVOs. Each CVO represents the right to receive contingent payments based on the performance of four synthetic fuel facilities purchased by subsidiaries of FPC in October 1999. The payments, if any, would be based on the net after-tax cash flows the facilities generate. The initial liability recorded at the acquisition date was approximately $49.3 million. The CVO liability is adjusted to reflect market price fluctuations. The liability, included in other liabilities and deferred credits, at December 31, 2001 and 2000, was $41.9 million and $40.4 million, respectively.
9. Preferred Stock of Subsidiaries - Not Subject to Mandatory Redemption
All of the Company's preferred stock at December 31, 2001 and 2000 was issued by its subsidiaries and was not subject to mandatory redemption. Preferred stock outstanding of subsidiaries consisted of the following (in thousands, except share data):
2001 2000
-----------------
Carolina Power & Light Company:
Authorized - 300,000 shares, cumulative, $100 par value Preferred Stock;
20,000,000 shares, cumulative, $100 par value Serial Preferred Stock
$5.00 Preferred - 236,997 shares outstanding (redemption price $110.00) $24,349 $24,349
$4.20 Serial Preferred - 100,000 shares outstanding (redemption price $102.00) 10,000 10,000
$5.44 Serial Preferred - 249,850 shares outstanding (redemption price$101.00) 24,985 24,985
-----------------
59,334 59,334
-----------------
Florida Power Corporation:
Authorized - 4,000,000 shares, cumulative, $100 par value Preferred Stock;
5,000,000 shares, cumulative, no par value Preferred Stock; 1,000,000 shares,
$100 par value Preference Stock
$100 par value Preferred Stock:
4.00% - 39,980 shares outstanding (redemption price $104.25) 3,998 3,998
4.40% - 75,000 shares outstanding (redemption price $102.00) 7,500 7,500
4.58% - 99,990 shares outstanding (redemption price $101.00) 9,999 9,999
4.60% - 39,997 shares outstanding (redemption price $103.25) 4,000 4,000
4.75% - 80,000 shares outstanding (redemption price $102.00) 8,000 8,000
-----------------
$33,497 $33,497
-----------------
Total Preferred Stock of Subsidiaries $92,831 $92,831
=================
|
10. Leases
The Company leases office buildings, computer equipment, vehicles, railcars and other property and equipment with various terms and expiration dates. Some rental payments for transportation equipment include minimum rentals plus contingent rentals based on mileage. Contingent rentals are not significant. Rent expense (under operating leases) totaled $62.6 million, $26.8 million and $21.3 million for 2001, 2000 and 1999, respectively.
Assets recorded under capital leases at December 31 consist of (in thousands):
2001 2000
------- -------
Buildings $27,626 $27,626
Equipment 12,170 9,366
Less: Accumulated amortization (8,975) (8,018)
------- -------
$30,821 $28,974
------- -------
|
Minimum annual rental payments, excluding executory costs such as property taxes, insurance and maintenance, under long-term noncancelable leases as of December 31, 2001 are (in thousands):
Capital Leases Operating Leases
-------------- ----------------
2002 $ 3,533 $ 52,339
2003 3,533 66,317
2004 3,533 50,245
2005 3,533 30,278
2006 3,459 22,132
Thereafter 35,675 86,265
-------- --------
$ 53,266 $307,576
========
Less amount representing imputed interest (22,445)
--------
Present value of net minimum lease payments
under capital leases $ 30,821
========
|
The Company is also a lessor of land, buildings, railcars and other types of properties it owns under operating leases with various terms and expiration dates. The leased buildings and railcars are depreciated under the same terms as other buildings and railcars included in diversified business property. Minimum rentals receivable under noncancelable leases as of December 31, 2001, are (in thousands):
Amounts
-------
2001 $12,190
2002 7,904
2003 5,591
2004 4,741
2005 3,766
Thereafter 9,222
-------
$43,414
|
11. Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents and short-term obligations approximate fair value due to the short maturities of these instruments. At December 31, 2001 and 2000, there were miscellaneous investments, consisting primarily of investments in company-owned life insurance, with carrying amounts of approximately $124.3 million and $187.8 million, respectively, included in miscellaneous other property and investments. The carrying amount of these investments approximates fair value due to the short maturity of certain instruments and certain instruments are presented at fair value. The carrying amount of the Company's long-term debt, including current maturities, was $10.2 billion and $6.1 billion at December 31, 2001 and 2000, respectively. The estimated fair value of this debt, as obtained from quoted market prices for the same or similar issues, was $10.6 billion and $6.0 billion at December 31, 2001 and 2000, respectively.
External funds have been established as a mechanism to fund certain costs of nuclear decommissioning (See Note 1I). These nuclear decommissioning trust funds are invested in stocks, bonds and cash equivalents. Nuclear decommissioning trust funds are presented on the Consolidated Balance Sheets at amounts that approximate fair value. Fair value is obtained from quoted market prices for the same or similar investments.
12. Common Stock
In August 2001, the Company issued 12.65 million shares of common stock at $40 per share for net cash proceeds of $488 million. Proceeds from the issuance were primarily used to retire commercial paper. During 2000 and 1999, the Company issued common stock in conjunction with the FPC and NCNG acquisitions, respectively (See Note 2).
As of December 31, 2001, the Company had 38,549,922 shares of common stock authorized by the board of directors that remained unissued and reserved, primarily to satisfy the requirements of the Company's stock plans. The Company intends, however, to meet the requirements of these stock plans with issued and outstanding shares presently held by the Trustee of the Progress Energy 401(k) Savings and Stock Ownership Plan (previously known as the Stock Purchase-Savings Plan) or with open market purchases of common stock shares, as appropriate.
There are various provisions limiting the use of retained earnings for the payment of dividends under certain circumstances. As of December 31, 2001, there were no significant restrictions on the use of retained earnings.
13. Regulatory Matters
A. Regulatory Assets and Liabilities
As regulated entities, the utilities are subject to the provisions of SFAS No. 71, "Accounting for the Effects of Certain Types of Regulation." Accordingly, the utilities record certain assets and liabilities resulting from the effects of the ratemaking process, which would not be recorded under generally accepted accounting principles for non-regulated entities. The utilities' ability to continue to meet the criteria for application of SFAS No. 71 may be affected in the future by competitive forces and restructuring in the electric utility industry. In the event that SFAS No. 71 no longer applied to a separable portion of the Company's operations, related regulatory assets and liabilities would be eliminated unless an appropriate regulatory recovery mechanism is provided. Additionally, these factors could result in an impairment of utility plant assets as determined pursuant to SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" (See Note 1L).
At December 31, 2001 and 2000, the balances of the utilities' regulatory assets (liabilities) were as follows (in thousands):
2001 2000
--------- ---------
Deferred fuel (included in current assets) $ 146,652 $ 217,806
----------------------
Income taxes recoverable through future rates 234,180 228,686
Deferred purchased power contract termination costs 95,326 226,656
Harris Plant deferred costs 32,476 44,813
Loss on reacquired debt 28,931 28,121
Deferred DOE enrichment facilities-related costs (Note 1G) 39,102 46,006
Other postretirement benefits (Note 2A) 12,207 15,670
Other 13,103 23,248
----------------------
Total long-term regulatory assets 455,325 613,200
----------------------
Nuclear maintenance and refueling (346) (10,835)
Defined benefit retirement plan (Note 2A) (234,102) (203,137)
Deferred revenues -- (63,000)
Emission allowance gains (7,494) --
Storm reserve (Note 20C) (35,527) (29,527)
Other (9,669) (10,077)
----------------------
Total long-term regulatory liabilities (287,138) (316,576)
----------------------
Net regulatory assets $ 314,839 $ 514,430
======================
|
Except for portions of deferred fuel, all regulatory assets earn a return or the cash has not yet been expended, in which case, the assets are offset by liabilities that do not incur a carrying cost.
B. Retail Rate Matters
The NCUC and SCPSC approved proposals to accelerate cost recovery of CP&L's nuclear generating assets beginning January 1, 2000, and continuing through 2004. The accelerated cost recovery began immediately after the 1999 expiration of the accelerated amortization of certain regulatory assets (See Note 1G). Pursuant to the orders, the accelerated depreciation expense for nuclear generating assets was set at a minimum of $106 million with a maximum of $150 million per year. In late 2000, CP&L received approval from the NCUC and the SCPSC to further accelerate the cost recovery of its nuclear generation facilities by $125 million in 2000. This additional depreciation allowed CP&L to reduce the minimum accelerated annual depreciation in 2001 through 2004 to $75 million. The resulting total accelerated depreciation was $75 million in 2001 and $275 million in 2000. Recovering the costs of its nuclear generating assets on an accelerated basis will better position CP&L for the uncertainties associated with potential restructuring of the electric utility industry.
In compliance with a regulatory order, Florida Power accrues a reserve for maintenance and refueling expenses anticipated to be incurred during scheduled nuclear plant outages.
On May 30, 2001, the NCUC issued an order allowing CP&L to offset a portion of its annual accelerated cost recovery of nuclear generating assets by the amount of sulfur dioxide (SO2) emission allowance expense. CP&L did not offset accelerated depreciation expense in 2001 against emission allowance expense. CP&L is allowed to recover emission allowance expense through the fuel clause adjustment in its South Carolina retail jurisdiction. Florida Power is also allowed to recover its emission allowance expenses through the fuel adjustment clause in its retail jurisdiction.
In conjunction with the acquisition of NCNG, CP&L agreed to cap base retail electric rates in North Carolina and South Carolina through December 2004. The cap on base retail electric rates in South Carolina was extended to December 2005 in conjunction with regulatory approval to form a holding company. NCNG also agreed to cap its North Carolina margin rates for gas sales and transportation services, with limited exceptions, through November 1, 2003. In February 2002, NCNG filed a general rate case with the NCUC requesting an annual rate increase of $47.6 million, based upon its completion of major expansion projects. The Company cannot predict the final outcome of this matter.
In conjunction with the FPC merger, CP&L reached a settlement with the Public Staff of the NCUC in which it agreed to reduce rates to all of its non-real time pricing customers by $3 million in 2002, $4.5 million in 2003, $6
million in 2004 and $6 million in 2005. CP&L also agreed to write off and forego recovery of $10 million of unrecovered fuel costs in each of its 2000 NCUC and SCPSC fuel cost recovery proceedings.
At December 31, 2000, Florida Power, with the approval of the FPSC, had established a regulatory liability to defer $63 million of revenues. In 2001, Florida Power applied the deferred revenues, plus accrued interest, to offset its regulatory asset related to deferred purchased power termination costs. In addition, Florida Power recorded accelerated amortization of $34.0 million to further offset this regulatory asset during 2001.
Florida Power previously operated under an agreement committing several parties not to seek any reduction in its base rates or authorized return on equity. During 2001, the FPSC required Florida Power to submit minimum filing requirements, based on a 2002 projected test year, to initiate a rate proceeding regarding its future base rates. The FPSC required that annual revenues of $98 million be held subject to refund to its customers. The FPSC may allow Florida Power to reduce the amount subject to refund if it is successful in recovering certain expenses incurred during 2001.
On September 14, 2001, Florida Power submitted its required rate filing, including its revenue requirements and supporting testimony. Under the filing, Florida Power customers would receive a $5 million annual credit rate for 15 years, or $75 million in total, from net synergies of its merger with the Company. Additionally, the filing provides that the regulatory asset (approximately $95 million at December 31, 2001) related to the purchase of Tiger Bay cogeneration facility in 1997 would be fully amortized by the end of 2003, which would provide customers with a further rate reduction of $37 million annually beginning in 2004. Also included in the filing is an incentive regulatory plan, which would provide for additional rate reductions through efficiencies derived as a result of Florida Power's ability to lower the future costs of its utility operations. Florida Power filed supplemental minimum filing requirements and testimony on November 15, 2001. Hearings are scheduled to begin March 20, 2002, with a final decision expected in July 2002. The FPSC has encouraged its staff, Florida Power and other parties to negotiate a settlement, if possible. The Company cannot predict the outcome or impact of these matters.
C. Plant-Related Deferred Costs
In 1988 rate orders, CP&L was ordered to remove from rate base and treat as abandoned plant certain costs related to the Harris Plant. Abandoned plant amortization related to the 1988 rate orders was completed in 1998 for the wholesale and North Carolina retail jurisdictions and in 1999 for the South Carolina retail jurisdiction. Amortization of plant abandonment costs is included in depreciation and amortization expense and totaled $15.0 million in 1999.
14. Risk Management Activities and Derivatives Transactions
The Company uses a variety of instruments, including swaps, options and forward contracts, to manage exposure to fluctuations in commodity prices and interest rates. Such instruments contain credit risk if the counterparty fails to perform under the contract. The Company minimizes such risk by performing credit reviews using, among other things, publicly available credit ratings of such counterparties. Potential non-performance by counterparties is not expected to have a material effect on the consolidated financial position or consolidated results of operations of the Company.
The Company engages in limited energy trading activities to optimize the value of electricity and fuel contracts, as well as generating facilities. These activities are accounted for at fair value.
A. Commodity Derivatives - Non-Trading
The Company enters into certain forward contracts involving cash settlements or physical delivery that reduce the exposure to market fluctuations relative to the price and delivery of electric products. During 2001, 2000 and 1999, the Company principally sold electricity forward contracts, which can reduce price risk on the Company's available but unsold generation. While such contracts are deemed to be economic hedges, the Company no longer designates such contracts as hedges for accounting purposes; therefore, these contracts are carried on the balance sheet at fair value, with changes in fair value recognized in earnings. Gains and losses from such contracts were not material during 2001, 2000 and 1999. Also, the Company did not have material outstanding positions in such contracts at December 31, 2001 or 2000. Most of the Company's commodity contracts either are not derivatives pursuant to SFAS No. 133 or qualify as normal purchases or sales pursuant to SFAS No. 133. Therefore, such contracts are not recorded at fair value.
B. Commodity Derivatives - Trading
The Company from time to time engages in the trading of electricity commodity derivatives and, therefore, experiences net open positions. The Company manages open positions with strict policies which limit its exposure to market risk and require daily reporting to management of potential financial exposures. When such instruments are entered into for trading purposes, the instruments are carried on the balance sheet at fair value, with changes in fair value recognized in earnings. The net results of such contracts have not been material in any year and the Company did not have material outstanding positions in such contracts at December 31, 2001 or 2000.
C. Other Derivative Instruments
The Company may from time to time enter into derivative instruments to hedge interest rate risk or equity securities risk.
The Company has interest rate swap agreements to hedge its exposure on variable rate debt positions. The agreements, with a total notional amount of $500 million, were effective in July 2000 and mature in July 2002. Under these agreements, the Company receives a floating rate based on the three-month London Interbank Offered Rate (LIBOR) and pays a weighted-average fixed rate of approximately 7.17%. The fair value of the swaps was a $18.5 million liability position at December 31, 2001. Interest rate swaps are carried on the balance sheet at fair value with the unrealized gains or losses adjusted through other comprehensive income. As such, payments or receipts on interest rate swap agreements are recognized as adjustments to interest expense.
During 2000, the Company entered into forward starting swap agreements to hedge its exposure to interest rates with regard to future issuances of fixed-rate debt. The fair value of the swaps was a $37.5 million liability position at December 31, 2000. During February 2001, as part of the issuance of $3.2 billion of senior unsecured notes, the Company terminated the forward starting swaps. The Company realized a $45.3 million loss on these contracts, designated as cash flow hedges, that is deferred through accumulated other comprehensive loss and amortized over the life of the associated debt instruments.
The notional amounts of the interest rate swaps are not exchanged and do not represent exposure to credit loss. In the event of default by a counterparty, the risk in these transactions is the cost of replacing the agreements at current market rates.
15. Stock-Based Compensation
The Company accounts for stock-based compensation in accordance with the provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations as permitted under SFAS No. 123, "Accounting for Stock-Based Compensation.
A. Employee Stock Ownership Plan
The Company sponsors the Progress Energy 401(k) Savings and Stock Ownership Plan (401(k)) for which substantially all full-time non-bargaining unit employees and certain part-time non-bargaining unit employees within participating subsidiaries are eligible. Participating subsidiaries within the Company as of January 1, 2002 were CP&L, NCNG, Florida Power, Progress Telecom, Progress Fuels (Corporate) and Progress Energy Service Company. The 401(k), which has Company matching and incentive goal features, encourages systematic savings by employees and provides a method of acquiring Company common stock and other diverse investments. The 401(k), as amended in 1989, is an Employee Stock Ownership Plan (ESOP) that can enter into acquisition loans to acquire Company common stock to satisfy 401(k) common share needs. Qualification as an ESOP did not change the level of benefits received by employees under the 401(k). Common stock acquired with the proceeds of an ESOP loan is held by the 401(k) Trustee in a suspense account. The common stock is released from the suspense account and made available for allocation to participants as the ESOP loan is repaid. Such allocations are used to partially meet common stock needs related to Company matching and incentive contributions and/or reinvested dividends. All or a portion of the dividends paid on ESOP suspense shares and on ESOP shares allocated to participants may be used to repay ESOP acquisition loans. To the extent used to repay such loans, the dividends are deductible for income tax purposes.
There were 5,199,388 and 5,782,376 ESOP suspense shares at December 31, 2001 and 2000, respectively, with a fair value of $234.1 million and $284.4 million, respectively. ESOP shares allocated to plan participants totaled 14,088,173 and 13,732,670 at December 31, 2001 and 2000, respectively. The Company's matching and incentive goal compensation cost under the 401(k) is determined based on matching percentages and incentive goal attainment as defined in the plan. Such compensation cost is allocated to participants' accounts in the form of Company
common stock, with the number of shares determined by dividing compensation cost by the common stock market value at the time of allocation. The Company currently meets common stock share needs with open market purchases and with shares released from the ESOP suspense account. Matching and incentive cost met with shares released from the suspense account totaled approximately $18.2 million, $15.6 million and $16.3 million for the years ended December 31, 2001, 2000 and 1999, respectively. The Company has a long-term note receivable from the 401(k) Trustee related to the purchase of common stock from the Company in 1989. The balance of the note receivable from the 401(k) Trustee is included in the determination of unearned ESOP common stock, which reduces common stock equity. ESOP shares that have not been committed to be released to participants' accounts are not considered outstanding for the determination of earnings per common share. Interest income on the note receivable and dividends on unallocated ESOP shares are not recognized for financial statement purposes.
B. Stock Option Agreements
Pursuant to the Company's 1997 Equity Incentive Plan, Amended and Restated as of September 26, 2001, the Company may grant options to purchase shares of common stock to officers and eligible employees. Generally, options granted vest one-third per year with 100 percent vesting at the end of year three. The options expire 10 years from the date of grant. All option grants have an exercise price equal to the fair market value of the Company's common stock on the grant date. In October 2001, a grant of approximately 2.4 million options was made at an exercise price of $43.49. There has been no other significant stock option activity.
Compensation cost is measured for stock options as the difference between the market price of the Company's common stock and the exercise price of the option at the grant date. Accordingly, no compensation expense has been recognized for the stock option granted.
Pro forma information regarding net income and earnings per share is required by SFAS No. 123. Under this statement, compensation cost is measured at the grant date based on the fair value of the award and is recognized over the vesting period. The pro forma amounts have been determined as if the Company had accounted for its employee stock options under SFAS No. 123. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions:
2001
-----
Risk-free interest rate (%) 4.83%
Dividend yield (%) 5.21%
Volatility factor (%) 26.47%
Weighted-average expected life of the options (in years) 10
|
The option valuation model requires the input of highly subjective assumptions, primarily stock price volatility, changes in which can materially affect the fair value estimate. The weighted-average fair value of stock options granted during 2001 was approximately $8.00.
For purposes of the pro forma disclosures required by SFAS No. 123, the estimated fair value of the options is amortized to expense over the options vesting period. Compensation expense would have been $2.9 million in 2001 under SFAS No. 123. The Company's pro forma information is as follows (in thousands, except per share data):
2001
--------
Net income:
As reported $541,610
Pro forma $539,845
Basic earnings per common share:
As reported $ 2.65
Pro forma $ 2.64
Diluted earnings per common share:
As reported $ 2.64
Pro forma $ 2.63
|
The effects of applying SFAS No. 123 in this pro forma disclosure are not likely to be representative of effects on reported net income for future years.
The number of options outstanding as of December 31, 2001, was 2.3 million with a weighted-average remaining contractual life of 9.75 years and a weighted-average exercise price of $43.49. No options were exercisable as of December 31, 2001.
C. Other Stock-Based Compensation Plans
The Company has additional compensation plans for officers and key employees of the Company that are stock-based in whole or in part. The two primary programs are the Performance Share Sub-Plan (PSSP) and the Restricted Stock Awards program (RSA), both of which were established pursuant to the Company's 1997 Equity Incentive Plan.
Under the terms of the PSSP, officers and key employees of the Company are granted performance shares that vest over a three-year consecutive period. Each performance share has a value that is equal to, and changes with, the value of a share of the Company's common stock, and dividend equivalents are accrued on, and reinvested in, the performance shares. The PSSP has two equally weighted performance measures, both of which are based on the Company's results as compared to a peer group of utilities. Compensation expense is recognized over the vesting period based on the expected ultimate cash payout. Compensation expense is reduced by any forfeitures.
The RSA allows the Company to grant shares of restricted common stock to officers and key employees of the Company. The restricted shares vest on a graded vesting schedule over a minimum of three years. Compensation expense, which is based on the fair value of common stock at the grant date, is recognized over the applicable vesting period, with corresponding increases in common stock equity. The weighted average price of restricted shares at the grant date was $41.86, $36.97 and $37.63 in 2001, 2000 and 1999, respectively. Compensation expense is reduced by any forfeitures. Restricted shares are not included as shares outstanding in the basic earnings per share calculation until the shares are no longer forfeitable. Changes in restricted stock shares outstanding were:
2001 2000 1999
------- ------- -------
Beginning balance 653,344 331,900 265,300
Granted 113,651 359,844 66,600
Vested (21,722) -- --
Forfeited (70,762) (38,400) --
----------------------------------------
Ending balance 674,511 653,344 331,900
========================================
|
The total amount expensed for other stock-based compensation plans was $14.3 million, $15.6 million and $2.2 million in 2001, 2000 and 1999, respectively.
16. Postretirement Benefit Plans
The Company and some of its subsidiaries have a non-contributory defined benefit retirement (pension) plan for substantially all full-time employees. The Company also has supplementary defined benefit pension plans that provide benefits to higher-level employees.
The components of net periodic pension benefit for the years ended December 31 are (in thousands):
2001 2000 1999
--------- -------- --------
Expected return on plan assets $(169,329) $(87,628) $(75,124)
Service cost 31,863 22,123 20,467
Interest cost 96,200 56,924 46,846
Amortization of transition obligation 125 125 106
Amortization of prior service benefit (1,325) (1,314) (1,314)
Amortization of actuarial gain (4,989) (5,721) (3,932)
--------- -------- --------
Net periodic pension benefit $ (47,455) $(15,491) $(12,951)
========= ======== ========
|
In addition to the net periodic benefit reflected above, in 2000 the Company recorded a charge of approximately $21.5 million to adjust one of its supplementary defined benefit pension plans. The effect of the adjustment for this plan is reflected in the actuarial loss (gain) line in the pension obligation reconciliation below.
Prior service costs and benefits are amortized on a straight-line basis over the average remaining service period of active participants. Actuarial gains and losses in excess of 10% of the greater of the pension obligation or the market-related value of assets are amortized over the average remaining service period of active participants.
Reconciliations of the changes in the plan's benefit obligations and the plan's funded status are (in thousands):
2001 2000
---------- ----------
Pension obligation at January 1 $1,376,859 $ 688,124
Interest cost 96,200 56,924
Service cost 31,863 22,123
Benefit payments (86,010) (55,291)
Actuarial loss (gain) 13,164 39,798
Plan amendments 20,882 --
Acquisitions (acquisition adjustment) (62,221) 625,181
---------- ----------
Pension obligation at December 31 $1,390,737 $1,376,859
Fair value of plan assets at December 31 1,677,630 1,843,410
---------- ----------
Funded status $ 286,893 $ 466,551
Unrecognized transition obligation 370 495
Unrecognized prior service cost (benefit) 5,346 (16,861)
Unrecognized actuarial loss (gain) 111,600 (158,541)
---------- ----------
Prepaid (accrued) pension cost at December 31, net $ 404,209 $ 291,644
========== ==========
|
The net prepaid pension cost of $404.2 million at December 31, 2001 is recognized in the accompanying Consolidated Balance Sheets as prepaid pension cost of $489.6 million and accrued benefit cost of $85.4 million, which is included in other liabilities and deferred credits. The net prepaid pension cost of $291.6 million at December 31, 2000 is recognized in the accompanying Consolidated Balance Sheets as prepaid pension cost of $373.2 million and accrued benefit cost of $81.6 million, which is included in other liabilities and deferred credits. The aggregate benefit obligation for those plans where the accumulated benefit obligation exceeded the fair value of plan assets was $85.4 million and $83.6 million at December 31, 2001 and 2000, respectively, and those plans have no plan assets.
Reconciliations of the fair value of pension plan assets are (in thousands):
2001 2000
---------- ----------
Fair value of plan assets at January 1 $1,843,410 $ 947,143
Actual return on plan assets (84,254) 24,840
Benefit payments (86,010) (55,291)
Employer contributions 4,484 1,329
Acquisitions -- 925,389
---------- ----------
Fair value of plan assets at December 31 $1,677,630 $1,843,410
========== ==========
|
The weighted-average discount rate used to measure the pension obligation was 7.5% in 2001 and 2000. The weighted-average rate of increase in future compensation for non-bargaining unit employees used to measure the pension obligation was 4.0% in 2001 and 2000 and 4.2% in 1999. The corresponding rate of increase in future compensation for bargaining unit employees was 3.5% in 2001 and 2000. The expected long-term rate of return on pension plan assets used in determining the net periodic pension cost was 9.25% in 2001, 2000 and 1999.
In addition to pension benefits, the Company and some of its subsidiaries provide contributory other postretirement benefits (OPEB), including certain health care and life insurance benefits, for retired employees who meet specified criteria.
The components of net periodic OPEB cost for the years ended December 31 are (in thousands):
2001 2000 1999
------- ------- -------
Expected return on plan assets $(4,651) $(4,045) $(3,378)
Service cost 13,231 10,067 7,936
Interest cost 28,414 15,446 13,914
Amortization of prior service cost 319 107 --
Amortization of transition obligation 4,701 5,878 5,760
Amortization of actuarial gain (592) (819) (1)
------- ------- -------
Net periodic OPEB cost $41,422 $26,634 $24,231
======= ======= =======
|
Prior service costs and benefits are amortized on a straight-line basis over the average remaining service period of active participants. Actuarial gains and losses in excess of 10% of the greater of the OPEB obligation or the market-related value of assets are amortized over the average remaining service period of active participants.
Reconciliations of the changes in the plan's benefit obligations and the plan's funded status are (in thousands):
2001 2000
--------- ---------
OPEB obligation at January 1 $ 374,923 $ 213,488
Interest cost 28,414 15,446
Service cost 13,231 10,067
Benefit payments (17,207) (7,258)
Actuarial gain 27,428 (12,590)
Plan amendment (25,845) --
Acquisitions -- 155,770
--------- ---------
OPEB obligation at December 31 $ 400,944 $ 374,923
Fair value of plan assets at December 31 55,529 54,642
--------- ---------
Funded status $(345,415) $(320,281)
Unrecognized transition obligation 33,129 70,715
Unrecognized prior service cost 7,675 955
Unrecognized actuarial loss (gain) 6,429 (25,060)
--------- ---------
Accrued OPEB cost at December 31 $(298,182) $(273,671)
========= =========
|
Reconciliations of the fair value of OPEB plan assets are (in thousands):
2001 2000
-------- --------
Fair value of plan assets at January 1 $ 54,642 $ 43,235
Actual return on plan assets (444) 124
Acquisition -- 11,283
Employer contribution 18,538 7,258
Benefits paid (17,207) (7,258)
-------- --------
Fair value of plan assets at December 31 $ 55,529 $ 54,642
======== ========
|
The assumptions used to measure the OPEB obligation and determine the net periodic OPEB cost are:
2001 2000 1999
---- ---------- ----
Weighted-average long-term rate of return on plan assets 8.70% 9.20% 9.25%
Weighted-average discount rate 7.50% 7.50% 7.50%
Initial medical cost trend rate for pre-Medicare benefits 7.50% 7.2% - 7.5% 7.50%
Initial medical cost trend rate for post-Medicare benefits 7.50% 6.2% - 7.5% 7.25%
Ultimate medical cost trend rate 5.0% 5.0% - 5.3% 5.0%
Year ultimate medical cost trend rate is achieved 2008 2005-2009 2006
|
The medical cost trend rates were assumed to decrease gradually from the initial rates to the ultimate rates. Assuming a 1% increase in the medical cost trend rates, the aggregate of the service and interest cost components of the net periodic OPEB cost for 2001 would increase by $5.6 million, and the OPEB obligation at December 31, 2001, would increase by $35.3 million. Assuming a 1% decrease in the medical cost trend rates, the aggregate of the service and interest cost components of the net periodic OPEB cost for 2001 would decrease by $4.8 million and the OPEB obligation at December 31, 2001, would decrease by $32.3 million.
During 1999, the Company completed the acquisition of NCNG (See Note 2B). During 2000, the Company completed the acquisition of FPC (See Note 2A). NCNG's and FPC's pension and OPEB liabilities, assets and net periodic costs are reflected in the above information as appropriate. Effective January 1, 2000, NCNG's benefit plans were merged with those of the Company. Certain of FPC's non-bargaining unit benefit plans were merged with those of the Company effective January 1, 2002.
Florida Power continues to recover qualified plan pension costs and OPEB costs in rates as if the acquisition had not occurred. Accordingly, a portion of the prepaid pension cost and a portion of the accrued OPEB cost reflected in the tables above have a corresponding regulatory liability and regulatory asset, respectively (See Note 2A). In addition, pursuant to its rate treatment, for 2001 Florida Power recognized additional periodic pension credit of $16.5 million and additional periodic OPEB cost of $3.5 million, as compared to the amounts included in the net periodic information above.
17. Earnings Per Common Share
Basic earnings per common share is based on the weighted-average of common shares outstanding. Diluted earnings per share includes the effect of the non-vested portion of restricted stock awards. The stock options outstanding as of December 31, 2001 were anti-dilutive and therefore are not included in diluted earnings per share. Restricted stock awards and contingently issuable shares had a dilutive effect on earnings per share for all three years and increased the weighted-average number of common shares outstanding for dilutive purposes by 664,403 in 2001, 454,924 in 2000 and 290,474 in 1999. The weighted-average number of common shares outstanding for dilutive purposes was 205.3 million, 157.6 million and 148.6 million for 2001, 2000 and 1999, respectively.
ESOP shares that have not been committed to be released to participants' accounts are not considered outstanding for the determination of earnings per common share. The weighted-average of these shares totaled 5.4 million, 5.7 million and 6.5 million for the years ended December 31, 2001, 2000 and 1999, respectively.
18. Income Taxes
Deferred income taxes are provided for temporary differences between book and tax bases of assets and liabilities. Investment tax credits related to regulated operations are amortized over the service life of the related property. A regulatory asset or liability has been recognized for the impact of tax expenses or benefits that are recovered or refunded in different periods by the utilities pursuant to rate orders.
Accumulated deferred income tax (assets) liabilities at December 31 are (in thousands):
2001 2000
---------- ----------
Accelerated depreciation and property
cost differences $1,812,743 $2,054,509
Deferred costs, net 82,566 63,085
Income tax credit carry forward (306,497) (103,754)
Miscellaneous other temporary differences, net (157,343) (150,969)
Valuation allowance 31,492 10,868
---------- ----------
Net accumulated deferred income
tax liability $1,462,961 $1,873,739
========== ==========
|
Total deferred income tax liabilities were $2.68 billion and $2.79 billion at December 31, 2001 and 2000, respectively. Total deferred income tax assets were $1.22 billion and $919 million at December 31, 2001 and 2000, respectively. The net of deferred income tax liabilities and deferred income tax assets is included on the Consolidated Balance Sheets under the captions other current liabilities and accumulated deferred income taxes.
The Company established a valuation allowance of $10.9 million in 2000 and established additional valuation allowances of $20.5 million during 2001 due to the uncertainty of realizing future tax benefits from certain state net operating loss carryforwards.
Reconciliations of the Company's effective income tax rate to the statutory federal income tax rate are:
2001 2000 1999
----- ---- ----
Effective income tax rate (38.9)% 29.7% 40.3%
State income taxes, net of federal benefit (7.7) (4.8) (4.6)
AFUDC amortization (4.9) (5.1) (1.7)
Federal tax credits 93.5 12.2 1.4
Goodwill amortization and write-offs (11.3) (0.7) (0.3)
Investment tax credit amortization 5.9 4.2 1.6
ESOP dividend deduction 1.9 1.0 1.1
Interpath investment impairment (2.1) -- --
Other differences, net (1.4) (1.5) (2.8)
----- ---- ----
Statutory federal income tax rate 35.0% 35.0% 35.0%
===== ==== ====
|
Income tax expense (benefit) is comprised of (in thousands):
2001 2000 1999
--------- -------- --------
Current - federal $ 185,309 $254,967 $253,140
state 52,433 61,309 48,075
Deferred - federal (356,160) (84,605) (30,011)
state (10,330) (10,761) (2,484)
Investment tax credit (22,895) (18,136) (10,299)
--------- -------- --------
Total income tax expense (benefi) $(151,643) $202,774 $258,421
========= ======== ========
|
The Company, through its subsidiaries, is a majority owner in five entities and a minority owner in one entity that own facilities that produce synthetic fuel as defined under the Internal Revenue Service Code (Code). The production and sale of the synthetic fuel from these facilities qualifies for tax credits under Section 29 of the Code (Section 29) if certain requirements are satisfied, including a requirement that the synthetic fuel differs significantly in chemical composition from the coal used to produce such synthetic fuel. All entities have received private letter rulings (PLR's) from the Internal Revenue Service (IRS) with respect to their synthetic fuel operations. The PLR's do not limit the production on which synthetic fuel credits may be claimed. Should the tax credits be denied on future audits, and the Company fails to prevail through the IRS or legal process, there could be a significant tax liability owed for previously taken Section 29 credits, with a significant impact on earnings and cash flows. In
management's opinion, the Company is complying with all the necessary requirements to be allowed such credits under Section 29 and believes it is probable, although it cannot provide certainty, that it will prevail on any credits taken.
19. Joint Ownership of Generating Facilities
CP&L and Florida Power hold undivided ownership interests in certain jointly owned generating facilities, excluding related nuclear fuel and inventories. Each is entitled to shares of the generating capability and output of each unit equal to their respective ownership interests. Each also pays its ownership share of additional construction costs, fuel inventory purchases and operating expenses. CP&L's and Florida Power's share of expenses for the jointly owned facilities is included in the appropriate expense category.
CP&L's and Florida Power's ownership interests in the jointly owned generating facilities are listed below with related information as of December 31, 2001 (dollars in thousands):
Company
Megawatt Ownership Plant Accumulated Accumulated Under
Subsidiary Facility Capability Interest Investment Depreciation Decommissioning Construction
---------- ------------------- ---------- --------- ---------- ------------ --------------- ------------
CP&L Mayo Plant 745 83.83% $ 460,026 $ 230,630 $ -- $ 7,116
CP&L Harris Plant 860 83.83% 3,154,183 1,321,694 93,637 14,416
CP&L Brunswick Plant 1,631 81.67% 1,427,842 828,480 339,945 41,455
CP&L Roxboro Unit 4 700 87.06% 309,032 126,007 - 7,881
Florida Crystal River Plant 834 91.78% 773,835 469,840 333,939 25,723
Power
|
In the table above, plant investment and accumulated depreciation are not reduced by the regulatory disallowances related to the Harris Plant.
20. Commitments and Contingencies
A. Fuel and Purchased Power
Pursuant to the terms of the 1981 Power Coordination Agreement, as amended, between CP&L and Power Agency, CP&L is obligated to purchase a percentage of Power Agency's ownership capacity of, and energy from, the Harris Plant. In 1993, CP&L and Power Agency entered into an agreement to restructure portions of their contracts covering power supplies and interests in jointly owned units. Under the terms of the 1993 agreement, CP&L increased the amount of capacity and energy purchased from Power Agency's ownership interest in the Harris Plant, and the buyback period was extended six years through 2007. The estimated minimum annual payments for these purchases, which reflect capacity costs, total approximately $32 million. These contractual purchases totaled $33.3 million, $33.9 million and $36.5 million for 2001, 2000 and 1999, respectively. In 1987, the NCUC ordered CP&L to reflect the recovery of the capacity portion of these costs on a levelized basis over the original 15-year buyback period, thereby deferring for future recovery the difference between such costs and amounts collected through rates. At December 31, 2001 and 2000, CP&L had deferred purchased capacity costs, including carrying costs accrued on the deferred balances, of $32.5 million and $44.8 million, respectively. Increased purchases (which are not being deferred for future recovery) resulting from the 1993 agreement with Power Agency were approximately $29 million, $26 million and $23 million for 2001, 2000 and 1999, respectively.
CP&L has a long-term agreement for the purchase of power and related transmission services from Indiana Michigan Power Company's Rockport Unit No. 2 (Rockport). The agreement provides for the purchase of 250 megawatts of capacity through 2009 with minimum annual payments of approximately $31 million, representing capital-related capacity costs. Total purchases (including transmission use charges) under the Rockport agreement amounted to $62.8 million, $61.0 million and $59.2 million for 2001, 2000 and 1999, respectively.
Effective June 1, 2001, CP&L executed a long-term agreement for the purchase of power from Skygen Energy LLC's Broad River facility (Broad River). The agreement provides for the purchase of approximately 500 megawatts of capacity through 2021 with an original minimum annual payment of approximately $16 million, primarily representing capital-related capacity costs. The minimum annual payments will be indexed for inflation. Total purchases under the Broad River agreement amounted to $35.9 million in 2001. A separate long-term agreement for additional power from Broad River will commence June 1, 2002. This agreement will provide for the purchase of approximately 300 megawatts of capacity through 2022 with an original minimum annual payment of
approximately $16 million representing capital-related capacity costs. The minimum annual payments will be indexed for inflation.
Florida Power has long-term contracts for approximately 460 megawatts of purchased power with other utilities, including a contract with The Southern Company for approximately 400 megawatts of purchased power annually through 2010. Florida Power can lower these purchases to approximately 200 megawatts annually with a three-year notice. Total purchases under these agreements amounted to $111.7 million and $104.5 million for 2001 and 2000, respectively. Minimum purchases under these contracts, representing capital-related capacity costs, are approximately $50 million annually through 2003 and $30 million annually through 2006.
Both CP&L and Florida Power have ongoing purchased power contracts with certain cogenerators (qualifying facilities) with expiration dates ranging from 2002 to 2025. These purchased power contracts generally provide for capacity and energy payments. Energy payments for the Florida Power contracts are based on actual power taken under these contracts. Minimum expected future capacity payments under these contracts as of December 31, 2001 are $235.7 million, $244.3 million, $255.4 million, $267.9 million and $279.1 million for 2002-2006, respectively. CP&L has various pay-for-performance contracts with qualifying facilities for approximately 300 megawatts of capacity expiring at various times through 2009. Payments for both capacity and energy are contingent upon the qualifying facilities' ability to generate. Payments made under these contracts were $145.1 million in 2001, $168.4 million in 2000 and $178.7 million in 1999.
Florida Power and CP&L have entered into various long-term contracts for coal, gas and oil requirements of its generating plants. Estimated annual payments for firm commitments of fuel purchases and transportation costs under these contracts are approximately $1.5 billion, $1.2 billion, $992.8 million, $942.4 million and $944.4 million for 2002 through 2006, respectively.
B. Other Commitments
The Company has certain future commitments related to four synthetic fuel facilities purchased that provide for contingent payments (royalties) of up to $11.4 million on sales from each plant annually through 2007. The related agreements were amended in December 2001 to require the payment of minimum annual royalties of approximately $6.6 million for each plant through 2007. As a result of the amendment, the Company recorded a liability (included in other liabilities and deferred credits on the Consolidated Balance Sheets) and a deferred cost asset (included in other assets and deferred debits in the Consolidated Balance Sheets) of approximately $134.0 million at December 31, 2001, representing the minimum amounts due through 2007, discounted at 6.05%. As of December 31, 2001, the portion of the asset and liability recorded that was classified as current was $25.8 million. The deferred cost asset will be amortized to expense each year as synthetic fuel sales are made. The maximum amounts payable under these agreements remain unchanged. Actual amounts accrued under these agreements were approximately $45.8 million in 2001 and $43.1 million in 2000.
The Company has entered into a joint venture to build an 850-mile natural gas pipeline system to serve 14 eastern North Carolina counties. The Company has agreed to fund approximately $22.0 million of the project. The entire project is expected to be completed by the end of 2004.
During February 2002, Progress Ventures completed the acquisition of two electric generating projects totaling approximately 1,100 megawatts for total cash consideration of $345 million. The transaction included a power purchase agreement with the seller through December 31, 2004. In addition, there is a project management completion agreement whereby the Company assumed certain liabilities to facilitate buildout of one of the projects.
In January 2002, Progress Ventures entered into a letter of intent to acquire approximately 215 natural gas wells, 52 miles of intrastate gas pipeline and 170 miles of gas-gathering systems. Total consideration of $153 million is expected to include $135 million in Company common stock and $18 million in cash. This transaction is expected to be completed during the first quarter of 2002.
C. Insurance
CP&L and Florida Power are members of Nuclear Electric Insurance Limited (NEIL), which provides primary and excess insurance coverage against property damage to members' nuclear generating facilities. Under the primary program, each company is insured for $500 million at each of its respective nuclear plants. In addition to primary coverage, NEIL also provides decontamination, premature decommissioning and excess property insurance with limits of $2.0 billion on the Brunswick and Harris Plants, and $1.1 billion on the Robinson and CR3 Plants.
Insurance coverage against incremental costs of replacement power resulting from prolonged accidental outages at nuclear generating units is also provided through membership in NEIL. Both CP&L and Florida Power are insured
thereunder, following a twelve-week deductible period, for 52 weeks in the amount of $3.5 million per week at each of the nuclear units. An additional 110 weeks of coverage is provided at 80% of the above weekly amount. For the current policy period, the companies are subject to retrospective premium assessments of up to approximately $31.4 million with respect to the primary coverage, $32.4 million with respect to the decontamination, decommissioning and excess property coverage, and $22.1 million for the incremental replacement power costs coverage, in the event covered losses at insured facilities exceed premiums, reserves, reinsurance and other NEIL resources. Pursuant to regulations, each company's property damage insurance policies provide that all proceeds from such insurance be applied, first, to place the plant in a safe and stable condition after an accident and, second, to decontamination costs, before any proceeds can be used for decommissioning, plant repair or restoration. Each company is responsible to the extent losses may exceed limits of the coverage described above.
Both CP&L and Florida Power are insured against public liability for a nuclear incident up to $9.54 billion per occurrence. Under the current provisions of the Price Anderson Act, which limits liability for accidents at nuclear power plants, each company, as an owner of nuclear units, can be assessed for a portion of any third-party liability claims arising from an accident at any commercial nuclear power plant in the United States. In the event that public liability claims from an insured nuclear incident exceed $200 million (currently available through commercial insurers), each company would be subject to pro rata assessments of up to $88.1 million for each reactor owned per occurrence. Payment of such assessments would be made over time as necessary to limit the payment in any one year to no more than $10 million per reactor owned. The Price Anderson Act expires August 1, 2002. There are several renewal proposals before Congress which include possible increased limits and retroactive premiums. The final outcome of this matter cannot be predicted at this time.
There have been recent revisions made to the nuclear property and nuclear liability insurance policies regarding the maximum recoveries available for multiple terrorism occurrences. Under the NEIL policies, if there were multiple terrorism losses occurring within one year after the first loss from terrorism, NEIL would make available one industry aggregate limit of $3.2 billion, along with any amounts it recovers from reinsurance, government indemnity or other sources up to the limits for each claimant. If terrorism losses occurred beyond the one-year period, a new set of limits and resources would apply. For nuclear liability claims arising out of terrorist acts, the primary level available through commercial insurers is now subject to an industry aggregate limit of $200.0 million. The second level of coverage obtained through the assessments discussed above would continue to apply to losses exceeding $200.0 million and would provide coverage in excess of any diminished primary limits due to the terrorist acts aggregate.
CP&L and Florida Power self-insure their transmission and distribution lines against loss due to storm damage and other natural disasters. Florida Power accrues $6 million annually to a storm damage reserve pursuant to a regulatory order and may defer losses in excess of the reserve (Note 13B).
D. Claims and uncertainties
1. The Company is subject to federal, state and local regulations addressing air and water quality, hazardous and solid waste management and other environmental matters.
Various organic materials associated with the production of manufactured gas, generally referred to as coal tar, are regulated under federal and state laws. The lead or sole regulatory agency that is responsible for a particular former coal tar site depends largely upon the state in which the site is located. There are several manufactured gas plant (MGP) sites to which both electric utilities and the gas utility have some connection. In this regard, both electric utilities and the gas utility, with other potentially responsible parties, are participating in investigating and, if necessary, remediating former coal tar sites with several regulatory agencies, including, but not limited to, the U.S. Environmental Protection Agency (EPA), the Florida Department of Environmental Protection (FDEP) and the North Carolina Department of Environment and Natural Resources, Division of Waste Management (DWM). Although the electric utilities and gas utility may incur costs at these sites about which it has been notified, based upon current status of these sites, the Company does not expect those costs to be material to its consolidated financial position or results of operations. The Company has accrued probable costs at certain of these sites.
Both electric utilities, the gas utility and Progress Ventures are periodically notified by regulators such as the EPA and various state agencies of their involvement or potential involvement in sites, other than MGP sites, that may require investigation and/or remediation. Although The Company's subsidiaries may incur costs at the sites about which they have been notified, based upon the current status of these sites, the Company does not expect those costs to be material to the consolidated financial position or results of operations of the Company.
There has been and may be further proposed federal legislation requiring reductions in air emissions for nitrogen oxides, sulfur dioxide and mercury setting forth national caps and emission levels over an extended period of time. This national multi-pollutant approach would have significant costs which could be material to CP&L's consolidated financial position or results of operations. Some companies may seek recovery of the related cost through rate adjustments or similar mechanisms. The Company cannot predict the outcome of this matter.
The EPA has been conducting an enforcement initiative related to a number of coal-fired utility power plants in an effort to determine whether modifications at those facilities were subject to New Source Review requirements or New Source Performance Standards under the Clean Air Act. Both CP&L and Florida Power were asked to provide information to the EPA as part of this initiative and cooperated in providing the requested information. The EPA has initiated civil enforcement actions against other unaffiliated utilities as part of this initiative, some of which have resulted in settlement agreements calling for expenditures, ranging from $1.0 billion to $1.4 billion. A utility that was not subject to a civil enforcement action settled its New Source Review issues with the EPA for $300 million. These settlement agreements have generally called for expenditures to be made over extended time periods, and some of the companies may seek recovery of the related cost through rate adjustments or similar mechanisms. The Company cannot predict the outcome of this matter.
In 1998, the EPA published a final rule addressing the issue of regional transport of ozone. This rule is commonly known as the NOx SIP Call. The EPA's rule requires 23 jurisdictions, including North Carolina, South Carolina and Georgia, but not Florida, to further reduce nitrogen oxide emissions in order to attain a pre-set state NOx emission level by May 31, 2004. CP&L is evaluating necessary measures to comply with the rule and estimates its related capital expenditures to meet these measures in North and South Carolina could be approximately $370 million, which has not been adjusted for inflation. Increased operation and maintenance costs relating to the NOx SIP Call are not expected to be material to the Company's results of operations. Further controls are anticipated as electricity demand increases. The Company cannot predict the outcome of this matter.
In July 1997, the EPA issued final regulations establishing a new eight-hour ozone standard. In October 1999, the District of Columbia Circuit Court of Appeals ruled against the EPA with regard to the federal eight-hour ozone standard. The U.S. Supreme Court has upheld, in part, the District of Columbia Circuit Court of Appeals decision. Further litigation and rulemaking are anticipated. North Carolina adopted the federal eight-hour ozone standard and is proceeding with the implementation process. North Carolina has promulgated final regulations, which will require CP&L to install nitrogen oxide controls under the State's eight-hour standard. The cost of those controls are included in the cost estimate of $370 million set forth above.
The EPA published a final rule approving petitions under Section 126 of the
Clean Air Act, which requires certain sources to make reductions in
nitrogen oxide emissions by May 1, 2003. The final rule also includes a set
of regulations that affect nitrogen oxide emissions from sources included
in the petitions. The North Carolina fossil-fueled electric generating
plants are included in these petitions. Acceptable state plans under the
NOx SIP Call can be approved in lieu of the final rules the EPA approved as
part of the 126 petitions. CP&L, other utilities, trade organizations and
other states participated in litigation challenging the EPA's action. On
May 15, 2001, the District of Columbia Circuit Court of Appeals ruled in
favor of the EPA which will require North Carolina to make reductions in
nitrogen oxide emissions by May 1, 2003. However, the Court in its May 15th
decision rejected the EPA's methodology for estimating the future growth
factors the EPA used in calculating the emissions limits for utilities. In
August 2001, the Court granted a request by CP&L and other utilities to
delay the implementation of the 126 Rule for electric generating units
pending resolution by the EPA of the growth factor issue. The Court's order
tolls the three-year compliance period (originally set to end on May 1,
2003) for electric generating units as of May 15, 2001. On January 16,
2002, the EPA issued a memo to harmonize the compliance dates for the
Section 126 Rule and the NOx SIP Call. The new compliance date for all
affected sources is now May 31, 2004, rather than May 1, 2003, subject to
the completion of the EPA's response to the related court decision on the
growth factor issue. The Company cannot predict the outcome of this matter.
On November 1, 2001, the Company completed the sale of the Inland Marine Transportation segment to AEP Resources, Inc. In connection with the sale, the Company entered into environmental indemnification provisions covering both unknown and known sites. The Company has recorded an accrual to cover estimated probable future environmental expenditures. The Company believes that it is reasonably possible that additional costs, which cannot be currently estimated, may be incurred related to the environmental indemnification provision beyond the amounts accrued. The Company cannot predict the outcome of this matter.
CP&L, Florida Power, Progress Ventures and NCNG have filed claims with the Company's general liability insurance carriers to recover costs arising out of actual or potential environmental liabilities. Some claims have
been settled and others are still pending. While management cannot predict the outcome of these matters, the outcome is not expected to have a material effect on the consolidated financial position or results of operations.
2. As required under the Nuclear Waste Policy Act of 1982, CP&L and Florida Power each entered into a contract with the Department of Energy (DOE) under which the DOE agreed to begin taking spent nuclear fuel by no later than January 31, 1998. All similarly situated utilities were required to sign the same standard contract.
Subsequently, a number of utilities each filed an action for damages in the Court of Claims. In a recent decision, the U.S. Circuit Court of Appeals (Federal Circuit) ruled that utilities may sue the DOE for damages in the Federal Court of Claims instead of having to file an administrative claim with DOE. CP&L and Florida Power are in the process of evaluating whether they should each file a similar action for damages.
CP&L and Florida Power also continue to monitor legislation that has been introduced in Congress which might provide some limited relief. CP&L and Florida Power cannot predict the outcome of this matter.
With certain modifications, CP&L's spent nuclear fuel storage facilities will be sufficient to provide storage space for spent fuel generated on CP&L's system through the expiration of the current operating licenses for all of CP&L's nuclear generating units. Subsequent to the expiration of these licenses, dry storage may be necessary. CP&L obtained NRC approval to use additional storage space at the Harris Plant in December 2000. Florida Power currently is storing spent nuclear fuel onsite in spent fuel pools. If Florida Power does not seek renewal of the CR3 operating license, CR3 will have sufficient storage capacity in place for fuel consumed through the end of the expiration of the license in 2016. If Florida Power extends the CR3 operating license, dry storage may be necessary.
3. The Company and its subsidiaries are involved in various litigation matters in the ordinary course of business, some of which involve substantial amounts. Where appropriate, accruals have been made in accordance with SFAS No. 5, "Accounting for Contingencies," to provide for such matters. In the opinion of management, the final disposition of pending litigation would not have a material adverse effect on the Company's consolidated results of operations or financial position.
21. Subsequent Event (Unaudited)
On March 27, 2002, the parties in Florida Power's rate case entered into a Stipulation and Settlement Agreement (the Agreement) related to retail rate matters. The Agreement is to be effective from May 1, 2002 through 2005; provided, however, that if Florida Power's base rate earnings fall below a 10% return on equity, Florida Power may petition the FPSC to amend its base rates.
The Agreement provides that Florida Power will reduce its retail revenues from the sale of electricity by $125 million annually through 2005. The Agreement also provides that Florida Power will operate under a Revenue Sharing Incentive Plan (the Plan) that establishes revenue caps and sharing thresholds for the years 2002 through 2005. The Plan provides that retail base rate revenues between the sharing thresholds and the retail base rate revenue caps will be divided into two shares - a 1/3 share to be received by Florida Power's shareholders, and a 2/3 share to be refunded to Florida Power's retail customers; provided, however, that for the year 2002 only, the refund to
customers will be limited to 67.1% of the 2/3 customer share. The retail base rate revenue sharing threshold amounts for 2002, 2003, 2004 and 2005 will be $1,296 million, $1,333 million, $1,370 million and $1,407 million, respectively. The Plan also provides that all retail base rate revenues above the retail base rate revenue caps established for the years 2003, 2004 and 2005 will be refunded to retail customers on an annual basis. For 2002, the refund to customers will be limited to 67.1% of the retail base rate revenues that exceed the 2002 cap. The retail base revenue caps for 2002, 2003, 2004 and 2005 will be $1,356 million, $1,393 million, $1,430 million and $1,467 million, respectively.
The Agreement also provides that beginning with the in-service date of Florida Power's Hines Unit 2 and continuing through December 31, 2005, Florida Power will be allowed to recover through the fuel cost recovery clause a return on average investment and depreciation expense for Hines Unit 2, to the extent such costs do not exceed the Unit's cumulative fuel savings over the recovery period.
Additionally, the Agreement provides that Florida Power will effect a mid-course correction of its fuel cost recovery clause to reduce the fuel factor by $50 million for the remainder of 2002. The fuel cost recovery clause will operate as it normally does, including, but not limited to any additional mid-course adjustments that may become necessary, and the calculation of true-ups to actual fuel clause expenses.
During the term of the Agreement, Florida Power will suspend accruals on its reserves for nuclear decommissioning and fossil dismantlement. Additionally, for each calendar year during the term of the Agreement, Florida Power will record a $62.5 million depreciation expense reduction, and may, at its option, record up to an equal annual amount as an offsetting accelerated depreciation expense. In addition, Florida Power is authorized, at its discretion, to accelerate the amortization of certain regulatory assets over the term of the Agreement.
Under the terms of the Agreement, Florida Power agreed to continue the implementation of its four-year Commitment to Excellence Reliability Plan and expects to achieve a 20% improvement in its annual System Average Interruption Duration Index by no later than 2004. If this improvement level is not achieved for calendar years 2004 or 2005, Florida Power will provide a refund of $3 million for each year the level is not achieved to 10% of its total retail customers served by its worst performing distribution feeder lines.
The Agreement also provides that Florida Power will refund to customers $35 million of the $98 million in interim revenues Florida Power has collected subject to refund since March 13, 2001. No other interim revenues that were collected during that period will continue to be held subject to refund.
The Agreement was filed with the FPSC for approval on March 27, 2002. If the FPSC approves the Agreement, the new rates will take effect May 1, 2002. Progress Energy cannot predict the outcome of this matter.
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND SHAREHOLDER OF CAROLINA POWER & LIGHT
COMPANY:
We have audited the accompanying consolidated balance sheets and schedules of capitalization of Carolina Power & Light Company and its subsidiaries (CP&L) as of December 31, 2001 and 2000, and the related consolidated statements of income and comprehensive income, retained earnings, and cash flows for each of the three years in the period ended December 31, 2001. Our audits also included the financial statement schedule listed in the Index at Item 8. These financial statements and the financial statement schedule are the responsibility of CP&L's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, based on our audits, such consolidated financial statements present fairly, in all material respects, the financial position of CP&L at December 31, 2001 and 2000, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
/s/ DELOITTE & TOUCHE LLP Raleigh, North Carolina February 15, 2002 |
Years ended December 31
(In thousands) 2001 2000 1999
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Operating Revenues
Electric $3,343,720 $3,323,676 $3,138,846
Natural gas -- 147,448 98,903
Diversified businesses 16,441 72,783 119,866
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Total Operating Revenues 3,360,161 3,543,907 3,357,615
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Operating Expenses
Fuel used in electric generation 647,263 627,463 581,340
Purchased power 353,551 325,366 365,425
Gas purchased for resale -- 103,734 67,465
Other operation and maintenance 701,703 741,466 682,407
Depreciation and amortization 521,910 708,249 503,105
Taxes other than on income 149,719 148,037 142,741
Diversified businesses 9,985 135,258 174,589
----------------------------------------------------------------------------------------------------------
Total Operating Expenses 2,384,131 2,789,573 2,517,072
----------------------------------------------------------------------------------------------------------
Operating Income 976,030 754,334 840,543
----------------------------------------------------------------------------------------------------------
Other Income (Expense)
Interest income 13,728 26,226 10,336
Gain on sale of assets -- 200,000 --
Impairment of investment (156,712) -- --
Other, net (4,155) (7,795) (30,739)
----------------------------------------------------------------------------------------------------------
Total Other Income (Expense) (147,139) 218,431 (20,403)
----------------------------------------------------------------------------------------------------------
Interest Charges
Long-term debt 245,808 223,562 180,676
Other interest charges 11,333 16,441 10,298
Allowance for borrowed funds used during construction (15,714) (18,537) (11,510)
----------------------------------------------------------------------------------------------------------
Total Interest Charges, Net 241,427 221,466 179,464
----------------------------------------------------------------------------------------------------------
Income before Income Taxes 587,464 751,299 640,676
Income Taxes 223,233 290,271 258,421
----------------------------------------------------------------------------------------------------------
Net Income 364,231 461,028 382,255
Preferred Stock Dividend Requirement 2,964 2,966 2,967
----------------------------------------------------------------------------------------------------------
Earnings for Common Stock 361,267 458,062 379,288
----------------------------------------------------------------------------------------------------------
Other Comprehensive Income (Loss), Net of Tax:
SFAS No. 133 transition adjustment (net of tax of $474) (738) -- --
Unrealized loss on cash flow hedges (net of tax of $7,565) (11,784) -- --
Reclassification adjustment for amounts included in net
income (net of tax of $3,515) 5,476 -- --
----------------------------------------------------------------------------------------------------------
Total Other Comprehensive Loss, Net of Tax (7,046) -- --
----------------------------------------------------------------------------------------------------------
Comprehensive Income for Common Stock $ 354,221 $ 458,062 $ 379,288
----------------------------------------------------------------------------------------------------------
|
See Notes to Carolina Power & Light Company consolidated financial statements.
(In thousands) December 31
Assets 2001 2000
------------------------------------------------------------------------------------------
Utility Plant
Electric utility plant in service $12,024,291 $11,125,901
Accumulated depreciation (5,952,206) (5,505,731)
------------------------------------------------------------------------------------------
Utility plant in service, net 6,072,085 5,620,170
Held for future use 7,105 7,105
Construction work in progress 711,129 815,246
Nuclear fuel, net of amortization 200,332 184,813
------------------------------------------------------------------------------------------
Total Utility Plant, Net 6,990,651 6,627,334
------------------------------------------------------------------------------------------
Current Assets
Cash and cash equivalents 21,250 30,070
Accounts receivable 454,228 466,774
Receivables from affiliated companies 31,707 341,932
Taxes receivable 17,543 15,412
Inventory 365,501 233,369
Deferred fuel cost 131,505 119,853
Prepayments 11,863 24,284
Other current assets 66,193 75,451
------------------------------------------------------------------------------------------
Total Current Assets 1,099,790 1,307,145
------------------------------------------------------------------------------------------
Deferred Debits and Other Assets
Regulatory assets 277,550 291,411
Nuclear decommissioning trust funds 416,721 411,279
Diversified business property, net 111,802 102,294
Miscellaneous other property and investments 231,325 395,995
Other assets and deferred debits 135,373 104,028
------------------------------------------------------------------------------------------
Total Deferred Debits and Other Assets 1,172,771 1,305,007
------------------------------------------------------------------------------------------
Total Assets 9,263,212 $ 9,239,486
------------------------------------------------------------------------------------------
Capitalization and Liabilities
------------------------------------------------------------------------------------------
Capitalization (see consolidated schedules of capitalization)
------------------------------------------------------------------------------------------
Common stock equity $ 3,095,456 $ 2,852,038
Preferred stock - not subject to mandatory redemption 59,334 59,334
Long-term debt, net 2,958,853 3,619,984
------------------------------------------------------------------------------------------
Total Capitalization 6,113,643 6,531,356
------------------------------------------------------------------------------------------
Current Liabilities
Current portion of long-term debt 600,000 --
Accounts payable 300,829 281,026
Payables to affiliated companies 157,423 255,074
Interest accrued 61,124 56,259
Other current liabilities 209,776 147,673
------------------------------------------------------------------------------------------
Total Current Liabilities 1,329,152 740,032
------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities
Accumulated deferred income taxes 1,316,823 1,491,660
Accumulated deferred investment tax credits 170,302 197,207
Regulatory liabilities 7,494 --
Other liabilities and deferred credits 325,798 279,231
------------------------------------------------------------------------------------------
Total Deferred Credits and Other Liabilities 1,820,417 1,968,098
------------------------------------------------------------------------------------------
Commitments and Contingencies (Note 15)
------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $ 9,263,212 $ 9,239,486
------------------------------------------------------------------------------------------
|
See Notes to Carolina Power & Light Company consolidated financial statements.
Years ended December 31
(In thousands) 2001 2000 1999
-----------------------------------------------------------------------------------------------------------------------------
Operating Activities
Net income $ 364,231 $ 461,028 $ 382,255
Adjustments to reconcile net income to net cash provided by operating activities:
Impairment of investment 156,712 -- --
Depreciation and amortization 609,718 800,056 592,001
Deferred income taxes (149,895) (83,554) (32,495)
Investment tax credit (14,928) (4,511) (10,299)
Gain on sale of assets -- (200,000) --
Deferred fuel credit (11,652) (40,763) (39,052)
Net (increase) decrease in accounts receivable 397,727 (299,717) (33,322)
Net increase in inventories (132,630) (3,699) (17,576)
Net (increase) decrease in prepaid and other current assets 21,679 87,575 (117,250)
Net increase (decrease) in accounts payable (183,739) 287,858 24,555
Net increase in other current liabilities 53,845 11,654 7,436
Other 46,402 29,180 75,867
-----------------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 1,157,470 1,045,107 832,120
-----------------------------------------------------------------------------------------------------------------------------
Investing Activities
Gross property additions (823,952) (821,991) (689,054)
Nuclear fuel additions (72,576) (59,752) (75,641)
Proceeds from sale of assets -- 200,000 --
Contributions to nuclear decommissioning trust (30,678) (30,727) (30,825)
Net cash flow of company-owned life insurance program (5,066) (4,291) (6,542)
Diversified business property additions (13,500) (56,489) (157,802)
Investments in non-utility activities (12,675) (107,225) (41,723)
-----------------------------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (958,447) (880,475) (1,001,587)
-----------------------------------------------------------------------------------------------------------------------------
Financing Activities
Proceeds from issuance of long-term debt 296,124 783,052 400,970
Net increase (decrease) in commercial paper reclassified to long-term debt (225,762) 123,697 268,500
Net increase in short-term indebtedness -- -- 70,600
Net increase (decrease) in cash provided by checks drawn in excess of bank balances -- 21,069 (117,643)
Retirement of long-term debt (134,611) (695,163) (113,335)
Equity contribution from parent 115,000 -- --
Dividends paid to parent (255,630) -- --
Dividends paid on preferred stock (2,964) (2,966) (2,967)
Dividends paid on common stock -- (432,325) (293,704)
Other -- (42) 6,169
-----------------------------------------------------------------------------------------------------------------------------
Net Cash Provided by (Used in) Financing Activities (207,843) (202,678) 218,590
-----------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents (8,820) (38,046) 49,123
-----------------------------------------------------------------------------------------------------------------------------
Increase in Cash from Acquisition (See Noncash Activities) -- -- 1,876
Decrease in Cash from Stock Distribution (See Note 1A) -- (11,755) --
Cash and Cash Equivalents at Beginning of the Year 30,070 79,871 28,872
-----------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 21,250 $ 30,070 $ 79,871
-----------------------------------------------------------------------------------------------------------------------------
Supplemental Disclosures of Cash Flow Information
Cash paid during the year - interest $ 230,828 $ 205,250 $ 174,101
income taxes $ 395,433 $ 434,908 $ 284,535
|
Noncash Activities
. On July 15, 1999, CP&L purchased all outstanding shares of North
Carolina Natural Gas Corporation (NCNG). In conjunction with the
purchase of NCNG, CP&L issued approximately $360 million in common
stock.
. On June 28, 2000, Caronet, a wholly owned subsidiary of CP&L,
contributed net assets in the amount of $93.0 million in exchange for
a 35% ownership interest (15% voting interest) in a newly formed
company.
. On July 1, 2000, CP&L distributed its ownership interest in the stock
of North Carolina Natural Gas Corporation, Strategic Resource
Solutions Corp., Monroe Power Company and Progress Ventures, Inc. to
Progress Energy, Inc. This resulted in a noncash dividend to its
parent of approximately $555.9 million.
. In January 2001, CP&L transferred certain assets, through a noncash
dividend to parent in the amount of $19.1 million, to Progress Energy
Service Company, LLC
See Notes to Carolina Power & Light Company consolidated financial statements.
December 31
(Dollars in thousands) 2001 2000
-------------------------------------------------------------------------------------------------------
Common Stock Equity
Common stock without par value, authorized 200,000,000
shares, 159,608,055 shares issued and
outstanding at December 31 $1,904,246 $1,765,813
Unearned restricted stock awards -- (12,708)
Unearned ESOP common stock (114,385) (127,211)
Accumulated other comprehensive loss (7,046) --
Retained earnings 1,312,641 1,226,144
-------------------------------------------------------------------------------------------------------
Total Common Stock Equity $3,095,456 $2,852,038
-------------------------------------------------------------------------------------------------------
Preferred Stock - not subject to mandatory redemption
-------------------------------------------------------------------------------------------------------
Authorized - 300,000 shares, cumulative, $100 par value
Preferred Stock; 20,000,000 shares, cumulative, $100 par
value Serial Preferred Stock
$5.00 Preferred - 236,997 shares (redemption price $110.00) $ 24,349 $ 24,349
$4.20 Serial Preferred - 100,000 shares outstanding (redemption
price $102.00) 10,000 10,000
$5.44 Serial Preferred -249,850 shares (redemption price $101.00) 24,985 24,985
-------------------------------------------------------------------------------------------------------
Total Preferred Stock $ 59,334 $ 59,334
-------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------
Long-Term Debt (maturities and weighted average interest rates as of
December 31, 2001)
First mortgage bonds, maturing 2003-2023 7.02% $1,800,000 $1,800,000
Pollution control obligations, maturing 2009-2024 2.22% 707,800 713,770
Unsecured subordinated debentures, maturing 2025 -- 125,000
Extendible notes, maturing 2002 2.83% 500,000 500,000
Medium-term notes, maturing 2008 6.65% 300,000 --
Commercial paper reclassified to long-term debt 3.10% 260,535 486,297
Miscellaneous notes 6.43% 7,234 7,324
Unamortized premium and discount, net (16,716) (12,407)
Current portion of long-term debt (600,000) --
-------------------------------------------------------------------------------------------------------
Total Long-Term Debt 2,958,853 3,619,984
-------------------------------------------------------------------------------------------------------
Total Capitalization $6,113,643 $6,531,356
-------------------------------------------------------------------------------------------------------
|
Years ended December 31
(In thousands) 2001 2000 1999
------------------------------------------------------------------------------------
Retained Earnings at Beginning of Year $1,226,144 $ 1,807,345 $ 1,728,301
Net income 364,231 461,028 382,255
Preferred stock dividends at stated rates (2,964) (2,966) (2,967)
Common stock dividends (274,770) (1,039,263) (300,244)
------------------------------------------------------------------------------------
Retained Earnings at End of Year $1,312,641 $ 1,226,144 $ 1,807,345
------------------------------------------------------------------------------------
|
(In thousands) First Quarter (a) Second Quarter (a) Third Quarter (a) Fourth Quarter (a) -------------------------------------------------------------------------------------------------------------- Year ended December 31, 2001 Operating revenues $826,603 783,379 976,891 773,288 Operating income 231,641 184,390 322,477 237,522 Net income (loss) 120,845 84,879 167,874 (9,367) (d) -------------------------------------------------------------------------------------------------------------- Year ended December 31, 2000 Operating revenues $877,140 $892,304 $943,112 $831,351 Operating income 185,110 214,184 330,675 24,365 (c) Net income (loss) 86,003 108,202 291,914 (b) (25,091) (c) |
(a) In the opinion of management, all adjustments necessary to fairly
present amounts shown for interim periods have been made. Results of
operations for an interim period may not give a true indication of
results for the year.
(b) Includes gain on sale of BellSouth Carolinas PCS Partnership interest.
(c) Includes approved further accelerated depreciation of $125 million on
nuclear generating assets.
(d) Includes impairment and other one-time charges relating to Interpath
of $107.2 million, after tax.
See Notes to Carolina Power & Light Company consolidated financial statements.
CAROLINA POWER & LIGHT COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies
A. Organization
Carolina Power & Light Company (CP&L) is a public service corporation primarily engaged in the generation, transmission, distribution and sale of electricity in portions of North Carolina and South Carolina. CP&L is a wholly owned subsidiary of Progress Energy, Inc. (the Company or Progress Energy), which was formed as a result of the reorganization of CP&L into a holding company structure on June 19, 2000. All shares of common stock of CP&L were exchanged for an equal number of shares of the Company. On December 4, 2000, the Company changed its name from CP&L Energy, Inc. to Progress Energy, Inc. The Company is a registered holding company under the Public Utility Holding Company Act (PUHCA) of 1935. Both the Company and its subsidiaries are subject to the regulatory provisions of the PUHCA.
On July 1, 2000, CP&L distributed its ownership interest in the stock of North Carolina Natural Gas (NCNG), Strategic Resource Solutions Corp. (SRS), Monroe Power Company (Monroe Power) and Progress Ventures, Inc. to the Company. As a result, those companies are direct subsidiaries of Progress Energy, Inc. and are not included in CP&L's results of operations and financial position since that date.
CP&L's results of operations include the results of NCNG for the periods subsequent to July 15, 1999 (See Note 2A) and prior to July 1, 2000.
B. Basis of Presentation
The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America and include the activities of CP&L and its majority-owned subsidiaries. Significant intercompany balances and transactions have been eliminated in consolidation except as permitted by Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting for the Effects of Certain Types of Regulation," which provides that profits on intercompany sales to regulated affiliates are not eliminated if the sales price is reasonable and the future recovery of the sales price through the rate making process is probable. The accounting records are maintained in accordance with uniform systems of accounts prescribed by the Federal Energy Regulatory Commission (FERC), the North Carolina Utilities Commission (NCUC) and the Public Service Commission of South Carolina (SCPSC). Certain amounts for 2000 and 1999 have been reclassified to conform to the 2001 presentation.
Unconsolidated investments in companies over which CP&L does not have control, but has the ability to exercise influence over operating and financial policies (generally, 20% - 50% ownership) are accounted for under the equity method of accounting. Effective June 28, 2000, a subsidiary of CP&L contributed the net assets used in its application service provider business to a newly formed company (Interpath) for a 35% ownership interest (15% voting interest) which is accounted for on a cost basis because CP&L does not exercise significant influence over those operations. Other investments are stated principally at cost. These investments, which total approximately $121 million at December 31, 2001, are included as miscellaneous other property and investments in the Consolidated Balance Sheets.
C. Use of Estimates and Assumptions
In preparing consolidated financial statements that conform with accounting principles generally accepted in the United States of America, management must make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements and amounts of revenues and expenses reflected during the reporting period. Actual results could differ from those estimates.
D. Utility Plant
The cost of additions, including betterments and replacements of units of property, is charged to utility plant. Maintenance and repairs of property, and replacements and renewals of items determined to be less than units of property, are charged to maintenance expense. The cost of units of property replaced, renewed or retired, plus removal or disposal costs, less salvage, is charged to accumulated depreciation. Generally, electric utility plant, other than nuclear fuel is pledged as collateral for the first mortgage bonds of CP&L.
The balances of utility plant in service at December 31 are listed below (in thousands), with a range of depreciable lives for each:
2001 2000
----------- -----------
Electric
Production plant (7-33 years) $ 7,301,225 $ 6,659,111
Transmission plant (30-75 years) 1,092,024 1,060,080
Distribution plant (12-50 years) 3,063,753 2,869,104
General plant and other (8-75 years) 567,289 537,606
----------- -----------
Utility plant in service $12,024,291 $11,125,901
=========== ===========
|
As prescribed in the regulatory uniform systems of accounts, an allowance for the cost of borrowed and equity funds used to finance utility plant construction (AFUDC) is charged to the cost of the plant. Regulatory authorities consider AFUDC an appropriate charge for inclusion in the rates charged to customers by the utilities over the service life of the property. The equity funds portion of AFUDC is credited to other income and the borrowed funds portion is credited to interest charges. The total equity funds portion of AFUDC was $8.8 million, $14.5 million and $3.9 million in 2001, 2000 and 1999, respectively. The composite AFUDC rate for CP&L's electric utility plant was 6.2%, 8.2% and 6.4% in 2001, 2000 and 1999, respectively. The composite AFUDC rate for NCNG's gas utility plant was 10.09% in 2000 and 1999, respectively.
E. Diversified Business Property
The following is a summary of diversified business property (in thousands):
2001 2000
-------- --------
Telecommunications equipment $ 94,164 $ 76,694
Other equipment 11,657 8,368
Construction work in progress 21,622 25,603
Accumulated depreciation (15,641) (8,371)
-------- --------
Diversified business property, net $111,802 $102,294
======== ========
|
Diversified business property is stated at cost. Depreciation is computed
on a straight-line basis using the following estimated useful lives:
telecommunications equipment - 5 to 20 years and computers, office
equipment and software - 3 to 10 years.
F. Depreciation and Amortization
For financial reporting purposes, substantially all depreciation of utility plant other than nuclear fuel is computed on the straight-line method based on the estimated remaining useful life of the property, adjusted for estimated net salvage. Depreciation provisions, including decommissioning costs (See Note 1G) and excluding accelerated cost recovery of nuclear generating assets, as a percent of average depreciable property other than nuclear fuel, were approximately 3.8% in 2001 and 2000 and 3.9% in 1999. Depreciation provisions totaled $504.9 million, $688.8 million and $409.6 million in 2001, 2000 and 1999, respectively.
Depreciation and amortization expense also includes amortization of deferred operation and maintenance expenses associated with Hurricane Fran, which struck significant portions of CP&L's service territory in September 1996. In 1996, the NCUC authorized CP&L to defer these expenses (approximately $40 million) with amortization over a 40-month period, which expired in December 1999.
With approval from the NCUC and the SCPSC, CP&L accelerated the cost recovery of its nuclear generating assets beginning January 1, 2000 and continuing through 2004. Also in 2000, CP&L received approval from the commissions to further accelerate the cost recovery of its nuclear generation facilities in 2000. The accelerated cost recovery of these assets resulted in additional depreciation expense of approximately $75 million and $275 million in 2001 and 2000, respectively (See Note 8B). Pursuant to authorizations from the NCUC and the SCPSC, CP&L accelerated the amortization of certain regulatory assets over a three-year period beginning January 1997 and expiring December 1999. The accelerated amortization of these regulatory assets resulted in additional depreciation and amortization expenses of approximately $68 million in 1999.
Amortization of nuclear fuel costs, including disposal costs associated with obligations to the U.S. Department of Energy (DOE), is computed primarily on the unit-of-production method and charged to fuel expense. Costs related
to obligations to the DOE for the decommissioning and decontamination of enrichment facilities are also charged to fuel expense. The total of these costs for the years ended December 31, 2001, 2000 and 1999 were $101.0 million, $112.1 million and $110.8 million, respectively.
G. Decommissioning Provisions
In CP&L's retail jurisdictions, provisions for nuclear decommissioning costs are approved by the NCUC and the SCPSC, and are based on site-specific estimates that include the costs for removal of all radioactive and other structures at the site. In the wholesale jurisdictions, the provisions for nuclear decommissioning costs are approved by FERC. Decommissioning cost provisions, which are included in depreciation and amortization expense, were $30.7 million in 2001 and 2000 and $33.3 million in 1999.
Accumulated decommissioning costs, which are included in accumulated depreciation, were $604.8 million and $599.3 million at December 31, 2001 and 2000, respectively. These costs include amounts retained internally and amounts funded in externally managed decommissioning trusts. Trust earnings increase the trust balance with a corresponding increase in the accumulated decommissioning balance. These balances are adjusted for net unrealized gains and losses related to changes in the fair value of trust assets.
CP&L's most recent site-specific estimates of decommissioning costs were developed in 1998, using 1998 cost factors, and are based on prompt dismantlement decommissioning, which reflects the cost of removal of all radioactive and other structures currently at the site, with such removal occurring shortly after operating license expiration. These estimates, in 1998 dollars, are $281.5 million for Robinson Unit No. 2, $299.6 million for Brunswick Unit No. 1, $298.7 million for Brunswick Unit No. 2 and $328.1 million for the Harris Plant. The estimates are subject to change based on a variety of factors including, but not limited to, cost escalation, changes in technology applicable to nuclear decommissioning and changes in federal, state or local regulations. The cost estimates exclude the portion attributable to North Carolina Eastern Municipal Power Agency (Power Agency), which holds an undivided ownership interest in the Brunswick and Harris nuclear generating facilities. Operating licenses for CP&L's nuclear units expire in the year 2010 for Robinson Unit No. 2, 2016 for Brunswick Unit No. 1, 2014 for Brunswick Unit No. 2 and 2026 for the Harris Plant.
Management believes that the decommissioning costs being recovered through rates by CP&L, when coupled with reasonable assumed after-tax fund earnings rates, are currently sufficient to provide for the costs of decommissioning.
The Financial Accounting Standards Board has issued SFAS No. 143, "Accounting for Asset Retirement Obligations" that will impact the accounting for decommissioning and dismantlement provisions (See Note 1J).
H. Other Policies
CP&L recognizes electric utility revenues as service is rendered to customers. Operating revenues include unbilled electric utility revenues earned when service has been delivered but not billed by the end of the accounting period.
Fuel expense includes fuel costs or recoveries that are deferred through fuel clauses established by CP&L's regulators. These clauses allow CP&L to recover fuel costs and portions of purchased power costs through surcharges on customer rates.
CP&L maintains an allowance for doubtful accounts receivable, which totaled approximately $12.2 million and $17.0 million at December 31, 2001 and 2000, respectively. Inventory, which includes fuel and materials and supplies is carried at average cost. Long-term debt premiums, discounts and issuance expenses for the utilities are amortized over the life of the related debt using the straight-line method. Any expenses or call premiums associated with the reacquisition of debt obligations by the utilities are amortized over the remaining life of the original debt using the straight-line method. CP&L considers all highly liquid investments with original maturities of three months or less to be cash equivalents.
I. Impairment of Long-lived Assets and Investments
SFAS No. 121 " Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to Be Disposed Of" requires review of long-lived assets and certain intangibles for impairment when events or circumstances indicate that the carrying value of an asset may not be recoverable. Any impairment losses are reported in the period in which the recognition criteria are first applied based on the fair value of the asset.
Write-downs of investments are charged against earnings when a decline in fair value is determined to be other-than-temporary. CP&L continually reviews its investments to determine whether a decline in fair value below the
cost basis is other-than-temporary. During 2001, CP&L obtained a valuation study to assess its investment in Interpath based on current valuations in the technology sector. As a result, CP&L has recorded an investment impairment of $156.7 million on a pre-tax basis for other-than-temporary declines in the fair value of its investment in Interpath.
J. Impact of New Accounting Standards
Effective January 1, 2001, CP&L adopted Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 138. SFAS No. 133, as amended, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. SFAS No. 133 requires that an entity recognize all derivatives as assets or liabilities in the balance sheet and measure those instruments at fair value.
As a result of the adoption of SFAS No. 133, CP&L recorded a transition adjustment as a cumulative effect of a change in accounting principle of $0.7 million, net of tax, which increased accumulated other comprehensive loss as of January 1, 2001. This amount relates to several derivatives used to hedge cash flows related to interest on long-term debt. The net derivative losses will be reclassified into earnings consistent with hedge designations, primarily over the life of the related debt instruments, which principally range from three to ten years. CP&L estimates that approximately $10.7 million of the net losses at December 31, 2001 will be reclassified into earnings during 2002. There was no transition adjustment affecting the Consolidated Statement of Income as a result of the adoption of SFAS No. 133.
During the second quarter of 2001, the FASB issued interpretations of SFAS No. 133 indicating that options in general cannot qualify for the normal purchases and sales exception, but provided an exception that allows certain electricity contracts, including certain capacity-energy contracts, to be excluded from the mark-to-market requirements of SFAS No. 133. The interpretations were effective July 1, 2001. Those interpretations did not require CP&L to mark-to-market any of its electricity capacity-energy contracts currently outstanding. In December 2001, the FASB revised the criteria related to the exception for certain electricity contracts, with the revision to be effective April 1, 2002. CP&L does not expect the revised interpretation to change its assessment of mark-to-market requirements for its current contracts. If an electricity or fuel supply contract in its regulated businesses is subject to mark-to-market accounting, there would be no income statement effect of the mark-to-market because the contract's mark-to-market gain or loss will be recorded as a regulatory asset or liability. Any mark-to-market gains or losses in its non-regulated businesses will affect income unless those contracts qualify for hedge accounting treatment.
The application of the new rules is still evolving, and further guidance from the FASB is expected, which could additionally impact CP&L's financial statements.
The FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations" in July 2001. This statement provides accounting requirements for retirement obligations associated with tangible long-lived assets and is effective January 1, 2003. This statement requires that the present value of retirement costs for which CP&L has a legal obligation be recorded as liabilities with an equivalent amount added to the asset cost and depreciated over an appropriate period. CP&L is currently assessing the effects this statement may ultimately have on accounting for decommissioning, dismantlement and other retirement costs.
Effective January 1, 2002, CP&L adopted SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 provides guidance for the accounting and reporting of impairment or disposal of long-lived assets. The statement supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." It also supersedes the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions" related to the disposal of a segment of a business. Adoption of this statement did not have a material effect on CP&L's financial statements.
2. Acquisitions and Dispositions
A. North Carolina Natural Gas Corporation
On July 15, 1999, CP&L completed the acquisition of NCNG for an aggregate purchase price of approximately $364 million, resulting in the issuance of approximately 8.3 million shares. The acquisition was accounted for as a purchase and, accordingly, the operating results of NCNG were included in CP&L's consolidated financial statements beginning with the date of acquisition. The excess of the aggregate purchase price over the fair value of
net assets acquired, approximately $240 million, was recorded as goodwill of the acquired business and is amortized primarily over a period of 40 years. Effective July 1, 2000, CP&L distributed its ownership in NCNG stock to its parent. As of that date, the results of NCNG are no longer included in CP&L's Consolidated Statements of Income and NCNG's assets and liabilities are no longer included in CP&L's Consolidated Balance Sheets.
B. BellSouth Carolinas PCS Partnership Interest
In September 2000, Caronet, Inc., a wholly owned subsidiary of CP&L, sold its 10% limited partnership interest in BellSouth Carolinas PCS for $200 million. The sale resulted in an after-tax gain of $121.1 million.
3. Financial Information by Business Segment
As described in Note 1A, on July 1, 2000, CP&L distributed its ownership interest in the stock of NCNG, SRS, Monroe Power and Progress Ventures, Inc. to Progress Energy. As a result, those companies are direct subsidiaries of Progress Energy and are not included in CP&L's results of operations and financial position since that date.
Through June 30, 2000, the business segments, operations and assets of Progress Energy and CP&L were substantially the same. Subsequent to July 1, 2000, CP&L's operations consist primarily of the CP&L Electric segment, the investment impairment described in Note 1I and the gain on sale of assets described in Note 2B. Subsequent to July 1, 2000, CP&L has no other material segments.
The financial information for the CP&L Electric segment for the years ended December 31, 2001, 2000 and 1999 is as follows:
Year Ended Year Ended Year Ended
(In thousands) December 31, 2001 December 31, 2000 December 31, 1999
-----------------------------------------------------------------------------------------------------
Revenues $3,343,720 $3,308,215 $3,146,158
Depreciation and Amortization 521,910 698,633 493,938
Net Interest Charges 241,427 221,856 183,099
Income Taxes 264,078 227,705 275,769
Net Income 468,328 373,764 430,295
Total Segment Assets 8,918,691 8,839,720 8,501,273
Capital and Investment Expenditures 823,952 805,489 671,401
=====================================================================================================
|
The primary differences between the CP&L Electric segment and CP&L consolidated financial information relate to other non-electric operations and elimination entries.
4. Related Party Transactions
CP&L participates in an internal money pool, operated by the Company, to more effectively utilize cash resources and to reduce outside short-term borrowings. Short-term borrowing needs are met first by available funds of the money pool participants. Borrowing companies pay interest at a rate designed to approximate the cost of outside short-term borrowings. Subsidiaries which invest in the money pool earn interest on a basis proportionate to their average monthly investment. The interest rate used to calculate earnings approximates external interest rates. Funds may be withdrawn from or repaid to the pool at any time without prior notice. At December 31, 2001, CP&L had $1.8 million of amounts receivable from the money pool that are included in receivables from affiliated companies on the Consolidated Balance Sheets and $49.7 million of amounts payable to the money pool that are included in payables to affiliated companies on the Consolidated Balance Sheets. At December 31, 2000, CP&L had $30.5 million of amounts receivable from the money pool that are included in receivables from affiliated companies on the Consolidated Balance Sheets. CP&L recorded $1.6 million of interest income and $1.7 million of interest expense related to the money pool for 2001. Amounts recorded for interest income and interest expense related to the money pool for 2000 were not significant.
During 2000, the Company formed Progress Energy Service Company, LLC (PESC) to provide specialized services, at cost, to the Company and its subsidiaries, as approved by the Securities and Exchange Commission. CP&L has an agreement with PESC under which services, including purchasing, accounting, treasury, tax, marketing, legal and human resources, are rendered to CP&L at cost. Amounts billed to CP&L by PESC for these services during 2001 and 2000 amounted to $173.9 million and $52.4 million, respectively. At December 31, 2001 and 2000, CP&L had net payables of $46.0 million and $250.7 million, respectively, to PESC that are included in payables to affiliated
companies on the Consolidated Balance Sheets. Subsidiaries of CP&L had amounts receivable from PESC of $13.7 million at December 31, 2001.
During the years ended December 31, 2001, 2000 and the period from July 15, 1999 to December 31, 1999, gas sales from NCNG to CP&L amounted to $14.7 million, $5.9 million and $1.0 million, respectively.
For the year ended December 31, 2001 and the period from July 1, 2000 to December 31, 2000, the Consolidated Statements of Income contain interest income received from NCNG in the amount of $4.8 million and $4.1 million, respectively. Prior to July 1, 2000, the interest income received from NCNG was eliminated in consolidation. At December 31, 2001 and 2000, CP&L had $6.2 million and $135.9 million, respectively, of notes receivable from NCNG that are included in receivables from affiliated companies on the Consolidated Balance Sheets.
At December 31, 2001, CP&L had a payable to Progress Energy in the amount of $40.2 million related to a short-term cash advance. This amount was repaid during February 2002.
See Note 11C related to restricted stock purchases for affiliated companies.
The remaining amounts of receivables and payables with affiliated companies at December 31, 2001 and 2000 represent intercompany amounts generated through CP&L's normal course of operations.
5. Debt and Credit Facilities
At December 31, 2001, CP&L had committed lines of credit totaling $575 million, all of which are used to support its commercial paper borrowings. CP&L is required to pay minimal annual commitment fees to maintain its credit facilities. The following table summarizes CP&L's credit facilities used to support the issuance of commercial paper (in millions):
Description Short-term Long-term Total
-----------------------------------------------------------
364-Day $-- $200 $200
5-Year (2 years remaining) -- 375 375
-----------------------------
$-- $575 $575
=============================
|
There were no loans outstanding under these facilities at December 31, 2001. CP&L's 364-day revolving credit agreement is considered a long-term commitment due to an option to convert to a one-year term loan at the expiration date.
Based on the available balances on the long-term facilities, commercial paper of approximately $261 million and $486 million has been reclassified to long-term debt at December 31, 2001 and 2000 respectively. The weighted average interest rate of such short-term obligations was 3.1% at December 31, 2001, and 7.40% at December 31, 2000.
The combined aggregate maturities of long-term debt for 2002 through 2005 are approximately $600 million, $268 million, $300 million, and $300 million, respectively. There are no maturities of long-term debt during 2006.
6. Leases
CP&L leases office buildings, computer equipment, vehicles, and other property and equipment with various terms and expiration dates. Rent expense (under operating leases) totaled $21.7 million, $13.8 million and $15.7 million for 2001, 2000 and 1999, respectively.
Assets recorded under capital leases consist of (in thousands):
2001 2000
------- -------
Buildings $27,626 $27,626
Less: Accumulated amortization (8,752) (8,018)
------- -------
$18,874 $19,608
======= =======
|
Minimum annual rental payments, excluding executory costs such as property taxes, insurance and maintenance, under long-term noncancelable leases as of December 31, 2001 are (in thousands):
Capital Operating
-------- ---------
Leases Leases
-------- --------
2002 $ 2,159 $18,832
2003 2,159 14,046
2004 2,159 10,059
2005 2,159 8,107
2006 2,159 6,074
Thereafter 22,431 29,041
-------- -------
$ 33,226 $86,159
=======
Less amount representing imputed interest (14,352)
--------
Present value of net minimum lease payments
under capital leases $ 18,874
========
7. Fair Value of Financial Instruments
|
The carrying amounts of cash and cash equivalents and short-term obligations approximate fair value due to the short maturities of these instruments. At December 31, 2001 and 2000, there were miscellaneous investments consisting primarily of investments in company-owned life insurance and other benefit plan assets with carrying amounts of approximately $50.0 million and $93.3 million, respectively, included in miscellaneous other property and investments. The carrying amount of these investments approximates fair value due to the short maturity of certain instruments and certain instruments are presented at fair value. The carrying amount of CP&L's long-term debt, including current maturities, was $3.6 billion at December 31, 2001 and 2000. The estimated fair value of this debt, as obtained from quoted market prices for the same or similar issues, was $3.7 billion and $3.6 billion at December 31, 2001 and 2000, respectively.
External funds have been established as a mechanism to fund certain costs of nuclear decommissioning (See Note 1G). These nuclear decommissioning trust funds are invested in stocks, bonds and cash equivalents. Nuclear decommissioning trust funds are presented at amounts that approximate fair value. Fair value is obtained from quoted market prices for the same or similar investments.
8. Regulatory Matters
A. Regulatory Assets and Liabilities
As a regulated entity, CP&L is subject to the provisions of SFAS No. 71, "Accounting for the Effects of Certain Types of Regulation." Accordingly, CP&L records certain assets and liabilities resulting from the effects of the ratemaking process, which would not be recorded under generally accepted accounting principles for non-regulated entities. CP&L's ability to continue to meet the criteria for application of SFAS No. 71 may be affected in the future by competitive forces and restructuring in the electric utility industry. In the event that SFAS No. 71 no longer applied to a separable portion of CP&L's operations, related regulatory assets and liabilities would be eliminated unless an appropriate regulatory recovery mechanism is provided. Additionally, these factors could result in an impairment of utility plant assets as determined pursuant to SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets."
At December 31, 2001 and 2000, the balances of the CP&L's regulatory assets (liabilities) were as follows (in thousands):
2001 2000
--------- --------
Deferred fuel (included in current assets) $ 131,505 $119,853
----------------------
Income taxes recoverable through future rates 208,702 210,571
Harris Plant deferred costs 32,476 44,813
Loss on reacquired debt 5,801 --
Deferred DOE enrichment facilities-related costs 30,571 36,027
----------------------
Total long-term regulatory assets 277,550 291,411
----------------------
Emission allowance gains (7,494) --
----------------------
Total long-term regulatory liabilities (7,494) --
----------------------
Net regulatory assets $ 401,561 $411,264
======================
|
Except for portions of deferred fuel, all regulatory assets earn a return or the cash has not yet been expended, in which case, the assets are offset by liabilities that do not incur a carrying cost.
B. Retail Rate Matters
The NCUC and the SCPSC approved proposals to accelerate cost recovery of CP&L's nuclear generating assets beginning January 1, 2000, and continuing through 2004. The accelerated cost recovery began immediately after the 1999 expiration of the accelerated amortization of certain regulatory assets (See Note 1F). Pursuant to the orders, the accelerated depreciation expense for nuclear generating assets was set at a minimum of $106 million with a maximum of $150 million per year. In late 2000, CP&L received approval from the NCUC and the SCPSC to further accelerate the cost recovery of its nuclear generation facilities by $125 million in 2000. This additional depreciation will allow CP&L to reduce the minimum accelerated annual depreciation in 2001 through 2004 to $75 million. The resulting total accelerated depreciation was $75 million and $275 million in 2001 and 2000, respectively. Recovering the costs of its nuclear generating assets on an accelerated basis will better position CP&L for the uncertainties associated with potential restructuring of the electric utility industry.
On May 30, 2001, the NCUC issued an order allowing CP&L to offset a portion of its annual accelerated cost recovery of nuclear generating assets by the amount of sulfur dioxide (SO2) emission allowance expense. CP&L did not offset accelerated depreciation expense in 2001 against emission allowance expense. CP&L is allowed to recover emission allowance expense through the fuel clause adjustment in its South Carolina retail jurisdiction.
In conjunction with the acquisition of NCNG, CP&L agreed to cap base retail electric rates in North Carolina and South Carolina through December 2004. The cap on base retail electric rates in South Carolina was extended to December 2005 in conjunction with regulatory approval to form a holding company. Management is of the opinion that this agreement will not have a material effect on CP&L's consolidated results of operations or financial position.
In conjunction with the Company's merger with Florida Progress Corporation, CP&L reached a settlement with the Public Staff of the NCUC in which it agreed to reduce rates to all of its non-real time pricing customers by $3 million in 2002, $4.5 million in 2003, $6 million in 2004 and $6 million in 2005. CP&L also agreed to write off and forego recovery of $10 million of unrecovered fuel costs in each of its 2000 NCUC and SCPSC fuel cost recovery proceedings.
C. Plant-Related Deferred Costs
In 1988 rate orders, CP&L was ordered to remove from rate base and treat as abandoned plant certain costs related to the Harris Plant. Abandoned plant amortization related to the 1988 rate orders was completed in 1998 for the wholesale and the North Carolina retail jurisdictions and in 1999 for the South Carolina retail jurisdiction. Amortization of plant abandonment costs is included in depreciation and amortization expense and totaled $15.0 million in 1999.
9. Risk Management Activities and Derivatives Transactions
CP&L uses a variety of instruments, including swaps, options and forward contracts, to manage exposure to fluctuations in commodity prices and interest rates. Such instruments contain credit risk if the counterparty fails to perform under the contract. CP&L minimizes such risk by performing credit reviews using, among other things, publicly available credit ratings of such counterparties. Potential non-performance by counterparties is not expected to have a material effect on the consolidated financial position or consolidated results of operations of CP&L.
A. Commodity Derivatives - Non-Trading
CP&L enters into certain forward contracts involving cash settlements or physical delivery that reduce the exposure to market fluctuations relative to the price and delivery of electric products. During 2001, 2000 and 1999, CP&L principally sold electricity forward contracts, which can reduce price risk on CP&L's available but unsold generation. While such contracts are deemed to be economic hedges, CP&L no longer designates such contracts as hedges for accounting purposes; therefore, these contracts are carried on the balance sheet at fair value, with changes in fair value recognized in earnings. Gains and losses from such contracts were not material during 2001, 2000 and 1999. Also, CP&L did not have material outstanding positions in such contracts at December 31, 2001 or 2000. Most of the CP&L commodity contracts either are not derivatives pursuant to SFAS No. 133 or qualify as normal purchases or sales pursuant to SFAS No. 133. Therefore, such contracts are not recorded at fair value.
B. Commodity Derivatives - Trading
CP&L from time to time engages in the trading of electricity commodity derivatives and, therefore, experiences net open positions. CP&L manages open positions with strict policies which limit its exposure to market risk and require daily reporting to management of potential financial exposures. When such instruments are entered into for trading purposes, the instruments are carried on the balance sheet at fair value, with changes in fair value recognized in earnings. The net results of such contracts have not been material in any year, and CP&L did not have material outstanding positions in such contracts at December 31, 2001 or 2000.
C. Other Derivative Instruments
CP&L may from time to time enter into derivative instruments to hedge interest rate risk or equity securities risk.
CP&L has interest rate swap agreements to hedge its exposure on variable rate debt positions. The agreements, with a total notional amount of $500 million, were effective in July 2000 and mature in July 2002. Under these agreements, CP&L receives a floating rate based on the three-month London Interbank Offered Rate (LIBOR) and pays a weighted-average fixed rate of approximately 7.17%. The fair value of the swaps was a $18.5 million liability position at December 31, 2001 and is included in other current liabilities in the accompanying Consolidated Balance Sheets. Interest rate swaps are carried on the balance sheet at fair value with unrealized gains or losses adjusted through other comprehensive income. As such, payments or receipts on interest rate swap agreements are recognized as adjustments to interest expense.
The notional amounts of the interest rate swaps are not exchanged and do not represent exposure to credit loss. In the event of default by a counterparty, the risk in these transactions is the cost of replacing the agreements at current market rates.
10. Capitalization
As of December 31, 2001, CP&L was authorized to issue up to 200,000,000 shares. All shares issued and outstanding are held by the Company effective with the share exchange on June 19, 2000 (See Note 1A).
There are various provisions limiting the use of retained earnings for the payment of dividends under certain circumstances. As of December 31, 2001, there were no significant restrictions on the use of retained earnings.
11. Stock-Based Compensation Plans
CP&L accounts for stock-based compensation in accordance with the provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations as permitted under SFAS No. 123, "Accounting for Stock-Based Compensation (SFAS No. 123).
A. Employee Stock Ownership Plan
Progress Energy sponsors the Progress Energy 401(k) Savings and Stock
Ownership Plan (401(k)) for which substantially all full-time
non-bargaining unit employees and certain part-time non-bargaining
employees within participating subsidiaries are eligible. CP&L participates
in the 401(k). The 401(k), which has matching and incentive goal features,
encourages systematic savings by employees and provides a method of
acquiring Progress Energy common stock and other diverse investments. The
401(k), as amended in 1989, is an Employee Stock Ownership Plan (ESOP) that
can enter into acquisition loans to acquire Progress Energy common stock to
satisfy 401(k) common share needs. Qualification as an ESOP did not change
the level of benefits received by employees under the 401(k). Common stock
acquired with the proceeds of an ESOP loan is held by the 401(k) Trustee in
a suspense account. The common stock is released from the suspense account
and made available for allocation to participants as the ESOP loan is
repaid. Such allocations are used to partially meet common stock needs
related to Progress Energy matching and incentive contributions and/or
reinvested dividends.
There were 5,199,388 and 5,782,376 ESOP suspense shares at December 31, 2001 and 2000, respectively, with a fair value of $234.1 million and $284.4 million, respectively. CP&L's matching and incentive goal compensation cost under the 401(k) is determined based on matching percentages and incentive goal attainment as defined in the plan. Such compensation cost is allocated to participants' accounts in the form of Progress Energy common stock, with the number of shares determined by dividing compensation cost by the common stock market value at the time of allocation. The 401(k) common stock share needs are met with open market purchases and with shares released from the ESOP suspense account. CP&L's matching and incentive cost met with shares released from the suspense
account totaled approximately $12.7 million, $14.7 million and $16.3 million for the years ended December 31, 2001, 2000 and 1999, respectively. CP&L has a long-term note receivable from the 401(k) Trustee related to the purchase of common stock from CP&L in 1989 (now Progress Energy common stock). The balance of the note receivable from the 401(k) Trustee is included in the determination of unearned ESOP common stock, which reduces common stock equity. Interest income on the note receivable is not recognized for financial statement purposes.
B. Stock Option Agreements
Pursuant to Progress Energy's 1997 Equity Incentive Plan, Amended and Restated as of September 26, 2001, Progress Energy may grant options to purchase shares of common stock to officers and eligible employees. During 2001, approximately 2.4 million common stock options were granted to officers and eligible employees of Progress Energy. Of this amount, approximately 1.0 million were granted to officers and eligible employees of CP&L. No compensation expense was recognized under the provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees and related Interpretations." Had compensation expense been measured based on the fair value of the options on the date of grant, calculated under the provisions of SFAS No. 123, CP&L's allocated share of such compensation expense would have reduced reported net income in 2001 by approximately $1.2 million. This expense includes approximately $0.4 million of after-tax expense allocated to CP&L for PESC employees.
C. Other Stock-Based Compensation Plans
Progress Energy has compensation plans for officers and key employees that are stock-based in whole or in part. CP&L participates in these plans. The two primary active stock-based compensation programs are the Performance Share Sub-Plan (PSSP) and the Restricted Stock Awards program (RSA), both of which were established pursuant to Progress Energy's 1997 Equity Incentive Plan.
Under the terms of the PSSP, officers and key employees are granted performance shares on an annual basis that vest over a three-year consecutive period. Each performance share has a value that is equal to, and changes with, the value of a share of Progress Energy's common stock, and dividend equivalents are accrued on, and reinvested in, the performance shares. The PSSP has two equally weighted performance measures, both of which are based on Progress Energy's results as compared to a peer group of utilities. Compensation expense is recognized over the vesting period based on the expected ultimate cash payout. Compensation expense is reduced by any forfeitures.
The RSA allows Progress Energy to grant shares of restricted common stock to key employees. As a result of CP&L's reorganization into a holding company structure, restricted common stock is common stock of Progress Energy, Inc. (See Note 1A). The restricted shares vest on a graded vesting schedule over a minimum of three years. The weighted average price of restricted shares at the grant date was $40.70, $34.14 and $37.63 in 2001, 2000 and 1999, respectively. Changes in restricted stock outstanding for key employees of CP&L were:
2001 2000 1999
-------- -------- -------
Beginning balance 254,200 331,900 265,300
Granted 43,600 207,000 66,600
Transfers -- (256,700) --
Forfeited -- (28,000) --
Vested (30,796) -- --
-----------------------------------------
Ending balance 267,004 254,200 331,900
=========================================
|
The transfers line item reflects the distribution of CP&L's ownership interest in NCNG to Progress Energy and the transfer of certain employees to PESC.
At December 31, 2000, the unearned restricted stock balance reflected in the Consolidated Schedules of Capitalization included amounts for restricted stock for CP&L employees, as well as restricted stock purchased by CP&L on behalf of affiliate companies in the amount of $10.4 million. During 2001, Progress Energy reimbursed CP&L for all the outstanding restricted stock and therefore, CP&L no longer has unearned restricted stock recorded as a reduction to equity. Compensation expense, which is based on the fair value of common stock at the grant date, is recognized over the applicable vesting period and is reduced by forfeitures. Subsequent to reimbursement by Progress Energy to CP&L, CP&L is allocated expense based on the restricted shares outstanding for CP&L employees The total amount expensed by CP&L for other stock-based compensation plans was $5.9 million, $9.8 million and $2.2 million in 2001, 2000 and 1999, respectively.
12. Postretirement Benefit Plans
CP&L and some of its subsidiaries have a non-contributory defined benefit retirement (pension) plan for substantially all eligible employees. CP&L also has a supplementary defined benefit pension plan that provides benefits to higher-level employees.
The components of net periodic pension cost are (in thousands):
2001 2000 1999
-------- -------- --------
Expected return on plan assets $(71,955) $(76,508) $(75,124)
Service cost 16,960 18,804 20,467
Interest cost 46,729 49,821 46,846
Amortization of transition obligation 116 121 106
Amortization of prior service benefit (1,230) (1,282) (1,314)
Amortization of actuarial gain (4,352) (5,607) (3,932)
-------- -------- --------
Net periodic pension benefit $(13,732) $(14,651) $(12,951)
======== ======== ========
|
In addition to the net periodic benefit reflected above, in 2000 CP&L recorded a charge of approximately $14.1 million to adjust its supplementary defined benefit pension plan. The effect of the adjustment for this plan is reflected in the actuarial loss line in the pension obligation reconciliation below.
Prior service costs and benefits are amortized on a straight-line basis over the average remaining service period of active participants. Actuarial gains and losses in excess of 10% of the greater of the pension obligation or the market-related value of assets are amortized over the average remaining service period of active participants.
Reconciliations of the changes in the plan's benefit obligations and the plan's funded status are (in thousands):
2001 2000
-------- ---------
Pension obligation
Pension obligation at January 1 $638,067 $ 688,124
Interest cost 46,729 49,821
Service cost 16,960 18,804
Benefit payments (43,636) (50,770)
Actuarial loss 5,621 27,990
Plan amendments 18,248 --
Transfers -- (95,902)
-------- ---------
Pension obligation at December 31 $681,989 $ 638,067
Fair value of plan assets at December 31 716,799 777,435
-------- ---------
Funded status $ 34,810 $ 139,368
Unrecognized transition obligation 338 454
Unrecognized prior service cost (benefit) 4,123 (15,355)
Unrecognized actuarial gain (28,416) (128,504)
-------- ---------
Prepaid (accrued) pension cost at December 31, net $ 10,855 $ (4,037)
======== =========
|
The net prepaid pension cost of $10.9 million at December 31, 2001 is included in the accompanying Consolidated Balance Sheets as prepaid pension cost of $25.7 million, which is included in other assets and deferred debits, and accrued benefit cost of $14.8 million, which is included in other liabilities and deferred credits. The net accrued pension cost of $4.0 million at December 31, 2000, is included in the accompanying Consolidated Balance Sheets as prepaid pension cost of $10.4 million, which is included in other assets and deferred debits, and accrued benefit cost of $14.4 million, which is included in other liabilities and deferred credits. The aggregate benefit obligation for the
plan where the accumulated benefit obligation exceeded the fair value of plan assets was $16.0 million at December 31, 2001, and the plan has no plan assets.
Reconciliations of the fair value of pension plan assets are (in thousands):
2001 2000
-------- ---------
Fair value of plan assets at January 1 $777,435 $ 947,143
Actual return on plan assets (18,160) (1,007)
Benefit payments (43,636) (50,770)
Employer contributions 1,160 1,160
Transfers -- (119,091)
-------- ---------
Fair value of plan assets at December 31 $716,799 $ 777,435
======== =========
|
The weighted-average discount rate used to measure the pension obligation was 7.5% in 2001 and 2000. The assumed rate of increase in future compensation used to measure the pension obligation was 4.0% in 2001 and 2000. The expected long-term rate of return on pension plan assets used in determining the net periodic pension cost was 9.25% in 2001, 2000 and 1999.
In addition to pension benefits, CP&L and some of its subsidiaries provide contributory postretirement benefits (OPEB), including certain health care and life insurance benefits, for retired employees who meet specified criteria.
The components of net periodic OPEB cost are (in thousands):
2001 2000 1999
------- ------- -------
Expected return on plan assets $(3,676) $(3,852) $(3,378)
Service cost 7,374 8,868 7,936
Interest cost 14,191 13,677 13,914
Amortization of prior service cost -- 54 --
Amortization of transition obligation 4,298 5,551 5,760
Amortization of actuarial gain (531) (779) (1)
------- ------- -------
Net periodic OPEB cost $21,656 $23,519 $24,231
======= ======= =======
|
Prior service costs and benefits are amortized on a straight-line basis over the average remaining service period of active participants. Actuarial gains and losses in excess of 10% of the greater of the OPEB obligation or the market-related value of assets are amortized over the average remaining service period of active participants.
Reconciliations of the changes in the plan's benefit obligations and the plan's funded status are (in thousands):
2001 2000
--------- ---------
OPEB obligation
OPEB obligation at January 1 $ 187,563 $ 213,488
Interest cost 14,191 13,677
Service cost 7,374 8,868
Benefit payments (7,137) (6,425)
Actuarial loss (gain) 19,242 (14,739)
Plan amendment (29,145) --
Transfers -- (27,306)
--------- ---------
OPEB obligation at December 31 $ 192,088 $ 187,563
Fair value of plan assets at December 31 38,182 39,048
--------- ---------
Funded status $(153,906) $(148,515)
Unrecognized transition obligation 28,263 61,706
Unrecognized actuarial gain (1,284) (25,600)
--------- ---------
Accrued OPEB cost at December 31 $(126,927) $(112,409)
========= =========
|
Reconciliations of the fair value of OPEB plan assets are (in thousands):
2001 2000
------- -------
Fair value of plan assets at January 1 $39,048 $43,235
Actual return on plan assets (866) (191)
Transfers -- (3,996)
Employer contribution 7,137 6,425
Benefits paid (7,137) (6,425)
------- -------
Fair value of plan assets at December 31 $38,182 $39,048
======= =======
|
The assumptions used to measure the OPEB obligation are:
2001 2000
---- ----
Weighted-average discount rate 7.50% 7.50%
Initial medical cost trend rate for
pre-Medicare benefits 7.50% 7.50%
Initial medical cost trend rate for
post-Medicare benefits 7.50% 7.50%
Ultimate medical cost trend rate 5.00% 5.00%
Year ultimate medical cost trend rate is achieved 2008 2007
|
The expected weighted-average long-term rate of return on plan assets used in determining the net periodic OPEB cost was 9.25% in 2001, 2000 and 1999. The medical cost trend rates were assumed to decrease gradually from the initial rates to the ultimate rates. Assuming a 1% increase in the medical cost trend rates, the aggregate of the service and interest cost components of the net periodic OPEB cost for 2001 would increase by $3.8 million, and the OPEB obligation at December 31, 2001, would increase by $21.3 million. Assuming a 1% decrease in the medical cost trend rates, the aggregate of the service and interest cost components of the net periodic OPEB cost for 2001 would decrease by $3.1 million and the OPEB obligation at December 31, 2001, would decrease by $19.2 million.
During 1999, CP&L completed the acquisition of NCNG. Effective January 1, 2000, NCNG's benefit plans were merged with those of CP&L. On July 1, 2000, CP&L distributed its ownership interest in the stock of NCNG to Progress Energy. In addition, on August 1, 2000, Progress Energy established Progress Energy Service Company, LLC. The effects of the acquisition of NCNG, the transfer of ownership interest in NCNG and the transfer of employees to Progress Energy Service Company, LLC are reflected as appropriate in the pension and OPEB liabilities, assets and net periodic costs presented above.
13. Income Taxes
Deferred income taxes are provided for temporary differences between book and tax bases of assets and liabilities. Investment tax credits related to regulated operations are amortized over the service life of the related property. A regulatory asset or liability has been recognized for the impact of tax expenses or benefits that are recovered or refunded in different periods by the utilities pursuant to rate orders.
Net accumulated deferred income tax liabilities at December 31 are (in thousands):
2001 2000
---------- ----------
Accelerated depreciation and property
cost differences $1,359,083 $1,474,167
Deferred costs, net 42,688 51,549
Miscellaneous other temporary differences, net (20,100) 30,749
Income tax credit carryforward (640) --
Valuation allowance 3,767 --
---------- ----------
Net accumulated deferred income tax liability $1,384,798 $1,556,465
========== ==========
|
Total deferred income tax liabilities were $2.05 billion and $2.12 billion at December 31, 2001 and 2000, respectively. Total deferred income tax assets were $ 661 million and $559 million at December 31, 2001 and 2000,
respectively. The net of deferred income tax liabilities and deferred income tax assets is included on the consolidated balance sheets under the captions other current liabilities and accumulated deferred income taxes. CP&L established a valuation allowance of $3.8 million in 2001 due to the uncertainty of realizing future tax benefits from certain state net operating loss carryforwards.
Reconciliations of CP&L's effective income tax rate to the statutory federal income tax rate are:
2001 2000 1999
---- ---- ----
Effective income tax rate 38.0% 38.6% 40.3%
State income taxes, net of federal benefit (3.2) (4.5) (4.6)
Investment tax credit amortization 2.5 3.7 1.6
Other differences, net (2.3) (2.8) (2.3)
---- ---- ----
Statutory federal income tax rate 35.0% 35.0% 35.0%
==== ==== ====
|
The provisions for income tax expense are comprised of (in thousands):
2001 2000 1999
--------- -------- --------
Income tax expense (credit):
Current - federal $ 348,921 $328,982 $253,140
state 39,135 62,228 48,075
Deferred - federal (140,486) (71,929) (30,011)
state (9,409) (11,625) (2,484)
Investment tax credit (14,928) (17,385) (10,299)
--------- -------- --------
Total income tax expense $ 223,233 $290,271 $258,421
========= ======== ========
|
14. Joint Ownership of Generating Facilities
CP&L holds undivided ownership interests in certain jointly owned generating facilities, excluding related nuclear fuel and inventories. CP&L is entitled to shares of the generating capability and output of each unit equal to their respective ownership interests. CP&L also pays its ownership share of additional construction costs, fuel inventory purchases and operating expenses. CP&L's share of expenses for the jointly owned facilities is included in the appropriate expense category.
CP&L's ownership interest in the jointly owned generating facilities is listed below with related information as of December 31, 2001 (dollars in thousands):
Company
Megawatt Ownership Plant Accumulated Accumulated Under
Facility Capability Interest Investment Depreciation Decommissioning Construction
-------- ---------- --------- ---------- ------------ --------------- ------------
Mayo Plant 745 83.83% $ 460,026 $ 230,630 $ -- $ 7,116
Harris Plant 860 83.83% 3,154,183 1,321,694 93,637 14,416
Brunswick Plant 1,631 81.67% 1,427,842 828,480 339,945 41,455
Roxboro Unit No. 4 700 87.06% 309,032 126,007 -- 7,881
|
In the table above, plant investment and accumulated depreciation are not reduced by the regulatory disallowances related to the Harris Plant.
15. Commitments and Contingencies
A. Fuel and Purchased Power
Pursuant to the terms of the 1981 Power Coordination Agreement, as amended, between CP&L and Power Agency, CP&L is obligated to purchase a percentage of Power Agency's ownership capacity of, and energy from, the Harris Plant. In 1993, CP&L and Power Agency entered into an agreement to restructure portions of their contracts covering power supplies and interests in jointly owned units. Under the terms of the 1993 agreement, CP&L increased the amount of capacity and energy purchased from Power Agency's ownership interest in the Harris Plant, and the buyback period was extended six years through 2007. The estimated minimum annual payments for these purchases, which reflect capacity costs, total approximately $32 million. These contractual purchases, totaled $33.3
million, $33.9 million and $36.5 million for 2001, 2000 and 1999, respectively. In 1987, the NCUC ordered CP&L to reflect the recovery of the capacity portion of these costs on a levelized basis over the original 15-year buyback period, thereby deferring for future recovery the difference between such costs and amounts collected through rates. In 1988, the SCPSC ordered similar treatment, but with a 10-year levelization period. At December 31, 2001 and 2000, CP&L had deferred purchased capacity costs, including carrying costs accrued on the deferred balances, of $32.5 million and $44.8 million, respectively. Increased purchases (which are not being deferred for future recovery) resulting from the 1993 agreement with Power Agency were approximately $29 million, $26 million and $23 million for 2001, 2000 and 1999, respectively.
CP&L has a long-term agreement for the purchase of power and related transmission services from Indiana Michigan Power Company's Rockport Unit No. 2 (Rockport). The agreement provides for the purchase of 250 megawatts of capacity through 2009 with estimated minimum annual payments of approximately $31 million, representing capital-related capacity costs. Total purchases (including transmission use charges) under the Rockport agreement amounted to $62.8 million, $61.0 million and $59.2 million for 2001, 2000 and 1999, respectively.
Effective June 1, 2001, CP&L executed a long-term agreement for the purchase of power from Skygen Energy LLC's Broad River facility (Broad River). The agreement provides for the purchase of approximately 500 megawatts of capacity through 2021 with an original minimum annual payment of approximately $16 million, primarily representing capital-related capacity costs. The minimum annual payments will be indexed for inflation. Total purchases under the Broad River agreement amounted to $35.9 million in 2001. A separate long-term agreement for additional power from Broad River will commence June 1, 2002. This agreement will provide for the purchase of approximately 300 megawatts of capacity through 2022 with an original minimum annual payment of approximately $16 million representing capital-related capacity costs. The minimum annual payments will be indexed for inflation.
CP&L has various pay-for-performance purchased power contracts with certain cogenerators (qualifying facilities) for approximately 300 megawatts of capacity expiring at various times through 2009. These purchased power contracts generally provide for capacity and energy payments. Payments for both capacity and energy are contingent upon the qualifying facilities' ability to generate. Payments made under these contracts were $145.1 million in 2001, $168.4 million in 2000 and $178.7 million in 1999.
CP&L has entered into various long-term contracts for coal, gas and oil requirements of its generating plants. Estimated annual payments for firm commitments of fuel purchases and transportation costs under these contracts are approximately $538 million, $403 million, $345 million, $270 million and $286 million for 2002 through 2006, respectively.
B. Insurance
CP&L is a member of Nuclear Electric Insurance Limited (NEIL), which provides primary and excess insurance coverage against property damage to members' nuclear generating facilities. Under the primary program, CP&L is insured for $500 million at each of its nuclear plants. In addition to primary coverage, NEIL also provides decontamination, premature decommissioning and excess property insurance with limits of $2.0 billion on the Brunswick and Harris Plants and $1.1 billion on the Robinson Plant.
Insurance coverage against incremental costs of replacement power resulting from prolonged accidental outages at nuclear generating units is also provided through membership in NEIL. CP&L is insured thereunder, following a twelve-week deductible period, for 52 weeks in the amount of $3.5 million per week at each of the nuclear units. An additional 110 weeks of coverage is provided at 80% of the above weekly amount. For the current policy period, CP&L is subject to retrospective premium assessments of up to approximately $24.1 million with respect to the primary coverage, $25.7 million with respect to the decontamination, decommissioning and excess property coverage, and $17.4 million for the incremental replacement power costs coverage, in the event covered losses at insured facilities exceed premiums, reserves, reinsurance and other NEIL resources. Pursuant to regulations of the NRC, CP&L's property damage insurance policies provide that all proceeds from such insurance be applied, first, to place the plant in a safe and stable condition after an accident and, second, to decontamination costs, before any proceeds can be used for decommissioning, plant repair or restoration. CP&L is responsible to the extent losses may exceed limits of the coverage described above.
CP&L is insured against public liability for a nuclear incident up to $9.54 billion per occurrence. Under the current provisions of the Price Anderson Act, which limits liability for accidents at nuclear power plants, CP&L, as an owner of nuclear units, can be assessed for a portion of any third-party liability claims arising from an accident at
any commercial nuclear power plant in the United States. In the event that public liability claims from an insured nuclear incident exceed $200 million (currently available through commercial insurers), the company would be subject to pro rata assessments of up to $88.1 million for each reactor owned per occurrence. Payment of such assessments would be made over time as necessary to limit the payment in any one year to no more than $10 million per reactor owned. The Price Anderson Act expires August 1, 2002. There are several renewal proposals before Congress which include possible increased limits and retroactive premiums. The final outcome of this matter cannot be predicted at this time.
There have been recent revisions made to the nuclear property and nuclear liability insurance policies regarding the maximum recoveries available for multiple terrorism occurrences. Under the NEIL policies, if there were multiple terrorism losses occurring within one year after the first loss from terrorism, NEIL would make available one industry aggregate limit of $3.2 billion, along with any amounts it recovers from reinsurance, government indemnity or other sources up to the limits for each claimant. If terrorism losses occurred beyond the one-year period, a new set of limits and resources would apply. For nuclear liability claims arising out of terrorist acts, the primary level available through commercial insurers is now subject to an industry aggregate limit of $200.0 million. The second level of coverage obtained through the assessments discussed above would continue to apply to losses exceeding $200.0 million and would provide coverage in excess of any diminished primary limits due to the terrorist acts aggregate.
CP&L self-insures its transmission and distribution lines against loss due to storm damage and other natural disasters.
C. Claims and Uncertainties
1. CP&L is subject to federal, state and local regulations addressing air and water quality, hazardous and solid waste management and other environmental matters.
Various organic materials associated with the production of manufactured gas, generally referred to as coal tar, are regulated under federal and state laws. The lead or sole regulatory agency that is responsible for a particular former coal tar site depends largely upon the state in which the site is located. There are several manufactured gas plant (MGP) sites to which CP&L has some connection. In this regard, CP&L, with other potentially responsible parties, are participating in investigating and, if necessary, remediating former coal tar sites with several regulatory agencies, including, but not limited to, the U.S. Environmental Protection Agency (EPA) and the North Carolina Department of Environment and Natural Resources, Division of Waste Management (DWM). Although CP&L may incur costs at these sites about which it has been notified, based upon current status of these sites, CP&L does not expect those costs to be material to its consolidated financial position or results of operations.
CP&L is periodically notified by regulators such as the EPA and various state agencies of their involvement or potential involvement in sites, other than MGP sites, that may require investigation and/or remediation. Although CP&L may incur costs at the sites about which they have been notified, based upon the current status of these sites, CP&L does not expect those costs to be material to its consolidated financial position or results of operations.
There has been and may be further proposed federal legislation requiring reductions in air emissions for nitrogen oxides, sulfur dioxide and mercury setting forth national caps and emission levels over an extended period of time. This national multi-pollutant approach would have significant costs which could be material to CP&L's consolidated financial position or results of operations. Some companies may seek recovery of the related cost through rate adjustments or similar mechanisms. CP&L cannot predict the outcome of this matter.
The EPA has been conducting an enforcement initiative related to a number of coal-fired utility power plants in an effort to determine whether modifications at those facilities were subject to New Source Review requirements or New Source Performance Standards under the Clean Air Act. CP&L has been asked to provide information to the EPA as part of this initiative and cooperated in providing the requested information. The EPA has initiated enforcement actions against other unaffiliated utilities as part of this initiative, some of which have resulted in settlement agreements calling for expenditures ranging from $1.0 billion to $1.4 billion. A utility that was not subject to a civil enforcement action settled its New Source Review issues with the EPA for $300 million. These settlement agreements have generally called for expenditures to be made over extended time periods, and some of the utilities may seek recovery of the related cost through rate adjustments. CP&L cannot predict the outcome of this matter.
In 1998, the EPA published a final rule addressing the issue of regional transport of ozone. This rule is commonly known as the NOx SIP Call. The EPA's rule requires 23 jurisdictions, including North Carolina and South Carolina,
to further reduce nitrogen oxide emissions in order to attain a pre-set state NOx emission level by May 31, 2004. CP&L is evaluating necessary measures to comply with the rule and estimates its related capital expenditures could be approximately $370 million, which has not been adjusted for inflation. Increased operation and maintenance costs relating to the NOx SIP Call are not expected to be material to CP&L's results of operations. Further controls are anticipated as electricity demand increases. CP&L cannot predict the outcome of this matter.
In July 1997, the EPA issued final regulations establishing a new eight-hour ozone standard. In October 1999, the District of Columbia Circuit Court of Appeals ruled against the EPA with regard to the federal eight-hour ozone standard. The U.S. Supreme Court has upheld, in part, the District of Columbia Circuit Court of Appeals decision. Further litigation and rulemaking are anticipated. North Carolina adopted the federal eight-hour ozone standard and is proceeding with the implementation process. North Carolina has promulgated final regulations, which will require CP&L to install nitrogen oxide controls under the State's eight-hour standard. The cost of those controls are included in the cost estimate of $370 million set forth above.
The EPA published a final rule approving petitions under Section 126 of the Clean Air Act, which requires certain sources to make reductions in nitrogen oxide emissions by 2003. The final rule also includes a set of regulations that affect nitrogen oxide emissions from sources included in the petitions. The North Carolina fossil-fueled electric generating plants are included in these petitions. Acceptable state plans under the NOx SIP Call can be approved in lieu of the final rules the EPA approved as part of the 126 petitions. CP&L, other utilities, trade organizations and other states are participating in litigation challenging the EPA's action. On May 15, 2001, the District of Columbia Circuit Court of Appeals ruled in favor of the EPA which will require North Carolina to make reductions in nitrogen oxide emissions by May 1, 2003. However, the Court in its May 15th decision rejected the EPA's methodology for estimating the future growth factors the EPA used in calculating the emissions limits for utilities. In August 2001, the court granted a request by CP&L and other utilities to delay the implementation of the 126 Rule for electric generating units pending resolution by the EPA of the growth factor issue. The court's order tolls the three-year compliance period (originally set to end on May 1, 2003) for electric generating units as of May 15, 2001. On January 16, 2002, the EPA issued a memo to harmonize the compliance dates for the Section 126 Rule and the NOx SIP Call. The new compliance date for all affected sources is now May 31, 2004, rather than May 1, 2003, subject to the completion of the EPA's response to the related court decision on the growth factor issue. CP&L cannot predict the outcome of this matter.
CP&L has filed claims with its general liability insurance carriers to recover costs arising out of actual or potential environmental liabilities. Some claims have settled and others are still pending. While management cannot predict the outcome of these matters, the outcome is not expected to have a material effect on the consolidated financial position or results of operations.
2. As required under the Nuclear Waste Policy Act of 1982, CP&L entered into a contract with the DOE under which the DOE agreed to begin taking spent nuclear fuel by no later than January 31, 1998. All similarly situated utilities were required to sign the same standard contract.
Subsequently, a number of utilities each filed an action for damages in the Court of Claims. In a recent decision, the U.S. Circuit Court of Appeals (Federal Circuit) ruled that utilities may sue the DOE for damages in the Federal Court of Claims instead of having to file an administrative claim with DOE. CP&L is in the process of evaluating whether they should file a similar action for damages.
CP&L also continues to monitor legislation that has been introduced in Congress which might provide some limited relief. CP&L cannot predict the outcome of this matter.
With certain modifications and additional approval by the NRC, CP&L's spent nuclear fuel storage facilities will be sufficient to provide storage space for spent fuel generated on its system through the expiration of the current operating licenses for all of its nuclear generating units. Subsequent to the expiration of these licenses, dry storage may be necessary. CP&L obtained NRC approval to use additional storage space at the Harris Plant in December 2000.
3. CP&L is involved in various litigation matters in the ordinary course of business, some of which involve substantial amounts. Where appropriate, accruals have been made in accordance with SFAS No. 5, "Accounting for Contingencies," to provide for such matters. In the opinion of management, the final disposition of pending litigation would not have a material adverse effect on CP&L's consolidated results of operations or financial position.
PROGRESS ENERGY, INC.
Schedule II - Valuation and Qualifying Accounts For the Years Ended December 31, 2001, 2000, and 1999
Balance at Charged to Balance at
Beginning Costs and Other End of
Description of Period Expenses Additions Deductions Period
-----------------------------------------------------------------------------------------------------
Year Ended
December 31, 2001
Uncollectible accounts $28,115,805 $14,598,962 $ 19,443,822 a. $(21,448,646) b. $40,709,943
Nuclear refueling
outage reserve $10,835,000 $17,281,000 -- $(27,770,000) $ 346,000
----------- ----------- ------------ ------------ -----------
$38,950,805 $31,879,962 $ 19,443,822 $(49,218,646) $41,055,943
=========== =========== ============ ============ ===========
Year Ended
December 31, 2000
Uncollectible accounts $16,809,765 $14,387,547 $ 8,254,368 c. $(11,335,875) b. $28,115,805
Nuclear refueling
outage reserve -- $ 884,000 $ 10,591,000 c. $ (640,000) $10,835,000
----------- ----------- ------------ ------------ -----------
$16,809,765 $15,271,547 $ 18,845,368 $(11,975,875) $38,950,805
=========== =========== ============ ============ ===========
Year Ended
December 31, 1999
Uncollectible accounts $14,226,931 $ 6,966,304 $ 2,607,368 d. $(6,990,838) b. $16,809,765
=========== =========== ============ ============ ===========
|
a. Represents the reclassification of Rail Services from Net Assets Held for
Sale
b. Represents write-off of uncollectible accounts, net of recoveries.
c. Represents acquisition of FPC on November 30, 2000.
d. Represents acquisition of NCNG on July 15, 1999.
CAROLINA POWER & LIGHT COMPANY
Schedule II - Valuation and Qualifying Accounts For the Years Ended December 31, 2001, 2000, and 1999
Balance at Charged to Balance at
Beginning Costs and Other End of
Description of Period Expenses Additions Deductions Period
---------------------------------------------------------------------------------------------------
Year Ended
December 31, 2001
Uncollectible accounts $16,976,093 $ 3,921,255 $ -- $ (8,651,299) a. $12,246,049
=========== =========== ========== ============ ===========
Year Ended
December 31, 2000
Uncollectible accounts $16,809,765 $12,450,000 $ -- $(12,283,672) b. $16,976,093
=========== =========== ========== ============ ===========
Year Ended
December 31, 1999
Uncollectible accounts $14,226,931 $ 6,966,304 $2,607,368 c. $ (6,990,838) a. $16,809,765
=========== =========== ========== ============ ===========
|
a. Represents write-off of uncollectible accounts, net of recoveries.
b. Represents transfer of uncollectible account balances for SRS, NCNG, Monroe
Power and Progress Ventures, Inc. to Progress Energy on July 1, 2000 of
$2,846,873 as well as write-off of uncollectible accounts, net of
recoveries of $9,436,799.
c. Represents acquisition of NCNG on July 15, 1999.
As a result of the acquisition of Florida Progress Corporation (FPC) and
Florida Power Corporation (Florida Power) by Progress Energy. Inc.
(Progress Energy), management decided to retain Deloitte & Touche LLP (D&T)
as its independent public accountants. D&T has served as the independent
public accountants for Progress Energy for over fifty years. On March 21,
2001, the Audit Committee of the Board of Directors approved this
recommendation and formally elected to (i) engage D&T as the independent
accountants for FPC and Florida Power and (ii) dismiss KPMG LLP (KPMG) as
such independent accountants.
KPMG's reports on FPC's and Florida Power's financial statements for 2000 and 1999 (the last two fiscal years of KPMG's engagement) contained no adverse opinion or a disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope or accounting principles. D&T became FPC's and Florida Power's independent accountants upon the completion of the 2000 audit and issuance of the related financial statements.
During FPC's and Florida Power's last two fiscal years and the subsequent interim period to the date hereof, there were no disagreements between FPC and Florida Power and KPMG on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of KPMG, would have caused them to make reference to the subject matter of the disagreements in connection with their report on the financial statements for such years.
KPMG furnished a letter addressed to the Securities and Exchange Commission stating that it agreed with the above statements made by Progress Energy in this Form 10-K.
PART III
a) Information on Progress Energy, Inc.'s directors is set forth in the Progress Energy 2001 definitive proxy statement dated April 1, 2002, and incorporated by reference herein. Information on Carolina Power & Light Company's directors is set forth in the CP&L 2001 definitive proxy statement dated April 1, 2002, and incorporated by reference herein.
b) Information on both Progress Energy's and CP&L's executive officers is set forth in PART I and incorporated by reference herein.
Information on Progress Energy, Inc.'s executive compensation is set forth in the Progress Energy 2001 definitive proxy statement dated April 1, 2002, and incorporated by reference herein. Information on Carolina Power & Light Company's executive compensation is set forth in the CP&L 2001 definitive proxy statement dated April 1, 2002, and incorporated by reference herein.
a) Progress Energy knows of no person who is a beneficial owner of more than five (5%) percent of any class of the Company's voting securities.
b) Information on security ownership of the Progress Energy's and Carolina Power & Light Company's management is set forth in the Progress Energy and Carolina Power & Light Company 2001 definitive proxy statements dated April 1, 2002, and incorporated by reference herein.
Information on certain relationships and related transactions is set forth in the Progress Energy and CP&L 2001 definitive proxy statement dated April 1, 2002, and incorporated by reference herein.
PART IV
a) The following documents are filed as part of the report:
1. Consolidated Financial Statements Filed:
See ITEM 8 - Consolidated Financial Statements and Supplementary Data.
2. Consolidated Financial Statement Schedules Filed:
See ITEM 8 - Consolidated Financial Statements and Supplementary Data
See EXHIBIT INDEX
b) Reports on Form 8-K or Form 8-K/A filed during or with respect to the last quarter of 2001 and the portion of the first quarter of 2002 prior to the filing of this Form 10-K:
Financial
Item Statements
Reported Included Date of Event Date Filed
-------- ---------- ----------------- -----------------
5 Yes November 30, 2000 October 23, 2001
5 Yes October 24, 2001 October 24, 2001
5 No October 24, 2001 October 24, 2001
9 No October 30, 2001 October 30, 2001
5 No October 30, 2001 November 2, 2001
9 No November 28, 2001 November 28, 2001
9 No January 11, 2002 January 11, 2002
5 No December 12, 2001 January 17, 2002
5 Yes January 23, 2002 February 6, 2002
7 Yes February 26, 2002 February 26, 2002
|
None
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: March 28, 2002 (Registrants)
By: /s/ Peter M. Scott III
----------------------
Executive Vice President and
Chief Financial Officer
By: /s/ Robert H. Bazemore, Jr.
--------------------------
Vice President and Controller
(Chief Accounting Officer)
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.
Signature Title Date
--------- ----- ----
/s/ William Cavanaugh III Principal Executive March 20, 2002
-------------------------- Officer and Director
(William Cavanaugh III,
Chairman, President and
Chief Executive Officer)
/s/ Edwin B. Borden Director March 20, 2002
-------------------
(Edwin B. Borden)
/s/ David L. Burner Director March 20, 2002
-------------------
(David L. Burner)
/s/ Charles W. Coker Director March 20, 2002
--------------------
(Charles W. Coker)
/s/ Richard L. Daugherty Director March 20, 2002
------------------------
(Richard L. Daugherty)
/s/ W.D. Frederick, Jr. Director March 20, 2002
----------------------
(W.D. Frederick, Jr.)
/s/ William O. McCoy Director March 20, 2002
--------------------
(William O. McCoy)
/s/ E. Marie McKee Director March 20, 2002
------------------
(E. Marie McKee)
/s/ John H. Mullin, III Director March 20, 2002
-----------------------
(John H. Mullin, III)
126
|
/s/ Richard A. Nunis Director March 20, 2002 -------------------- (Richard A. Nunis) /s/ Carlos A. Saladrigas Director March 20, 2002 ------------------------ (Carlos A. Saladrigas) /s/ J. Tylee Wilson Director March 20, 2002 ------------------- (J. Tylee Wilson) /s/ Jean Giles Wittner Director March 20, 2002 ---------------------- (Jean Giles Wittner) |
EXHIBIT INDEX
Progress
Number Exhibit Energy, Inc. CP&L
------------ ----
*2(a) Agreement and Plan of Merger By and Among X
Carolina Power & Light Company, North
Carolina Natural Gas Corporation and Carolina
Acquisition Corporation, dated as of November
10, 1998 (filed as Exhibit No. 2(b) to
Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 1998,
File No. 1-3382.)
*2(b) Agreement and Plan of Merger by and among X
Carolina Power & Light Company, North
Carolina Natural Gas Corporation and Carolina
Acquisition Corporation, Dated as of November
10, 1998, as Amended and Restated as of April
22, 1999 (filed as Exhibit 2 to Quarterly
Report on Form 10-Q for the quarterly period
ended March 31, 1999, File No. 1-3382).
*2(c) Agreement and Plan of Exchange, dated as of X X
August 22, X X 1999, by and among Carolina
Power & Light Company, Florida Progress
Corporation and CP&L Holdings, Inc. (filed as
Exhibit 2.1 to Current Report on Form 8-K
dated August 22, 1999, File No. 1-3382).
*2(d) Amended and Restated Agreement and Plan of X X
Exchange, by and among Carolina Power & Light
Company, Florida Progress Corporation and
CP&L Energy, Inc., dated as of August 22,
1999, amended and restated as of March 3,
2000 (filed as Annex A to Joint Preliminary
Proxy Statement of Carolina Power & Light
Company and Florida Progress Corporation
dated March 6, 2000, File No. 1-3382).
*3a(1) Restated Charter of Carolina Power & Light X
Company, as amended May 10, 1995 (filed as
Exhibit No. 3(i) to Quarterly Report on Form
10-Q for the quarterly period ended June 30,
1995, File No. 1-3382).
*3a(2) Restated Charter of Carolina Power & Light X
Company as amended on May 10, 1996 (filed as
Exhibit No. 3(i) to Quarterly Report on Form
10-Q for the quarterly period ended June 30,
1997, File No. 1-3382).
*3a(3) Amended and Restated Articles of X
Incorporation of CP&L Energy, Inc., as
amended and restated on June 15, 2000 (filed
as Exhibit No. 3a(1) to Quarterly Report on
Form 10-Q for the quarterly period ended June
30, 2000, File No. 1-15929 and No. 1-3382).
3b(1) Amended and Restated Articles of X
Incorporation of CP&L Energy, Inc., as
amended and restated on December 4, 2000.
128
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3b(2) By-Laws of Carolina Power & Light Company, as X
amended on X December 12, 2001.
*3b(3) By-Laws of Progress Energy, Inc., as amended X
and restated December 12, 2000 (filed as
Exhibit No. 3 to Current Report on Form 8-K
dated January 17, 2002, File No. 1-15929).
*4a(1) Resolution of Board of Directors, dated X
December 8, 1954, authorizing the issuance
of, and establishing the series designation,
dividend rate and redemption prices for
CP&L's Serial Preferred Stock, $4.20 Series
(filed as Exhibit 3(c), File No. 33-25560).
*4a(2) Resolution of Board of Directors, dated X
January 17, 1967, authorizing the issuance
of, and establishing the series designation,
dividend rate and redemption prices for
CP&L's Serial Preferred Stock, $5.44 Series
(filed as Exhibit 3(d), File No. 33-25560).
*4a(3) Statement of Classification of Shares dated X
January 13, 1971, relating to the
authorization of, and establishing the series
designation, dividend rate and redemption
prices for CP&L's Serial Preferred Stock,
$7.95 Series (filed as Exhibit 3(f), File No.
33-25560).
*4a(4) Statement of Classification of Shares dated X
September 7, 1972, relating to the
authorization of, and establishing the series
designation, dividend rate and redemption
prices for CP&L's Serial Preferred Stock,
$7.72 Series (filed as Exhibit 3(g), File No.
33-25560).
*4b(1) Mortgage and Deed of Trust dated as of May 1, X
1940 X between CP&L and The Bank of New York
(formerly, Irving Trust Company) and
Frederick G. Herbst (Douglas J. MacInnes,
Successor), Trustees and the First through
Fifth Supplemental Indentures thereto
(Exhibit 2(b), File No. 2-64189); the Sixth
through Sixty-sixth Supplemental Indentures
(Exhibit 2(b)-5, File No. 2-16210; Exhibit
2(b)-6, File No. 2-16210; Exhibit 4(b)-8,
File No. 2-19118; Exhibit 4(b)-2, File No.
2-22439; Exhibit 4(b)-2, File No. 2-24624;
Exhibit 2(c), File No. 2-27297; Exhibit 2(c),
File No. 2-30172; Exhibit 2(c), File No.
2-35694; Exhibit 2(c), File No. 2-37505;
Exhibit 2(c), File No. 2-39002; Exhibit 2(c),
File No. 2-41738; Exhibit 2(c), File No.
2-43439; Exhibit 2(c), File No. 2-47751;
Exhibit 2(c), File No. 2-49347; Exhibit 2(c),
File No. 2-53113; Exhibit 2(d), File No.
2-53113; Exhibit 2(c), File No. 2-59511;
Exhibit 2(c), File No. 2-61611; Exhibit 2(d),
File No. 2-64189; Exhibit 2(c), File No.
2-65514; Exhibits 2(c) and 2(d), File No.
2-66851; Exhibits 4(b)-1, 4(b)-2, and 4(b)-3,
File No. 2-81299; Exhibits 4(c)-1 through
4(c)-8, File No. 2-95505; Exhibits 4(b)
through 4(h), File No. 33-25560; Exhibits
4(b) and 4(c), File No. 33-33431; Exhibits
4(b) and 4(c), File No. 33-38298; Exhibits
4(h) and 4(i), File No. 33-42869; Exhibits
4(e)-(g), File No. 33-48607; Exhibits 4(e)
and
129
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4(f), File No. 33-55060; Exhibits 4(e) and
4(f), File No. 33-60014; Exhibits 4(a) and
4(b) to Post-Effective Amendment No. 1, File
No. 33-38349; Exhibit 4(e), File No.
33-50597; Exhibit 4(e) and 4(f), File No.
33-57835; Exhibit to Current Report on Form
8-K dated August 28, 1997, File No. 1-3382;
Form of Carolina Power & Light Company First
Mortgage Bond, 6.80% Series Due August 15,
2007 filed as Exhibit 4 to Form 10-Q for the
period ended September 30, 1998, File No.
1-3382; Exhibit 4(b), File No. 333-69237; and
Exhibit 4(c) to Current Report on Form 8-K
dated March 19, 1999, File No. 1-3382.); and
the Sixty-eighth Supplemental Indenture
(Exhibit No. 4(b) to Current Report on Form
8-K dated April 20, 2000, File No. 1-3382;
and the Sixty-ninth Supplemental Indenture
(Exhibit No. 4b(2) to Annual Report on Form
10-K dated March 29, 2001, File No. 1-3382);
and the Seventieth Supplemental Indenture,
(Exhibit 4b(3) to Annual Report on Form 10-K
dated March 29, 2001, File No. 1-3382).
4b(2) Seventy-first Supplemental Indenture, dated X
as of February 1, 2002, to Carolina Power &
Light Company's Mortgage and Deed of Trust,
dated May 1, 1940, between Carolina Power &
Light Company and The Bank of New York and
Douglas J. MacInnes, as Trustees.
*4c(1) Indenture, dated as of March 1, 1995, between X
CP&L and Bankers Trust Company, as Trustee,
with respect to Unsecured Subordinated Debt
Securities (filed as Exhibit No. 4(c) to
Current Report on Form 8-K dated April 13,
1995, File No. 1-3382).
*4c(2) Resolutions adopted by the Executive X
Committee of the Board of Directors at a
meeting held on April 13, 1995, establishing
the terms of the 8.55% Quarterly Income
Capital Securities (Series A Subordinated
Deferrable Interest Debentures) (filed as
Exhibit 4(b) to Current Report on Form 8-K
dated April 13, 1995, File No. 1-3382).
*4d Indenture (for Senior Notes), dated as of X
March 1, 1999 X between Carolina Power &
Light Company and The Bank of New York, as
Trustee, (filed as Exhibit No. 4(a) to
Current Report on Form 8-K dated March 19,
1999, File No. 1-3382), and the First and
Second Supplemental Senior Note Indentures
thereto (Exhibit No. 4(b) to Current Report
on Form 8-K dated March 19, 1999, File No.
1-3382); Exhibit No. 4(a) to Current Report
on Form 8-K dated April 20, 2000, File No.
1-3382).
*4e Indenture (For Debt Securities), dated as of X
October 28, 1999 between Carolina Power &
Light Company and The Chase Manhattan Bank,
as Trustee (filed as Exhibit 4(a) to Current
Report on Form 8-K dated November 5, 1999,
File No. 1-3382), and an Officer's
Certificate issued pursuant thereto, dated as
of October 28, 1999, authorizing the issuance
and sale of Extendible Notes due October 28,
2009 (Exhibit 4(b) to Current Report on Form
8-K dated November 5, 1999, File No. 1-3382).
130
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*4f Contingent Value Obligation Agreement, dated X
as of November 30, 2000, between CP&L Energy,
Inc. and The Chase Manhattan Bank, as Trustee
(Exhibit 4.1 to Current Report on Form 8-K
dated December 12, 2000, File No. 1-3382).
*10a(1) Purchase, Construction and Ownership X
Agreement dated July 30, 1981 between
Carolina Power & Light Company and North
Carolina Municipal Power Agency Number 3 and
Exhibits, together with resolution dated
December 16, 1981 changing name to North
Carolina Eastern Municipal Power Agency,
amending letter dated February 18, 1982, and
amendment dated February 24, 1982 (filed as
Exhibit 10(a), File No. 33-25560).
*10a(2) Operating and Fuel Agreement dated July 30, X
1981 between Carolina Power & Light Company
and North Carolina Municipal Power Agency
Number 3 and Exhibits, together with
resolution dated December 16, 1981 changing
name to North Carolina Eastern Municipal
Power Agency, amending letters dated August
21, 1981 and December 15, 1981, and amendment
dated February 24, 1982 (filed as Exhibit
10(b), File No. 33-25560).
*10a(3) Power Coordination Agreement dated July 30, X
1981 between Carolina Power & Light Company
and North Carolina Municipal Power Agency
Number 3 and Exhibits, together with
resolution dated December 16, 1981 changing
name to North Carolina Eastern Municipal
Power Agency and amending letter dated
January 29, 1982 (filed as Exhibit 10(c),
File No. 33-25560).
*10a(4) Amendment dated December 16, 1982 to X
Purchase, Construction and Ownership
Agreement dated July 30, 1981 between
Carolina Power & Light Company and North
Carolina Eastern Municipal Power Agency
(filed as Exhibit 10(d), File No. 33-25560).
*10a(5) Agreement Regarding New Resources and Interim X
Capacity X between Carolina Power & Light
Company and North Carolina Eastern Municipal
Power Agency dated October 13, 1987 (filed as
Exhibit 10(e), File No. 33-25560).
*10a(6) Power Coordination Agreement - 1987A between X
North Carolina Eastern Municipal Power Agency
and Carolina Power & Light Company for
Contract Power From New Resources Period
1987-1993 dated October 13, 1987 (filed as
Exhibit 10(f), File No. 33-25560).
10b(1) Carolina Power & Light Company $375,000,000 X
5-Year X Revolving Credit Agreement dated as
of June 30, 1998.
10b(2) Carolina Power & Light Company $375,000,000 X
364-Day X Revolving Credit Agreement dated as
of June 30, 1998.
10b(3) Amendment and Restatement dated June 29, 1999 X
to
|
Carolina X Power & Light Company $375,000,000
364-Day Revolving Credit Agreement dated as
of June 30, 1998.
10b(4) Notice to Administrative Agent from Carolina X
Power & Light Company to request a reduction
in the Commitments of the Lenders of
$175,000,000 to the Revolving Credit
Agreement dated June 30, 1998 and Amended and
Restated June 29, 1999.
10b(5) Progress Energy, Inc. $500,000,000 364-Day X
Revolving Credit Agreement dated as of
November 13, 2001.
10b(6) Progress Energy, Inc. $450,000,000 3-Year X
Revolving Credit Agreement dated November 13,
2001.
10b(7) Amendment, dated February 13, 2002, to X
Progress Energy, Inc. $500,000,000 364-Day
Revolving Credit Agreement dated as of
November 13, 2001.
10b(8) Amendment, dated February 13, 2002, to X
Progress Energy, Inc. $450,000,000 3-Year
Revolving Credit Agreement dated November 13,
2001.
|
-+*10c(1) Directors Deferred Compensation Plan X effective January 1, X 1982 as amended (filed
as Exhibit 10(g), File No. 33-25560).
-+*10c(2) Retirement Plan for Outside Directors (filed X
as Exhibit 10(i), File No. 33-25560).
-+*10c(3) Key Management Deferred Compensation Plan X
(filed as Exhibit 10(k), File No. 33-25560).
+*10c(4) Resolutions of the Board of Directors, dated X
March 15, X 1989, amending the Key Management
Deferred Compensation Plan (filed as Exhibit
10(a), File No. 33-48607).
-+*10c(5) Resolutions of the Board of Directors dated X X
May 8, 1991, amending the CP&L Directors
Deferred Compensation Plan (filed as Exhibit
10(b), File No. 33-48607).
+*10c(6) Resolutions of Board of Directors dated July X
9, 1997, X amending the Deferred Compensation
Plan for Key Management Employees of Carolina
Power & Light Company.
+*10c(7) Carolina Power & Light Company Non-Employee X X
Director Stock Unit Plan, effective January
1, 1998.
-+*10c(8) Carolina Power & Light Company Restricted X X
Stock Agreement, as approved January 7, 1998,
pursuant to the Company's 1997 Equity
Incentive Plan (filed as Exhibit No. 10 to
Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 1998, File
No. 1-3382.)
-+10c(9) Carolina Power & Light Company Restoration X X
Retirement Plan, as amended January 1, 2000.
132
|
-+*10c(10)Amended and Restated Supplemental Senior X X
Executive Retirement Plan of Carolina Power &
Light Company, effective January 1, 1984, as
last amended March 15, 2000 (filed as Exhibit
10b(24) to Annual Report on Form 10-K for the
fiscal year ended December 31, 1999, File No.
1-3382).
-+10c(11) Performance Share Sub-Plan of the 1997 Equity X X
Incentive Plan, as amended January 1, 2001.
+*10c(12) 1997 Equity Incentive Plan, Amended and X X
Restated as of X X September 26, 2001 (filed
as Exhibit 4.3 to Progress Energy Form S-8
dated September 27, 2001, File No. 1-3382).
+*10c(13) Progress Energy, Inc. Form of Stock Option X
Agreement (filed as Exhibit 4.4 to Form S-8
dated September 27, 2001, File No.
333-70332).
+*10c(14) Progress Energy, Inc. Form of Stock Option X
Award (filed as Exhibit 4.5 to Form S-8 dated
September 27, 2001, File No. 333-70332).
-+10c(15) Amended Management Incentive Compensation X X
Plan of Progress Energy, Inc., as amended and
restated January 1, 2002.
-+10c(16) Progress Energy, Inc. Management Deferred X X
Compensation Plan, amended and restated as of
January 1, 2002.
+*10c(17) Agreement dated April 27, 1999 between X
Carolina Power & Light Company and Sherwood
H. Smith, Jr. (filed as Exhibit 10b, File No.
1-3382).
+*10c(18) Employment Agreement dated August 1, 2000 X
between CP&L Service Company LLC and William
Cavanaugh III (filed as Exhibit 10(i) to
Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 2000,
File No. 1-15929 and No. 1-3382).
+*10c(19) Employment Agreement dated August 1, 2000 X
between Carolina Power & Light Company and
William S. "Skip" Orser (filed as Exhibit
10(ii) to Quarterly Report on Form 10-Q for
the quarterly period ended September 30,
2000, File No. 1-15929 and No. 1-3382).
+*10c(20) Employment Agreement dated August 1, 2000 X
between X Carolina Power & Light Company and
Tom Kilgore (filed as Exhibit 10(iii) to
Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 2000,
File No. 1-15929 and No. 1-3382).
+*10c(21) Employment Agreement dated August 1, 2000 X
between CP&L Service Company LLC and Robert
McGehee (filed as Exhibit 10(iv) to Quarterly
Report on Form 10-Q for the quarterly period
ended September 30, 2000, File No. 1-
133
|
15929 and No. 1-3382).
+*10c(22) Form of Employment Agreement dated August 1, X X
2000 (i) X X between Carolina Power & Light
Company and Don K. Davis; and (ii) between
CP&L Service Company LLC and Peter M. Scott
III and William D. Johnson (filed as Exhibit
10(v) to Quarterly Report on Form 10-Q for
the quarterly period ended September 30,
2000, File No. 1-15929 and No. 1-3382).
+*10c(23) Form of Employment Agreement dated August 1, X X
2000 (i) between Carolina Power & Light
Company and Fred Day IV, C.S. "Scotty"
Hinnant and E. Michael Williams; and (ii)
between CP&L Service Company LLC and Bonnie
V. Hancock and Cecil L. Goodnight (filed as
Exhibit 10(vi) to Quarterly Report on Form
10-Q for the quarterly period ended September
30, 2000, File No. 1-15929 and No. 1-3382).
+*10c(24) Employment Agreement dated November 30, 2000 X
between Carolina Power & Light Company,
Florida Power Corporation and H. William
Habermeyer, Jr. (filed as Exhibit 10.(b)(32)
to Florida Progress Corporation and Florida
Power Corporation Annual Reports on Form 10-K
for the year ended December 31, 2000).
12 Computation of Ratio of Earnings to Fixed X X
Charges and Ratio of Earnings to Fixed
Charges Preferred Dividends Combined.
21 Subsidiaries of Progress Energy, Inc. X
23(a) Consent of Deloitte & Touche LLP. X X
23(b) Consent of KPMG LLP. X
|
*Incorporated herein by reference as indicated.
+Management contract or compensation plan or arrangement required to be filed as an exhibit to this report pursuant to Item 14 (c) of Form 10-K.
-Sponsorship of this management contract or compensation plan or arrangement was transferred from Carolina Power & Light Company to Progress Energy, Inc., effective August 1, 2000.
Exhibit 3b(1)
State of North Carolina
Department of the Secretary of State
ARTICLES OF AMENDMENT
CP&L ENERGY, INC.
Pursuant to Section 55-10-06 of the General Statutes of North Carolina, the undersigned corporation hereby submits the following Articles of Amendment for the purpose of amending its Articles of Incorporation.
1. The name of the corporation is CP&L Energy, Inc.
2. The text of each amendment adopted is as follows:
Article I of the Articles of Incorporation shall be amended and restated to read "The name of the Corporation is Progress Energy, Inc. (the 'Corporation')."
3. The date of adoption of the amendment was June 15, 2000.
4. The amendment was approved by shareholder action, and such shareholder approval was obtained as required by Chapter 55 of the North Carolina General Statutes.
5. These articles will be effective upon filing.
This the 4th day of December, 2000
--- --------
CP&L ENERGY, INC.
By: /s/ William D. Johnson
----------------------
William D. Johnson
Executive Vice President and
Corporate Secretary
|
Exhibit 3b(2)
B Y - L A W S
of
CAROLINA POWER & LIGHT COMPANY
Raleigh, North Carolina
(As Amended December 12, 2001)
Section 1. The annual meeting of the stockholders of the Company shall be held at the principal office of the Company, on the second Wednesday of May in each year, if not a legal holiday, and if a legal holiday, then on the next day not a legal holiday, at ten o'clock A.M., or at such other date, or hour, or at such other place within or without the State of North Carolina as stated in the notice of the meeting as the Board of Directors may determine.
Section 2. Special meetings of the stockholders of the Company may be held upon call by a majority of the Board of Directors or of the Executive Committee, or by the Chairman of the Board, or by the President of the Company, at the principal office of the Company or at such other place within or without the State of North Carolina, and at such time, as may be stated in the call and notice.
Section 3. Written notice of the time and place of every meeting of stockholders may be given, and shall be deemed to have been duly given, by mailing the same at least ten, but not more than sixty, days prior to the meeting, to each stockholder of record, entitled to vote at such meeting, and addressed to him at his address as it appears on the records of the Company, with postage thereon prepaid. Notice may also be given by any other lawful means.
Section 4. In accordance with Section 55-7-20 of the General Statutes of North Carolina, the Company, or an officer having charge of the record of stockholders of the Company, shall prepare a list of stockholders which shall be available for inspection by stockholders, or their agents or attorneys.
Section 5. The holders of a majority of the stock of the Company having voting powers must be present in person or represented by proxy at each meeting of the stockholders to constitute a quorum; absent such quorum, the meeting may be adjourned by a majority of shares voting on a motion to adjourn. If such adjournment is for less than thirty days, notice other than announcement at the meeting need not be given. At any adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at the original meeting.
Section 6. (a) When a quorum is present at any meeting, the vote of the holders of a majority of the outstanding stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of any applicable statute or of the Charter a different vote is required, in which case such express provision shall govern and control the decision of such question.
Section 6. (b) To be properly brought before a meeting of shareholders, business must be (i) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (ii) otherwise properly brought before the meeting by or at the direction of the Board of Directors or (iii) otherwise properly brought before an annual meeting by a shareholder of the Company who was a shareholder of record at the time of the giving of notice provided for in Section 3 of these By-Laws and who is entitled to vote at the meeting. In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a shareholder, the shareholder must give timely notice of the proposal in writing to the Secretary of the Company. To be timely, a shareholder's notice must be received by the Secretary of the Company at the principal executive offices of the Company not later than the close of business on the 60th day prior to the first anniversary of the immediately preceding year's annual meeting. In no event shall the public announcement of an adjournment or postponement of an annual meeting or the fact that an annual meeting is held after the anniversary of the preceding annual meeting commence a new time period for the giving of a shareholder notice as described above. A shareholder's notice shall set forth as to each matter the shareholder proposes to bring before the meeting (i) a brief description of the business desired to be brought before the annual meeting, including the complete text of any resolutions to be presented at the annual meeting with respect to such business, (ii) the reasons for conducting such business at the annual meeting, (iii) the name and address of record of the shareholder and the beneficial owner, if any, on whose behalf the proposal is made, (iv) the class and number of shares of the Company which are owned by the shareholder and such beneficial owner, (v) a representation that the shareholder is a holder of record of shares of the Company entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such business, and (vi) any material interest of the shareholder and such beneficial owner in such business.
In the event that a shareholder attempts to bring business before a meeting
without complying with the procedures set forth in this Section 6(b), such
business shall not be transacted at such meeting. The Chairman of the Board of
Directors, or any other individual presiding over the meeting pursuant to
Section 8 of these By-Laws, shall have the power and duty to determine whether
any proposal to bring business before the meeting was made in accordance with
the procedures set forth in this Section 6(b), and, if any business is not
proposed in compliance with this Section, to declare that such defective
proposal shall be disregarded and that such proposed business shall not be
transacted at such meeting.
Section 7. The Board of Directors in advance of any meeting of stockholders may appoint two voting inspectors to act at any such meeting or adjournment thereof. If they fail to make such
appointment, or if their appointees or any of them fail to appear at the meeting of stockholders, the chairman of the meeting may appoint such inspectors or any inspector to act at that meeting.
Section 8. Meetings of the stockholders shall be presided over by the Chairman of the Board of Directors, or, if he is not present, the President, or, if the President is not present, a Vice President, or if neither of said officers is present, by a chairman pro tem to be elected at the meeting. The Secretary of the Company shall act as secretary of such meetings, if present, but if not present, some person shall be appointed by the presiding officer to act during the meeting.
Section 9. Each holder of Preferred Stock and/or Common Stock shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of such stock held by such stockholder. Except where the transfer books of the Company have been closed or a date has been fixed as a record date for the determination of its stockholders entitled to vote, no share of stock shall be voted at any election for directors which has been transferred on the books of the Company within twenty days next preceding such election of directors.
Section 10. (a) The number of directors of the Company shall not be less than eleven (11) nor more than fifteen (15). The authorized number of directors, within the limits above specified, shall be determined by the affirmative vote of a majority of the whole board given at any regular or special meeting of the Board of Directors, provided that, the number of directors shall not be reduced to a number less than the number of directors then in office unless such reduction shall become effective only at and after the next ensuing meeting of the shareholders for the election of directors. This subsection (a) was adopted by the stockholders of the Company.
(b) The directors shall appoint from among their number a Chairman, who shall serve at the pleasure of the Board. Members of the Board of Directors of the Company who are full-time employees of the Company shall retire from the Board upon their retirement from employment or upon attaining the age of 65 years, whichever occurs first; provided, however, that the Chairman of the Board, if then a full-time employee of the Company, shall be eligible to continue as a member of the Board until the first Annual Meeting of Shareholders occurring at least one year after retirement from employment or after attaining the age of 65 years, whichever occurs first, if so requested to remain by the Board. Those persons who are not employed full-time by the Company shall not be eligible for election as a Director in any calendar year (or subsequent year) in which he or she has reached or will reach the age of 73 years, unless requested by the Chairman of the Board and approved on an annual basis by the full Board. Otherwise, any Director who reaches the age of 73 during a term of office shall resign as of the first day of the month so following unless otherwise determined by the Board.
(c) The election of directors shall be held at the annual meeting of stockholders. The directors, other than those who may be elected under circumstances specified in the Company's Restated Charter, as it may be amended, by the holders of any class of stock having a preference over the Common Stock as to dividends or in liquidation, shall be classified into three classes, as nearly
equal in number as possible. The initial terms of directors first elected or re-elected by the stockholders on the date this amendment to the By-Laws is adopted shall be for the following terms of office:
Class I: One year Class II: Two years Class III: Three years |
and until their successors shall be elected and shall qualify. Upon the expiration of the initial term specified for each class of directors their successors shall be elected for three-year terms or until such time as their successors shall be elected and qualified. In the event of any increase or decrease in the number of directors, the additional or eliminated directorships, shall be classified or chosen so that all classes of directors shall remain or become equal in number, as nearly as possible. This subsection (c) was adopted by the stockholders of the Company.
(d) Subject to the rights of holders of any securities or obligations of
the Company conferring special rights regarding election of directors,
nominations for the election of directors shall be made by the Board of
Directors or by any shareholder entitled to vote in elections of directors;
provided however, that any shareholder entitled to vote in the election of
directors may nominate one or more persons for election as directors only at an
annual meeting and if written notice of such shareholder's intent to make such
nomination or nominations has been received, either by personal delivery or by
United States registered or certified mail, postage prepaid, by the Secretary of
the Company at the principal executive offices of the Company not later than the
close of business on the 60th day prior to the first anniversary of the
immediately preceding year's annual meeting. In no event shall the public
announcement of an adjournment or postponement of an annual meeting or the fact
that an annual meeting is held after the anniversary of the preceding annual
meeting commence a new time period for the giving of a shareholder's notice as
described above. Each notice shall set forth (i) the name and address of record
of the shareholder who intends to make the nomination, the beneficial owner, if
any, on whose behalf the nomination is made and of the person or persons to be
nominated, (ii) the class and number of shares of the Company that are owned by
the shareholder and such beneficial owner, (iii) a representation that the
shareholder is a holder of record of shares of the Company entitled to vote at
such meeting and intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice, (iv) a description of
all arrangements, understandings or relationships between the shareholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the
shareholder, and (v) such other information regarding each nominee proposed by
such shareholder as would be required to be disclosed in solicitations of
proxies for election of directors in an election contest, or is otherwise
required to be disclosed, pursuant to the proxy rules of the Securities and
Exchange Commission, had the nominee been nominated, or intended to be
nominated, by the Board of Directors, and shall include a consent signed by each
such nominee to serve as a director of the Company if so elected. In the event
that a shareholder attempts to nominate any person without complying with the
procedures set forth in this Section 10.(d), such person shall not be nominated
and shall not stand for election at such meeting. The Chairman of the Board of
Directors, or any other individual presiding over the meeting pursuant to
Section 8 of these By-Laws, shall have the power and duty to determine whether a
nomination proposed to be brought before the
meeting was made in accordance with the procedures set forth in this Section 10.(d) and, if any proposed nomination is not in compliance with this Section 10.(d), to declare that such defective proposal shall be disregarded.
Section 11. In case of any vacancy in the number of directors through death, resignation, disqualification, increase in the number of directors or other cause, the remaining directors present at the meeting, by affirmative vote of a majority thereof, though less than a quorum, may elect a successor to hold office until the next shareholders' meeting at which directors are elected and until the election of his successor.
Section 12. Regular meetings of the Board of Directors shall be held at times fixed by resolution of the Board, and special meetings may be held upon the written call of the Executive Committee, or by the Chairman of the Board, or by the President or by any two directors; and the Secretary or officer performing his duties shall give reasonable notice of all meetings of directors; provided, that a meeting may be held without notice immediately after the annual election, and notice need not be given of regular meetings held at times fixed by resolution of the Board. Meetings may be held at any time without notice if all the directors are present, or if those not present waive notice either before or after the meeting. All regular and special meetings shall be held at the principal offices of the Company, provided that the Board, from time to time, may order that any meeting be held elsewhere within or without the State of North Carolina. A majority of the whole Board of Directors shall constitute a quorum, and the act of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors, unless a greater proportion is required by the Charter.
Section 13. The business and affairs of the Company shall be managed by its Board of Directors, which may exercise all such powers of the Company and do all such lawful acts and things which are not by law or by the Charter directed or required to be exercised or done by the stockholders; provided, however, that the officers of the Company shall, without prior action of the Board of Directors, perform all acts and things incidental to the usual and ordinary course of the business in which the Company is engaged as hereinafter provided by the By-Laws or as may hereafter be delegated by the Board of Directors. A majority of the Board of Directors may create one or more Committees and appoint other members of the Board of Directors to serve on such Committees. Each such Committee shall have two or more members, who serve at the pleasure of the Board of Directors. Any such Committee may exercise authority over any matters except those matters described in Section 55-8-25(e) of the General Statutes of North Carolina.
Section 14. A majority of the whole Board of Directors, present at any meeting held after their election in each year, may appoint an Executive Committee, to consist of three or more directors, which Committee shall have and may exercise, during the intervals between meetings of the Board, by a majority vote of those present at a meeting, all the powers vested in the Board, except the following matters as more fully described in Section 55-8-25(e) of the General Statutes of North Carolina:
. Authorize distributions;
. Approve or propose to shareholders action that is by law required to
be approved by the shareholders;
. Fill vacancies on the Board of Directors or on any of its Committees;
. Amend the Company's Articles of Incorporation pursuant to
N.C.G.S.Section.55-10-102;
. Adopt, amend or repeal the Company's By-Laws;
. Approve a plan of merger not requiring shareholder approval;
. Authorize or approve reacquisition of shares, except according to a
formula or method prescribed by the Board of Directors; or
. Authorize or approve the issuance or sale or contract for sale of
shares, or determine the designation and relative rights, preferences,
and limitations of a class or series of shares.
A majority of the whole Board of Directors present at any meeting shall have the power at any time to change the membership of such Committee and to fill vacancies in it. The Executive Committee may make rules for the conduct of its business. A majority of the members of said Committee shall constitute a quorum. The Chairman of the Executive Committee shall be appointed by the Board of Directors from the membership of the Executive Committee.
Section 15. Notices to directors or stockholders shall be in writing and given personally or by mail to the directors and by mail to the stockholders at their addresses appearing on the books of the Company; provided, however, that no notice need be given any stockholder or director whose address is outside of the United States. Notice by mail shall be deemed to be given at the time when the same shall be mailed. Notice to directors may also be given verbally, or by telegram, or cable, and any such notice shall be deemed to be given when delivered to and accepted for transmittal by an office of the transmitting company.
Section 16. Whenever any notice is required to be given under the provisions of applicable statutes or of the Charter or of these By-Laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice in apt time.
Section 17. The Board of Directors shall annually at its first meeting held after the Annual Meeting of Stockholders, or as soon thereafter as may be practical, elect the officers of the Company, who shall consist of a President, one or more Senior Executive Vice Presidents and Executive Vice Presidents, two or more Senior Vice Presidents, three or more Vice Presidents, a Secretary, a Treasurer, a Controller and such other officers or assistant officers and agents as may be appointed by the Board of Directors. At other times, the Board of Directors or any Committee to which it delegates the authority to do so may elect officers to fill any new office or a vacancy in any office occurring by virtue of the incumbent's death, resignation, removal or otherwise at any duly convened
meeting of the Board or of the Committee. The officer shall serve for the period specified or until a successor is chosen. From time to time the Board of Directors may also elect a Vice Chairman who shall have such duties as described herein and as may from time to time be directed. Any two offices may be held by the same person, but no officer may act in more than one capacity where action of two or more officers is required. The Vice Chairman, if any, of the Board of Directors shall be chosen from among the Directors, but the other officers need not be Directors of the Company
Section 18. The Board of Directors shall appoint the Chief Executive Officer who shall be either the Chairman, the Vice Chairman or the President of the Company. In the event the Chief Executive Officer is unavailable at the time for needed action, or in other circumstances as directed by the Chief Executive Officer, then the Chairman, the Vice Chairman, if any, or the President if there is no Vice Chairman, who is not then serving as Chief Executive Officer, shall be the next officer in line of authority to perform the duties of Chief Executive Officer. If the Chairman, the Vice Chairman and the President should be unavailable at the time for needed action, or in other circumstances as directed by the Chief Executive Officer, then the next officer in line of authority to perform the duties of the Chief Executive Officer shall be a Senior Executive Vice President or Executive Vice President as designated by the Chief Executive Officer.
Section 19. Any officer may be reassigned duties by appropriate members of Senior Management at any time. Any officer may be removed from office at any time by the Board of Directors, or by any Committee to which it delegates the authority to remove officers from office, without prejudice to the rights of the officer removed under an employment agreement in writing previously duly authorized by the Board of Directors or an Executive Committee of the Board of Directors. Any officer may resign at any time by giving written notice to the Board of Directors, the President or any other officer of the Company. Such resignation shall take effect at the time specified therein, and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.
Section 20. The Board of Directors or the Chief Executive Officer of the Company may require the Treasurer and any other officer, employee or agent of the Company to give bond, in such sum and with such surety or sureties as either shall determine, for the faithful discharge of their duties.
Section 21. Unless otherwise provided by the Board of Directors, the Company's Chief Executive Officer is vested with full power, authority, and the duty, to perform in person, and by delegation of authority to subordinate officers and employees of the Company, all acts and things deemed by him to be reasonably necessary or desirable to direct, handle, and manage, and in general carry on the Company's business transactions authorized by its Charter, in respect to all matters except those which by law must be performed by the Directors, including but not limited to the following: (a) constructing and contracting for the construction of generating plants authorized by the Directors; (b) operating and maintaining generating plants and appurtenant works; (c) constructing, maintaining, and operating substations, lines and all other facilities, appurtenant to the transmission, distribution and delivery of electricity; (d) acquiring by direct purchase, gift, exchange, or by
condemnation, all rights of way, easements, lands, and estates in lands, flowage and water rights; (e) acquiring, maintaining and disposing of tools, machinery, appliances, materials, vehicles, and other appurtenant facilities; (f) employing, and fixing compensation of, Company personnel (except that the compensation of the Chief Executive Officer and the other Company employees who are members of the Board shall be fixed by the Board of Directors) in compliance with any procedures established by the Board; (g) borrowing money from time to time for terms not exceeding three years, and in connection therewith pledging the credit of the Company and executing unsecured loan agreements, promissory notes, and other desirable instruments evidencing obligations to the lender; (h) fixing the rates and conditions of service and dealing with regulatory bodies in respect thereto, and promoting the use of electricity by means of sales representatives, advertising and otherwise; (i) collecting and keeping accounts of all monies due the Company and making and preserving records of the Company's properties and accounts and fiscal affairs; and (j) possessing, preserving, and protecting all property, assets, and interests of the Company and instituting, prosecuting, intervening in, and defending actions and proceedings in any court or before any administrative agency or tribunal affecting the Company's interests and welfare.
Section 22. Every holder of stock in the Company shall be entitled to have a certificate or certificates certifying the number of fully paid shares owned by him in the Company which shall be in form consistent with law and with the Charter of the Company and as shall be approved by the Board of Directors. The stock certificates shall be signed by: 1) either the Chairman of the Board of Directors or the President, and 2) either the Secretary or Treasurer. Such signatures may be facsimile or other similar method.
Section 23. All transfers of stock of the Company shall be made upon its books by authority of the holder of the shares or of his legal representative, and before a new certificate is issued the old certificate shall be surrendered for cancellation, provided that in case any certificate is lost, stolen or destroyed, a new certificate therefor may be issued pursuant to the provisions of Section 24 hereof.
Section 24. No certificate of shares of stock of the Company shall be issued in place of any certificate alleged to have been lost or stolen or destroyed, except upon the approval of the Board of Directors who may require delivery to the Company of a bond in such sum as it may direct and subject to its approval as indemnity against any claim in respect to such lost or stolen or destroyed certificate; provided that the Board of Directors may delegate to the Company's Transfer Agent and Registrar authority to issue and register, respectively, from time to time without further action or approval of the Board of Directors, new certificates of stock to replace certificates reported lost, stolen or destroyed upon receipt of an affidavit of loss and bond of indemnity in form and amount and with corporate surety satisfactory to them in each instance protecting the Company and them against loss. Such legal evidence of such loss or theft or destruction shall be furnished to the Board of Directors as may be required by them.
Section 25. The Board of Directors shall have power and authority to make all such rules and regulations as it may deem expedient concerning the issue, transfer, conversion and registration of certificates for shares of the capital stock of the Company, not inconsistent with the laws of North Carolina, the Charter of the Company and these By-Laws. The Board of Directors is authorized to appoint one or more transfer agents and registrars for the capital stock of the Company.
Section 26. The Board of Directors shall have power to close the stock transfer books or in lieu thereof to fix record dates as authorized by law.
Section 27. Subject to the provisions of the applicable statutes and the Charter of the Company, dividends, either cash or stock, upon the capital stock of the Company may be declared by the Board of Directors at any meeting thereof.
Section 28. Deeds, bonds, notes, mortgages and contracts of the Company may be executed on behalf of the Company by the President, or a Vice President, or any one of such other persons as shall from time to time be authorized by the Board of Directors, and when necessary or appropriate may be attested or countersigned by the Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer. The corporate seal of the Company may be affixed to deeds, bonds, notes, mortgages, contracts or stock certificates by an appropriate officer of the Company by impression thereon, or, by order of an appropriate officer of the Company, a facsimile of said seal may be affixed thereto by engraving, printing, lithograph or other method.
Section 29. The monies of the Company shall be deposited in the name of the Company in such bank or banks or trust company or trust companies as the Treasurer, with approval of the Chief Executive Officer, shall from time to time select, and shall be drawn out only by checks or other orders signed by persons designated by resolution by the Board of Directors.
Section 30. As and when used in any of the foregoing By-Laws the words "stockholder" and "stockholders" shall be deemed and held to be synonymous with the words "shareholder" and "shareholders", and the word "stock" shall be deemed and held to be synonymous with the words "share" or "shares", respectively, as used in Chapter 55 of the General Statutes of North Carolina.
Section 31. The Board of Directors shall have power from time to time to adopt, amend, alter, add to, and repeal By-Laws for the Company by affirmative vote of a majority of the directors then holding office, provided, however, that the By-Laws may not be amended by the Board of Directors to require more than a majority of the voting shares for a quorum at a stockholder's meeting, or more than a majority vote at such meeting, except where higher percentages are required by law. Any By-Laws so made or any provisions thereof may be altered or repealed by vote of the holders of a majority of the total number of shares of the Company then issued and outstanding and
entitled to vote thereon at any annual stockholders' meeting. Additionally, any By-Law adopted, amended or repealed by the stockholders may not be readopted, amended or repealed by the Board of Directors unless the Charter or a By-Law adopted by the stockholders authorizes the Board of Directors to adopt, amend or repeal that particular By-Law or the By-Laws generally.
Section 32. (a) The Company shall reimburse or indemnify any past, present or future officer or director of the Company for and against such liabilities and expenses as are authorized by (1) a resolution adopted by the Company's stockholders at a special meeting held on December 31, 1943, which is made a part hereof as though incorporated herein, or (2) by Sections 55-8-54, 55-8-55, 55-8-56 and 55-8-57 of the General Statutes of North Carolina. Persons serving as officers or directors of the Company or serving in any such capacity at the request of the Company in any other corporation, partnership, joint venture, trust or other enterprise shall be provided reimbursement and indemnification by the Company to the maximum extent allowed hereunder or under applicable law, including without limitation Sections 55-8-54, 55-8-55, 55-8-56 and 55-8-57 of the General Statutes of North Carolina.
(b) In addition to the reimbursement and indemnification provisions set forth above, any person who at any time serves or has served (1) as an officer or director of the Company, or (2) at the request of the Company as an officer of director (or in any position of similar authority, by whatever title known) of any other corporation, partnership, joint venture, trust or other enterprise, or (3) as an individual trustee or administrator under any employee benefit plan, shall have a right to be indemnified by the Company to the fullest extent permitted by law against (i) all reasonable expenses, including attorney's fees, actually and necessarily incurred by him in connection with any pending, threatened or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, and whether or not brought by the Company or on behalf of the Company in a derivative action, seeking to hold him liable by reason of or arising out of his status as such or his activities in any of the foregoing capacities, and (ii) payments made by him in satisfaction of any judgement, money decree, fine, penalty or settlement for which he may have become liable in any such action, suit or proceeding; provided, however, that the Company shall not indemnify any person against liability or litigation expense he may incur on account of his activities which were at the time taken known or believed by him to be clearly in conflict with the best interests of the Company.
(c) The Board of Directors shall take all action as may be necessary or appropriate to authorize the Company to pay all amounts required under these Sections 32(a),(b) and (c) of the By-Laws including, without limitation and to the extent deemed to be appropriate, necessary, or required by law (1) making a good faith evaluation of the manner in which the claimant for indemnity acted and of the reasonable amount of indemnity due such individual, or (2) making advances of costs and expenses, or (3) giving notice to, or obtaining approval by, the shareholders of the Company.
(d) Any person who serves or has served in any of the aforesaid capacities for or on behalf of the Company shall be deemed to be doing or to have done so in reliance upon, and as
consideration for, the rights of reimbursement and indemnification provided for herein. Such rights of reimbursement and indemnification shall inure to the benefit of the legal representatives of such individuals, shall include amounts paid in settlement and shall not be exclusive of any other rights to which such individuals shall be entitled apart from the provisions of this Section.
(e) The Company may, in its sole discretion, wholly or partially indemnify and advance expenses to any employee or agent of the Company to the same extent as provided herein for officers and directors.
Exhibit 4b(2)
CAROLINA POWER & LIGHT COMPANY
TO
THE BANK OF NEW YORK
(formerly Irving Trust Company)
AND
DOUGLAS J. MACINNES
(successor to Frederick G. Herbst, Richard H. West, J.A.
Austin, E.J. McCabe, G. White, D.W. May, J.A. Vaughan,
Joseph J. Arney, Wafaa Orfy and W.T. Cunningham)
as Trustees under Carolina Power & Light Company's Mortgage and Deed of Trust, dated as of May 1, 1940
Seventy-first Supplemental Indenture
Providing among other things for First Mortgage Bonds, Pollution Control Series W (Eightieth Series)
Dated as of February 1, 2002
Prepared by and Return to:
Hunton & Williams (TSG)
Post Office Box 109
Raleigh, North Carolina 27602
SEVENTY-FIRST SUPPLEMENTAL INDENTURE
INDENTURE, dated as of February 1, 2002, by and between CAROLINA POWER & LIGHT COMPANY, a corporation of the State of North Carolina, whose post office address is 411 Fayetteville Street, Raleigh, North Carolina 27601-1768 (hereinafter sometimes called the Company), and THE BANK OF NEW YORK (formerly Irving Trust Company), a corporation of the State of New York, whose post office address is 101 Barclay Street, New York, New York 10286 (hereinafter sometimes called the Corporate Trustee), and DOUGLAS J. MACINNES (successor to Frederick G. Herbst, Richard H. West, J.A. Austin, E.J. McCabe, G. White, D.W. May, J.A. Vaughan, Joseph J. Arney, Wafaa Orfy and W.T. Cunningham), whose post office address is 1784 W. McGalliard Avenue, Hamilton, New Jersey 08610 (the Corporate Trustee and the Individual Trustee being hereinafter together sometimes called the Trustees), as Trustees under the Mortgage and Deed of Trust, dated as of May 1, 1940 (hereinafter called the Mortgage), which Mortgage was executed and delivered by the Company to Irving Trust Company (now The Bank of New York) and Frederick G. Herbst to secure the payment of bonds issued or to be issued under and in accordance with the provisions of the Mortgage, reference to which Mortgage is hereby made, this Indenture (hereinafter sometimes called the Seventy-first Supplemental Indenture) being supplemental thereto:
WHEREAS, the Mortgage was recorded in various Counties in the States of North Carolina and South Carolina; and
WHEREAS, the Mortgage was indexed and cross-indexed in the real and chattel mortgage records in various Counties in the States of North Carolina and South Carolina; and
WHEREAS, an instrument, dated as of June 25, 1945, was executed by the Company appointing Richard H. West as Individual Trustee in succession to said Frederick G. Herbst (deceased) under the Mortgage, and by Richard H. West accepting said appointment, which instrument was recorded in various Counties in the States of North Carolina and South Carolina; and
WHEREAS, an instrument, dated as of December 12, 1957, was executed by the Company appointing J.A. Austin as Individual Trustee in succession to said Richard H. West (resigned) under the Mortgage, and by J.A. Austin accepting said appointment, which instrument was recorded in various Counties in the States of North Carolina and South Carolina; and
WHEREAS, an instrument, dated as of April 15, 1966, was executed by the Company appointing E.J. McCabe as Individual Trustee in succession to said J.A. Austin (resigned) under the Mortgage, and by E.J. McCabe accepting said appointment, which instrument was recorded in various Counties in the States of North Carolina and South Carolina; and
WHEREAS, by the Seventeenth Supplemental Indenture mentioned below, the Company, among other things, appointed G. White as Individual Trustee in succession to said E.J. McCabe (resigned), and G. White accepted said appointment; and
WHEREAS, by the Nineteenth Supplemental Indenture mentioned below, the Company, among other things, appointed D.W. May as Individual Trustee in succession to said G. White (resigned), and D.W. May accepted said appointment; and
WHEREAS, by the Thirty-fifth Supplemental Indenture mentioned below, the Company, among other things, appointed J.A. Vaughan as Individual Trustee in succession to said D.W. May (resigned), and J.A. Vaughan accepted said appointment; and
WHEREAS, an instrument, dated as of June 27, 1988, was executed by the Company appointing Joseph J. Arney as Individual Trustee in succession to said J.A. Vaughan (resigned) under the Mortgage, and by Joseph J. Arney accepting said appointment, which instrument was recorded in various Counties in the States of North Carolina and South Carolina; and
WHEREAS, by the Forty-fifth Supplemental Indenture mentioned below, the Company, among other things, appointed Wafaa Orfy as Individual Trustee in succession to said Joseph J. Arney (resigned), and Wafaa Orfy accepted said appointment; and
WHEREAS, by the Forty-ninth Supplemental Indenture mentioned below, the Company, among other things, appointed W.T. Cunningham as Individual Trustee in succession to said Wafaa Orfy (resigned), and W.T. Cunningham accepted said appointment; and
WHEREAS, by the Sixty-sixth Supplemental Indenture mentioned below, the Company, among other things, appointed Douglas J. MacInnes as Individual Trustee in succession to said W.T. Cunningham (resigned), and Douglas J. MacInnes accepted said appointment; and
WHEREAS, such instruments were indexed and cross-indexed in the real and chattel mortgage records in various Counties in the States of North Carolina and South Carolina; and
WHEREAS, by the Mortgage, the Company covenanted that it would execute and deliver such supplemental indenture or indentures and such further instruments and do such further acts as might be necessary or proper to carry out more effectually the purposes of the Mortgage and to make subject to the lien of the Mortgage any property thereafter acquired intended to be subject to the lien thereof; and
WHEREAS, for said purposes, among others, the Company executed and delivered to the Trustees the following supplemental indentures:
Designation Dated as of
----------- -----------
First Supplemental Indenture........................ January 1, 1949
Second Supplemental Indenture....................... December 1, 1949
Third Supplemental Indenture........................ February 1, 1951
Fourth Supplemental Indenture....................... October 1, 1952
Fifth Supplemental Indenture........................ March 1, 1958
Sixth Supplemental Indenture........................ April 1, 1960
Seventh Supplemental Indenture...................... November 1, 1961
Eighth Supplemental Indenture....................... July 1, 1964
Ninth Supplemental Indenture........................ April 1, 1966
Tenth Supplemental Indenture........................ October 1, 1967
Eleventh Supplemental Indenture..................... October 1, 1968
Twelfth Supplemental Indenture...................... January 1, 1970
Thirteenth Supplemental Indenture................... August 1, 1970
3
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Designation Dated as of
----------- -----------
Fourteenth Supplemental Indenture................... January 1, 1971
Fifteenth Supplemental Indenture.................... October 1, 1971
Sixteenth Supplemental Indenture.................... May 1, 1972
Seventeenth Supplemental Indenture.................. May 1, 1973
Eighteenth Supplemental Indenture................... November 1, 1973
Nineteenth Supplemental Indenture................... May 1, 1974
Twentieth Supplemental Indenture.................... December 1, 1974
Twenty-first Supplemental Indenture................. April 15, 1975
Twenty-second Supplemental Indenture................ October 1, 1977
Twenty-third Supplemental Indenture................. June 1, 1978
Twenty-fourth Supplemental Indenture................ May 15, 1979
Twenty-fifth Supplemental Indenture................. November 1, 1979
Twenty-sixth Supplemental Indenture................. November 1, 1979
Twenty-seventh Supplemental Indenture............... April 1, 1980
Twenty-eighth Supplemental Indenture................ October 1, 1980
Twenty-ninth Supplemental Indenture................. October 1, 1980
Thirtieth Supplemental Indenture.................... December 1, 1982
Thirty-first Supplemental Indenture................. March 15, 1983
Thirty-second Supplemental Indenture................ March 15, 1983
Thirty-third Supplemental Indenture................. December 1, 1983
Thirty-fourth Supplemental Indenture................ December 15, 1983
Thirty-fifth Supplemental Indenture................. April 1, 1984
Thirty-sixth Supplemental Indenture................. June 1, 1984
Thirty-seventh Supplemental Indenture............... June 1, 1984
Thirty-eighth Supplemental Indenture................ June 1, 1984
Thirty-ninth Supplemental Indenture................. April 1, 1985
Fortieth Supplemental Indenture..................... October 1, 1985
Forty-first Supplemental Indenture.................. March 1, 1986
Forty-second Supplemental Indenture................. July 1, 1986
Forty-third Supplemental Indenture.................. January 1, 1987
Forty-fourth Supplemental Indenture................. December 1, 1987
Forty-fifth Supplemental Indenture.................. September 1, 1988
Forty-sixth Supplemental Indenture.................. April 1, 1989
Forty-seventh Supplemental Indenture................ August 1, 1989
Forty-eighth Supplemental Indenture................. November 15, 1990
Forty-ninth Supplemental Indenture.................. November 15, 1990
Fiftieth Supplemental Indenture..................... February 15, 1991
Fifty-first Supplemental Indenture.................. April 1, 1991
Fifty-second Supplemental Indenture................. September 15, 1991
Fifty-third Supplemental Indenture.................. January 1, 1992
Fifty-fourth Supplemental Indenture................. April 15, 1992
Fifty-fifth Supplemental Indenture.................. July 1, 1992
Fifty-sixth Supplemental Indenture.................. October 1, 1992
Fifty-seventh Supplemental Indenture................ February 1, 1993
Fifty-eighth Supplemental Indenture................. March 1, 1993
4
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Designation Dated as of
----------- -----------
Fifty-ninth Supplemental Indenture.................. July 1, 1993
Sixtieth Supplemental Indenture..................... July 1, 1993
Sixty-first Supplemental Indenture.................. August 15, 1993
Sixty-second Supplemental Indenture................. January 15, 1994
Sixty-third Supplemental Indenture.................. May 1, 1994
Sixty-fourth Supplemental Indenture................. August 15, 1997
Sixty-fifth Supplemental Indenture.................. April 1, 1998
Sixty-sixth Supplemental Indenture.................. March 1, 1999
Sixty-seventh Supplemental Indenture................ March 1, 2000
Sixty-eighth Supplemental Indenture................. April 1, 2000
Sixty-ninth Supplemental Indenture.................. June 1, 2000
Seventieth Supplemental Indenture................... July 1, 2000
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which supplemental indentures (other than said Sixty-fifth Supplemental Indenture and said Sixty-seventh Supplemental Indenture) were recorded in various Counties in the States of North Carolina and South Carolina, and were indexed and cross-indexed in the real and chattel mortgage or security interest records in various Counties in the States of North Carolina and South Carolina; and
WHEREAS, no recording or filing of said Sixty-fifth Supplemental Indenture in any manner or place is required by law in order to fully preserve and protect the security of the bondholders and all rights of the Trustees or is necessary to make effective the lien intended to be created by the Mortgage or said Sixty-fifth Supplemental Indenture; and said Sixty-seventh Supplemental Indenture was recorded only in Rowan County, North Carolina to make subject to the lien of the Mortgage, as supplemented, certain property of the Company located in said County intended to be subject to the lien of the Mortgage, as supplemented, all in accordance with Section 42 of the Mortgage; and
WHEREAS, the Mortgage and said First through Seventieth Supplemental Indentures (other than said Sixty-fifth and said Sixty-seventh Supplemental Indentures) were or are to be recorded in all Counties in the States of North Carolina and South Carolina in which this Seventy-first Supplemental Indenture is to be recorded; and
WHEREAS, in addition to the property described in the Mortgage, as heretofore supplemented, the Company has acquired certain other property, rights and interests in property; and
WHEREAS, the Company has heretofore issued, in accordance with the provisions of the Mortgage, as supplemented, the following series of First Mortgage Bonds:
Series Principal Amount Issued Outstanding
------ ----------------------- -----------
3-3/4% Series due 1965 $ 46,000,000 None
3-1/8% Series due 1979 20,100,000 None
3-1/4% Series due 1979 43,930,000 None
5
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Series Principal Amount Issued Outstanding
------ ----------------------- ------------
2-7/8% Series due 1981 $ 15,000,000 None
3-1/2% Series due 1982 20,000,000 None
4-1/8% Series due 1988 20,000,000 None
4-7/8% Series due 1990 25,000,000 None
4-1/2% Series due 1991 25,000,000 None
4-1/2% Series due 1994 30,000,000 None
5-1/8% Series due 1996 30,000,000 None
6-3/8% Series due 1997 40,000,000 None
6-7/8% Series due 1998 40,000,000 None
8-3/4% Series due 2000 40,000,000 None
8-3/4% Series due August 1, 2000 50,000,000 None
7-3/8% Series due 2001 65,000,000 None
7-3/4% Series due October 1, 2001 70,000,000 None
7-3/4% Series due 2002 100,000,000 None
7-3/4% Series due 2003 100,000,000 None
8-1/8% Series due November 1, 2003 100,000,000 None
9-3/4% Series due 2004 125,000,000 None
11-1/8% Series due 1994 50,000,000 None
11% Series due April 15, 1984 100,000,000 None
8-1/2% Series due October 1, 2007 100,000,000 None
9-1/4% Series due June 1, 2008 100,000,000 None
10-1/2% Series due May 15, 2009 125,000,000 None
12-1/4% Series due November 1, 2009 100,000,000 None
Pollution Control Series A 63,000,000 None
14-1/8% Series due April 1, 1987 125,000,000 None
Pollution Control Series B 50,000,000 None
Pollution Control Series C 6,000,000 None
11-5/8% Series due December 1, 1992 100,000,000 None
Pollution Control Series D 48,485,000 $ 48,485,000
Pollution Control Series E 5,970,000 None
12-7/8% Series due December 1, 2013 100,000,000 None
Pollution Control Series F 34,700,000 34,700,000
13-3/8% Series due April 1, 1994 100,000,000 None
Pollution Control Series G 122,615,000 None
Pollution Control Series H 70,000,000 None
Pollution Control Series I 70,000,000 None
Pollution Control Series J 6,385,000 1,795,000
Pollution Control Series K 2,580,000 2,580,000
Extendible Series due April 1, 1995 125,000,000 None
11-3/4% Series due October 1, 2015 100,000,000 None
8-7/8% Series due March 1, 2016 100,000,000 None
8-1/8% Series due July 1, 1996 125,000,000 None
8-1/2% Series due January 1, 2017 100,000,000 None
9.174% Series due December 1, 1992 100,000,000 None
9% Series due September 1, 1993 100,000,000 None
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Series Principal Amount Issued Outstanding
------ ----------------------- -------------
9.60% Series due April 1, 1991 $100,000,000 None
Secured Medium-Term Notes, Series A 200,000,000 None
8-1/8% Series due November 15, 1993 100,000,000 None
Secured Medium-Term Notes, Series B 100,000,000 None
8-7/8% Series due February 15, 2021 125,000,000 None
9% Series due April 1, 2022 100,000,000 None
8-5/8% Series due September 15, 2021 100,000,000 $100,000,000
5.20% Series due January 1, 1995 125,000,000 None
7-7/8% Series due April 15, 2004 150,000,000 150,000,000
8.20% Series due July 1, 2022 150,000,000 150,000,000
6-3/4% Series due October 1, 2002 100,000,000 100,000,000
6-1/8% Series due February 1, 2000 150,000,000 None
7-1/2% Series due March 1, 2023 150,000,000 150,000,000
5-3/8% Series due July 1, 1998 100,000,000 None
Secured Medium-Term Notes, Series C 200,000,000 None
6-7/8% Series due August 15, 2023 100,000,000 100,000,000
5-7/8% Series due January 15, 2004 150,000,000 150,000,000
Pollution Control Series L 72,600,000 72,600,000
Pollution Control Series M 50,000,000 50,000,000
6.80% Series due August 15, 2007 200,000,000 200,000,000
5.95% Senior Note Series due March 1, 2009 400,000,000 400,000,000
7.50% Senior Note Series Due April 1, 2005 300,000,000 300,000,000
Pollution Control Series N 67,300,000 67,300,000
Pollution Control Series O 55,640,000 55,640,000
Pollution Control Series P 50,000,000 50,000,000
Pollution Control Series Q 50,000,000 50,000,000
Pollution Control Series R 45,600,000 45,600,000
Pollution Control Series S 41,700,000 41,700,000
Pollution Control Series T 50,000,000 50,000,000
Pollution Control Series U 50,000,000 50,000,000
Pollution Control Series V 87,400,000 87,400,000
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which bonds are sometimes called bonds of the First through Seventy-ninth Series, respectively; and
WHEREAS, Section 8 of the Mortgage provides that the form of each series of bonds (other than the First Series) issued thereunder and of the coupons to be attached to coupon bonds of such series shall be established by Resolution of the Board of Directors of the Company and that the form of such series, as established by said Board of Directors, shall specify the descriptive title of the bonds and various other terms thereof, and may also contain such provisions not inconsistent with the provisions of the Mortgage as said Board of Directors may, in its discretion, cause to be inserted therein expressing or referring to the terms and conditions upon which such bonds are to be issued and/or secured under the Mortgage; and
WHEREAS, Section 120 of the Mortgage provides, among other things, that any power, privilege or right expressly or impliedly reserved to or in any way conferred upon the Company by any provision of the Mortgage, whether such power, privilege or right is in any way restricted or is unrestricted, may be in whole or in part waived or surrendered or subjected to any restriction if at the time unrestricted or to additional restriction if already restricted, and the Company may enter into any further covenants, limitations or restrictions for the benefit of any one or more series of bonds issued thereunder, or the Company may cure any ambiguity contained therein, or in any supplemental indenture, or may establish the terms and provisions of any series of bonds other than said First Series, by an instrument in writing executed and acknowledged by the Company in such manner as would be necessary to entitle a conveyance of real estate to record in all of the states in which any property at the time subject to the lien of the Mortgage shall be situated; and
WHEREAS, the Company now desires to create a new series of bonds and to add to its covenants and agreements contained in the Mortgage, as heretofore supplemented, certain other covenants and agreements to be observed by it and to alter and amend in certain respects the covenants and provisions contained in the Mortgage, as heretofore supplemented; and
WHEREAS, the execution and delivery by the Company of this Seventy-first Supplemental Indenture, and the terms of the bonds of the Eightieth Series, hereinafter referred to, have been duly authorized by the Board of Directors of the Company by appropriate resolutions of said Board of Directors;
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That the Company, in consideration of the premises and of One Dollar to it duly paid by the Trustees at or before the ensealing and delivery of these presents, the receipt whereof is hereby acknowledged, and in further evidence of assurance of the estate, title and rights of the Trustees and in order further to secure the payment of both the principal of and interest and premium, if any, on the bonds from time to time issued under the Mortgage, according to their tenor and effect and the performance of all the provisions of the Mortgage (including any instruments supplemental thereto and any modification made as in the Mortgage provided) and of said bonds, hereby grants, bargains, sells, releases, conveys, assigns, transfers, mortgages, pledges, sets over and confirms (subject, however, to Excepted Encumbrances as defined in Section 6 of the Mortgage) unto The Bank of New York and Douglas J. MacInnes, as Trustees under the Mortgage, and to their successor or successors in said trust, and to said Trustees and their successors and assigns forever, all the following described properties of the Company:
All electric generating plants, stations, transmission lines, and electric distribution systems, including permanent improvements, extensions or additions to or about such electrical plants, stations, transmission lines and distribution systems of the Company; all dams, power houses, power sites, buildings, generators, reservoirs, pipe lines, flumes, structures and works; all substations, transformers, switchboards, towers, poles, wires, insulators, and other appliances and equipment, and the Company's rights or interests in the land upon which the same are situated, and all other
property, real or personal, forming a part of or appertaining to, or used, occupied or enjoyed in connection with said generating plants, stations, transmission lines, and distribution systems; together with all rights of way, easements, permits, privileges, franchises and rights for or related to the construction, maintenance, or operation thereof, through, over, under or upon any public streets or highways, or the public lands of the United States, or of any State or other lands; and all water appropriations and water rights, permits and privileges; including all property, real, personal, and mixed, acquired by the Company after the date of the execution and delivery of the Mortgage, in addition to property covered by the above-mentioned supplemental indentures (except any herein or in the Mortgage, as heretofore supplemented, expressly excepted), now owned or, subject to the provisions of Section 87 of the Mortgage, hereafter acquired by the Company and wheresoever situated, including (without in anywise limiting or impairing by the enumeration of the same the scope and intent of the foregoing or of any general description contained in this Seventy-first Supplemental Indenture) all lands, power sites, flowage rights, water rights, flumes, raceways, dams, rights of way and roads; all steam and power houses, gas plants, street lighting systems, standards and other equipment incidental thereto, telephone, radio and television systems, air-conditioning systems and equipment incidental thereto, water works, steam heat and hot water plants, lines, service and supply systems, bridges, culverts, tracts, ice or refrigeration plants and equipment, street and interurban railway systems, offices, buildings and other structures and the equipment thereof; all machinery, engines, boilers, dynamos, electric and gas machines, regulators, meters, transformers, generators, motors, electrical, gas and mechanical appliances, conduits, cables, water, steam heat, gas or other pipes, gas mains and pipes, service pipes, fittings, valves and connections, pole and transmission lines, wires, cables, tools, implements, apparatus, furniture, chattels and choses in action; all municipal and other franchises, consents or permits; all lines for the transmission and distribution of electric current, gas, steam heat or water for any purpose including poles, wires, cables, pipes, conduits, ducts and all apparatus for use in connection therewith; all real estate, lands, easements, servitudes, licenses, permits, franchises, privileges, rights of way and other rights in or relating to real estate or the occupancy of the same and (except as herein or in the Mortgage, as heretofore supplemented, expressly excepted) all the right, title and interest of the Company in and to all other property of any kind or nature appertaining to and/or used and/or occupied and/or enjoyed in connection with any property
hereinbefore or in the Mortgage, as heretofore supplemented, described.
TOGETHER WITH all and singular the tenements, hereditaments and appurtenances belonging or in anywise appertaining to the aforesaid property or any part thereof, with the reversion and reversions, remainder and remainders and (subject to the provisions of Section 57 of the Mortgage) the tolls, rents, revenues, issues, earnings, income, product and profits thereof, and all the estate, right, title and interest and claim whatsoever, at law as well as in equity, which the Company now has or may hereafter acquire in and to the aforesaid property and franchises and every part and parcel thereof.
IT IS HEREBY AGREED by the Company that, subject to the provisions of
Section 87 of the Mortgage, all the property, rights and franchises acquired by
the Company after the date hereof (except any herein or in the Mortgage, as
heretofore supplemented, expressly excepted) shall be and are as fully granted
and conveyed hereby and as fully embraced within the lien hereof and the lien of
the Mortgage as if such property, rights and franchises were now owned by the
Company and were specifically described herein and conveyed hereby.
PROVIDED THAT the following are not and are not intended to be now or hereafter granted, bargained, sold, released, conveyed, assigned, transferred, mortgaged, pledged, set over or confirmed hereunder and are hereby expressly excepted from the lien and operation of this Seventy-first Supplemental Indenture and from the lien and operation of the Mortgage, namely: (1) cash, shares of stock and obligations (including bonds, notes and other securities) not hereafter specifically pledged, paid, deposited or delivered under the Mortgage or covenanted so to be; (2) merchandise, equipment, materials or supplies held for the purpose of sale in the usual course of business and fuel, oil and similar materials and supplies consumable in the operation of any properties of the Company; rolling stock, buses, motor coaches, vehicles and automobiles; (3) bills, notes and accounts receivable, and all contracts, leases and operating agreements not specifically pledged under the Mortgage, as heretofore supplemented, or this Seventy-first Supplemental Indenture or covenanted so to be; (4) electric energy and other materials or products generated, manufactured, produced or purchased by the Company for sale, distribution or use in the ordinary course of its business; and (5) any property and rights heretofore released from the lien of the Mortgage; provided, however, that the property and rights expressly excepted from the lien and operation of the Mortgage and this Seventy-first Supplemental Indenture in the above subdivisions (2) and (3) shall (to the extent permitted by law) cease to be so excepted in the event and as of the date that either or both of the Trustees or a receiver or trustee shall enter upon and take possession of the Mortgaged and Pledged Property in the manner provided in Article XII of the Mortgage by reason of the occurrence of a Default as defined in said Article XII.
TO HAVE AND TO HOLD all such properties, real, personal and mixed, granted, bargained, sold, released, conveyed, assigned, transferred, mortgaged, pledged, set over or confirmed by the Company as aforesaid, or intended so to be, unto the Trustees, their successors and assigns forever.
IN TRUST NEVERTHELESS, for the same purposes and upon the same terms, trusts and conditions and subject to and with the same provisos and covenants as are set forth in the Mortgage, as heretofore supplemented, this Seventy-first Supplemental Indenture being supplemental to the Mortgage.
AND IT IS HEREBY COVENANTED by the Company that all the terms, conditions, provisos, covenants and provisions contained in the Mortgage, as heretofore supplemented, shall affect and apply to the property hereinbefore described and conveyed and to the estate, rights, obligations and duties of the Company and the Trustees and the beneficiaries of the trust with respect to said property, and to the Trustees and their successors as Trustees of said property in the same manner and with the same effect as if the said property had been owned by the Company at the time of the execution of the Mortgage and had been specifically and at length described in and conveyed to the Trustees by the Mortgage as a part of the property therein stated to be conveyed.
The Company further covenants and agrees to and with the Trustees and their successor or successors in such trust under the Mortgage as follows:
ARTICLE I
EIGHTIETH SERIES OF BONDS
Section 1.(I) There shall be a series of bonds designated "Pollution Control Series W" (herein sometimes referred to as the "Eightieth Series"), each of which shall also bear the descriptive title "First Mortgage Bond," and the form thereof, which shall be established by Resolution of the Board of Directors of the Company, shall contain suitable provisions with respect to the matters hereinafter in this Section specified. Bonds of the Eightieth Series shall be dated as in Section 10 of the Mortgage provided, and mature on February 1, 2017.
Bonds of the Eightieth Series shall be issued as fully registered bonds in denominations of Five Thousand Dollars and, at the option of the Company, in any multiple or multiples of Five Thousand Dollars (the exercise of such option to be evidenced by the execution and delivery thereof); they shall bear interest at the rate of 5.375% per annum, payable on each Interest Payment Date, as such term is defined in the Pollution Control Revenue Refunding Bonds (Carolina Power & Light Company Project), Series 2002 (the "Wake Bonds") issued by The Wake County Industrial Facilities and Pollution Control Financing Authority (the "Wake Authority") under the Trust Indenture, dated as of February 1, 2002 (the "Wake Indenture"), between the Wake Authority and First Union National Bank, as trustee (the "Wake Trustee," which term includes any successor trustee under the Wake Indenture) (each a "Wake Interest Payment Date"), from the last Wake Interest Payment Date to which interest on the Wake Bonds has been paid in full or, if no interest has been paid in full on the Wake Bonds, then from the date of first authentication by the Corporate Trustee of bonds of the Eightieth Series. The principal of, premium, if any, and interest on each said bond shall be payable at the office or agency of the Company in the Borough of Manhattan, The City of New York, in such coin or currency of the United States of America as at the time of payment is legal tender for public and private debts.
(II) The bonds of the Eightieth Series shall be initially issued in the aggregate principal amount of $48,485,000 to, and registered in the name of, the Wake Trustee in order to secure the obligation of the Company to repay loans of the proceeds of the sale of the Wake Bonds made by the Wake Authority to the Company pursuant to the Loan Agreement, dated as of February 1, 2002 (the "Wake Loan Agreement"), to finance costs of refunding the outstanding $48,485,000 Pollution Control Revenue Bonds (Carolina Power & Light Company Project) Adjustable Rate Option Bond Series 1983.
The Company's obligation to make payments with respect to the principal of, premium, if any, and interest on the bonds of the Eightieth Series shall be fully or partially satisfied and discharged to the extent that, at the time any such payment shall be due, the corresponding amount then due of principal of, and/or premium, if any, and interest on the Wake Bonds, issued contemporaneously herewith, shall have been fully or partially paid (other than by the application of the proceeds of a payment in respect of the bonds of the Eightieth Series), as the case may be, or there shall have been deposited with the Wake Trustee pursuant to the Wake Indenture trust funds sufficient under the Wake Indenture to pay fully or partially, as the case may be, the corresponding amount then due of principal of, and/or premium, if any, and/or interest on, the Wake Bonds (other than by the application of the proceeds of a payment in respect of the bonds of the Eightieth Series).
Upon payment of the principal of, premium if any, and interest due on the Wake Bonds, whether at maturity or prior to maturity by acceleration, redemption or otherwise, or upon provision for the payment thereof having been made in accordance with the Wake Indenture (other than by the application of the proceeds of a payment in respect of the bonds of the Eightieth Series), bonds of the Eightieth Series in a principal amount equal to the principal amount of Wake Bonds so paid or for which such provision for payment has been made shall be deemed fully paid, satisfied and discharged, and the obligations of the Company thereunder shall be terminated and the bonds of the Eightieth Series shall be surrendered to the Corporate Trustee and canceled by the Corporate Trustee in accordance with Section 56 of the Mortgage, except as otherwise provided in the Wake Indenture.
From and after the Release Date (as defined in the Wake Indenture (the "Wake Release Date")), and upon delivery to the Wake Trustee of the documents provided for in Section 4.01(a)(iii) of the Wake Loan Agreement, the bonds of the Eightieth Series shall be deemed fully paid, satisfied and discharged, the obligation of the Company thereunder shall be terminated, and the bonds of the Eightieth Series shall be surrendered to the Corporate Trustee and canceled by the Corporate Trustee in accordance with Section 56 of the Mortgage.
The Corporate Trustee may conclusively presume that the obligation of the Company to pay the principal of, premium, if any, and interest on the bonds of the Eightieth Series as the same shall become due and payable shall have been fully satisfied and discharged unless and until it shall have received a written notice from the Wake Trustee, signed by its President, a Vice President or a Trust Officer, stating that the corresponding payment of principal of, or premium, if any, or interest on the Wake Bonds has become due and payable and has not been fully paid and, with respect to principal and premium, if any, of the Wake Bonds, specifying the principal of, and premium, if any, on the Wake Bonds then due and payable and the amount of funds required to make such payment, and, with respect to interest on the Wake Bonds,
specifying the last date to which interest has been paid and the amount of funds required to make such payment.
(III) In the event that any Wake Bonds are to be redeemed pursuant to the Wake Indenture, bonds of the Eightieth Series, in a principal amount equal to the principal amount of Wake Bonds so to be redeemed, shall be redeemed by the Company, on the date fixed for redemption of such Wake Bonds, at the principal amount thereof plus accrued interest to such redemption date and, should the Wake Bonds so to be redeemed be redeemable at a price that includes a redemption premium, together with premium in an amount equal to such redemption premium on such Wake Bonds.
In the event that the principal of and accrued interest on the Wake Bonds shall have been declared by the Wake Trustee to be due and payable in accordance with the provisions of Section 12.03 of the Wake Indenture, the bonds of the Eightieth Series then Outstanding shall be redeemed by the Company, immediately and on the same date as the Wake Bonds thereby become due and payable, at the principal amount thereof and premium, if any, plus accrued interest to the date of their payment; provided, however, that if such declaration and its consequences have been rescinded and annulled in accordance with the provisions of Section 12.03 of the Wake Indenture, the Company shall not be required so to redeem any bonds of the Eightieth Series then Outstanding.
The Corporate Trustee may conclusively presume that no redemption of bonds of the Eightieth Series is required pursuant to this subsection (III) unless and until it shall have received a written notice from the Wake Trustee, signed by its President, a Vice President or a Trust Officer, stating that the Wake Bonds are to be redeemed pursuant to the Wake Indenture or stating that the principal of and accrued interest on the Wake Bonds has been declared by the Wake Trustee to be due and payable pursuant to Section 12.03 of the Wake Indenture, as the case may be, and specifying the principal amount and premium, if any, and accrued and unpaid interest, if any, and redemption date of the Wake Bonds to be so redeemed. Said notice shall also contain a waiver of notice of said redemption by the Wake Trustee, as holder of all the bonds of the Eightieth Series then Outstanding.
Bonds of the Eightieth Series shall not be redeemable at the option of the Company except as provided in this subsection (III).
(IV) The Company hereby waives its right to have any notice of redemption pursuant to subsection (III) of this Section 1 state that such notice is subject to the receipt of the redemption moneys by the Corporate Trustee before the date fixed for redemption. Notwithstanding the provisions of Section 52 of the Mortgage, any such notice under such subsection shall not be conditional.
(V) The bonds of the Eightieth Series shall not be transferable except as required to effect an assignment to a successor trustee under the Wake Indenture or a nominee of such trustee, any such transfer to be made at the office or agency of the Company in the Borough of Manhattan, The City of New York.
At the option of the registered owner, any bonds of the Eightieth Series, upon surrender thereof for cancellation at the office or agency of the Company in the Borough of Manhattan, The City of New York, are exchangeable for a like aggregate principal amount of bonds of the same series of other authorized denominations. The bonds of the Eightieth Series may bear such legends as may be necessary to comply with any law or with any rules or regulations made pursuant thereto or with the rules or regulations of any stock exchange or to conform to usage or agreement with respect thereto.
Upon any exchange or transfer of bonds of the Eightieth Series, the Company
may make a charge therefor sufficient to reimburse it for any tax or taxes or
other governmental charge required to be paid by the Company, as provided in
Section 12 of the Mortgage, but the Company hereby waives any right to make a
charge in addition thereto for any exchange or transfer of bonds of said Series.
(VI) The Company covenants and agrees that, prior to the Wake Release Date, it will not take any action that would cause the outstanding principal amount of the bonds of the Eightieth Series to be less than the then outstanding principal amount of the Wake Bonds.
ARTICLE II
CERTAIN PROVISIONS WITH RESPECT TO FUTURE ADVANCES
SECTION 2. Upon the filing of this Seventy-first Supplemental Indenture for record in all counties in which the Mortgaged and Pledged Property is located, and until a further indenture or indentures supplemental to the Mortgage shall be executed and delivered by the Company to the Trustees pursuant to authorization by the Board of Directors of the Company and filed for record in all counties in which the Mortgaged and Pledged Property is located further increasing or decreasing the amount of future advances which may be secured by the Mortgage, as supplemented, the Mortgage, as supplemented, may secure future advances and other indebtedness and sums not to exceed in the aggregate $750,000,000, in addition to $2,556,650,000 in aggregate principal amount of bonds to be Outstanding at the time of such filing, and all such advances and other indebtedness and sums shall be secured by the Mortgage, as supplemented, equally, to the same extent and with the same priority, as the amount originally advanced on the security of the Mortgage, namely, $46,000,000, and such advances and other indebtedness and sums may be made or become owing and may be repaid and again made or become owing and the amount so stated shall be considered only as the total amount of such advances and other indebtedness and sums as may be outstanding at one time.
ARTICLE III
MISCELLANEOUS PROVISIONS
SECTION 3. Subject to any amendments provided for in this Seventy-first Supplemental Indenture, the terms defined in the Mortgage, as heretofore supplemented, shall, for all purposes of this Seventy-first Supplemental Indenture, have the meanings specified in the Mortgage, as heretofore supplemented.
SECTION 4. The Trustees hereby accept the trusts herein declared, provided, created or supplemented and agree to perform the same upon the terms and conditions herein and in the Mortgage, as heretofore supplemented, set forth and upon the following terms and conditions:
The Trustees shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Seventy-first Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made by the Company solely. In general each and every term and condition contained in Article XVI of the Mortgage shall apply to and form part of this Seventy-first Supplemental Indenture with the same force and effect as if the same were herein set forth in full with such omissions, variations and insertions, if any, as may be appropriate to make the same conform to the provisions of this Seventy-first Supplemental Indenture.
SECTION 5. Subject to the provisions of Article XV and Article XVI of the Mortgage, whenever in this Seventy-first Supplemental Indenture either of the parties hereto is named or referred to, this shall be deemed to include the successors or assigns of such party, and all the covenants and agreements in this Seventy-first Supplemental Indenture contained by or on behalf of the Company or by or on behalf of the Trustees shall bind and inure to the benefit of the respective successors and assigns of such parties whether so expressed or not.
SECTION 6. Nothing in this Seventy-first Supplemental Indenture, expressed or implied, is intended, or shall be construed, to confer upon, or to give to, any person, firm or corporation, other than the parties hereto and the holders of the Outstanding bonds and coupons, any right, remedy or claim under or by reason of this Seventy-first Supplemental Indenture or any covenant, condition, stipulation, promise or agreement hereof, and all the covenants, conditions, stipulations, promises and agreements in this Seventy-first Supplemental Indenture contained by or on behalf of the Company shall be for the sole and exclusive benefit of the parties hereto, and of the holders of the Outstanding bonds and coupons.
SECTION 7. This Seventy-first Supplemental Indenture shall be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.
IN WITNESS WHEREOF, Carolina Power & Light Company has caused its corporate name to be hereunto affixed, and this instrument to be signed and sealed by its President or one of its Vice Presidents or its Treasurer and its corporate seal to be attested by its Secretary or one of its Assistant Secretaries, and The Bank of New York has caused its corporate name to be hereunto affixed, and this instrument to be signed and sealed by one of its Vice Presidents or Assistant Vice Presidents, and its corporate seal to be attested by one of its Vice Presidents, Assistant Vice Presidents or Assistant Treasurers and Douglas J. MacInnes has hereunto set his hand and affixed his seal, all as of the day and year first above written.
CAROLINA POWER & LIGHT COMPANY
ATTEST:
Executed, sealed and delivered by CAROLINA POWER & LIGHT COMPANY in the presence of:
(Trustees' Signature Page Follows)
Trustees' Signature Page
Seventy-first Supplemental Indenture dated as of February 1, 2002, to Mortgage and Deed of Trust dated as of May 1, 1940
THE BANK OF NEW YORK, as Trustee
ATTEST:
Executed, sealed and delivered
by THE BANK OF NEW YORK and
DOUGLAS J. MACINNES
in the presence of:
STATE OF NORTH CAROLINA )
) SS.:
COUNTY OF WAKE )
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This 5th day of February, A.D. 2002, personally came before me, Sherry M. Dean, a Notary Public for Wake County, THOMAS R. SULLIVAN, who, being by me duly sworn, says that he is the Vice President and Treasurer of CAROLINA POWER & LIGHT COMPANY, and that the seal affixed to the foregoing instrument in writing is the corporate seal of said company, and that said writing was signed and sealed by him in behalf of said corporation by its authority duly given. And the said THOMAS R. SULLIVAN acknowledged the said writing to be the act and deed of said corporation.
On the 5th day of February, in the year of 2002, before me personally came THOMAS R. SULLIVAN, to me known, who, being by me duly sworn, did depose and say that he resides at 121 Lock Pointe Drive, Cary, North Carolina 27511, State of North Carolina; that he is the Treasurer of CAROLINA POWER & LIGHT COMPANY, one of the corporations described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like order.
Notary Public, State of North Carolina Wake County My Commission Expires: 10/14/2003
STATE OF NORTH CAROLINA )
) SS.:
COUNTY OF WAKE )
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Personally appeared before me Sarah Nelson, who being duly sworn, says that she saw the corporate seal of CAROLINA POWER & LIGHT COMPANY affixed to the above written instrument, and that she also saw THOMAS R. SULLIVAN, Treasurer, with PATRICIA KORNEGAY-TIMMONS, an Assistant Secretary, of said CAROLINA POWER & LIGHT COMPANY, sign and attest the same, and that she, deponent, with Phyllis Jensen, witnessed the execution and delivery thereof as the act and deed of said CAROLINA POWER & LIGHT COMPANY.
Sworn to before me this 5th day of February, 2002
Sherry M. Dean, Notary Public
State of North Carolina, Wake County
My Commission Expires: October 14, 2003
STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )
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I, WILLIAM J. CASSELS, a Notary Public in and for the County aforesaid, do hereby certify that DOUGLAS J. MACINNES personally appeared before me this day and acknowledged the due execution by him as successor Individual Trustee of the foregoing instrument.
WITNESS my hand and official seal this day of February, 2002.
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--------------------------------
Notary Public, State of New York
No. 01CA5027729
Qualified in Bronx County
Commission Expires May 16, 2002
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STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )
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WITNESS my hand and official seal this day of February, 2002.
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--------------------------------
Notary Public, State of New York
No. 01CA5027729
Qualified in Bronx County
Commission Expires May 16, 2002
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EXECUTION COPY
$375,000,000
5-YEAR REVOLVING CREDIT AGREEMENT
Dated as of June 30, 1998
CAROLINA POWER & LIGHT COMPANY
(Company)
and
THE BANKS LISTED ON THE SIGNATURE PAGES HEREOF
(Banks)
and
THE OTHER LENDERS FROM TIME TO TIME
PARTY HERETO
(Lenders)
and
CITIBANK, N.A.
(Administrative Agent)
and
WACHOVIA BANK, NATIONAL ASSOCIATION
(Documentation Agent)
REVOLVING CREDIT AGREEMENT
Dated as of June 30, 1998
CAROLINA POWER & LIGHT COMPANY, a North Carolina corporation (the "Company"), the banks listed on the signature pages hereof (the "Banks") CITIBANK, N.A. ("Citibank"), as administrative agent (the "Administrative Agent") for the Lenders (as hereinafter defined) hereunder, and Wachovia Bank, National Association ("Wachovia"), as Documentation Agent, agree as follows:
ARTICLE I.
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):
"A Advance" means an advance by a Lender to the Company as part of an A Borrowing and refers to a Base Rate Advance or a Eurodollar Rate Advance, each of which shall be a "Type" of A Advance.
"A Borrowing" means a borrowing consisting of simultaneous A Advances of the same Type made by each of the Lenders pursuant to Section 2.01.
"A Note" means a promissory note of the Company payable to the order of any Lender, in substantially the form of Exhibit A-1 hereto, evidencing the aggregate indebtedness of the Company to such Lender resulting from the A Advances made by such Lender.
"Advance" means an A Advance or a B Advance.
"Affiliate" means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by, or is under common control with such Person or is a director or officer of such Person.
"Applicable Lending Office" means, with respect to each Lender, (i) such Lender's Domestic Lending Office in the case of a Base Rate Advance, or (ii) such Lender's Eurodollar Lending Office, in the case of a Eurodollar Rate Advance.
"Applicable Margin" means on any date, the rate per annum set forth below, determined by reference to the First Mortgage Bond ratings of the Company:
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Basis for LEVEL 1 LEVEL 2 LEVEL 3 LEVEL 4 LEVEL 5
Pricing If the First If the First If the First If the First If the First
Mortgage Bonds Mortgage Bonds Mortgage Bonds Mortgage Bonds Mortgage Bonds
are rated at are rated at are rated at are rated at are rated less
least A- by least BBB+ by least BBB by least BBB- by than Level 4
Standard & Standard & Standard & Poor's Standard & Poor's
Poor's or at Poor's or at or at least Baa2 or at least Baa3
least A3 by least Baa1 by by Moody's by Moody's
Moody's Moody's
-----------------------------------------------------------------------------------------------------
Eurodollar 0.200% 0.225% 0.300% 0.300% 0.550%
Rate
-----------------------------------------------------------------------------------------------------
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"Assignment and Acceptance" means an assignment and acceptance entered into by a Lender and an Eligible Assignee, and accepted by the Administrative Agent, in substantially the form of Exhibit C hereto.
"B Advance" means an advance by a Lender to the Company as part of a B Borrowing resulting from the auction bidding procedure described in Section 2.03.
"B Borrowing" means a borrowing consisting of simultaneous B Advances from each of the Lenders whose offer to make one or more B Advances as part of such borrowing has been accepted by the Company under the auction bidding procedure described in Section 2.03.
"B Note" means a promissory note of the Company payable to the order of any Lender, in substantially the form of Exhibit A-2 hereto, evidencing the indebtedness of the Company to such Lender resulting from a B Advance made by such Lender.
"B Reduction" has the meaning specified in Section 2.01.
"Base Rate" means, for any Interest Period or any other period, a fluctuating interest rate per annum as shall be in effect from time to time, which rate per annum shall at all times be equal to the highest from time to time of:
(a) the rate of interest announced publicly by Citibank in New York, New York, from time to time, as Citibank's base rate;
(b) 1/2 of one percent per annum above the latest three-week moving average of secondary market morning offering rates in the United States for three-month certificates of deposit of major United States money market banks, such three-week moving average being determined weekly by Citibank on the basis of
such rates reported by certificate of deposit dealers to and published by the Federal Reserve Bank of New York or, if such publication shall be suspended or terminated, on the basis of quotations for such rates received by Citibank from three New York certificate of deposit dealers of recognized standing selected by Citibank, in either case rounded upward to the nearest 1/4 of one percent; and
(c) 1/2 of one percent per annum above the Federal Funds Rate in effect from time to time.
"Base Rate Advance" means an A Advance which bears interest as provided in Section 2.07(a).
"Borrowing" means an A Borrowing or a B Borrowing.
"Business Day" means a day of the year on which banks are not required or authorized to close at the principal office of any Lender and, if the applicable Business Day relates to any Eurodollar Rate Advances, on which dealings are carried on in the London interbank market.
"Commitment" has the meaning specified in Section 2.01.
"Consolidated" refers to the consolidation of the accounts of the Company and the Subsidiaries in accordance with generally accepted accounting principles, including principles of consolidation, consistent with those applied in the preparation of the financial statements referred to in Section 4.01(e).
"Convert", "Conversion" and "Converted" each refers to a conversion of Advances of one Type into Advances of another Type, or the selection of a new, or the renewal of the same, Interest Period for Eurodollar Rate Advances, pursuant to Section 2.09 or 2.10.
"Domestic Lending Office" means, with respect to any Lender, the office of such Lender specified as its "Domestic Lending Office" below its name on the signature pages hereof or such other office of such Lender as such Lender may from time to time specify to the Company and the Administrative Agent.
"Eligible Assignee" means (i) any other Lender or any Affiliate of a
Lender meeting the criteria set forth in clause (ii) hereof (without regard
to the proviso at the end of such clause) and (ii) (A) any other commercial
bank organized under the laws of the United States, or any State thereof,
and having a combined capital and surplus of at least $250,000,000 (as
established in its most recent report of condition to its primary
regulator), (B) a savings and loan association or savings bank organized
under the laws of the United States, or any State thereof, and having a
combined capital and surplus of at least $250,000,000 (as established in
its most recent report of condition to its primary regulator), (C) a
commercial bank organized under the laws of any other country which is a
member of the OECD or has concluded special lending arrangements with the
International Monetary Fund associated with its General Arrangements to
Borrow of the Cayman Islands, or a political subdivision of any such
country, and having a combined capital and surplus of at least $250,000,000
(as established in its most recent report of condition to its primary
regulator); provided that such bank is acting through a branch or agency
located in the United States or in the country in which it is organized or
another country which is described in this clause (C), (D) the central bank
of any country which is a member of the OECD, and (E) a finance company,
insurance company or other financial institution or fund (whether a
corporation, partnership or other entity) which is engaged in making,
purchasing or otherwise investing in commercial loans in the ordinary
course of its business, whose outstanding unsecured indebtedness is rated
AA- or better by S&P or Aa3 or better by Moody's (or an equivalent rating
by another nationally-recognized credit rating agency of similar standing
if neither of such corporations is then in the business of rating unsecured
indebtedness); provided, that, in the case of any such Person described in
this clause (ii), the identity of such Person is notified by the proposed
assignor to the Company and the Administrative Agent (or by the Company to
the Administrative Agent pursuant to Section 8.07(g)) in writing at least
ten Business Days prior to the date of the proposed assignment under
Section 8.07 and is consented to in writing by the Company and the
Administrative Agent (each of which shall not unreasonably withhold their
respective consents) at least five Business Days prior to the date of such
proposed assignment.
"Environmental Laws" means any federal, state or local laws, ordinances or codes, rules, orders, or regulations relating to pollution or protection of the environment, including, without limitation, laws relating to hazardous substances, laws relating to reclamation of land and waterways and laws relating to emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes into the environment (including, without limitation, ambient air, surface water, ground water, land surface or subsurface strata) or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollution, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder.
"Eurocurrency Liabilities" has the meaning assigned to that term in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time.
"Eurodollar Lending Office" means, with respect to each Lender, the office of such Lender specified as its "Eurodollar Lending Office" below its name on the signature pages hereof (or, if no such office is specified, its Domestic Lending Office), or such other office of such Lender as such Lender may from time to time specify to the Company and the Administrative Agent.
"Eurodollar Rate" means, for the Interest Period for each Eurodollar Rate Advance comprising part of the same A Borrowing an interest rate per annum equal to the average (rounded upward to the nearest whole multiple of 1/8 of 1% per annum, if such average is not such a multiple) of the rates per annum at which deposits in U.S. dollars are offered by the principal office of each of the Reference Banks in London, England to prime banks in the London Interbank market at 11:00 A.M. (London time) two Business Days before the first day of such Interest Period for a period equal to such Interest Period and in an amount substantially equal to the amount of such Eurodollar Rate Advance comprising part of such A Borrowing to be outstanding during such Interest Period from such Reference Bank. The Eurodollar Rate for the Interest Period for each Eurodollar Rate Advance comprising part of the same A Borrowing shall be determined by the Administrative Agent on the basis of the applicable rates furnished to and received by the Administrative Agent from the Reference Banks two Business Days before the first day of such Interest Period, subject, however, to the provisions of Section 2.08.
"Eurodollar Rate Advance" means an A Advance which bears interest as provided in Section 2.07(b).
"Eurodollar Rate Reserve Percentage" of any Lender for the Interest Period for any Eurodollar Rate Advance means the reserve percentage applicable during such Interest Period (or if more than one such percentage shall be so applicable, the daily average of such percentages for those days in such Interest Period during which any such percentage shall be so applicable) under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for such Lender with respect to liabilities or assets consisting of or including Eurocurrency Liabilities having a term equal to such Interest Period.
"Events of Default" has the meaning assigned to that term in Section 6.01.
"Existing Facilities" refers to those credit agreements listed on Schedule 1 hereto.
"Extension Date" means the 364th day following the date of this Agreement and each 364th day thereafter.
"Federal Funds Rate" means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.
"First Mortgage Bonds" means those bonds issued by the Company pursuant to the Mortgage.
"Guaranty" of any Person means any obligation, contingent or otherwise, of such Person (a) to pay any Liability of any other Person or to otherwise protect, or having the practical effect of protecting, the holder of any such Liability against loss (whether such obligation arises by virtue of such Person being a partner of a partnership or participant in a joint venture or by agreement to pay, to keep well, to purchase assets, goods, securities or services or to take or pay, or otherwise) or (b) incurred in connection with the issuance by a third person of a Guaranty of any Liability of any other Person (whether such obligation arises by agreement to reimburse or indemnify such third Person or otherwise). The word "Guarantee" when used as a verb has the correlative meaning.
"Indebtedness" of any Person means (a) any obligation of such Person
for borrowed money, (b) any obligation of such Person evidenced by a bond,
debenture, note or other similar instrument, (c) any obligation of such
Person to pay the deferred purchase price of property or services, except a
trade account payable that arises in the ordinary course of business but
only if and so long as the same is payable on customary trade terms, (d)
any obligation of such Person as lessee under a capital lease, (e) any
Mandatorily Redeemable Stock of such Person (the amount of such Mandatorily
Redeemable Stock to be determined for this purpose as the higher of the
liquidation preference of and the amount payable upon redemption of such
Mandatorily Redeemable Stock), (f) any obligation of such Person to
purchase securities or other property that arises out of or in connection
with the sale of the same or substantially similar securities or property,
(g) any non-contingent obligation of such Person to reimburse any other
Person in respect of amounts paid under a letter of credit or other
Guaranty issued by such other Person to the extent that such reimbursement
obligation remains outstanding after it becomes non-contingent, (h) any
Indebtedness of others secured by (or for which
the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) a mortgage, lien, pledge, charge or other encumbrance on any asset of such Person, (i) any Liabilities in respect of unfunded vested benefits under plans covered by Title IV of ERISA and (j) any Indebtedness of others Guaranteed by such Person.
"Interest Period" means, for each Eurodollar Rate Advance comprising
part of the same A Borrowing, the period commencing on the date of such A
Advance or the date of the Conversion of any A Advance into such an A
Advance and ending on the last day of the period selected by the Company
pursuant to the provisions below and, thereafter, each subsequent period
commencing on the last day of the immediately preceding Interest Period and
ending on the last day of the period selected by the Company pursuant to
the provisions below. The duration of each such Interest Period shall be
one, two, three or six months, as the Company may, in the Notice of A
Borrowing given by the Company to the Administrative Agent pursuant to
Section 2.02, select; provided, however, that:
(i) the Company may not select any Interest Period that ends after the Termination Date;
(ii) Interest Periods commencing on the same date for A Advances comprising the same A Borrowing shall be of the same duration; and
(iii) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day; provided that if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the next preceding Business Day.
The Administrative Agent shall promptly advise each Lender by telex, telecopy transmission or cable of each Interest Period so selected by the Company.
"Lenders" means the Lenders listed on the signature pages hereof and each Eligible Assignee that shall become a party hereto pursuant to Section 8.07.
"Liability" of any Person means any indebtedness, liability or obligation of or binding upon, such Person or any of its assets, of any kind, nature or description, direct or indirect, absolute or contingent, due or not due, contractual or tortious, liquidated or unliquidated, whether arising under contract, applicable law, or otherwise, whether now existing or hereafter arising.
"Majority Lenders" means at any time Lenders holding at least 51% of the then aggregate unpaid principal amount of the A Notes held by Lenders, or, if no such principal amount is then outstanding, Lenders having at least 51% of the Commitments
(provided that, for purposes hereof, neither the Company, nor any of its Affiliates, if a Lender, shall be included in (i) the Lenders holding such amount of the A Advances or having such amount of the Commitments or (ii) determining the aggregate unpaid principal amount of the A Advances or the total Commitments).
"Mandatorily Redeemable Stock" means, with respect to any Person, any share of such Person's capital stock to the extent that it is (a) redeemable, payable or required to be purchased or otherwise retired or extinguished, or convertible into any Indebtedness or other Liability of such Person, (i) at a fixed or determinable date, whether by operation of a sinking fund or otherwise, (ii) at the option of any Person other than such Person or (iii) upon the occurrence of a condition not solely within the control of such Person, such as a redemption required to be made out of future earnings or (b) convertible into Mandatorily Redeemable Stock.
"Moody's" means Moody's Investors Service, Inc., or any successor thereto.
"Moody's Rating" means the rating of the First Mortgage Bonds most recently announced by Moody's.
"Mortgage" means the Mortgage and Deed of Trust, dated as of May 1, 1940, from the Company to The Bank of New York (formerly Irving Trust Company) and to Frederick G. Herbst (W.T. Cunningham, successor), as modified, amended or supplemented from time to time.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA.
"NCUC Order" means the order by the North Carolina Utilities Commission that authorizes the Company to execute, deliver and perform this Agreement and the Notes.
"Note" means an A Note or a B Note.
"Notice of A Borrowing" has the meaning specified in Section 2.02(a).
"Notice of B Borrowing" has the meaning specified in Section 2.03(a).
"Notice of Conversion" has the meaning specified in Section 2.10.
"OECD" means the Organization for Economic Cooperation and Development.
"Person" means an individual, partnership, corporation (including a business trust), limited liability company, joint stock company, trust, unincorporated association, joint venture or other entity, or a foreign state or political subdivision thereof or any agency of such state or subdivision.
"Plan" means an employee benefit plan (other than a Multiemployer Plan) maintained for employees of the Company or any of its Affiliates and covered by Title IV of ERISA.
"Reference Banks" means Citibank and Wachovia.
"Register" has the meaning specified in Section 8.07(c).
"Responsible Officer" means the President, any Vice President, the
Chief Financial Officer, the Treasurer, the Controller or any Assistant
Treasurer of the Company the signatures of whom, in each case, have been
certified to the Administrative Agent and each other Bank pursuant to
Section 3.01(d), or in a certificate delivered to the Administrative Agent
replacing or amending such certificate. Each Bank may conclusively rely on
each certificate so delivered until it shall have received a copy of a
certificate from the Secretary or an Assistant Secretary of the Company
amending, canceling or replacing such certificate.
"S&P" means Standard & Poor's Ratings Group or any successor thereto.
"S&P Rating" means the rating of the First Mortgage Bonds most recently announced by S&P.
"SCPSC Order" means the order by the South Carolina Public Service Commission that authorizes the Company to execute, deliver and perform this Agreement and the Notes.
"Subsidiary" means any corporation of which more than 50% of the outstanding capital stock having ordinary voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether or not at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned by the Company, by the Company and one or more other Subsidiaries, or by one or more other Subsidiaries.
"Termination Date" means, with respect to a Lender, the earlier to occur of (i) the later of the five-year anniversary date of this Agreement and upon the effectiveness of any extension to the Termination Date, such date to which the Termination Date is extended in accordance with Section 2.16, and (ii) the date of termination in whole of the Commitments pursuant to Section 2.05 or 6.01.
"Termination Event" means (i) a Reportable Event described in Section 4043 of ERISA and the regulations issued thereunder (other than a Reportable Event not subject to the provision for 30-day notice to the Pension Benefit Guaranty Corporation under such regulations), or (ii) the withdrawal of the Company or any of its Affiliates from a
Plan during a plan year in which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA, or (iii) the filing of a notice of intent to terminate a Plan or the treatment of a Plan amendment as a termination under Section 4041 of ERISA, or (iv) the institution of proceedings to terminate a Plan by the Pension Benefit Guaranty Corporation, or (v) any other event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan.
"Total Capitalization" means the sum of "the current portion of long-term debt" plus "total capitalization" appearing on the consolidated balance sheet of the Company and its Subsidiaries, prepared as of the date of determination in accordance with generally accepted accounting principles consistent with those applied in the preparation of the financial statements referred to in Section 4.01(e), plus, without limitation or duplication, obligations as lessee under leases and as purchaser under power purchase agreements which have been, in accordance with generally accepted accounting principles, recorded as capitalized leases or capitalized power purchase agreements, as the case may be.
SECTION 1.02. Computation of Time Periods. In this Agreement in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each means "to but excluding".
SECTION 1.03. Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles consistent with those applied in the preparation of the financial statements referred to in Section 4.01(e).
ARTICLE II.
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The A Advances. Each Lender severally agrees, on the terms
and conditions hereinafter set forth, to make A Advances to the Company from
time to time on any Business Day during the period from the date hereof to but
excluding the Termination Date, in an aggregate amount outstanding not to exceed
at any time the amount set opposite such Lender's name on the signature pages
hereof or, if such Lender has entered into any Assignment and Acceptance, set
forth for such Lender in the Register maintained by the Administrative Agent
pursuant to Section 8.07(c), as such amount may be reduced pursuant to Section
2.05 (such Lender's "Commitment"); provided, that the aggregate amount of the
Commitments of the Lenders shall be deemed used from time to time to the extent
of the aggregate amount of the B Advances then outstanding and such deemed use
of the aggregate amount of the Commitments shall be applied to the Lenders
ratably according to their respective Commitments (such deemed use of the
aggregate amount of the Commitments being a "B Reduction"). Each A Borrowing
shall be in an aggregate amount not less than $10,000,000 or an integral
multiple of $1,000,000 in excess thereof and shall consist of A Advances of the
same Type made on the same day by the Lenders ratably according to their
respective Commitments. Until the Termination Date, within the limits of each
Lender's Commitment, the Company may from time to time borrow, repay pursuant to
Section 2.06 or prepay pursuant to Section 2.11(b) and reborrow under this
Section 2.01.
SECTION 2.02. Making the A Advances. (a) Each A Borrowing shall be made on
notice, given not later than 10:00 A.M. (New York City time) on the day of such
proposed A Borrowing, in the case of an A Borrowing comprised of Base Rate
Advances, or on the third Business Day prior to the date of the proposed A
Borrowing, in the case of an A Borrowing comprised of Eurodollar Rate Advances,
by the Company to the Administrative Agent, which shall give to each Lender
prompt notice thereof by telex, telecopier or cable. Each such notice of a
Borrowing (a "Notice of A Borrowing") shall be by telex, telecopier or cable,
confirmed promptly in writing, in substantially the form of Exhibit B-1 hereto,
specifying therein the requested (i) date of such A Borrowing, (ii) Type of
Advances comprising such A Borrowing, (iii) aggregate amount of such A
Borrowing, and (iv) in the case of an A Borrowing comprised of Eurodollar Rate
Advances, the Interest Period for each such A Advance. In the case of a proposed
A Borrowing comprised of Eurodollar Rate Advances, the Administrative Agent
shall promptly notify each Lender of the applicable interest rate under Section
2.07(b). Each Lender shall, before 12:00 P.M. (New York City time) on the date
of such A Borrowing, make available for the account of its Applicable Lending
Office to the Administrative Agent at its address referred to in Section 8.02,
in same day funds, such Lender's ratable portion of such A Borrowing. After the
Administrative Agent's receipt of such funds and upon fulfillment of the
applicable conditions set forth in Article III, the Administrative Agent will
make such funds available to the Company at the Administrative Agent's aforesaid
address.
(a) Each Notice of A Borrowing shall be irrevocable and binding on the Company and, in respect of any Borrowing comprised of Eurodollar Rate Advances, the Company shall indemnify each Lender against any loss or expense incurred by such Lender as a result of any failure by the Company to fulfill on or before the date specified for such A Borrowing the applicable conditions set forth in Article III, including, without limitation, any loss (including loss of anticipated profits) or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the A Advance to be made by such Lender as part of such A Borrowing when such A Advance, as a result of such failure, is not made on such date.
(b) Unless the Administrative Agent shall have received notice from a Lender prior to the date of any A Borrowing that such Lender will not make available to the Administrative Agent such Lender's ratable portion of such A Borrowing, the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the date of such A Borrowing in accordance with subsection (a) of this Section 2.02 and the Administrative Agent may, in reliance upon such assumption, make available to the Company on such date a corresponding amount. If and to the extent such Lender shall not have so made such ratable portion available to the Administrative Agent, such Lender and the Company severally agree to repay to the Administrative Agent (without duplication), forthwith on demand, such corresponding amount, together with interest thereon for each day from the date such amount is made available to the Company until the date such amount is repaid to the Administrative Agent, (x) in the case of the Company, at the interest rate applicable at the time to A Advances comprising such A Borrowing and (y) in the case of such Lender, at the Federal Funds Rate. If such Lender shall repay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Lender's A Advance as part of such A Borrowing for purposes of this Agreement.
(c) The failure of any Lender to make the A Advance to be made by it as part of any A Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its A Advance on the date of such A Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the A Advance to be made by such other Lender on the date of any A Borrowing.
(d) If, for any reason, an A Borrowing is not made on the date specified in any Notice of A Borrowing, the Administrative Agent hereby agrees to repay to each Lender the amount, if any, which such Lender has made available to the Administrative Agent as such Lender's ratable portion of such A Borrowing, together with interest thereon for each day from the date such amount is made available to the Administrative Agent until the date such amount is repaid to such Lender, at the Federal Funds Rate.
SECTION 2.03a The B Advances. (a) Each Lender severally agrees that the Company may make B Borrowings under this Section 2.03 from time to time on any Business Day during the period from the date hereof until the date occurring 30 days prior to the Termination Date in the manner set forth below; provided that, following the making of each B Borrowing, the
aggregate amount of the Advances then outstanding shall not exceed the aggregate amount of the Commitments of the Lenders (computed without regard to any B Reduction).
(i) The Company may request a B Borrowing under this Section 2.03 by delivering to the Administrative Agent, by telecopier, telex or cable, confirmed immediately in writing, a notice of a B Borrowing (a "Notice of B Borrowing"), in substantially the form of Exhibit B-2 hereto, specifying the date and aggregate amount of the proposed B Borrowing, the maturity date for repayment of each B Advance to be made as part of such B Borrowing (which maturity date may not be earlier than the date occurring 30 days after the date of such B Borrowing or later than the Termination Date and in no event may be later than 180 days following the date of such B Borrowing), the rate or rates of interest applicable to each such B Advance, the interest payment date or dates relating thereto, and any other terms to be applicable to such B Borrowing, not later than 10:00 A.M. (New York City time) (A) at least one Business Day prior to the date of the proposed B Borrowing, if the Company shall specify in the Notice of B Borrowing that the rates of interest to be offered by the Lenders shall be fixed rates per annum and (B) at least four Business Days prior to the date of the proposed B Borrowing, if the Company shall instead specify in the Notice of B Borrowing the basis to be used by the Lenders in determining the rates of interest to be offered by them. The Administrative Agent shall in turn promptly notify each Lender of each request for a B Borrowing received by it from the Company by sending such Lender a copy of the related Notice of B Borrowing.
(ii) Each Lender may, if, in its sole discretion, it elects to do so,
irrevocably offer to make one or more B Advances to the Company as part of
such proposed B Borrowing at a rate or rates of interest specified by such
Lender in its sole discretion, by notifying the Administrative Agent (which
shall give prompt notice thereof to the Company), before 10:00 A.M. (New
York City time) (A) on the date of such proposed B Borrowing, in the case
of a Notice of B Borrowing delivered pursuant to clause (A) of paragraph
(i) above, and (B) three Business Days before the date of such proposed B
Borrowing, in the case of a Notice of B Borrowing delivered pursuant to
clause (B) of paragraph (i) above, of the minimum amount and maximum amount
of each B Advance which such Lender would be willing to make as part of
such proposed B Borrowing (which amounts may, subject to the proviso to the
first sentence of this Section 2.03(a), exceed such Lender's Commitment),
the rate or rates of interest therefor and such Lender's Applicable Lending
Office with respect to such B Advance; provided that if the Administrative
Agent in its capacity as a Lender shall, in its sole discretion, elect to
make any such offer, it shall notify the Company of such offer before 9:00
A.M. (New York City time) on the date on which notice of such election is
to be given to the Administrative Agent by the other Lenders. If any Lender
shall elect not to make such an offer, such Lender shall so notify the
Administrative Agent, before 10:00 A.M. (New York City time) on the date on
which notice of such election is to be given to the Administrative Agent by
the other Lenders, and such Lender shall not be obligated to, and shall
not, make any B Advance as part of such B Borrowing; provided that the
failure
by any Lender to give such notice shall not cause such Lender to be obligated to make any B Advance as part of such proposed B Borrowing.
(iii) The Company shall, in turn, (A) before 11:00 A.M. (New York City time) on the date of such proposed B Borrowing, in the case of a Notice of B Borrowing delivered pursuant to clause (A) of paragraph (i) above, and (B) before 1:00 P.M. (New York City time) three Business Days before the date of such proposed B Borrowing, in the case of a Notice of B Borrowing delivered pursuant to clause (B) of paragraph (i) above, either
(x) cancel such B Borrowing by giving the Administrative Agent notice to that effect, or
(y) in its sole discretion, accept one or more of the offers made by any Lender or Lenders pursuant to paragraph (ii) above by giving notice to the Administrative Agent of the amount of each B Advance (which amount shall be equal to or greater than the minimum amount, and equal to or less than the maximum amount, notified to the Company by the Administrative Agent on behalf of such Lender for such B Advance pursuant to paragraph (ii) above) to be made by each Lender as part of such B Borrowing, and reject any remaining offers made by Lenders pursuant to paragraph (ii) above by giving the Administrative Agent notice to that effect; provided, however, that, in accepting any such offers, the Company shall do so in the ascending order of effective yield and, as among offers resulting in the same effective yield, ratably among all such offers based upon the amount notified to the Company by the Administrative Agent on behalf of each Lender for such B Advance pursuant to paragraph (ii) above.
(iv) If the Company notifies the Administrative Agent that such B Borrowing is canceled pursuant to paragraph (iii)(x) above, the Administrative Agent shall give prompt notice thereof to the Lenders and such B Borrowing shall not be made.
(v) If the Company accepts one or more of the offers made by any Lender or Lenders pursuant to paragraph (iii)(y) above, the Administrative Agent shall in turn promptly notify (A) each Lender that has made an offer as described in paragraph (ii) above of the date and aggregate amount of such B Borrowing and whether or not any offer or offers made by such Lender pursuant to paragraph (ii) above have been accepted by the Company, (B) each Lender that is to make a B Advance as part of such B Borrowing of the amount of each B Advance to be made by such Lender as part of such B Borrowing and (C) each Lender that is to make a B Advance as part of such B Borrowing, upon receipt, that the Administrative Agent has received forms of documents appearing to fulfill the applicable conditions set forth in Article III. Each Lender that is to make a B Advance as part of such B Borrowing shall, before 12:00 noon (New York City time) on the date of such B Borrowing specified in the notice received from the
Administrative Agent pursuant to clause (A) of the preceding sentence or any later time when such Lender shall have received notice from the Administrative Agent pursuant to clause (C) of the preceding sentence, make available for the account of its Applicable Lending Office to the Administrative Agent at its address referred to in Section 8.02 such Lender's portion of such B Borrowing, in same day funds. Upon fulfillment of the applicable conditions set forth in Article III and after receipt by the Administrative Agent of such funds, the Administrative Agent will make such funds available to the Company at the Administrative Agent's aforesaid address. Promptly after each B Borrowing the Administrative Agent will notify each Lender of the amount of the B Borrowing, the consequent B Reduction and the dates upon which such B Reduction commenced and will terminate.
(e) Each B Borrowing shall be in an aggregate amount not less than
$10,000,000 or an integral multiple of $1,000,000 in excess thereof and,
following the making of each B Borrowing, the Company shall be in compliance
with the limitation set forth in the proviso to the first sentence of subsection
(a) above.
(f) Within the limits and on the conditions set forth in this Section 2.03, the Company may from time to time borrow under this Section 2.03 or repay pursuant to subsection (d) below, and reborrow under this Section 2.03; provided that a B Borrowing shall not be made within three Business Days of the date of any other B Borrowing.
(g) The Company shall repay to the Administrative Agent for the account of each Lender which has made a B Advance, or each other holder of a B Note, on the maturity date of each B Advance (such maturity date being not later than the then effective Termination Date and that specified by the Company for repayment of such B Advance in the related Notice of B Borrowing delivered pursuant to subsection (a)(i) above and provided for in the B Note evidencing such B Advance), the then unpaid principal amount of such B Advance. The Company shall have no right to prepay any principal amount of any B Advance.
(h) The Company shall pay interest on the unpaid principal amount of each B Advance from the date of such B Advance to the date the principal amount of such B Advance is repaid in full, at the rate of interest for such B Advance specified by the Lender making such B Advance in its notice with respect thereto delivered pursuant to subsection (a)(ii) above, payable on the interest payment date or dates specified by the Company for such B Advance in the related Notice of B Borrowing delivered pursuant to subsection (a)(i) above, as provided in the B Note evidencing such B Advance; provided that any amount of principal which is not paid when due (whether at stated maturity, by acceleration or otherwise) shall bear interest, from the date on which such amount is due until such amount is paid in full, payable on demand, at a rate per annum equal to 2.0% per annum above such rate of interest for such B Advance.
(i) The indebtedness of the Company resulting from each B Advance made to the Company as part of a B Borrowing shall be evidenced by a separate B Note of the Company payable to the order of the Lender making such B Advance.
SECTION 2.04a Facility Fee. The Company agrees to pay to the Administrative Agent for the account of each Lender a facility fee on each Lender's Commitment, irrespective of usage, from the date hereof, in the case of each Bank, and from the effective date specified in the Assignment and Acceptance pursuant to which it became a Lender, in the case of each other Lender, until the Termination Date, payable quarterly in arrears on the last day of each March, June, September and December during the term of such Lender's Commitment, commencing September 30, 1998, and on the Termination Date, at a rate per annum determined by reference to the Company's First Mortgage Bond ratings as set forth below:
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Basis for LEVEL 1 LEVEL 2 LEVEL 3 LEVEL 4 LEVEL 5
Pricing If the First If the First If the First If the First If the First
Mortgage Bonds Mortgage Bonds Mortgage Bonds Mortgage Bonds Mortgage Bonds
are rated at are rated at are rated at are rated at are rated less
least A- by least BBB+ by least BBB by least BBB- by than Level 4
Standard & Standard & Standard & Standard &
Poor's or at Poor's or at Poor's or at Poor's or at
least A3 by least Baa1 by least Baa2 by least Baa3 by
Moody's Moody's Moody's Moody's
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Facility Fee 0.100% 0.125% 0.150% 0.200% 0.300%
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SECTION 2.05a Reduction of the Commitments. The Company shall have the right, upon at least three Business Days' notice to the Administrative Agent, irrevocably to terminate in whole or reduce ratably in part the respective Commitments of the Lenders; provided that the aggregate amount of the Commitments of the Lenders shall not be reduced to an amount which is less than the aggregate principal amount of the A Advances and the B Advances then outstanding; and provided further, that each partial reduction shall be in the aggregate amount of $10,000,000 or an integral multiple of $1,000,000 in excess thereof.
SECTION 2.06a Repayment of A Advances. The Company shall repay the principal amount of each A Advance made by each Lender on the Termination Date.
SECTION 2.07a Interest on Advances. The Company shall pay interest on the unpaid principal amount of each A Advance made by each Lender from the date of such A Advance until such principal amount shall be paid in full, at the following rates per annum:
(j) Base Rate Advances. If such A Advance is a Base Rate Advance, a rate per annum equal at all times to the Base Rate in effect from time to time, payable quarterly in arrears on the last day of each September, December, March, and June and on the date such Base Rate Advance shall be paid in full; provided that any amount of principal which is not paid when due (whether at stated maturity, by acceleration or otherwise) shall bear interest, from the date on which such amount is due until such amount is paid in full, payable on demand, at a rate per annum equal at all times to 2.0% per annum above the Base Rate in effect from time to time.
(k) Eurodollar Rate Advances. If such A Advance is a Eurodollar Rate Advance, a rate per annum equal at all times during the Interest Period for such A Advance to the Eurodollar Rate for such Interest Period, plus the Applicable Margin for Eurodollar Rate Advances, payable on the last day of such Interest Period and, if such Interest Period has a duration of more than three months, on each day which occurs during such Interest Period every three months from the first day of such Interest Period; provided that any amount of principal which is not paid when due (whether at stated maturity, by acceleration or otherwise) shall bear interest, from the date on which such amount is due until such amount is paid in full, payable on demand, at a rate per annum equal at all times to 2.0% per annum above the Base Rate in effect from time to time.
SECTION 2.08a Additional Interest on Eurodollar Rate Advances. The Company shall pay to each Lender additional interest on the unpaid principal amount of each Eurodollar Rate Advance of such Lender, from the date of such A Advance until such principal amount is paid in full, at an interest rate per annum equal at all times to the remainder obtained by subtracting (i) the Eurodollar Rate for the Interest Period for such A Advance from (ii) the rate obtained by dividing such Eurodollar Rate by a percentage equal to 100% minus the Eurodollar Rate Reserve Percentage of such Lender for such Interest Period, payable on each date on which interest is payable on such A Advance. All claims for such additional interest shall be submitted by such Lender to the Company (with a copy to the Administrative Agent) as soon as is reasonably possible and in all events within ninety days after the first day of such Interest Period; provided, however, that if a claim is not submitted to the Company within such ninety day period, such Lender shall thereby waive its claim to such additional interest incurred during such ninety-day period but not to any such additional interest incurred thereafter. A certificate as to the amount of such additional interest, submitted to the Company (with a copy to the Administrative Agent) by such Lender, shall be conclusive and binding for all purposes, absent manifest error.
SECTION 2.09a Interest Rate Determination. (a) Each Reference Bank agrees to furnish to the Administrative Agent timely information for the purpose of determining the Eurodollar Rate. If any one or more of the Reference Banks shall not furnish such timely information to the Administrative Agent for determination of any such interest rate, the Administrative Agent shall determine such interest rate on the basis of timely information furnished by the remaining Reference Banks.
(l) The Administrative Agent shall give prompt notice to the Company and the Lenders of the applicable interest rate determined by the Administrative Agent for purposes of Section 2.07(a) or (b), and the applicable rate, if any, furnished by each Reference Bank for determining the applicable interest rate under Section 2.07(b).
(m) If fewer than two Reference Banks furnish timely information to the Administrative Agent for determining the Eurodollar Rate for any Eurodollar Rate Advances,
(i) the Administrative Agent shall forthwith notify the Company and the Lenders that the interest rate cannot be determined for such Eurodollar Rate Advances,
(ii) each such Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance (or if such Advance is then a Base Rate Advance, will continue as a Base Rate Advance), and
(iii) the obligation of the Lenders to make, or to Convert A Advances into, Eurodollar Rate Advances shall be suspended until the Administrative Agent shall notify the Company and the Lenders that the circumstances causing such suspension no longer exist.
(n) If, with respect to any Eurodollar Rate Advances, the Majority Lenders notify the Administrative Agent that the Eurodollar Rate for any Interest Period for such A Advances will not adequately reflect the cost to such Majority Lenders of making, funding or maintaining their respective Eurodollar Rate Advances for such Interest Period, the Administrative Agent shall forthwith so notify the Company and the Lenders, whereupon
(i) each Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance, and
(ii) the obligation of the Lenders to make, or to Convert A Advances into, Eurodollar Rate Advances shall be suspended until the Administrative Agent shall notify the Company and the Lenders that the circumstances causing such suspension no longer exist.
(o) If the Company shall fail to select the duration of any Interest Period for any Eurodollar Rate Advances in accordance with the provisions contained in the definition of "Interest Period" in Section 1.01, the Administrative Agent will forthwith so notify the Company and the Lenders and such Advances will automatically, on the last day of the then existing Interest Period therefor, Convert into Base Rate Advances.
(p) On the date on which the aggregate unpaid principal amount of A Advances comprising any A Borrowing shall be reduced, by prepayment or otherwise, to less than $20,000,000, such A Advances shall, if they are Advances of a Type other than Base Rate Advances, automatically Convert into Base Rate Advances, and on and after such date the right of the Company to Convert such A Advances into Advances of a Type other than Base Rate Advances shall terminate; provided, however, that if and so long as each such A Advance shall be of the same Type and have the same Interest Period as A Advances comprising another A Borrowing or other A Borrowings, and the aggregate unpaid principal amount of all such A Advances shall equal or exceed $20,000,000, the Company shall have the right to continue all such A Advances as, or to Convert all such A Advances into, Advances of such Type having such Interest Period.
SECTION 2.10a Voluntary Conversion of A Advances. The Company may, on any Business Day prior to the Termination Date, upon notice given to the Administrative Agent not
later than 10:00 A.M. (New York City time) on the third Business Day prior to
the date of the proposed Conversion, in the case of any proposed Conversion into
Eurodollar Rate Advances, and on the date of the proposed Conversion, in the
case of any proposed Conversion into Base Rate Advances, and subject to the
provisions of Sections 2.09 and 2.13 and so long as no Event of Default has
occurred and is continuing on the date of such proposed Conversion, Convert all
A Advances of one Type comprising the same A Borrowing into Advances of another
Type; provided, however, that any Conversion of any Eurodollar Rate Advances
into Advances of another Type shall be made on, and only on, the last day of an
Interest Period for such Eurodollar Rate Advances. Each such notice of a
Conversion (a"Notice of Conversion") shall be by telex, telecopier or cable,
confirmed promptly in writing, in substantially the form of Exhibit B-3 hereto
and shall, within the restrictions specified above, specify (i) the date of such
Conversion, (ii) the aggregate amount of, Type of, and Interest Periods
applicable to the A Advances to be Converted, (iii) the Type of A Advance to
which such A Advances (or portions thereof) are proposed to be Converted, and
(iv) if such Conversion is into Eurodollar Rate Advances, the duration of the
Interest Period for each such A Advance.
SECTION 2.11a Prepayments of A Advances. (a) The Company shall have no right to prepay any principal amount of any A Advances other than as provided in subsection (b) below.
(q) The Company may, upon notice given to the Administrative Agent at least two Business Days prior to the proposed prepayment, in the case of any Eurodollar Rate Advance, and on the date of the proposed prepayment, in the case of any Base Rate Advance, and if such notice is given the Company shall, prepay the outstanding principal amounts of the A Advances comprising the same Borrowing in whole or ratably in part, together with accrued interest to the date of such prepayment on the amount prepaid and, in the case of any Eurodollar Rate Advance, any amount payable pursuant to Section 8.04(b); provided, however, that each partial prepayment shall be in an aggregate principal amount not less than $5,000,000 and in integral multiples of $1,000,000 in excess thereof.
SECTION 2.12a Increased Costs. (a) If, due to either (i) the introduction of or any change (other than any change by way of imposition or increase of reserve requirements, in the case of Eurodollar Rate Advances, included in the Eurodollar Rate Reserve Percentage), in or in the interpretation of any law or regulation, or (ii) the compliance with any guideline or request from any central bank or other governmental authority (whether or not having the force of law), there shall be any increase in the cost to any Lender of agreeing to make or making, funding or maintaining Eurodollar Rate Advances, then the Company shall from time to time, upon demand by such Lender (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for account of such Lender additional amounts sufficient to reimburse such Lender for such increased cost. All claims for increased cost shall be submitted by such Lender to the Company (with a copy to the Administrative Agent) as soon as is reasonably possible and in all events within ninety days after such introduction, such change, or the beginning of such compliance, the occurrence of which resulted in such increased cost, and the Company shall make such payment within five Business Days after notice of such claim is received; provided, however, that if a claim is not submitted to the Company within such ninety-day period, such
Lender shall thereby waive its claim to such increased cost incurred during such ninety-day period but not to any such increased cost incurred thereafter. A certificate as to the amount of such increased cost, submitted to the Company (with a copy to the Administrative Agent) by such Lender, shall be conclusive and binding for all purposes, absent manifest error.
(r) If any Lender determines that compliance with any law or regulation or any guideline or request from any central bank or other governmental authority (whether or not having the force of law) affects or would affect the amount of capital required or expected to be maintained by such Lender or any corporation controlling such Lender and that the amount of such capital is increased by or based upon the existence of such Lender's commitment to lend hereunder and other commitments of this type, then, upon demand by such Lender (with a copy of such demand to the Administrative Agent), the Company shall immediately pay to the Administrative Agent for the account of such Lender, from time to time as specified by such Lender, additional amounts sufficient to compensate such Lender or such corporation in the light of such circumstances, to the extent that such Lender reasonably determines such increase in capital to be allocable to the existence of such Lender's commitment to lend hereunder. All claims for such additional amounts shall be submitted by such Lender (with a copy to the Administrative Agent) as soon as is reasonably possible and in all events within ninety days after such determination by such Lender, and the Company shall make such payment within five Business Days after notice of such claim is received; provided, however, that if a claim is not submitted to the Company within such ninety-day period, such Lender shall thereby waive its claim to such additional amounts incurred during such ninety-day period but not to any such additional amounts incurred thereafter. A certificate as to such amounts submitted to the Company and the Administrative Agent by such Lender shall be conclusive and binding for all purposes, absent manifest error.
SECTION 2.13a Illegality. Notwithstanding any other provision of this
Agreement, if any Lender shall notify the Administrative Agent that the
introduction of or any change in or in the interpretation of any law or
regulation makes it unlawful, or any central bank or other governmental
authority asserts that it is unlawful, for such Lender or its Eurodollar Lending
Office to perform its obligations hereunder to make Eurodollar Rate Advances or
B Advances based upon the Eurodollar Rate or to fund or maintain Eurodollar Rate
Advances or B Advances based upon the Eurodollar Rate hereunder, (i) the
obligation of the Lenders to make Eurodollar Rate Advances or B Advances based
upon the Eurodollar Rate, or to Convert A Advances into Eurodollar Rate
Advances, shall be suspended until the Administrative Agent shall notify the
Company and the Lenders that the circumstances causing such suspension no longer
exist, (ii) the Company shall forthwith prepay in full all Eurodollar Rate
Advances of all Lenders then outstanding, together with interest accrued
thereon, unless the Company, within five Business Days of notice from the
Administrative Agent, Converts all Eurodollar Rate Advances of all Lenders then
outstanding into Advances of another Type in accordance with Section 2.10 and
(iii) the Company shall forthwith prepay all B Advances based upon the
Eurodollar Rate of all Lenders then outstanding, together with interest thereon.
SECTION 2.14a Payments and Computations. (a) The Company shall make each payment hereunder and under the Notes not later than 11:00 A.M. (New York City time) on the day when due in U.S. dollars to the Administrative Agent at its address referred to in Section 8.02 in same day funds. The Administrative Agent will promptly thereafter cause to be distributed like funds relating to the payment of principal or interest or fees (other than pursuant to Section 2.03, 2.08 or 2.12) ratably to the Lenders for the account of their respective Applicable Lending Offices, and like funds relating to the payment of any other amount payable to any Lender to such Lender for the account of its Applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement. Upon its acceptance of an Assignment and Acceptance and recording of the information contained therein in the Register pursuant to Section 8.07(d), from and after the effective date specified in such Assignment and Acceptance, the Administrative Agent shall make all payments hereunder and under the Notes in respect of the interest assigned thereby to the Lender assignee thereunder, and the parties to such Assignment and Acceptance shall make all appropriate adjustments in such payments for periods prior to such effective date directly between themselves.
(s) All computations of interest based on the Base Rate shall be made by the Administrative Agent on the basis of a year of 365 or 366 days, as the case may be, and all computations of interest based on the Eurodollar Rate or of fees payable hereunder shall be made by the Administrative Agent, and all computations of interest pursuant to Section 2.08 shall be made by a Lender, on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period of which such interest or fees are payable. Each determination by the Administrative Agent (or, in the case of Section 2.08, by a Lender) of an interest rate hereunder shall be conclusive and binding for all purposes.
(t) Whenever any payment hereunder or under the Notes shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or fees, as the case may be; provided, however, that if such extension would cause payment of interest on or principal of Eurodollar Rate Advances to be made in the next following calendar month, such payment shall be made on the next preceding Business Day.
(u) Unless the Administrative Agent shall have received notice from the Company prior to the date on which any payment is due to the Lenders hereunder that the Company will not make such payment in full, the Administrative Agent may assume that the Company has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent the Company shall not have so made such payment in full to the Administrative Agent, each Lender shall repay to the Administrative Agent forthwith on demand such amount distributed to such Lender, together with interest thereon for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Administrative Agent at the Federal Funds Rate.
SECTION 2.15a Sharing of Payments, Etc. If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of the A Advances made by it (other than pursuant to Section 2.03, 2.08 or 2.12) in excess of its ratable share of payments on account of the A Advances obtained by all the Lenders, such Lender shall forthwith purchase from the other Lenders such participation in the A Advances made by them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender shall be rescinded and such Lender shall repay to the purchasing Lender the purchase price to the extent of such recovery, together with an amount equal to such Lender's ratable share (according to the proportion of (i) the amount of such Lender's required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Company agrees that any Lender so purchasing a participation from another Lender pursuant to this Section 2.15 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of the Company in the amount of such participation.
SECTION 2.16a Extension of Termination Date. (a) Unless the Termination Date shall have occurred, at least 30 days but not more than 45 days prior to each Extension Date, the Company may request that the Lenders, by written notice to the Administrative Agent (in substantially the form attached hereto as Exhibit F), consent to a 364-day extension of the Termination Date. Each Lender shall, in its sole discretion, determine whether to consent to such request and shall notify the Administrative Agent of its determination at least 20 days but not more than 30 days prior to such Extension Date. The failure to respond by any Lender within such time period shall be deemed a denial of such request. The Administrative Agent shall deliver a notice to the Company and the Lenders at least 15 days but not more than 20 days, prior to such Extension Date of the identity of the Lenders that have consented to such extension and the Lenders that have declined such consent (the "Declining Lenders"). If Lenders holding in the aggregate less than 51% of the Commitments (without regard to any B Reductions) have consented to the requested extension, the Termination Date shall not be extended, and the Commitments of all Lenders shall terminate on the then current Termination Date.
(v) If Lenders holding in the aggregate at least 51% of the Commitments (without regard to any B Reductions) have consented to the requested extension, subject to the conditions set forth in Section 2.16(c), the Termination Date shall be extended as to such consenting Lenders only (and not as to any Declining Lender) for a period of 364 days from the then current Termination Date, and the Commitments of any Declining Lenders shall terminate on the Termination Date (as theretofore in effect) and all Advances of such Declining Lenders shall be repaid to them on such date. If the Company so requests, each Lender consenting to such request shall be given the opportunity at least seven days but not more than 15 days prior to such Extension Date, in each Lender's sole discretion, to commit to increase its Commitment by submission of a written notice setting forth the desired increase in such Lender's Commitment to the Administrative Agent in amounts such that the aggregate Commitments hereunder after
giving effect to any such extension and increase in the Commitments shall not exceed the aggregate Commitment immediately prior to such Extension Date. If the Administrative Agent receives Commitments to increase the Commitments from the Lenders, which, when aggregated with the existing Commitments, (i) are less than or equal to the Commitments immediately prior to such Extension Date, the Administrative Agent shall accept all such Commitments, (ii) are greater than the Commitments on the date hereof, the Administrative Agent may determine, in its reasonable discretion, which Commitments to accept and the amounts by which each submitting Lender's Commitments shall be increased so that the aggregate Commitments after such Extension Date shall equal the aggregate Commitments immediately prior to such Extension Date (any Lender whose commitment to increase its Commitment hereunder is accepted by the Administrative Agent, an "Increasing Commitment Lender"). If Lenders do not consent to increase the aggregate Commitments to an amount equal to the Commitments immediately prior to such Extension Date, the Company may, at least two days but not more than seven days prior to such Extension Date, request that the Administrative Agent, in its sole discretion, accept the Commitment or Commitments of an Eligible Assignee or Eligible Assignees such that the aggregate Commitments hereunder after such Extension Date shall not be greater than Commitments hereunder immediately prior to such Extension Date. If the Administrative Agent shall accept the Commitment of any Increasing Commitment Lender or Eligible Assignee, the Commitments of the Declining Lenders shall terminate on such Extension Date, and any Advances made by such Declining Lenders shall be repaid on such date in accordance with this Agreement.
(w) Each such accepted Eligible Assignee and each Increasing Commitment
Lender shall deliver a signature page hereto indicating that it is bound by the
terms hereof and setting forth its aggregate Commitment hereunder. Such new
signature page shall constitute a part hereof upon acceptance by the
Administrative Agent and, in the case of any signature page submitted by any
Increasing Commitment Lender, shall replace such Increasing Commitment Lender's
signature page. Any such extension shall become effective upon the then current
Extension Date, if the Company shall have delivered to (i) the Administrative
Agent and each Lender, on or prior to the then current Extension Date, an
opinion of counsel to the Company substantially in the form of Exhibit D-2
attached hereto upon which each Lender and the Administrative Agent may rely,
together with any governmental order referred to therein attached thereto, (ii)
any Increasing Commitment Lender and any new Lender hereunder, a new A Note in
the principal amount of such Lender's increase of its Commitment hereunder, in
the case of an Increasing Commitment Lender, and in the principal amount of such
Lender's Commitment, in the case of a new Lender, in each case after giving
effect to any such extension and (iii) a certificate of the type described in
Section 3.01(d) with respect to officers authorized to sign the Notes described
in clause (ii) hereof. Upon satisfaction of such conditions and the
effectiveness of such extension, each new Lender and Increasing Commitment
Lender shall make A Advances to the Company (A) in the case of each new Lender,
equal to such Lender's ratable portion of the A Advances outstanding immediately
prior to such Extension Date and (B) in the case of each Increasing Commitment
Lender, equal to such portion of such Lender's ratable portion of the A Advances
(assuming that such Lender's Commitment consists only of the increased portion
thereof) outstanding immediately prior to such Extension Date, in each case,
without giving effect to any repayment of A Advances to Declining Lenders made on such Extension Date.
ARTICLE III.
CONDITIONS OF LENDING
SECTION 3.01a Conditions Precedent to Closing. The Commitments of the
Lenders shall not become effective unless and until (i) the conditions precedent
set forth in Section 3.01 of the $375,000,000 364-Day Revolving Credit
Agreement, dated as of the date hereof, among the Company, the Banks, the
Lenders from time to time party thereto and Citibank, N.A., as Administrative
Agent shall have been satisfied, (ii) the Existing Facilities shall have been
terminated and all amounts outstanding thereunder shall have been paid in full
and (iii) the Administrative Agent shall have received the following:
(a) The A Notes to the order of the Lenders, respectively.
(b) Certified copies of the resolutions of the Board of Directors of the Company approving this Agreement and the Notes, and of all documents evidencing other necessary corporate action and governmental approvals, including the NCUC Order and the SCPSC Order, with respect to this Agreement and the Notes.
(c) A certificate of the Secretary or an Assistant Secretary of the Company, dated as of the date hereof, certifying the names and true signatures of the officers of the Company authorized to sign this Agreement and the Notes and the other documents to be delivered hereunder.
(d) A certificate of a Responsible Officer of the Company, dated as of the date hereof, certifying (i) the accuracy of the representations and warranties contained herein and (ii) that no event has occurred and is continuing which constitutes an Event of Default or which would constitute an Event of Default but for the requirement that notice be given on time elapse, or both.
(e) Certified copies of all required governmental approvals and authorizations.
(f) Certified copy of the Restated Charter and By-Laws of the Company.
(g) A favorable opinion of counsel for the Company, substantially in the form of Exhibit D-1 hereto and as to such other matters as any Lender through the Administrative Agent may reasonably request.
(h) A favorable opinion of King & Spalding, counsel for the Administrative Agent, substantially in the form of Exhibit E hereto.
SECTION 3.02a Conditions Precedent to Each A Borrowing. The obligation of each Lender to make an A Advance on the occasion of each A Borrowing (including the initial A Borrowing) shall be subject to the further conditions precedent that (i) the Administrative Agent shall have received the written confirmatory Notice of A Borrowing with respect thereto, and (ii) on the date of such A Borrowing, the following statements shall be true (and each of the giving of the applicable Notice of A Borrowing and the acceptance by the Company of the proceeds of such A Borrowing shall constitute a representation and warranty by the Company that, on the date of such A Borrowing, such statements are true):
(i) The representations and warranties contained in Section 4.01 (excluding those contained in Section 4.01(e)) are correct on and as of the date of such A Borrowing, before and after giving effect to such A Borrowing and to the application of the proceeds therefrom, as though made on and as of such date; and
(j) No event has occurred and is continuing, or would result from such A Borrowing or from the application of the proceeds therefrom, which constitutes an Event of Default or which would constitute an Event of Default but for the requirement that notice be given or time elapse, or both.
SECTION 3.03a Conditions Precedent to Each B Borrowing. The obligation of
each Lender which is to make a B Advance on the occasion of a B Borrowing
(including the initial B Borrowing) to make such B Advance as part of such B
Borrowing is subject to the conditions precedent that (i) the Administrative
Agent shall have received the written confirmatory Notice of B Borrowing with
respect thereto, (ii) on or before the date of such B Borrowing, but prior to
such B Borrowing, the Administrative Agent shall have received a B Note payable
to the order of such Lender for each of the one or more B Advances to be made by
such Lender as part of such B Borrowing, in a principal amount equal to the
principal amount of the B Advance to be evidenced thereby and otherwise on such
terms as were agreed to for such B Advance in accordance with Section 2.03, and
(iii) on the date of such B Borrowing the following statements shall be true
(and each of the giving of the applicable Notice of B Borrowing and the
acceptance by the Company of the proceeds of such B Borrowing shall constitute a
representation and warranty by the Company that, on the date of such B
Borrowing, such statements are true):
(k) The representations and warranties contained in Section 4.01 (other than Section 4.01(e)) are true and correct on and as of the date of such B Borrowing, before and after giving effect to such B Borrowing and to the application of the proceeds therefrom, as though made on and as of such date; and
(l) No event has occurred and is continuing, or would result from such B Borrowing or from the application of the proceeds therefrom, which constitutes an Event of Default or which would constitute an Event of Default but for the requirement that notice be given or time elapse or both.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Company. The Company represents and warrants as follows:
(a) The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of North Carolina and is duly qualified to do business and in good standing under the laws of the State of South Carolina.
(b) The execution, delivery and performance by the Company of this Agreement and the Notes are within the Company's corporate powers, have been duly authorized by all necessary corporate action, and do not contravene (iA the Company's charter or by-laws or (iiA any law or contractual restriction binding on or affecting the Company.
(c) No authorization or approval or other action by, and no notice to or filing with any governmental authority or regulatory body is required for the due execution, delivery and performance by the Company of this Agreement or the Notes, other than the NCUC Order and the SCPSC Order, each of which has been duly issued, is final and in full force and effect, and all periods for review or appeal thereof have expired, and no such request for review or appeal has been filed and is pending.
(d) This Agreement is, and the Notes when delivered hereunder will be, legal, valid and binding obligations of the Company enforceable against the Company in accordance with their respective terms.
(e) The Consolidated balance sheet of the Company and the Subsidiaries as at December 31, 1997, and the related Consolidated statements of income and retained earnings of the Company and the Subsidiaries for the fiscal year then ended, copies of which have been furnished to each Lender, fairly present the financial condition of the Company and the Subsidiaries as at such date and the results of the operations of the Company and the Subsidiaries for the period ended on such date, all in accordance with generally accepted accounting principles consistently applied. Since December 31, 1997, there has been no material adverse change in the financial condition, operations or properties of the Company.
(f) Except as described in the reports and registration statements which the Company has filed with the Securities and Exchange Commission prior to the date of this Agreement, there is no pending or threatened action or proceeding affecting the Company or any Subsidiary before any court, governmental agency or arbitrator, which may materially adversely affect the financial condition, operations or properties of the Company.
(g) No proceeds of any Advance will be used to acquire any security in any transaction which is subject to Sections 13 and 14 of the Securities Exchange Act of 1934.
(h) The Company is not engaged in the business of extending credit for the purpose of buying or carrying margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System), and no proceeds of any Advance will be used to buy or carry any margin stock or to extend credit to others for the purpose of buying or carrying any margin stock.
(i) Following application of the proceeds of each Advance, not more than 5
percent of the value of the assets (either of the Company only or of the Company
and the Subsidiaries on a Consolidated basis) subject to the provisions of
Section 5.02(a) or 5.02(e) will be margin stock (within the meaning of
Regulation U issued by the Board of Governors of the Federal Reserve System).
(j) No Termination Event has occurred or is reasonably expected to occur with respect to any Plan.
(k) The Company is not an "investment company" or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended.
(l) The Company is in substantial compliance with all applicable laws, rules, regulations and orders of any governmental authority, the noncompliance with which would materially and adversely affect the business or condition of the Company, such compliance to include, without limitation, substantial compliance with Environmental Laws and paying before the same become delinquent all material taxes, assessments and governmental charges imposed upon it or upon its property, except to the extent compliance with any of the foregoing is then being contested in good faith by appropriate legal proceedings.
ARTICLE V.
COVENANTS OF THE COMPANY
SECTION 5.01. Affirmative Covenants. So long as any Note shall remain unpaid or any Lender shall have any Commitment hereunder, the Company shall, unless the Majority Lenders shall otherwise consent in writing:
(a) Compliance with Laws, Etc. Except to the extent contested in good faith, comply, and cause each Subsidiary to comply, with all applicable laws, rules, regulations and orders (such compliance to include, without limitation, paying before the same become delinquent all taxes, assessments and governmental charges imposed upon it or upon its property), the non-compliance with which would materially adversely affect the Company's business or credit.
(b) Preservation of Corporate Existence, Etc. Preserve and maintain its corporate existence, rights (charter and statutory) and franchises.
(c) Visitation Rights. At any reasonable time and from time to time, permit the Administrative Agent or any of the Lenders or any agents or representatives thereof to examine and make copies of and abstracts from the records and books of account of, and visit the properties of, the Company and any of the Subsidiaries, and to discuss the affairs, finances and accounts of the Company and any of the Subsidiaries with any of their respective officers or directors.
(d) Keeping of Books. Keep, and cause each Subsidiary to keep, proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of the Company and such Subsidiary in accordance with generally accepted accounting principles consistently applied.
(e) Maintenance of Properties, Etc. Maintain and preserve, and cause each Subsidiary to maintain and preserve, all of its properties which are used or useful in the conduct of its business in good working order and condition, ordinary wear and tear excepted.
(f) Maintenance of Insurance. Maintain, and cause each Subsidiary to maintain, insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which the Company or such Subsidiary operates.
(g) Taxes. File, and cause each Subsidiary to file, all tax returns (federal, state and local) required to be filed and paid and pay all taxes shown thereon to be due, including interest and penalties, or provide adequate reserves for payment thereof other than such taxes that the Company or such Subsidiary is contesting in good faith by appropriate legal proceedings.
(h) Material Obligations. Pay, and cause each Subsidiary to pay, promptly as the same shall become due each material obligation of the Company or such Subsidiary.
(i) Reporting Requirements. Furnish to the Lenders: (iA as soon as available and in any event within 60 days after the end of each of the first three quarters of each fiscal year of the Company, a Consolidated balance sheet of the Company and the Subsidiaries as at the end of such quarter and Consolidated statements of income and retained earnings of the Company and the Subsidiaries for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, certified by the treasurer or the chief financial officer of the Company; (iiA as soon as available and in any event within 100 days after the end of each fiscal year of the Company, a copy of the annual report for such year for the Company and the Subsidiaries, containing Consolidated financial statements for such year certified by Deloitte & Touche or other independent public accountants acceptable to the Majority Lenders; (iiiA promptly after the sending or filing thereof, copies of all reports which the Company sends to any of its security
holders, and copies of all reports and registration statements which the Company or any Subsidiary files with the Securities and Exchange Commission or any national securities exchange; (ivA immediately upon the Company's knowing of the occurrence of any Event of Default or any event which, with the giving of notice or lapse of time, or both, would constitute an Event of Default, a statement of the chief financial officer or treasurer of the Company setting forth details of such Event of Default or event and the action which the Company proposes to take with respect thereto; and (vA such other information respecting the condition or operations, financial or otherwise, of the Company or any Subsidiary as any Lender through the Administrative Agent may from time to time reasonably request.
(j) Indebtedness to Total Capitalization. Maintain at all times a ratio of consolidated Indebtedness of the Company and its Subsidiaries to Total Capitalization of not more than 65%.
(k) Use of Proceeds. Use the proceeds of each Advance solely for general corporate purposes (including, without limitation, as a commercial paper back-up). No proceeds of any Advance will be used to acquire any equity security of a class that is registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended and in effect from time to time.
SECTION 5.02. Negative Covenants. So long as any Note shall remain unpaid or any Lender shall have any Commitment hereunder, the Company will not, without the written consent of the Majority Lenders:
(l) Liens, Etc. Create, incur, assume or suffer to exist, or permit any
Subsidiary to create, incur, assume or suffer to exist, any lien, security
interest or other charge or encumbrance, or any other type of preferential
arrangement, upon or with respect to any of its properties, whether now owned or
hereafter acquired, or assign, or permit any Subsidiary to assign, any right to
receive income, in each case to secure any Indebtedness of any Person, other
than (iA liens, mortgages and security interests created by the Mortgage, (iiA
liens and security interests affecting the fuel used by the Company in its power
generating operations, and (iiiA liens, mortgages and security interests
securing other Indebtedness not exceeding $100,000,000; provided, however, that,
in the event that and for so long as the First Mortgage Bonds are rated lower
than BBB- or Baa3 by S&P or Moody's, respectively, or, in the event that neither
of such corporations is in the business of rating the First Mortgage Bonds,
lower than an equivalent rating of the First Mortgage Bonds by another
nationally-recognized credit rating agency of similar standing, the Company's
right to continue to create, incur and suffer to exist liens, mortgages and
security interests securing other Indebtedness pursuant to the foregoing clause
(iii) shall be suspended.
(m) Indebtedness. Create, incur, assume or suffer to exist, or permit any Subsidiary to create, incur, assume or suffer to exist, any Indebtedness other than (iA Indebtedness hereunder and under the Notes, (iiA Indebtedness secured by liens and security interests permitted pursuant to clauses (ii) and (iii) of subsection 5.02(a), (iiiA Indebtedness evidenced by the First Mortgage Bonds and (ivA unsecured Indebtedness, including guarantees issued in connection with the financing of pollution control facilities operated by the Company, guarantees of Indebtedness
incurred by any wholly-owned Subsidiary and guarantees of debt securities issued by any financing Subsidiary established to secure debt financing in the offshore markets.
(n) Lease Obligations. Create, incur, assume or suffer to exist, or permit any Subsidiary to create, incur, assume or suffer to exist, any obligations for the payment of rental for any property under leases or agreements to lease having a term of one year or more which would cause the direct or contingent Consolidated liabilities of the Company and the Subsidiaries in respect of all such obligations payable in any calendar year to exceed 10% of the Consolidated operating revenues of the Company and the Subsidiaries for the immediately preceding calendar year.
(o) Mergers, Etc. Merge with or into or consolidate with or into, or acquire all or substantially all of the assets or securities of, any Person, unless, in each case, (iA immediately after giving effect thereto, no event shall occur and be continuing which constitutes an Event of Default or an event which with the giving of notice or lapse of time, or both, would constitute an Event of Default, and (iiA in the case of any such merger to which the Company is a party, such other Person is a utility company and the resulting or surviving corporation, if not the Company, (x) is organized and existing under the laws of the United States of America or any State thereof, (y) is a corporation satisfactory to the Majority Lenders, and (z) shall have expressly assumed, by an instrument satisfactory in form and substance to the Majority Lenders, the due and punctual payment of all amounts due under this Agreement and the Notes and the performance of every covenant and undertaking of the Company contained in this Agreement.
(p) Sales, Etc. of Assets. Sell, lease, transfer or otherwise dispose of, or permit any Subsidiary to sell, lease, transfer or otherwise dispose of, any of its assets, other than the following sales: (iA sales of generating capacity to the Company's wholesale customers, (iiA sales of nuclear fuel, (iiiA sales of accounts receivable, (ivA sales in connection with a transaction authorized by subsection (d) of this Section, (vA sales of investments in securities with a maturity of less than one year, or (viA other sales not exceeding $150,000,000 in the aggregate in any fiscal year of the Company.
(q) Margin Stock. Use any proceeds of any Advance to buy or carry margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System).
ARTICLE VI.
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following events ("Events of Default") shall occur and be continuing:
(a) The Company shall fail to pay any installment of principal of any Note when due, or shall fail to pay any interest on any Note or any fees hereunder within five Business Days after such interest or fees shall become due; or
(b) Any representation or warranty made by the Company herein or by the Company (or any of its officers) in connection with this Agreement shall prove to have been incorrect in any material respect when made; or
(c) The Company shall fail to perform or observe any other term, covenant or agreement contained in Section 5.01(b), 5.01(i)(iv), 5.01(j) or 5.02 on its part to be performed or observed; or the Company shall fail to perform or observe any other term, covenant or agreement contained in this Agreement on its part to be performed or observed and any such failure shall remain unremedied for 30 days after written notice thereof shall have been given to the Company by the Administrative Agent or any Lender; or
(d) The Company or any of the Subsidiaries shall fail to pay any amount in respect of any Indebtedness in excess of $10,000,000 (but excluding Indebtedness evidenced by the Notes) of the Company or such Subsidiary (as the case may be), or any interest or premium thereon, when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Indebtedness; or any other default under any agreement or instrument relating to any such Indebtedness, or any other event, shall occur and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such default or event is to accelerate, or to permit the acceleration of, the maturity of such Indebtedness; or any such Indebtedness shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), prior to the stated maturity thereof; or
(e) The Company or any of the Subsidiaries shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Company or any of the Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property; or the Company or any of the Subsidiaries shall take any corporate action to authorize any of the actions set forth above in this subsection (e); or
(f) Any judgment or order for the payment of money in excess of $10,000,000 shall be rendered against the Company or any of the Subsidiaries and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be any period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or
(g) Any Termination Event with respect to a Plan shall have occurred, and, 30 days after notice thereof shall have been given to the Company by the Administrative Agent, (i) such Termination Event (if correctable) shall not have been corrected and (ii) the then present value of such Plan's vested benefits exceeds the then current value of assets accumulated in such Plan by more than the amount of $20,000,000 (or in the case of a Termination Event involving the withdrawal of a "substantial employer" (as defined in Section 4001(a)(2) of ERISA), the withdrawing employer's proportionate share of such excess shall exceed such amount); or
(h) The Company or any of its Affiliates as employer under a Multiemployer Plan shall have made a complete or partial withdrawal from such Multiemployer Plan and the plan sponsor of such Multiemployer Plan shall have notified such withdrawing employer that such employer has incurred a withdrawal liability in an annual amount exceeding $20,000,000;
then, and in any such event, the Administrative Agent shall at the request, or may with the consent, of the Majority Lenders, by notice to the Company, (i) declare the Commitments and the obligation of each Lender to make Advances to be terminated, whereupon the same shall forthwith terminate, and (ii) declare the Notes, all interest thereon and all other amounts payable under this Agreement to be forthwith due and payable, whereupon the Notes, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Company; provided, however, that in the event of an actual or deemed entry of an order for relief with respect to the Company or any of the Subsidiaries under the Federal Bankruptcy Code, (A) the obligation of each Lender to make Advances shall automatically be terminated and (B) the Notes, all such interest and all such amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Company.
ARTICLE VII.
THE ADMINISTRATIVE AGENT;
THE Documentation Agent
SECTION 7.01. Authorization and Action. Each Lender hereby appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent by the terms hereof, together with such powers as are reasonably provided for by this Agreement (including, without limitation, enforcement or collection of the Notes), the Administrative Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Majority Lenders, and such instructions shall be binding upon all Lenders and all holders of Notes; provided, however, that the Administrative Agent shall not be required to
take any action which exposes the Administrative Agent to personal liability or which is contrary to this Agreement or applicable law.
SECTION 7.02. Administrative Agent's Reliance, Etc. Neither the
Administrative Agent nor any of its directors, officers, agents or employees
shall be liable for any action taken or omitted to be taken by it or them under
or in connection with this Agreement, except for its or their own gross
negligence or willful misconduct. Without limitation of the generality of the
foregoing, the Administrative Agent: (i) may treat the payee of any Note as the
holder thereof until the Administrative Agent receives and accepts an Assignment
and Acceptance entered into by the Lender which is the payee of such Note, as
assignor, and an Eligible Assignee, as assignee, as provided in Section 8.07;
(ii) may consult with legal counsel (including counsel for the Company),
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts; (iii) makes
no warranty or representation to any Lender and shall not be responsible to any
Lender for any statements, warranties or representations made in or in
connection with this Agreement; (iv) shall not have any duty to ascertain or to
inquire as to the performance or observance of any of the terms, covenants or
conditions of this Agreement on the part of the Company or to inspect the
property (including the books and records) of the Company; (v) shall not be
responsible to any Lender for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any other
instrument or document furnished pursuant hereto; and (vi) shall incur no
liability under or in respect of this Agreement by acting upon any notice,
consent, certificate or other instrument or writing (which may be by telegram,
telecopy, cable or telex) believed by it to be genuine and signed or sent by the
proper party or parties.
SECTION 7.03. The Administrative Agent; the Documentation Agent and their Respective Affiliates. With respect to its Commitment, the Advances made by it and the Notes issued to it, the Administrative Agent and the Documentation Agent shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not the Administrative Agent or the Documentation Agent, as the case may be; and the term "Lender" or "Lenders" shall, unless otherwise expressly indicated, include each of Citibank and Wachovia in its individual capacity, as applicable. Citibank, Wachovia and their respective Affiliates may accept deposits from, lend money to, act as trustee under indentures of, and generally engage in any kind of business with, the Company, any of the Subsidiaries and any Person who may do business with or own securities of the Company or any Subsidiary, all as if Citibank or Wachovia, as the case may be, were not the Administrative Agent and without any duty to account therefor to the Lenders.
SECTION 7.04. Lender Credit Decision. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent, the Documentation Agent or any other Lender and based on the financial statements referred to in Section 4.01(e) and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent, the Documentation Agent or any other
Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement.
SECTION 7.05. Indemnification. The Lenders agree to indemnify the Administrative Agent and the Documentation Agent (to the extent not reimbursed by the Company), ratably according to the respective principal amounts of the Notes then held by each of them (or if no Notes are at the time outstanding, ratably according to the respective amounts of their Commitments), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against the Administrative Agent or the Documentation Agent, as the case may be, in any way relating to or arising out of this Agreement or any action taken or omitted by the Administrative Agent or the Documentation Agent, as the case may be, under this Agreement; provided that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Administrative Agent's or the Documentation Agent's, as the case may be, gross negligence or willful misconduct. Without limitation of the foregoing, each Lender agrees to reimburse the Administrative Agent promptly upon demand for its ratable share of any out-of-pocket expenses (including reasonable counsel fees) incurred by the Administrative Agent in connection with the preparation, execution, administration, or enforcement of, or legal advice in respect of rights or responsibility under, this Agreement, to the extent that the Administrative Agent is not reimbursed for such expenses by the Company.
SECTION 7.06. Successor Administrative Agent. The Administrative Agent may resign at any time by giving written notice thereof to the Lenders and the Company and may be removed at any time with or without cause by the Majority Lenders. Upon any such resignation or removal, the Majority Lenders shall have the right to appoint a successor Administrative Agent. If no successor Administrative Agent shall have been so appointed by the Majority Lenders, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent's giving of notice of resignation or the Majority Lenders' removal of the retiring Administrative Agent, a court of competent jurisdiction may appoint a successor Administrative Agent, which shall be a commercial bank organized under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $50,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Administrative Agent's resignation or removal hereunder as Administrative Agent, the provisions of this Article VII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement.
ARTICLE VIII.
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. No amendment or waiver of any provision of this Agreement or the Notes, nor consent to any departure by the Company therefrom, shall in any event be effective unless the same shall be in writing and signed by the Majority Lenders, in the case of any such amendment, waiver or consent of or in respect of this Agreement or any A Note, or the Lender which shall have made the B Advance to which such amendment, waiver or consent relates, in the case of any such amendment, waiver or consent of or in respect of the B Note to which such B Advance relates, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no amendment, waiver or consent shall, unless in writing and signed by all of the Lenders, do any of the following: (a) waive any of the conditions specified in Section 3.01, 3.02 or 3.03, (b) change the Commitment of any Lender or subject any Lender to any additional obligations, (c) reduce the principal of, or interest on, the A Notes or any fees hereunder, (d) postpone any date fixed for any payment of principal of, or interest on, the A Notes or any fees hereunder, (e) change the percentage of the Commitments or of the aggregate unpaid principal amount of the A Notes, or the number of Lenders, which shall be required for the Lenders or any of them to take any action under this Agreement, and (f) amend, waive, or in any way modify or suspend any provision of Section 2.16 or of this Section 8.01; and provided, further, that no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required hereinabove to take such action, affect the rights or duties of the Administrative Agent under this Agreement or any Note.
SECTION 8.02. Notices, Etc. All notices and other communications provided for hereunder shall, unless otherwise stated herein, be in writing (including telegraphic communication) and mailed, telecopied, telegraphed or delivered, if to the Company, at its address at 411 Fayetteville Street, Raleigh, North Carolina 27602, Attention: Manager of Financial Operations; if to any Lender, at its Domestic Lending Office set forth under its name on the signature pages hereof; and if to the Administrative Agent, at its address at One Court Square, 7th Floor, Zone 2, Long Island City, New York 11120, Attention: Bank Loan Syndications; or, as to each party, at such other address as shall be designated by such party in a written notice to the other parties. All such notices and communications shall be effective when received by the addressee thereof.
SECTION 8.03. No Waiver; Remedies. No failure on the part of any Lender or the Administrative Agent to exercise, and no delay in exercising, any right hereunder or under any Note shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder or under any Note preclude any other or further exercise thereof of the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.
SECTION 8.04. Costs, Expenses and Taxes. (a) The Company agrees to pay on demand all costs and expenses of the Administrative Agent in connection with (i) the preparation, execution and delivery of this Agreement, the Notes and the other documents to be delivered hereunder, (ii) the first Borrowing under this Agreement, (iii) any modification, amendment or supplement to this Agreement, the Notes and the other documents to be delivered hereunder and (ivA the enforcement of the rights and remedies of the Lenders and the Administrative Agent under this Agreement, the Notes and the other documents to be delivered hereunder (whether through negotiations or legal proceedings), all the above costs and expenses to include, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Administrative Agent and each of the Lenders with respect thereto. In addition, the Company shall pay any and all stamp and other taxes payable or determined to be payable in connection with the execution and delivery of this Agreement, the Notes and the other documents to be delivered hereunder, and agrees to save the Administrative Agent and each Lender harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such taxes.
(a) If, due to payments made by the Company due to acceleration of the maturity of the Notes pursuant to Section 6.01 or due to any other reason, any Lender receives payments of principal of any Eurodollar Rate Advance based upon the Eurodollar Rate other than on the last day of the Interest Period for such A Advance, the Company shall, upon demand by such Lender (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender any amounts required to compensate such Lender for any additional losses, costs or expenses which it may reasonably incur as a result of such payment, including, without limitation, any loss (including loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by any Lender to fund or maintain such A Advance.
(b) Any and all payments by the Company hereunder or under the Notes shall be made, in accordance with Section 2.14, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Lender and the Administrative Agent, taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction under the laws of which such Lender or the Administrative Agent (as the case may be) is organized or any political subdivision thereof and, in the case of each Lender, taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction of such Lender's Applicable Lending Office or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If the Company shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Note to any Lender or the Administrative Agent, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 8.04) such Lender or the Administrative Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Company shall make such deductions and (iii) the Company shall
pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law.
(c) The Company will indemnify each Lender and the Administrative Agent for the full amount of Taxes (including, without limitation, any Taxes imposed by any jurisdiction on amounts payable under this Section 8.04) paid by such Lender or the Administrative Agent (as the case may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally asserted. This indemnification shall be made within 30 days from the date such Lender or the Administrative Agent (as the case may be) makes written demand therefor.
(d) Prior to the date of the initial Borrowing or on the date of the Assignment and Acceptance pursuant to which it became a Lender, in the case of each Lender that becomes a Lender by virtue of entering into an Assignment and Acceptance, and from time to time thereafter if requested by the Company or the Administrative Agent, each Lender organized under the laws of a jurisdiction outside the United States shall provide the Administrative Agent and the Company with the forms prescribed by the Internal Revenue Service of the United States certifying that such Lender is exempt from United States withholding taxes with respect to all payments to be made to such Lender hereunder and under the Notes. If for any reason during the term of this Agreement, any Lender becomes unable to submit the forms referred to above or the information or representations contained therein are no longer accurate in any material respect, such Lender shall notify the Administrative Agent and the Company in writing to that effect. Unless the Company and the Administrative Agent have received forms or other documents satisfactory to them indicating that payment hereunder or under any Note are not subject to United States withholding tax, the Company or the Administrative Agent shall withhold taxes from such payments at the applicable statutory rate in the case of payments to or for any Lender organized under the laws of a jurisdiction outside the United States.
(e) Any Lender claiming any additional amounts payable pursuant to Section 8.04(c) or (d) shall use its reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) (i) to change the jurisdiction of its Applicable Lending Office if the making of such a change would avoid the need for, or reduce the amount of, any such additional amounts which may thereafter accrue and would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender and (ii) to otherwise minimize the amounts due, or to become due, under Sections 8.04(c) and (d).
(f) If the Company makes any additional payment to any Lender pursuant to Sections 8.04(c) and (d) in respect of any Taxes, and such Lender determines that it has received (i) a refund of such Taxes or (ii) a credit against or relief or remission for, or a reduction in the amount of, any tax or other governmental charge solely as a result of any deduction or credit for any Taxes with respect to which it has received payments under Sections 8.04(c) and (d), such Lender shall, to the extent that it can do so without prejudice to the retention of such refund, credit, relief, remission or reduction, pay to the Company such amount as such Lender shall have determined to be attributable to the deduction or withholding of such Taxes. If such Lender later
determines that it was not entitled to such refund, credit, relief, remission or reduction to the full extent of any payment made pursuant to the first sentence of this Section 8.04(g), the Company shall upon demand of such Lender promptly repay the amount of such overpayment. Any determination made by such Lender pursuant to this Section 8.04(g) shall in the absence of bad faith or manifest error be conclusive, and nothing in this Section 8.04(g) shall be construed as requiring any Lender to conduct its business or to arrange or alter in any respect its tax or financial affairs so that it is entitled to receive such a refund, credit or reduction or as allowing any Person to inspect any records, including tax returns, of any Lender.
(g) Without prejudice to the survival of any other agreement of the Company
hereunder, the agreements and obligations of the Company contained in this
Section 8.04 shall survive the payment in full of principal and interest
hereunder and under the Notes.
SECTION 8.05. Right of Set-off. Upon (i) the occurrence and during the continuance of any Event of Default and (ii) the making of the request or the granting of the consent specified by Section 6.01 to authorize the Administrative Agent to declare the Notes due and payable pursuant to the provisions of Section 6.01, each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the credit or the account of the Company now or hereafter existing under this Agreement and the Notes held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement or such Note and although such obligations may be unmatured. Each Lender agrees promptly to notify the Company after any such set-off and application made by such Lender; provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) which such Lender may have.
SECTION 8.06. Binding Effect. This Agreement shall become effective when it shall have been executed by the Company and the Administrative Agent and when the Administrative Agent shall have been notified by each Lender that such Lender has executed it and thereafter shall be binding upon and inure to the benefit of the Company, the Administrative Agent and each Lender and their respective successors and assigns, except that the Company shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of each Lender.
SECTION 8.07. Assignments and Participations. (a) Each Lender may, with the consent of the Agent and the Borrower (such consent not to be unreasonably withheld and, in the case of the Borrower, such consent shall not be required if an Event of Default has occurred and is continuing), assign to one or more banks or other entities all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment, the A Advances owing to it and the A Note or Notes held by it); provided, however, that (i) each such assignment shall be of a constant, and not a varying, percentage of all rights and obligations under this Agreement (other than any B Advances or B Notes), (ii) the
amount of the Commitment of the assigning Lender being assigned pursuant to each such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event be less than 50% of all such rights and obligations or less than the lesser of (A) $10,000,000 and (B) all of such Lender's rights and obligations and, if the preceding clause (A) is applicable, shall be an integral multiple of $1,000,000, (iii) each such assignment shall be to an Eligible Assignee, and (iv) the parties to each such assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with any A Note or Notes subject to such assignment and a processing and recordation fee of $3,500. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, (x) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender hereunder and (y) the Lender assignor thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto).
(h) By executing and delivering an Assignment and Acceptance, the Lender
assignor thereunder and the assignee thereunder confirm to and agree with each
other and the other parties hereto as follows: (i) other than as provided in
such Assignment and Acceptance, such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other instrument or document furnished pursuant
hereto; (ii) such assigning Lender makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the Company
or the performance or observance by the Company of any of its obligations under
this Agreement or any other instrument or document furnished pursuant hereto;
(iii) such assignee confirms that it has received a copy of this Agreement,
together with copies of the financial statements referred to in Section 4.01(e)
and such other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into such Assignment and
Acceptance; (iv) such assignee will, independently and without reliance upon the
Administrative Agent, such assigning Lender or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi)
such assignee appoints and authorizes the Administrative Agent to take such
action as agent on its behalf and to exercise such powers under this Agreement
as are delegated to the Administrative Agent by the terms hereof, together with
such powers as are reasonably incidental thereto; and (vii) such assignee agrees
that it will perform in accordance with their terms all of the obligations which
by the terms of this Agreement are required to be performed by it as a Lender.
(i) The Administrative Agent shall maintain at its address referred to in
Section 8.02 a copy of each Assignment and Acceptance (and copies of the related
consents of the Company and the Administrative Agent to such assignment)
delivered to and accepted by it and a register for the recordation of the names
and addresses of the Lenders and the Commitment of, and principal amount of the
A Advances owing to, each Lender from time to time (the"Register"). The entries
in the Register shall be conclusive and binding for all purposes, absent
manifest error, and the Company, the Administrative Agent and the Lenders may
treat each Person whose name is recorded in the Register as a Lender hereunder
for all purposes of this Agreement. The Register shall be available for
inspection by the Company or any Lender at any reasonable time and from time to
time upon reasonable prior notice.
(j) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an assignee representing that it is an Eligible Assignee,
together with any A Note or Notes subject to such assignment, the Administrative
Agent shall, if such Assignment and Acceptance has been completed and is in
substantially the form of Exhibit C hereto, (i) accept such Assignment and
Acceptance, (ii) record the information contained therein in the Register and
(iii) give prompt notice thereof to the Company. Within five Business Days after
its receipt of such notice, the Company, at its own expense, shall execute and
deliver to the Administrative Agent in exchange for the surrendered A Note or
Notes a new A Note to the order of such Eligible Assignee in an amount equal to
the Commitment assumed by it pursuant to such Assignment and Acceptance and, if
the assigning Lender has retained a Commitment hereunder, a new A Note to the
order of the assigning Lender, in an amount equal to the Commitment retained by
it hereunder. Such new A Note or Notes shall be in an aggregate principal amount
equal to the aggregate principal amount of such surrendered A Note or Notes,
shall be dated the effective date of such Assignment and Acceptance and shall
otherwise be in substantially the form of Exhibit A-1 hereto.
(k) Each Lender may assign to one or more banks or other entities any B Note or Notes held by it.
(l) Each Lender may sell participations to one or more banks or other
entities in or to all or a portion of its rights and obligations under this
Agreement (including, without limitation, all or a portion of its Commitment,
the Advances owing to it and the Note or Notes held by it); provided, however,
that (i) such Lender's obligations under this Agreement (including, without
limitation, its Commitment to the Company hereunder) shall remain unchanged,
(ii) such Lender shall remain solely responsible to the other parties hereto for
the performance of such obligations, (iii) such Lender shall remain the holder
of any such Note for all purposes of this Agreement, (iv) the Company, the
Administrative Agent and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and (v) the holder of any such participation,
other than an Affiliate of such Lender, shall not be entitled to require such
Lender to take or omit to take any action hereunder, except action (A) extending
the time for payment of interest on, or the final maturity of any portion of the
principal amount of, the Notes or (B) reducing the principal amount of or the
rate of interest payable on the Notes. Without limiting the generality of the
foregoing: (i) such
participating banks or other entities shall be entitled to the cost protection provisions contained in Sections 2.08, 2.12 and 8.04(b) only if, and to the same extent, the Lender from which such participating banks or other entities acquired its participation would, at the time, be entitled to claim thereunder; and (ii) such participating banks or other entities shall also, to the fullest extent permitted by law, be entitled to exercise the rights of set-off contained in Section 8.05 as if such participating banks or other entities were Lenders hereunder.
(m) If any Lender (or any bank, financial institution, or other entity to
which such Lender has sold a participation) shall make any demand for payment
under Section 2.12(b), then within 30 days after any such demand (if, but only
if, such demanded payment has been made by the Company), the Company may, with
the approval of the Administrative Agent (which approval shall not be
unreasonably withheld) and provided that no Event of Default or event which,
with the passage of time or the giving of notice, or both, would constitute an
Event of Default shall then have occurred and be continuing, demand that such
Lender assign in accordance with this Section 8.07 to one or more Eligible
Assignees designated by the Company all (but not less than all) of such Lender's
Commitment and the Advances owing to it within the period ending on the later to
occur of such 30th day and the last day of the longest of the then current
Interest Periods for such Advances. If any such Eligible Assignee designated by
the Company shall fail to consummate such assignment on terms acceptable to such
Lender, or if the Company shall fail to designate any such Eligible Assignees
for all or part of such Lender's Commitment or Advances, then such demand by the
Company shall become ineffective; it being understood for purposes of this
subsection (g) that such assignment shall be conclusively deemed to be on terms
acceptable to such Lender, and such Lender shall be compelled to consummate such
assignment to an Eligible Assignee designated by the Company, if such Eligible
Assignee (i) shall agree to such assignment by entering into an Assignment and
Acceptance in substantially the form of Exhibit C hereto with such Lender and
(ii) shall offer compensation to such Lender in an amount equal to all amounts
then owing by the Company to such Lender hereunder and under the Notes made by
the Company to such Lender, whether for principal, interest, fees, costs or
expenses (other than the demanded payment referred to above and payable by the
Company as a condition to the Company's right to demand such assignment), or
otherwise.
(n) Any Lender may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 8.07, disclose to the assignee or participant or proposed assignee or participant, any information relating to the Company furnished to such Lender by or on behalf of the Company; provided that, prior to any such disclosure, the assignee or participant or proposed assignee or participant shall agree to preserve the confidentiality of any confidential information relating to the Company received by it from such Lender.
(o) Anything in this Section 8.07 to the contrary notwithstanding, any Lender may assign and pledge all or any portion of its Commitment and the Advances owing to it to any Federal Reserve Bank (and its transferees) as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any Operating Circular issued by such Federal Reserve Bank. No such assignment shall release the assigning Lender from its obligations hereunder.
SECTION 8.08. Governing Law. This Agreement and the Notes shall be governed by, and construed in accordance with, the laws of the State of New York. The Company (i) irrevocably submits to the non-exclusive jurisdiction of any New York State court or Federal court sitting in New York City in any action arising out of this Agreement or any Note, (ii) agrees that all claims in such action may be decided in such court, (iii) waives, to the fullest extent it may effectively do so, the defense of an inconvenient forum and (iv) consents to the service of process by mail. A final judgment in any such action shall be conclusive and may be enforced in other jurisdictions. Nothing herein shall affect the right of any party to serve legal process in any manner permitted by law or affect its right to bring any action in any other court.
SECTION 8.09. WAIVER OF JURY TRIAL. THE COMPANY, THE ADMINISTRATIVE AGENT, AND EACH LENDER EACH HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY AND LAWFULLY DO SO, ALL RIGHT TO TRIAL BY JURY AS TO ANY ISSUE RELATING TO THIS AGREEMENT OR ANY NOTE IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY NOTE, OR ANY OTHER INSTRUMENT OR DOCUMENT DELIVERED HEREUNDER OR THEREUNDER.
SECTION 8.10. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.
SECTION 8.11. Severability. Any provision of this Agreement which is prohibited, unenforceable or not authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition, unenforceability or non-authorization without invalidating the remaining provisions hereof or affecting the validity, enforceability or legality of such provision in any other jurisdiction.
SECTION 8.12. Headings. Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose.
SECTION 8.13. Entire Agreement. This Agreement and the Notes constitute the entire contract between the parties relative to the subject matter hereof. Any previous agreement among the parties with respect to the subject matter hereof is superseded by this Agreement and the Notes. Except as is expressly provided for herein, nothing in this Agreement or the Notes, expressed or implied, is intended to confer upon any party other than the parties hereto any rights, remedies, obligations or liabilities under or by reason of this Agreement or the Notes.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.
CAROLINA POWER & LIGHT
COMPANY
CITIBANK, N.A., as Administrative Agent and as a Lender
Title:
WACHOVIA BANK, NATIONAL
ASSOCIATION
Title:
THE CHASE MANHATTAN BANK
Title:
THE FIRST NATIONAL BANK OF
CHICAGO
Title:
FIRST UNION NATIONAL BANK
Title:
REVOLVING COMMITMENT
VEHICLE CORPORATION
Title:
BRANCH BANKING AND TRUST
COMPANY, A NORTH CAROLINA
BANKING CORPORATION
Title:
THE FUJI BANK, LIMITED, ATLANTA
AGENCY
Title:
MELLON BANK, N.A.
Title:
NORDDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK/
CAYMAN ISLANDS BRANCH
Title:
Title:
SUNTRUST BANK, ATLANTA
Title:
UBS AG, NEW YORK BRANCH
Title:
Title:
SCHEDULE I
Existing Facilities
$165,000,000 5-Year Revolving Credit Facility, Citibank, N.A., Agent, December 29, 1995
$250,000,000 5-Year Revolving Credit Facility, Citibank, N.A., Agent, March 26, 1996
$100,000,000 364-Day Revolving Credit Facility, Citibank, N.A., Agent, March 26, 1996
$150,000,000 364-Day Revolving Credit Facility, Citibank, N.A., and Wachovia Bank, National Association, Co-Agents, April 1, 1998
EXHIBIT A-1
FORM OF A NOTE
The Company promises to pay interest on the unpaid principal amount of each A Advance from the date of such A Advance until such principal amount is paid in full, at such interest rates, and payable at such times, as are specified in the Credit Agreement.
Both principal and interest are payable in lawful money of the United States of America to Citibank, N.A., as Administrative Agent, at One Court Square, 7th Floor, Zone 2, Long Island City, New York 11120, Attention: Bank Loan Syndications, in same day funds. Each A Advance made by the Lender to the Company and the maturity thereof, and all payments made on account of principal hereof, shall be recorded by the Lender and, prior to any transfer hereof, endorsed on the grid attached hereto which is part of this Promissory Note, which endorsement shall constitute prima facie evidence of the accuracy of the information endorsed. No failure to make or error in making any such endorsement as authorized hereby shall affect the validity of the obligation to repay the unpaid principal amount of this Promissory Note with interest as provided in the Credit Agreement or the validity of any payment thereof made by the Company.
Advance being evidenced by this Promissory Note, and (ii) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events and also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified.
CAROLINA POWER & LIGHT COMPANY
By
Name:
Title:
ADVANCES, INTEREST PERIODS AND PAYMENTS OF PRINCIPAL
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Amount
Interest of Principal
Amount Period Paid or Unpaid
Date of Advance (if any) Prepaid Principal Notation
of Balance Made By
Advance
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EXHIBIT A-2
FORM OF B NOTE
FOR VALUE RECEIVED, the undersigned, CAROLINA POWER & LIGHT COMPANY, a North Carolina corporation (the "Company"), HEREBY PROMISES TO PAY to the order
of (the "Lender") for the account of its Applicable Lending
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Office (as defined in the Credit Agreement referred to below), on , 19
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, the principal amount of Dollars ($ ).
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The Company promises to pay interest on the unpaid principal amount hereof from the date hereof until such principal amount is paid in full, at the interest rate and payable on the interest payment date or dates provided below:
Interest Payment Date or Dates:
The Company hereby waives presentment, demand, protest and notice of any kind. No failure to exercise, and no delay in exercising, any rights hereunder on the part of the holder hereof shall operate as a waiver of such rights.
This Promissory Note shall be governed by, and construed in accordance with, the laws of the State of New York, United States.
CAROLINA POWER & LIGHT COMPANY
Title:
EXHIBIT B-1
NOTICE OF A BORROWING
[Date]
Citibank, N.A., as Administrative Agent
for the Lenders parties to the
Credit Agreement referred to below
One Court Square
7th Floor, Zone 2
Long Island City, New York 11120
Attention: Bank Loan Syndications
Gentlemen:
(ii) The Type of A Advances comprising the Proposed A Borrowing is [Base Rate Advances][Eurodollar Rate Advances].
Very truly yours,
CAROLINA POWER & LIGHT COMPANY
Title:
EXHIBIT B-2
NOTICE OF B BORROWING
Citibank, N.A., as Administrative Agent
for the Lenders parties to the
Credit Agreement referred to below
One Court Square
7th Floor, Zone 2
Long Island City, New York 11120
Attention: Bank Loan Syndications
Gentlemen:
The undersigned hereby certifies that the aggregate amount of the Proposed B Borrowing and all other Borrowings to be made on the same day under the Credit Agreement is within the aggregate amount of the unused Commitments of the Lenders.
The undersigned hereby confirms that the Proposed B Borrowing is to be made available to it in accordance with Section 2.03(a)(v) of the Credit Agreement.
Very truly yours,
CAROLINA POWER & LIGHT COMPANY
Title:
EXHIBIT B-3
NOTICE OF CONVERSION
[Date]
Citibank, N.A., as Administrative Agent
for the Lenders parties to the
Credit Agreement referred to below
One Court Square
7th Floor, Zone 2
Long Island City, New York 11120
Attention: Bank Loan Syndications
Gentlemen:
The undersigned hereby certifies that, on the date hereof, and on the date of the Proposed Conversion, no event has occurred and is continuing, or would result from such Proposed Conversion, which constitutes an Event of Default.
Very truly yours,
CAROLINA POWER & LIGHT COMPANY
Title:
EXHIBIT C
ASSIGNMENT AND ACCEPTANCE
1. The Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, that interest in and to all of the Assignor's rights and obligations under the Credit Agreement as of the date hereof (other than in respect of B Advances and B Notes) which represents the percentage interest specified on Schedule 1 of all outstanding rights and obligations under the Credit Agreement (other than in respect of B Advances and B Notes), including, without limitation, such interest in the Assignor's Commitment, the A Advances owing to the Assignor, and the A Note[s] held by the Assignor. After giving effect to such sale and assignment, the Assignee's Commitment and the amount of the A Advances owing to the Assignee will be as set forth in Section 2 of Schedule 1.
2. The Assignor (i) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; (ii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other instrument or document furnished pursuant thereto; (iii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Company or the performance or observance by the Company of any of its obligations under the Credit Agreement or any other instrument or document furnished pursuant thereto; and (iv) attaches the A Note[s] referred to in paragraph 1 above and requests that the Administrative Agent exchange such A Note[s] for a new A Note payable to the order of the Assignee in an amount equal to the Commitment assumed by the Assignee pursuant hereto or new A Notes payable to the order of the Assignee in an amount equal to the Commitment assumed by the Assignee pursuant hereto and the Assignor in an amount equal to the Commitment retained by the Assignor under the Credit Agreement, respectively, as specified on Schedule 1 hereto.
3. The Assignee (i) confirms that it has received a copy of the Credit
Agreement, together with copies of the financial statements referred to in
Section 4.01(e) thereof and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Assignment and Acceptance; (ii) agrees that it will, independently and
without reliance upon the Administrative Agent, the Assignor or any other Lender
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under the Credit Agreement; (iii) confirms that it is an Eligible Assignee; (iv)
appoints and authorizes the Administrative Agent to take such action as agent on
its behalf and to exercise such powers under the Credit Agreement as are
delegated to the Administrative Agent by the terms thereof, together with such
powers as are reasonably incidental thereto; (v) agrees that it will perform in
accordance with their terms all of the obligations which by the terms of the
Credit Agreement are required to be performed by it as a Lender; [and] (vi)
specifies as its Domestic Lending Office (and address for notices) and
Eurodollar Lending Office the offices set forth beneath its name on the
signature pages hereof [and (vii) attaches the forms prescribed by the Internal
Revenue Service of the United States certifying as to the Assignee's status for
purposes of determining exemption from United States withholding taxes with
respect to all payments to be made to the Assignee under the Credit Agreement
and the Notes or such other documents as are necessary to indicate that all such
payments are subject to such rates at a rate reduced by an applicable tax
treaty]./1/
4. Following the execution of this Assignment and Acceptance by the Assignor and the Assignee, it will be delivered to the Administrative Agent for acceptance and recording by the Administrative Agent. The effective date of this Assignment and Acceptance shall be the date of acceptance thereof by the Administrative Agent, unless otherwise specified on Schedule 1 hereto (the "Effective Date").
5. Upon such acceptance and recording by the Administrative Agent, as of the Effective Date, (i) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and (ii) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement.
6. Upon such acceptance and recording by the Administrative Agent, from and after the Effective Date, the Administrative Agent shall make all payments under the Credit Agreement and the A Notes in respect of the interest assigned hereby (including, without limitation, all
payments of principal, interest and commitment fees with respect thereto) to the Assignee. The Assignor and Assignee shall make all appropriate adjustments in payments under the Credit Agreement and the A Notes for periods prior to the Effective Date directly between themselves.
7. This Assignment and Acceptance shall be governed by, and construed in accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and Acceptance to be executed by their respective officers thereunto duly authorized, as of the date first above written, such execution being made on Schedule 1 hereto.
Schedule 1 to Assignment and Acceptance
Assignee's Commitment: $
Aggregate Outstanding Principal Amount of A Advances owing to Assignee: $
Principal Amount: $
Effective Date/1/
[NAME OF ASSIGNOR]
By
Title:
[NAME OF ASSIGNEE]
By
Title:
Domestic Lending Office (and
address for notices):
[Address]
Eurodollar Lending Office:
[Address]
Accepted this day of
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CITIBANK, N.A.,
as Administrative Agent
CAROLINA POWER & LIGHT
COMPANY
EXHIBIT D-1
FORM OF OPINION OF COUNSEL FOR THE COMPANY
Carolina Power & Light Company
Gentlemen:
In connection with the preparation, execution and delivery of the Credit Agreement, I have examined or have had examined under my supervision:
(1) The Credit Agreement.
(2) The A Notes and the other documents furnished by the Company pursuant to Section 3.01 of the Credit Agreement.
(3) The form of the B Notes, attached as Exhibit A-2 to the Credit Agreement, to be executed and delivered by the Company in connection with any B Borrowing.
(4) The Restated Charter of the Company (the "Charter").
(5) The By-Laws of the Company and all amendments thereto (the "By-Laws").
(6) The NCUC Order and the SCPSC Order.
I have also examined the originals, or copies of such other corporate records of the Company, certificates of public officials and of officers of the Company and agreements, instruments and other documents as I have deemed necessary as a basis for the opinions expressed below. As to questions of fact material to such opinions, I have, when relevant facts were not independently established by me, relied upon certificates of the Company or its officers or of public officials. I have assumed the authenticity of all documents submitted to me as originals, the conformity to originals of all documents submitted as certified or photostatic copies and the authenticity of the originals, and the due execution and delivery, pursuant to due authorization, of the Credit Agreement by the Lenders, the Administrative Agent and the validity and binding effect thereof on such parties.
I am qualified to practice law in the State of North Carolina, and the opinions expressed herein are limited to the laws of the State of North Carolina, the laws of the State of South Carolina applicable to public utilities and the Federal laws of the United States. No opinion is expressed as to the choice of law provisions contained in Section 8.08 of the Credit Agreement.
Based upon the foregoing and upon such investigation as I have deemed necessary, I am of the following opinion:
1. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of North Carolina, and is duly qualified to do business and in good standing in the State of South Carolina.
2. The execution, delivery and performance by the Company of the Credit
Agreement and the Notes are within the Company's corporate powers, have
been duly authorized by all necessary corporate action, and do not
contravene (i) the Charter or the By-Laws or (ii) any law, rule or
regulation applicable to the Company (including, without limitation,
Regulation X of the Board of Governors of the Federal Reserve System) or
(iii) any contractual or legal restriction binding or affecting the
Company. The Credit Agreement and the A Notes have been duly executed and
delivered on behalf of the Company.
3. No authorization, approval or other action by, and no notice to or filing with any governmental authority or regulatory body is required for the due execution, delivery and performance by the Company of the Credit Agreement and the Notes, other than the NCUC Order and the SCPSC Order, each of which has been duly issued, is final and in full force and effect, and all periods for review or appeal thereof have expired, and no such request for review or appeal has been filed and is pending.
4. If in any action or proceeding arising out of or relating to the Credit Agreement or the Notes in any court of the State of North Carolina or in any federal court sitting in the State of North Carolina, such court were to hold that the Credit Agreement and the Notes are governed by, and to be construed in accordance with, the laws of the State of North Carolina, the Credit Agreement, the A Notes and, upon their completion, execution and delivery in accordance with the terms of the Credit Agreement, the B Notes would be, under the laws of the State of North Carolina, legal, valid and binding obligations of the Company enforceable against the Company in accordance with their respective terms.
5. To the best of my knowledge, except as described in the reports and registration statements which the Company has filed with the Securities and Exchange Commission, there are no pending or overtly threatened actions or proceedings against the Company or any of the Subsidiaries before any court, governmental agency or arbitrator which purport to affect the legality, validity, binding effect or enforceability of the Credit Agreement or any of the Notes or which are likely to have a materially adverse effect upon the financial condition or operations of the Company or any of the Subsidiaries.
The opinions set forth above are subject to the following qualifications:
(a) The enforceability of the Company's obligations under the Credit Agreement and the Notes is subject to the effect of any applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar law affecting creditors' rights generally.
(b) The enforceability of the Company's obligations under the Credit Agreement and the Notes is subject to the effect of general principles of equity, including (without limitation) concepts of materiality, reasonableness, good faith and fair dealing (regardless of whether considered in a proceeding in equity or at law). Such principles of equity are of general application, and, in applying such principles, a court, among other things, might not allow a contracting party to exercise remedies in respect of a default deemed immaterial, or might decline to order an obligor to perform covenants.
(c) In addition to the application of equitable principles described above, courts have imposed an obligation on contracting parties to act reasonably and in good faith in the exercise of their contractual rights and remedies, and may also apply public policy considerations in limiting the right of parties seeking to obtain indemnification under circumstances where the conduct of such parties is determined to have constituted negligence.
(d) No opinion is expressed herein as to (i) Section 8.05 of the Credit Agreement, (ii) the enforceability of provisions purporting to grant to a party conclusive rights of determination, (iii) the availability of specific performance or other equitable remedies, (iv) the enforceability of rights to indemnity under federal or state securities laws or (v) the enforceability of waivers by parties of their respective rights and remedies under law.
The foregoing opinion is solely for your benefit and may not be relied upon by any other Person other than (i) any other Person that may become a Lender under the Credit Agreement after the date hereof and (ii) King & Spalding, in connection with their opinion delivered on the date hereof under Section 3.01 of the Credit Agreement.
Very truly yours,
EXHIBIT D-2
FORM OF OPINION OF COUNSEL FOR THE COMPANY UPON EXTENSION OF THE
TERMINATION DATE
To each of the Lenders parties to the
$375,000,000 5-Year Revolving Credit
Agreement, dated as of June __, 1998,
among Carolina Power & Light Company,
said and Citibank, N.A., as
Administrative Agent for said Lenders
Carolina Power & Light Company
Gentlemen:
In connection with the preparation, execution and delivery of the Credit Agreement, I have examined or have had examined under my supervision:
(1) The Credit Agreement.
(2) The A Notes and the other documents furnished by the Company pursuant to Section 3.01 of the Credit Agreement.
(3) The form of the B Notes, attached as Exhibit A-2 to the Credit Agreement, to be executed and delivered by the Company in connection with any B Borrowing.
(5) The Restated Charter of the Company (the "Charter").
(6) The By-Laws of the Company and all amendments thereto (the "By-Laws").
I have also examined the originals, or copies of such other corporate records of the Company, certificates of public officials and of officers of the Company and agreements, instruments and other documents as I have deemed necessary as a basis for the opinions expressed below. As to questions of fact material to such opinions, I have, when relevant facts were not independently established by me, relied upon certificates of the Company or its officers or of public officials. I have assumed the authenticity of all documents submitted to me as originals, the conformity to originals of all documents submitted as certified or photostatic copies and the authenticity of the originals, and the due execution and delivery, pursuant to due authorization, of the Credit Agreement by the Lenders, the Administrative Agent and the Documentation Agents and the validity and binding effect thereof on such parties.
I have also reviewed the NCUC Order and the SCPSC Order, each of which is attached hereto.
I am qualified to practice law in the State of North Carolina, and the opinions expressed herein are limited to the laws of the State of North Carolina, the laws of the State of South Carolina applicable to public utilities and the Federal laws of the United States. No opinion is expressed as to the choice of law provisions contained in Section 8.08 of the Credit Agreement.
Based upon the foregoing and upon such investigation as I have deemed necessary, I am of the following opinion:
1. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of North Carolina, and is duly qualified to do business and in good standing in the State of South Carolina.
2. The execution, delivery and performance, after giving effect to the Extension, by the Company of the Credit Agreement and the Notes, are within the Company's corporate powers, have been duly authorized by all necessary corporate action, and do not contravene (i) the Charter or the By-Laws or (ii) any law, rule or regulation applicable to the Company (including, without limitation, Regulation X of the Board of Governors of the Federal Reserve System) or (iii) any contractual or legal restriction binding or affecting the Company. The Credit Agreement and the A Notes have been duly executed and delivered on behalf of the Company.
3. No authorization, approval or other action by, and no notice to or filing with any governmental authority or regulatory body is required for the due execution, delivery and performance, after giving effect to the Extension, by the Company of the Credit Agreement and the Notes, other than the NCUC Order and the SCPSC Order, each of which has been duly issued, is final and in full force and effect, and all periods for review or appeal thereof have expired, and no such request for review or appeal has been filed and is pending.
4. If in any action or proceeding arising out of or relating to the Credit Agreement or the Notes in any court of the State of North Carolina or in any federal court sitting in the State of North Carolina, such court were to hold that the Credit Agreement and the Notes are governed by, and to be construed in accordance with, the laws of the State of North Carolina, the Credit Agreement, the A Notes and, upon their completion, execution and delivery in accordance with the terms of the Credit Agreement, the B Notes would be, under the laws of the State of North Carolina and after giving effect to the Extension, legal, valid and binding obligations of the Company enforceable against the Company in accordance with their respective terms.
5. To the best of my knowledge, except as described in the reports and registration statements which the Company has filed with the Securities and Exchange Commission, there are no pending or overtly threatened actions or proceedings against the Company or any of the Subsidiaries before any court, governmental agency or arbitrator which purport to affect the legality, validity, binding effect or enforceability of the Credit Agreement or any of the Notes or which are likely to have a materially adverse effect upon the financial condition or operations of the Company or any of the Subsidiaries.
The opinions set forth above are subject to the following qualifications:
(a) The enforceability of the Company's obligations under the Credit Agreement and the Notes is subject to the effect of any applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar law affecting creditors' rights generally.
(b) The enforceability of the Company's obligations under the Credit Agreement and the Notes is subject to the effect of general principles of equity, including (without limitation) concepts of materiality, reasonableness, good faith and fair dealing (regardless of whether considered in a proceeding in equity or at law). Such principles of equity are of general application, and, in applying such principles, a court, among other things, might not allow a contracting party to exercise remedies in respect of a default deemed immaterial, or might decline to order an obligor to perform covenants.
(c) In addition to the application of equitable principles described above, courts have imposed an obligation on contracting parties to act reasonably and in good faith in the exercise of their contractual rights and remedies, and may also apply public policy considerations in limiting the right of parties seeking to obtain indemnification under circumstances where the conduct of such parties is determined to have constituted negligence.
(d) No opinion is expressed herein as to (i) Section 8.05 of the Credit Agreement, (ii) the enforceability of provisions purporting to grant to a party conclusive rights of determination, (iii) the availability of specific performance or other equitable remedies, (iv) the enforceability of rights to indemnity under federal or state securities laws or (v) the enforceability of waivers by parties of their respective rights and remedies under law.
The foregoing opinion is solely for your benefit and may not be relied
upon by any other Person other than (i) any other Person that may
become a Lender under the Credit Agreement after the date hereof and
(ii) King & Spalding, in connection with their opinion delivered on
the date hereof under Section 3.01 of the Credit Agreement.
Very truly yours,
EXHIBIT E
FORM OF OPINION OF COUNSEL
TO THE ADMINISTRATIVE AGENT
[DATE]
Re: Carolina Power & Light Company
Ladies and Gentlemen:
In this connection, we have examined the following documents:
1. counterpart of the Credit Agreement, executed by the parties thereto;
2. the A Notes to the order of each Bank;
3. the form of the B Notes, attached as Exhibit A-2 to the Credit Agreement, to be executed and delivered by the Company in connection with any B Borrowing; and
4. the documents furnished by or on behalf of the Company pursuant to subsections (b) through (e) of Section 3.01 of the Credit Agreement, including, without limitation, the opinion of the General Counsel to the Company (the "Company Opinion").
In our examination of the documents referred to above, we have assumed the authenticity of all such documents submitted to us as originals, the genuineness of all signatures, the due authority of the parties executing such documents and the conformity to the originals of all such documents submitted to us as copies. We have also assumed that you have independently evaluated, and are satisfied with, the creditworthiness of the Company and the business terms reflected in the Credit Agreement. We have relied, as to factual matters, on the documents we have examined.
To the extent that our opinions expressed below involve conclusions as to matters governed by law other than the law of the State of New York, we have relied upon the Company Opinion and have assumed without independent investigation the correctness of the matters set forth therein, our opinions expressed below being subject to the assumptions, qualifications and limitations set forth in the Company Opinion.
Based upon and subject to the foregoing, and subject to the qualifications set forth below, we are of the opinion that the Credit Agreement and the A Notes are, and upon their completion, execution and delivery in accordance with the terms of the Credit Agreement, the B Notes will be, the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms.
Our opinion is subject to the following qualifications:
(a) The enforceability of the Company's obligations under the Credit Agreement and the Notes is subject to the effect of any applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar law affecting creditors' rights generally.
(b) The enforceability of the Company's obligations under the Credit Agreement and the Notes is subject to the effect of general principles of equity, including (without limitation) concepts of materiality, reasonableness, good faith and fair dealing (regardless of whether considered in a proceeding in equity or at law). Such principles of equity are of general application, and, in applying such principles, a court, among other things, might not allow a contracting party to exercise remedies in respect of a default deemed immaterial, or might decline to order an obligor to perform covenants.
(c) We note further that, in addition to the application of equitable principles described above, courts have imposed an obligation on contracting parties to act reasonably and in good faith in the exercise of their contractual rights and remedies, and may also apply public policy considerations in limiting the right of parties seeking to obtain indemnification under circumstances where the conduct of such parties is determined to have constituted negligence.
(d) We express no opinion herein as to (i) the enforceability of Section 8.05 of the Credit Agreement, (ii) the enforceability of provisions purporting to grant to a party conclusive rights of
determination, (iii) the availability of specific performance or other equitable remedies, (iv) the enforceability of rights to indemnity under federal or state securities laws or (v) the enforceability of waivers by parties of their respective rights and remedies under law.
(e) Our opinions expressed above are limited to the law of the State of New York, and we do not express any opinion herein concerning any other law.
The foregoing opinion is solely for your benefit and may not be relied upon by any other person or entity.
Very truly yours,
EXHIBIT F
FORM OF REQUEST FOR EXTENSION
OF THE TERMINATION DATE
CAROLINA POWER & LIGHT COMPANY
(Company)
AND
CITIBANK, N.A.
(Administrative Agent)
Request for Extension of Termination Date
and
Certificate of Representations and Warranties and No Default
Witness my hand this day of , .
------ --------- ----
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|
EXECUTION COPY
$375,000,000
364-DAY REVOLVING CREDIT AGREEMENT
Dated as of June 30, 1998
CAROLINA POWER & LIGHT COMPANY
(Company)
and
THE BANKS LISTED ON THE SIGNATURE PAGES HEREOF
(Banks)
and
THE OTHER LENDERS FROM TIME TO TIME
PARTY HERETO
(Lenders)
and
CITIBANK, N.A.
(Administrative Agent)
and
WACHOVIA BANK, NATIONAL ASSOCIATION
(Documentation Agent)
REVOLVING CREDIT AGREEMENT
Dated as of June 30,1998
CAROLINA POWER & LIGHT COMPANY, a North Carolina corporation (the "Company"), the banks listed on the signature pages hereof (the "Banks") CITIBANK, N.A. ("Citibank"), as administrative agent (the "Administrative Agent") for the Lenders (as hereinafter defined) hereunder, and WACHOVIA BANK, NATIONAL ASSOCIATION ("Wachovia"), as Documentation Agent, agree as follows:
ARTICLE I.
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):
"A Advance" means an advance by a Lender to the Company as part of an A Borrowing and refers to a Base Rate Advance or a Eurodollar Rate Advance, each of which shall be a "Type" of A Advance.
"A Borrowing" means a borrowing consisting of simultaneous A Advances of the same Type made by each of the Lenders pursuant to Section 2.01.
"A Note" means a promissory note of the Company payable to the order of any Lender, in substantially the form of Exhibit A-1 hereto, evidencing the aggregate indebtedness of the Company to such Lender resulting from the A Advances made by such Lender.
"Advance" means an A Advance or a B Advance.
"Affiliate" means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by, or is under common control with such Person or is a director or officer of such Person.
"Applicable Lending Office" means, with respect to each Lender, (i) such Lender's Domestic Lending Office in the case of a Base Rate Advance, or (ii) such Lender's Eurodollar Lending Office, in the case of a Eurodollar Rate Advance.
"Applicable Margin" means on any date, the rate per annum set forth below, determined by reference to the First Mortgage Bond ratings of the Company:
---------------------------------------------------------------------------------------------
Basis for LEVEL 1 LEVEL 2 LEVEL 3 LEVEL 4 LEVEL 5
Pricing If the First If the First If the First If the First If the First
Mortgage Bonds Mortgage Bonds Mortgage Mortgage Mortgage
are rated at are rated at Bonds are Bonds are Bonds are
least A- by least BBB+ by rated at rated at rated less
Standard & Standard & least BBB by least BBB- by than Level 4
Poor's or at Poor's or at Standard & Standard &
least A3 by least Baa1 by Poor's or at Poor's or at
Moody's Moody's least Baa2 by least Baa3 by
Moody's Moody's
---------------------------------------------------------------------------------------------
Eurodollar 0.225% 0.250% 0.325% 0.350% 0.600%
Rate
---------------------------------------------------------------------------------------------
|
"Assignment and Acceptance" means an assignment and acceptance entered into by a Lender and an Eligible Assignee, and accepted by the Administrative Agent, in substantially the form of Exhibit C hereto.
"B Advance" means an advance by a Lender to the Company as part of a B Borrowing resulting from the auction bidding procedure described in Section 2.03.
"B Borrowing" means a borrowing consisting of simultaneous B Advances from each of the Lenders whose offer to make one or more B Advances as part of such borrowing has been accepted by the Company under the auction bidding procedure described in Section 2.03.
"B Note" means a promissory note of the Company payable to the order of any Lender, in substantially the form of Exhibit A-2 hereto, evidencing the indebtedness of the Company to such Lender resulting from a B Advance made by such Lender.
"B Reduction" has the meaning specified in Section 2.01.
"Base Rate" means, for any Interest Period or any other period, a fluctuating interest rate per annum as shall be in effect from time to time, which rate per annum shall at all times be equal to the highest from time to time of:
(a) the rate of interest announced publicly by Citibank in New York, New York, from time to time, as Citibank's base rate;
(b) 1/2 of one percent per annum above the latest three-week moving average of secondary market morning offering rates in the United States for three-
month certificates of deposit of major United States money market banks, such three-week moving average being determined weekly by Citibank on the basis of such rates reported by certificate of deposit dealers to and published by the Federal Reserve Bank of New York or, if such publication shall be suspended or terminated, on the basis of quotations for such rates received by Citibank from three New York certificate of deposit dealers of recognized standing selected by Citibank, in either case rounded upward to the nearest 1/4 of one percent; and
(c) 1/2 of one percent per annum above the Federal Funds Rate in effect from time to time.
" Base Rate Advance" means an A Advance which bears interest as provided in Section 2.07(a).
"Borrowing" means an A Borrowing or a B Borrowing.
"Business Day" means a day of the year on which banks are not required or authorized to close at the principal office of any Lender and, if the applicable Business Day relates to any Eurodollar Rate Advances, on which dealings are carried on in the London interbank market.
"Commitment" has the meaning specified in Section 2.01.
"Commitment Termination Date" means, with respect to a Lender, the
earlier to occur of (i) the later of the Extension Date and (x) with
respect to all Lenders other than Declining Lenders, upon the effectiveness
of any extension to the Commitment Termination Date, such date to which the
Commitment Termination Date is extended in accordance with Section 2.16 and
(y) with respect to Declining Lenders, the Extension Date as then in effect
without giving effect to any requested extension, and (ii) the date of
termination in whole of the Commitments pursuant to Section 2.05 or 6.01.
"Consolidated" refers to the consolidation of the accounts of the Company and the Subsidiaries in accordance with generally accepted accounting principles, including principles of consolidation, consistent with those applied in the preparation of the financial statements referred to in Section 4.01(e).
"Convert", "Conversion" and "Converted" each refers to a conversion of Advances of one Type into Advances of another Type, or the selection of a new, or the renewal of the same, Interest Period for Eurodollar Rate Advances, pursuant to Section 2.09 or 2.10.
"Declining Lender" has the meaning assigned to that term in Section 2.16.
"Domestic Lending Office" means, with respect to any Lender, the office of such Lender specified as its "Domestic Lending Office" below its name on the signature pages hereof or such other office of such Lender as such Lender may from time to time specify to the Company and the Administrative Agent.
"Eligible Assignee" means (i) any other Lender or any Affiliate of a
Lender meeting the criteria set forth in clause (ii) hereof (without regard
to the proviso at the end of such clause) and (ii) (A) any other commercial
bank organized under the laws of the United States, or any State thereof,
and having a combined capital and surplus of at least $250,000,000 (as
established in its most recent report of condition to its primary
regulator), (B) a savings and loan association or savings bank organized
under the laws of the United States, or any State thereof, and having a
combined capital and surplus of at least $250,000,000 (as established in
its most recent report of condition to its primary regulator), (C) a
commercial bank organized under the laws of any other country which is a
member of the OECD or has concluded special lending arrangements with the
International Monetary Fund associated with its General Arrangements to
Borrow of the Cayman Islands, or a political subdivision of any such
country, and having a combined capital and surplus of at least $250,000,000
(as established in its most recent report of condition to its primary
regulator); provided that such bank is acting through a branch or agency
located in the United States or in the country in which it is organized or
another country which is described in this clause (C), (D) the central bank
of any country which is a member of the OECD, and (E) a finance company,
insurance company or other financial institution or fund (whether a
corporation, partnership or other entity) which is engaged in making,
purchasing or otherwise investing in commercial loans in the ordinary
course of its business, whose outstanding unsecured indebtedness is rated
AA- or better by S&P or Aa3 or better by Moody's (or an equivalent rating
by another nationally-recognized credit rating agency of similar standing
if neither of such corporations is then in the business of rating unsecured
indebtedness); provided, that, in the case of any such Person described in
this clause (ii), the identity of such Person is notified by the proposed
assignor to the Company and the Administrative Agent (or by the Company to
the Administrative Agent pursuant to Section 8.07(g)) in writing at least
ten Business Days prior to the date of the proposed assignment under
Section 8.07 and is consented to in writing by the Company and the
Administrative Agent (each of which shall not unreasonably withhold their
respective consents) at least five Business Days prior to the date of such
proposed assignment.
"Environmental Laws" means any federal, state or local laws, ordinances or codes, rules, orders, or regulations relating to pollution or protection of the environment, including, without limitation, laws relating to hazardous substances, laws relating to reclamation of land and waterways and laws relating to emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes into the environment (including, without limitation, ambient air, surface water, ground water, land surface or subsurface strata) or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollution, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder.
"Eurocurrency Liabilities" has the meaning assigned to that term in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time.
"Eurodollar Lending Office" means, with respect to each Lender, the office of such Lender specified as its "Eurodollar Lending Office" below its name on the signature pages hereof (or, if no such office is specified, its Domestic Lending Office), or such other office of such Lender as such Lender may from time to time specify to the Company and the Administrative Agent.
"Eurodollar Rate" means, for the Interest Period for each Eurodollar Rate Advance comprising part of the same A Borrowing an interest rate per annum equal to the average (rounded upward to the nearest whole multiple of 1/8 of 1% per annum, if such average is not such a multiple) of the rates per annum at which deposits in U.S. dollars are offered by the principal office of each of the Reference Banks in London, England to prime banks in the London Interbank market at 11:00 A.M. (London time) two Business Days before the first day of such Interest Period for a period equal to such Interest Period and in an amount substantially equal to the amount of such Eurodollar Rate Advance comprising part of such A Borrowing to be outstanding during such Interest Period from such Reference Bank. The Eurodollar Rate for the Interest Period for each Eurodollar Rate Advance comprising part of the same A Borrowing shall be determined by the Administrative Agent on the basis of the applicable rates furnished to and received by the Administrative Agent from the Reference Banks two Business Days before the first day of such Interest Period, subject, however, to the provisions of Section 2.08.
"Eurodollar Rate Advance" means an A Advance which bears interest as provided in Section 2.07(b).
"Eurodollar Rate Reserve Percentage" of any Lender for the Interest Period for any Eurodollar Rate Advance means the reserve percentage applicable during such Interest Period (or if more than one such percentage shall be so applicable, the daily average of such percentages for those days in such Interest Period during which any such percentage shall be so applicable) under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) for determining the
maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for such Lender with respect to liabilities or assets consisting of or including Eurocurrency Liabilities having a term equal to such Interest Period.
"Events of Default" has the meaning assigned to that term in Section 6.01.
"Existing Facilities" refers to those credit agreements listed on Schedule 1 hereto.
"Extension Date" means the 364th day following the date of this Agreement and each subsequent date to which the Commitment Termination Date has been extended pursuant to Section 2.16.
"Federal Funds Rate" means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.
"First Mortgage Bonds" means those bonds issued by the Company pursuant to the Mortgage.
"Guaranty" of any Person means any obligation, contingent or otherwise, of such Person (a) to pay any Liability of any other Person or to otherwise protect, or having the practical effect of protecting, the holder of any such Liability against loss (whether such obligation arises by virtue of such Person being a partner of a partnership or participant in a joint venture or by agreement to pay, to keep well, to purchase assets, goods, securities or services or to take or pay, or otherwise) or (b) incurred in connection with the issuance by a third Person of a Guaranty of any Liability of any other Person (whether such obligation arises by agreement to reimburse or indemnify such third Person or otherwise). The word "Guarantee" when used as a verb has the correlative meaning.
"Increasing Commitment Lender" has the meaning assigned to that term in Section 2.16(b).
"Indebtedness" of any Person means (a) any obligation of such Person for borrowed money, (b) any obligation of such Person evidenced by a bond, debenture, note or other similar instrument, (c) any obligation of such Person to pay the deferred purchase price of property or services, except a trade account payable that arises in the
ordinary course of business but only if and so long as the same is payable on customary trade terms, (d) any obligation of such Person as lessee under a capital lease, (e) any Mandatorily Redeemable Stock of such Person (the amount of such Mandatorily Redeemable Stock to be determined for this purpose as the higher of the liquidation preference and the amount payable upon redemption of such Mandatorily Redeemable Stock), (f) any obligation of such Person to purchase securities or other property that arises out of or in connection with the sale of the same or substantially similar securities or property, (g) any non-contingent obligation of such Person to reimburse any other Person in respect of amounts paid under a letter of credit or other Guaranty issued by such other Person to the extent that such reimbursement obligation remains outstanding after it becomes non-contingent, (h) any Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) a mortgage, lien, pledge, charge or other encumbrance on any asset of such Person, (i) any Liabilities in respect of unfunded vested benefits under plans covered by Title IV of ERISA and (j) any Indebtedness of others Guaranteed by such Person.
"Interest Period" means, for each Eurodollar Rate Advance comprising
part of the same A Borrowing, the period commencing on the date of such A
Advance or the date of the Conversion of any A Advance into such an A
Advance and ending on the last day of the period selected by the Company
pursuant to the provisions below and, thereafter, each subsequent period
commencing on the last day of the immediately preceding Interest Period and
ending on the last day of the period selected by the Company pursuant to
the provisions below. The duration of each such Interest Period shall be
one, two, three or six months, as the Company may, in the Notice of A
Borrowing given by the Company to the Administrative Agent pursuant to
Section 2.02, select; provided, however, that:
(i) the Company may not select any Interest Period that ends after the Commitment Termination Date;
(ii) Interest Periods commencing on the same date for A Advances comprising the same A Borrowing shall be of the same duration; and
(iii) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day; provided that if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the next preceding Business Day.
The Administrative Agent shall promptly advise each Lender by telex, telecopy transmission or cable of each Interest Period so selected by the Company.
"Lenders" means the Lenders listed on the signature pages hereof and each Eligible Assignee that shall become a party hereto pursuant to Section 8.07.
"Liability" of any Person means any indebtedness, liability or obligation of or binding upon, such Person or any of its assets, of any kind, nature or description, direct or indirect, absolute or contingent, due or not due, contractual or tortious, liquidated or unliquidated, whether arising under contract, applicable law, or otherwise, whether now existing or hereafter arising.
"Majority Lenders" means at any time Lenders holding at least 51% of
the then aggregate unpaid principal amount of the A Notes held by Lenders,
or, if no such principal amount is then outstanding, Lenders having at
least 51% of the Commitments (provided that, for purposes hereof, neither
the Company, nor any of its Affiliates, if a Lender, shall be included in
(i) the Lenders holding such amount of the A Advances or having such amount
of the Commitments or (ii) determining the aggregate unpaid principal
amount of the A Advances or the total Commitments).
"Mandatorily Redeemable Stock" means, with respect to any Person, any share of such Person's capital stock to the extent that it is (a) redeemable, payable or required to be purchased or otherwise retired or extinguished, or convertible into any Indebtedness or other Liability of such Person, (i) at a fixed or determinable date, whether by operation of a sinking fund or otherwise, (ii) at the option of any Person other than such Person or (iii) upon the occurrence of a condition not solely within the control of such Person, such as a redemption required to be made out of future earnings or (b) convertible into Mandatorily Redeemable Stock.
"Moody's" means Moody's Investors Service, Inc., or any successor thereto.
"Moody's Rating" means the rating of the First Mortgage Bonds most recently announced by Moody's.
"Mortgage" means the Mortgage and Deed of Trust, dated as of May 1, 1940, from the Company to The Bank of New York (formerly Irving Trust Company) and to Frederick G. Herbst (W.T. Cunningham, successor), as modified, amended or supplemented from time to time.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA.
"NCUC Order" means the order by the North Carolina Utilities Commission that authorizes the Company to execute, deliver and perform this Agreement and the Notes.
"Note" means an A Note or a B Note.
"Notice of A Borrowing" has the meaning specified in Section 2.02(a).
"Notice of B Borrowing" has the meaning specified in Section 2.03(a).
"Notice of Conversion" has the meaning specified in Section 2.10.
"OECD" means the Organization for Economic Cooperation and Development.
"Person" means an individual, partnership, corporation (including a business trust), limited liability company, joint stock company, trust, unincorporated association, joint venture or other entity, or a foreign state or political subdivision thereof or any agency of such state or subdivision.
"Plan" means an employee benefit plan (other than a Multiemployer Plan) maintained for employees of the Company or any of its Affiliates and covered by Title IV of ERISA.
"Reference Banks" means Citibank and Wachovia.
"Register" has the meaning specified in Section 8.07(c).
"Responsible Officer" means the President, any Vice President, the
Chief Financial Officer, the Treasurer, the Controller or any Assistant
Treasurer of the Company the signatures of whom, in each case, have been
certified to the Administrative Agent and each other Bank pursuant to
Section 3.01(d), or in a certificate delivered to the Administrative Agent
replacing or amending such certificate. Each Bank may conclusively rely on
each certificate so delivered until it shall have received a copy of a
certificate from the Secretary or an Assistant Secretary of the Company
amending, canceling or replacing such certificate.
"S&P" means Standard & Poor's Ratings Group or any successor thereto.
"S&P Rating" means the rating of the First Mortgage Bonds most recently announced by S&P.
"SCPSC Order" means the order by the South Carolina Public Service Commission that authorizes the Company to execute, deliver and perform this Agreement and the Notes.
"Subsidiary" means any corporation of which more than 50% of the outstanding capital stock having ordinary voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether or not at the time capital stock of any other
class or classes of such corporation shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned by the Company, by the Company and one or more other Subsidiaries, or by one or more other Subsidiaries.
"Term Loan Conversion Notice" has the meaning assigned to that term in
Section 2.17.
"Term Loan Conversion Option" means the option of the Company to convert the A Advances into term loans in accordance with Section 2.17.
"Termination Date" means, with respect to all Lenders, the Commitment Termination Date, unless the Term Loan Conversion Option has been effectively exercised in accordance with Section 2.17, in which case the Termination Date means the earliest to occur of (i) the date the A Advances become due and payable in accordance with such Section, (ii) the date of repayment in full of the A Advances pursuant to Section 2.11(b) or acceleration of the Notes in accordance with Section 6.01 and (iii) prior to the effectiveness of the Term Loan Conversion Option, the reduction in full of the Commitments pursuant to Section 2.05.
"Termination Event" means (i) a Reportable Event described in Section 4043 of ERISA and the regulations issued thereunder (other than a Reportable Event not subject to the provision for 30-day notice to the Pension Benefit Guaranty Corporation under such regulations), or (ii) the withdrawal of the Company or any of its Affiliates from a Plan during a plan year in which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA, or (iii) the filing of a notice of intent to terminate a Plan or the treatment of a Plan amendment as a termination under Section 4041 of ERISA, or (iv) the institution of proceedings to terminate a Plan by the Pension Benefit Guaranty Corporation, or (v) any other event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan.
"Total Capitalization" means the sum of "the current portion of long-term debt" plus "total capitalization" appearing on the consolidated balance sheet of the Company and its Subsidiaries, prepared as of the date of determination in accordance with generally accepted accounting principles consistent with those applied in the preparation of the financial statements referred to in Section 4.01(e), plus, without limitation or duplication, obligations as lessee under leases and as purchaser under power purchase agreements which have been, in accordance with generally accepted accounting principles, recorded as capitalized leases or capitalized power purchase agreements, as the case may be.
SECTION 1.02. Computation of Time Periods. In this Agreement in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each means "to but excluding".
SECTION 1.03. Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles consistent with those applied in the preparation of the financial statements referred to in Section 4.01(e).
ARTICLE II.
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The A Advances. Each Lender severally agrees, on the terms
and conditions hereinafter set forth, to make A Advances to the Company from
time to time on any Business Day during the period from the date hereof to and
including the Commitment Termination Date, in an aggregate amount outstanding
not to exceed at any time the amount set opposite such Lender's name on the
signature pages hereof or, if such Lender has entered into any Assignment and
Acceptance, set forth for such Lender in the Register maintained by the
Administrative Agent pursuant to Section 8.07(c), as such amount may be reduced
pursuant to Section 2.05 (such Lender's "Commitment"); provided, that the
aggregate amount of the Commitments of the Lenders shall be deemed used from
time to time to the extent of the aggregate amount of the B Advances then
outstanding and such deemed use of the aggregate amount of the Commitments shall
be applied to the Lenders ratably according to their respective Commitments
(such deemed use of the aggregate amount of the Commitments being a "B
Reduction"). Each A Borrowing shall be in an aggregate amount not less than
$10,000,000 or an integral multiple of $1,000,000 in excess thereof and shall
consist of A Advances of the same Type made on the same day by the Lenders
ratably according to their respective Commitments. Until the Commitment
Termination Date, within the limits of each Lender's Commitment, the Company may
from time to time borrow, repay pursuant to Section 2.06 or prepay pursuant to
Section 2.11(b) and reborrow under this Section 2.01.
SECTION 2.02. Making the A Advances. (a) Each A Borrowing shall be made on
notice, given not later than 10:00 A.M. (New York City time) on the day of such
proposed A Borrowing, in the case of an A Borrowing comprised of Base Rate
Advances, or on the third Business Day prior to the date of the proposed A
Borrowing, in the case of an A Borrowing comprised of Eurodollar Rate Advances,
by the Company to the Administrative Agent, which shall give to each Lender
prompt notice thereof by telex, telecopier or cable. Each such notice of a
Borrowing (a "Notice of A Borrowing") shall be by telex, telecopier or cable,
confirmed promptly in writing, in substantially the form of Exhibit B-1 hereto,
specifying therein the requested (i) date of such A Borrowing, (ii) Type of
Advances comprising such A Borrowing, (iii) aggregate amount of such A
Borrowing, and (iv) in the case of an A Borrowing comprised of Eurodollar Rate
Advances, the Interest Period for each such A Advance. In the case of a proposed
A Borrowing comprised of Eurodollar Rate Advances, the Administrative Agent
shall promptly notify each Lender of the applicable interest rate under Section
2.07(b). Each Lender shall, before 12:00 P.M. (New York City time) on the date
of such A Borrowing, make available
for the account of its Applicable Lending Office to the Administrative Agent at its address referred to in Section 8.02, in same day funds, such Lender's ratable portion of such A Borrowing. After the Administrative Agent's receipt of such funds and upon fulfillment of the applicable conditions set forth in Article III, the Administrative Agent will make such funds available to the Company at the Administrative Agent's aforesaid address.
(a) Each Notice of A Borrowing shall be irrevocable and binding on the Company and, in respect of any Borrowing comprised of Eurodollar Rate Advances, the Company shall indemnify each Lender against any loss or expense incurred by such Lender as a result of any failure by the Company to fulfill on or before the date specified for such A Borrowing the applicable conditions set forth in Article III, including, without limitation, any loss (including loss of anticipated profits) or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the A Advance to be made by such Lender as part of such A Borrowing when such A Advance, as a result of such failure, is not made on such date.
(b) Unless the Administrative Agent shall have received notice from a Lender prior to the date of any A Borrowing that such Lender will not make available to the Administrative Agent such Lender's ratable portion of such A Borrowing, the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the date of such A Borrowing in accordance with subsection (a) of this Section 2.02 and the Administrative Agent may, in reliance upon such assumption, make available to the Company on such date a corresponding amount. If and to the extent such Lender shall not have so made such ratable portion available to the Administrative Agent, such Lender and the Company severally agree to repay to the Administrative Agent (without duplication), forthwith on demand, such corresponding amount, together with interest thereon for each day from the date such amount is made available to the Company until the date such amount is repaid to the Administrative Agent, (x) in the case of the Company, at the interest rate applicable at the time to A Advances comprising such A Borrowing and (y) in the case of such Lender, at the Federal Funds Rate. If such Lender shall repay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Lender's A Advance as part of such A Borrowing for purposes of this Agreement.
(c) The failure of any Lender to make the A Advance to be made by it as part of any A Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its A Advance on the date of such A Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the A Advance to be made by such other Lender on the date of any A Borrowing.
(d) If, for any reason, an A Borrowing is not made on the date specified in any Notice of A Borrowing, the Administrative Agent hereby agrees to repay to each Lender the amount, if any, which such Lender has made available to the Administrative Agent as such Lender's ratable portion of such A Borrowing, together with interest thereon for each day from the date such
amount is made available to the Administrative Agent until the date such amount is repaid to such Lender, at the Federal Funds Rate.
SECTION 2.03 The B Advances. (a) Each Lender severally agrees that the Company may make B Borrowings under this Section 2.03 from time to time on any Business Day during the period from the date hereof until the date occurring 30 days prior to the Commitment Termination Date in the manner set forth below; provided that, following the making of each B Borrowing, the aggregate amount of the Advances then outstanding shall not exceed the aggregate amount of the Commitments of the Lenders (computed without regard to any B Reduction).
(i) The Company may request a B Borrowing under this Section 2.03 by delivering to the Administrative Agent, by telecopier, telex or cable, confirmed immediately in writing, a notice of a B Borrowing (a "Notice of B Borrowing"), in substantially the form of Exhibit B-2 hereto, specifying the date and aggregate amount of the proposed B Borrowing, the maturity date for repayment of each B Advance to be made as part of such B Borrowing (which maturity date may not be earlier than the date occurring 30 days after the date of such B Borrowing or later than the Commitment Termination Date and in no event may be later than 180 days following the date of such B Borrowing), the rate or rates of interest applicable to each such B Advance the interest payment date or dates relating thereto, and any other terms to be applicable to such B Borrowing, not later than 10:00 A.M. (New York City time) (A) at least one Business Day prior to the date of the proposed B Borrowing, if the Company shall specify in the Notice of B Borrowing that the rates of interest to be offered by the Lenders shall be fixed rates per annum and (B) at least four Business Days prior to the date of the proposed B Borrowing, if the Company shall instead specify in the Notice of B Borrowing the basis to be used by the Lenders in determining the rates of interest to be offered by them. The Administrative Agent shall in turn promptly notify each Lender of each request for a B Borrowing received by it from the Company by sending such Lender a copy of the related Notice of B Borrowing.
(ii) Each Lender may, if, in its sole discretion, it elects to do so,
irrevocably offer to make one or more B Advances to the Company as part of
such proposed B Borrowing at a rate or rates of interest specified by such
Lender in its sole discretion, by notifying the Administrative Agent (which
shall give prompt notice thereof to the Company), before 10:00 A.M. (New
York City time) (A) on the date of such proposed B Borrowing, in the case
of a Notice of B Borrowing delivered pursuant to clause (A) of paragraph
(i) above, and (B) three Business Days before the date of such proposed B
Borrowing, in the case of a Notice of B Borrowing delivered pursuant to
clause (B) of paragraph (i) above, of the minimum amount and maximum amount
of each B Advance which such Lender would be willing to make as part of
such proposed B Borrowing (which amounts may, subject to the proviso to the
first sentence of this Section 2.03(a), exceed such Lender's Commitment),
the rate or rates of interest therefor and such
Lender's Applicable Lending Office with respect to such B Advance; provided that if the Administrative Agent in its capacity as a Lender shall, in its sole discretion, elect to make any such offer, it shall notify the Company of such offer before 9:00 A.M. (New York City time) on the date on which notice of such election is to be given to the Administrative Agent by the other Lenders. If any Lender shall elect not to make such an offer, such Lender shall so notify the Administrative Agent, before 10:00 A.M. (New York City time) on the date on which notice of such election is to be given to the Administrative Agent by the other Lenders, and such Lender shall not be obligated to, and shall not, make any B Advance as part of such B Borrowing; provided that the failure by any Lender to give such notice shall not cause such Lender to be obligated to make any B Advance as part of such proposed B Borrowing.
(iii) The Company shall, in turn, (A) before 11:00 A.M. (New York City time) on the date of such proposed B Borrowing, in the case of a Notice of B Borrowing delivered pursuant to clause (A) of paragraph (i) above, and (B) before 1:00 P.M. (New York City time) three Business Days before the date of such proposed B Borrowing, in the case of a Notice of B Borrowing delivered pursuant to clause (B) of paragraph (i) above, either
(x) cancel such B Borrowing by giving the Administrative Agent notice to that effect, or
(y) in its sole discretion, accept one or more of the offers made by any Lender or Lenders pursuant to paragraph (ii) above by giving notice to the Administrative Agent of the amount of each B Advance (which amount shall be equal to or greater than the minimum amount, and equal to or less than the maximum amount, notified to the Company by the Administrative Agent on behalf of such Lender for such B Advance pursuant to paragraph (ii) above) to be made by each Lender as part of such B Borrowing, and reject any remaining offers made by Lenders pursuant to paragraph (ii) above by giving the Administrative Agent notice to that effect; provided, however, that, in accepting any such offers, the Company shall do so in the ascending order of effective yield and, as among offers resulting in the same effective yield, ratably among all such offers based upon the amount notified to the Company by the Administrative Agent on behalf of each Lender for such B Advance pursuant to paragraph (ii) above.
(iv) If the Company notifies the Administrative Agent that such B Borrowing is canceled pursuant to paragraph (iii)(x) above, the Administrative Agent shall give prompt notice thereof to the Lenders and such B Borrowing shall not be made.
(v) If the Company accepts one or more of the offers made by any Lender or Lenders pursuant to paragraph (iii)(y) above, the Administrative Agent shall in turn
promptly notify (A) each Lender that has made an offer as described in
paragraph (ii) above of the date and aggregate amount of such B Borrowing
and whether or not any offer or offers made by such Lender pursuant to
paragraph (ii) above have been accepted by the Company, (B) each Lender
that is to make a B Advance as part of such B Borrowing of the amount of
each B Advance to be made by such Lender as part of such B Borrowing and
(C) each Lender that is to make a B Advance as part of such B Borrowing,
upon receipt, that the Administrative Agent has received forms of documents
appearing to fulfill the applicable conditions set forth in Article III.
Each Lender that is to make a B Advance as part of such B Borrowing shall,
before 12:00 noon (New York City time) on the date of such B Borrowing
specified in the notice received from the Administrative Agent pursuant to
clause (A) of the preceding sentence or any later time when such Lender
shall have received notice from the Administrative Agent pursuant to clause
(C) of the preceding sentence, make available for the account of its
Applicable Lending Office to the Administrative Agent at its address
referred to in Section 8.02 such Lender's portion of such B Borrowing, in
same day funds. Upon fulfillment of the applicable conditions set forth in
Article III and after receipt by the Administrative Agent of such funds,
the Administrative Agent will make such funds available to the Company at
the Administrative Agent's aforesaid address. Promptly after each B
Borrowing the Administrative Agent will notify each Lender of the amount of
the B Borrowing, the consequent B Reduction and the dates upon which such B
Reduction commenced and will terminate.
(e) Each B Borrowing shall be in an aggregate amount not less than
$10,000,000 or an integral multiple of $1,000,000 in excess thereof and,
following the making of each B Borrowing, the Company shall be in compliance
with the limitation set forth in the proviso to the first sentence of subsection
(a) above.
(f) Within the limits and on the conditions set forth in this Section 2.03, the Company may from time to time borrow under this Section 2.03 or repay pursuant to subsection (d) below, and reborrow under this Section 2.03; provided that a B Borrowing shall not be made within three Business Days of the date of any other B Borrowing.
(g) The Company shall repay to the Administrative Agent for the account of each Lender which has made a B Advance, or each other holder of a B Note, on the maturity date of each B Advance (such maturity date being not later than the then effective Commitment Termination Date and that specified by the Company for repayment of such B Advance in the related Notice of B Borrowing delivered pursuant to subsection (a)(i) above and provided for in the B Note evidencing such B Advance), the then unpaid principal amount of such B Advance. The Company shall have no right to prepay any principal amount of any B Advance.
(h) The Company shall pay interest on the unpaid principal amount of each B Advance from the date of such B Advance to the date the principal amount of such B Advance is repaid in full, at the rate of interest for such B Advance specified by the Lender making such B
Advance in its notice with respect thereto delivered pursuant to subsection
(a)(ii) above, payable on the interest payment date or dates specified by the
Company for such B Advance in the related Notice of B Borrowing delivered
pursuant to subsection (a)(i) above, as provided in the B Note evidencing such B
Advance; provided that any amount of principal which is not paid when due
(whether at stated maturity, by acceleration or otherwise) shall bear interest,
from the date on which such amount is due until such amount is paid in full,
payable on demand, at a rate per annum equal to 2.0% per annum above such rate
of interest for such B Advance.
(i) The indebtedness of the Company resulting from each B Advance made to the Company as part of a B Borrowing shall be evidenced by a separate B Note of the Company payable to the order of the Lender making such B Advance.
SECTION 2.04 Facility Fee. The Company agrees to pay to the Administrative Agent for the account of each Lender a facility fee on each Lender's Commitment, irrespective of usage, from the date hereof, in the case of each Bank, and from the effective date specified in the Assignment and Acceptance pursuant to which it became a Lender, in the case of each other Lender, until the Commitment Termination Date, payable quarterly in arrears on the last day of each March, June, September and December during the term of such Lender's Commitment, commencing September 30, 1998, and on the Commitment Termination Date, at a rate per annum determined by reference to the Company's First Mortgage Bond ratings as set forth below:
-------------------------------------------------------------------------------------------------
Basis for LEVEL 1 LEVEL 2 LEVEL 3 LEVEL 4 LEVEL 5
Pricing If the First If the First If the First If the First If the First
Mortgage Bonds Mortgage Bonds Mortgage Bonds Mortgage Bonds Mortgage Bonds
are rated at are rated at are rated at are rated at are rated less
least A- by least BBB+ by least BBB by least BBB- by than Level 4
Standard & Standard & Standard & Standard &
Poor's or at Poor's or at Poor's or at Poor's or at
least A3 by least Baa1 by least Baa2 by least Baa3 by
Moody's Moody's Moody's Moody's
-------------------------------------------------------------------------------------------------
Facility Fee 0.075% 0.100% 0.125% 0.150% 0.250%
-------------------------------------------------------------------------------------------------
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SECTION 2.05 Reduction of the Commitments. The Company shall have the right, upon at least three Business Days' notice to the Administrative Agent, irrevocably to terminate in whole or reduce ratably in part the respective Commitments of the Lenders; provided that the aggregate amount of the Commitments of the Lenders shall not be reduced to an amount which is less than the aggregate principal amount of the A Advances and the B Advances then outstanding; and provided further, that each partial reduction shall be in the aggregate amount of $10,000,000 or an integral multiple of $1,000,000 in excess thereof.
SECTION 2.06 Repayment of A Advances. The Company shall repay the principal
amount of each A Advance made by each Lender on the Termination Date, subject to
Section 2.17 hereof.
SECTION 2.07 Interest on Advances. The Company shall pay interest on the unpaid principal amount of each A Advance made by each Lender from the date of such A Advance until such principal amount shall be paid in full, at the following rates per annum:
(j) Base Rate Advances. If such A Advance is a Base Rate Advance, a rate per annum equal at all times to the Base Rate in effect from time to time, payable quarterly in arrears on the last day of each September, December, March, and June and on the date such Base Rate Advance shall be paid in full; provided that any amount of principal which is not paid when due (whether at stated maturity, by acceleration or otherwise) shall bear interest, from the date on which such amount is due until such amount is paid in full, payable on demand, at a rate per annum equal at all times to 2.0% per annum above the Base Rate in effect from time to time.
(k) Eurodollar Rate Advances. If such A Advance is a Eurodollar Rate Advance, a rate per annum equal at all times during the Interest Period for such A Advance to the Eurodollar Rate for such Interest Period, plus the Applicable Margin for Eurodollar Rate Advances, payable on the last day of such Interest Period and, if such Interest Period has a duration of more than three months, on each day which occurs during such Interest Period every three months from the first day of such Interest Period; provided that any amount of principal which is not paid when due (whether at stated maturity, by acceleration or otherwise) shall bear interest, from the date on which such amount is due until such amount is paid in full, payable on demand, at a rate per annum equal at all times to 2.0% per annum above the Base Rate in effect from time to time.
SECTION 2.08 Additional Interest on Eurodollar Rate Advances. The Company shall pay to each Lender additional interest on the unpaid principal amount of each Eurodollar Rate Advance of such Lender, from the date of such A Advance until such principal amount is paid in full, at an interest rate per annum equal at all times to the remainder obtained by subtracting (i) the Eurodollar Rate for the Interest Period for such A Advance from (ii) the rate obtained by dividing such Eurodollar Rate by a percentage equal to 100% minus the Eurodollar Rate Reserve Percentage of such Lender for such Interest Period, payable on each date on which interest is payable on such A Advance. All claims for such additional interest shall be submitted by such Lender to the Company (with a copy to the Administrative Agent) as soon as is reasonably possible and in all events within ninety days after the first day of such Interest Period; provided, however, that if a claim is not submitted to the Company within such ninety day period, such Lender shall thereby waive its claim to such additional interest incurred during such ninety-day period but not to any such additional interest incurred thereafter. A certificate as to the amount of such additional interest, submitted to the Company (with a copy to the Administrative Agent) by such Lender, shall be conclusive and binding for all purposes, absent manifest error.
SECTION 2.09 Interest Rate Determination. (a) Each Reference Bank agrees to furnish to the Administrative Agent timely information for the purpose of determining the Eurodollar Rate. If any one or more of the Reference Banks shall not furnish such timely information to the Administrative Agent for determination of any such interest rate, the Administrative Agent shall determine such interest rate on the basis of timely information furnished by the remaining Reference Banks.
(l) The Administrative Agent shall give prompt notice to the Company and the Lenders of the applicable interest rate determined by the Administrative Agent for purposes of Section 2.07(a) or (b), and the applicable rate, if any, furnished by each Reference Bank for determining the applicable interest rate under Section 2.07(b).
(m) If fewer than two Reference Banks furnish timely information to the Administrative Agent for determining the Eurodollar Rate for any Eurodollar Rate Advances,
(i) the Administrative Agent shall forthwith notify the Company and the Lenders that the interest rate cannot be determined for such Eurodollar Rate Advances,
(ii) each such Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance (or if such Advance is then a Base Rate Advance, will continue as a Base Rate Advance), and
(iii) the obligation of the Lenders to make, or to Convert A Advances into, Eurodollar Rate Advances shall be suspended until the Administrative Agent shall notify the Company and the Lenders that the circumstances causing such suspension no longer exist.
(n) If, with respect to any Eurodollar Rate Advances, the Majority Lenders notify the Administrative Agent that the Eurodollar Rate for any Interest Period for such A Advances will not adequately reflect the cost to such Majority Lenders of making, funding or maintaining their respective Eurodollar Rate Advances for such Interest Period, the Administrative Agent shall forthwith so notify the Company and the Lenders, whereupon
(i) each Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance, and
(ii) the obligation of the Lenders to make, or to Convert A Advances into, Eurodollar Rate Advances shall be suspended until the Administrative Agent shall notify the Company and the Lenders that the circumstances causing such suspension no longer exist.
(o) If the Company shall fail to select the duration of any Interest Period for any Eurodollar Rate Advances in accordance with the provisions contained in the definition of
"Interest Period" in Section 1.01, the Administrative Agent will forthwith so notify the Company and the Lenders and such Advances will automatically, on the last day of the then existing Interest Period therefor, Convert into Base Rate Advances.
(p) On the date on which the aggregate unpaid principal amount of A Advances comprising any A Borrowing shall be reduced, by prepayment or otherwise, to less than $20,000,000, such A Advances shall, if they are Advances of a Type other than Base Rate Advances, automatically Convert into Base Rate Advances, and on and after such date the right of the Company to Convert such A Advances into Advances of a Type other than Base Rate Advances shall terminate; provided, however, that if and so long as each such A Advance shall be of the same Type and have the same Interest Period as A Advances comprising another A Borrowing or other A Borrowings, and the aggregate unpaid principal amount of all such A Advances shall equal or exceed $20,000,000, the Company shall have the right to continue all such A Advances as, or to Convert all such A Advances into, Advances of such Type having such Interest Period.
SECTION 2.10 Voluntary Conversion of A Advances. The Company may, on any
Business Day prior to the Termination Date (including any date occurring on and
after the effectiveness of the Term Loan Conversion Option), upon notice given
to the Administrative Agent not later than 10:00 A.M. (New York City time) on
the third Business Day prior to the date of the proposed Conversion, in the case
of any proposed Conversion into Eurodollar Rate Advances, and on the date of the
proposed Conversion, in the case of any proposed Conversion into Base Rate
Advances, and subject to the provisions of Sections 2.09 and 2.13 and so long as
no Event of Default has occurred and is continuing on the date of such proposed
Conversion, Convert all A Advances of one Type comprising the same A Borrowing
into Advances of another Type; provided, however, that any Conversion of any
Eurodollar Rate Advances into Advances of another Type shall be made on, and
only on, the last day of an Interest Period for such Eurodollar Rate Advances.
Each such notice of a Conversion (a"Notice of Conversion") shall be by telex,
telecopier or cable, confirmed promptly in writing, in substantially the form of
Exhibit B-3 hereto and shall, within the restrictions specified above, specify
(i) the date of such Conversion, (ii) the aggregate amount of, Type of, and
Interest Periods applicable to the A Advances to be Converted, (iii) the Type of
A Advance to which such A Advances (or portions thereof) are proposed to be
Converted, and (iv) if such Conversion is into Eurodollar Rate Advances, the
duration of the Interest Period for each such A Advance.
SECTION 2.11 Prepayments of A Advances. (a) The Company shall have no right to prepay any principal amount of any A Advances other than as provided in subsection (b) below.
(q) The Company may, upon notice given to the Administrative Agent at least two Business Days prior to the proposed prepayment, in the case of any Eurodollar Rate Advance, and on the date of the proposed prepayment, in the case of any Base Rate Advance, and if such notice is given the Company shall, prepay the outstanding principal amounts of the A Advances comprising the same Borrowing in whole or ratably in part, together with accrued interest to the
date of such prepayment on the amount prepaid and, in the case of any Eurodollar Rate Advance, any amount payable pursuant to Section 8.04(b); provided, however, that each partial prepayment shall be in an aggregate principal amount not less than $5,000,000 and in integral multiples of $1,000,000 in excess thereof.
SECTION 2.12 Increased Costs. (a) If, due to either (i) the introduction of or any change (other than any change by way of imposition or increase of reserve requirements, in the case of Eurodollar Rate Advances, included in the Eurodollar Rate Reserve Percentage), in or in the interpretation of any law or regulation, or (ii) the compliance with any guideline or request from any central bank or other governmental authority (whether or not having the force of law), there shall be any increase in the cost to any Lender of agreeing to make or making, funding or maintaining Eurodollar Rate Advances, then the Company shall from time to time, upon demand by such Lender (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for account of such Lender additional amounts sufficient to reimburse such Lender for such increased cost. All claims for increased cost shall be submitted by such Lender to the Company (with a copy to the Administrative Agent) as soon as is reasonably possible and in all events within ninety days after such introduction, such change, or the beginning of such compliance, the occurrence of which resulted in such increased cost, and the Company shall make such payment within five Business Days after notice of such claim is received; provided, however, that if a claim is not submitted to the Company within such ninety-day period, such Lender shall thereby waive its claim to such increased cost incurred during such ninety-day period but not to any such increased cost incurred thereafter. A certificate as to the amount of such increased cost, submitted to the Company (with a copy to the Administrative Agent) by such Lender, shall be conclusive and binding for all purposes, absent manifest error.
(r) If any Lender determines that compliance with any law or regulation or any guideline or request from any central bank or other governmental authority (whether or not having the force of law) affects or would affect the amount of capital required or expected to be maintained by such Lender or any corporation controlling such Lender and that the amount of such capital is increased by or based upon the existence of such Lender's commitment to lend hereunder and other commitments of this type, then, upon demand by such Lender (with a copy of such demand to the Administrative Agent), the Company shall immediately pay to the Administrative Agent for the account of such Lender, from time to time as specified by such Lender, additional amounts sufficient to compensate such Lender or such corporation in the light of such circumstances, to the extent that such Lender reasonably determines such increase in capital to be allocable to the existence of such Lender's commitment to lend hereunder. All claims for such additional amounts shall be submitted by such Lender (with a copy to the Administrative Agent) as soon as is reasonably possible and in all events within ninety days after such determination by such Lender, and the Company shall make such payment within five Business Days after notice of such claim is received; provided, however, that if a claim is not submitted to the Company within such ninety-day period, such Lender shall thereby waive its claim to such additional amounts incurred during such ninety-day period but not to any such additional amounts incurred thereafter. A certificate as to such amounts submitted to the
Company and the Administrative Agent by such Lender shall be conclusive and binding for all purposes, absent manifest error.
SECTION 2.13 Illegality. Notwithstanding any other provision of this
Agreement, if any Lender shall notify the Administrative Agent that the
introduction of or any change in or in the interpretation of any law or
regulation makes it unlawful, or any central bank or other governmental
authority asserts that it is unlawful, for such Lender or its Eurodollar Lending
Office to perform its obligations hereunder to make Eurodollar Rate Advances or
B Advances based upon the Eurodollar Rate or to fund or maintain Eurodollar Rate
Advances or B Advances based upon the Eurodollar Rate hereunder, (i) the
obligation of the Lenders to make Eurodollar Rate Advances or B Advances based
upon the Eurodollar Rate, or to Convert A Advances into Eurodollar Rate
Advances, shall be suspended until the Administrative Agent shall notify the
Company and the Lenders that the circumstances causing such suspension no longer
exist, (ii) the Company shall forthwith prepay in full all Eurodollar Rate
Advances of all Lenders then outstanding, together with interest accrued
thereon, unless the Company, within five Business Days of notice from the
Administrative Agent, Converts all Eurodollar Rate Advances of all Lenders then
outstanding into Advances of another Type in accordance with Section 2.10 and
(iii) the Company shall forthwith prepay all B Advances based upon the
Eurodollar Rate of all Lenders then outstanding, together with interest thereon.
SECTION 2.14 Payments and Computations. (a) The Company shall make each payment hereunder and under the Notes not later than 11:00 A.M. (New York City time) on the day when due in U.S. dollars to the Administrative Agent at its address referred to in Section 8.02 in same day funds. The Administrative Agent will promptly thereafter cause to be distributed like funds relating to the payment of principal or interest or fees (other than pursuant to Section 2.03, 2.08 or 2.12) ratably to the Lenders for the account of their respective Applicable Lending Offices, and like funds relating to the payment of any other amount payable to any Lender to such Lender for the account of its Applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement. Upon its acceptance of an Assignment and Acceptance and recording of the information contained therein in the Register pursuant to Section 8.07(d), from and after the effective date specified in such Assignment and Acceptance, the Administrative Agent shall make all payments hereunder and under the Notes in respect of the interest assigned thereby to the Lender assignee thereunder, and the parties to such Assignment and Acceptance shall make all appropriate adjustments in such payments for periods prior to such effective date directly between themselves.
(s) All computations of interest based on the Base Rate shall be made by the Administrative Agent on the basis of a year of 365 or 366 days, as the case may be, and all computations of interest based on the Eurodollar Rate or of fees payable hereunder shall be made by the Administrative Agent, and all computations of interest pursuant to Section 2.08 shall be made by a Lender, on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period of which such interest
or fees are payable. Each determination by the Administrative Agent (or, in the case of Section 2.08, by a Lender) of an interest rate hereunder shall be conclusive and binding for all purposes.
(t) Whenever any payment hereunder or under the Notes shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or fees, as the case may be; provided, however, that if such extension would cause payment of interest on or principal of Eurodollar Rate Advances to be made in the next following calendar month, such payment shall be made on the next preceding Business Day.
(u) Unless the Administrative Agent shall have received notice from the Company prior to the date on which any payment is due to the Lenders hereunder that the Company will not make such payment in full, the Administrative Agent may assume that the Company has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent the Company shall not have so made such payment in full to the Administrative Agent, each Lender shall repay to the Administrative Agent forthwith on demand such amount distributed to such Lender, together with interest thereon for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Administrative Agent at the Federal Funds Rate.
SECTION 2.15 Sharing of Payments, Etc. If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of the A Advances made by it (other than pursuant to Section 2.03, 2.08 or 2.12) in excess of its ratable share of payments on account of the A Advances obtained by all the Lenders, such Lender shall forthwith purchase from the other Lenders such participation in the A Advances made by them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender shall be rescinded and such Lender shall repay to the purchasing Lender the purchase price to the extent of such recovery, together with an amount equal to such Lender's ratable share (according to the proportion of (i) the amount of such Lender's required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Company agrees that any Lender so purchasing a participation from another Lender pursuant to this Section 2.15 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of the Company in the amount of such participation.
SECTION 2.16 Extension of Commitment Termination Date. (a) Unless (i) the Commitment Termination Date shall have occurred or (ii) the Company shall have exercised the Term Loan Conversion Option in accordance with Section 2.17, at least 30 days but not more
than 45 days prior to each Extension Date, the Company may request that the Lenders, by written notice to the Administrative Agent (in substantially the form attached hereto as Exhibit F), consent to a 364-day extension of the Commitment Termination Date. Each Lender shall, in its sole discretion, determine whether to consent to such request and shall notify the Administrative Agent of its determination at least 20 days but not more than 30 days prior to such Extension Date. The failure to respond by any Lender within such time period shall be deemed a denial of such request. The Administrative Agent shall deliver a notice to the Company and the Lenders at least 15 days but not more than 20 days, prior to such Extension Date of the identity of the Lenders that have consented to such extension and the Lenders that have declined such consent (the "Declining Lenders"). If Lenders holding in the aggregate less than 51% of the Commitments (without regard to any B Reductions) have consented to the requested extension, the Commitment Termination Date shall not be extended, and the Commitments of all Lenders shall terminate on the then current Commitment Termination Date.
(v) If Lenders holding in the aggregate at least 51% of the Commitments (without regard to any B Reductions) have consented to the requested extension, subject to the conditions set forth in Section 2.16(c), the Commitment Termination Date shall be extended as to such consenting Lenders only (and not as to any Declining Lender) for a period of 364 days from the then current Commitment Termination Date, and the Commitments of any Declining Lenders shall terminate on the Commitment Termination Date (as theretofore in effect) and all Advances of such Declining Lenders shall be repaid to them on such date. If the Company so requests, each Lender consenting to such request shall be given the opportunity at least seven days but not more than 15 days prior to such Extension Date, in each Lender's sole discretion, to commit to increase its Commitment by submission of a written notice setting forth the desired increase in such Lender's Commitment to the Administrative Agent in amounts such that the aggregate Commitments hereunder after giving effect to any such extension and increase in the Commitments shall not exceed the aggregate Commitment immediately prior to such Extension Date. If the Administrative Agent receives Commitments to increase the Commitments from the Lenders, which, when aggregated with the existing Commitments, (i) are less than or equal to the Commitments immediately prior to such Extension Date, the Administrative Agent shall accept all such Commitments, (ii) are greater than the Commitments on the date hereof, the Administrative Agent may determine, in its reasonable discretion, which Commitments to accept and the amounts by which each submitting Lender's Commitments shall be increased so that the aggregate Commitments after such Extension Date shall equal the aggregate Commitments immediately prior to such Extension Date (any Lender whose commitment to increase its Commitment hereunder is accepted by the Administrative Agent, an "Increasing Commitment Lender"). If Lenders do not consent to increase the aggregate Commitments to an amount equal to the Commitments immediately prior to such Extension Date, the Company may, at least two days but not more than seven days prior to such Extension Date, request that the Administrative Agent, in its sole discretion, accept the Commitment or Commitments of an Eligible Assignee or Eligible Assignees such that the aggregate Commitments hereunder after such Extension Date shall not be greater than Commitments hereunder immediately prior to such Extension Date. If the Administrative Agent shall accept the Commitment of any Increasing Commitment Lender or
Eligible Assignee, the Commitments of the Declining Lenders shall terminate on such Extension Date, and any Advances made by such Declining Lenders shall be repaid on such date in accordance with this Agreement.
(w) Each such accepted Eligible Assignee and each Increasing Commitment
Lender shall deliver a signature page hereto indicating that it is bound by the
terms hereof and setting forth its aggregate Commitment hereunder. Such new
signature page shall constitute a part hereof upon acceptance by the
Administrative Agent and, in the case of any signature page submitted by any
Increasing Commitment Lender, shall replace such Increasing Commitment Lender's
signature page. Any such extension shall become effective upon the then current
Extension Date, if the Company shall have delivered to (i) the Administrative
Agent and each Lender, on or prior to the then current Extension Date, an
opinion of counsel to the Company substantially in the form of Exhibit D-2
attached hereto upon which each Lender and the Administrative Agent may rely,
together with any governmental order referred to therein attached thereto, (ii)
any Increasing Commitment Lender and any new Lender hereunder, a new A Note in
the principal amount of such Lender's increase of its Commitment hereunder, in
the case of an Increasing Commitment Lender, and in the principal amount of such
Lender's Commitment, in the case of a new Lender, in each case after giving
effect to any such extension and (iii) a certificate of the type described in
Section 3.01(d) with respect to officers authorized to sign the Notes described
in clause (ii) hereof. Upon satisfaction of such conditions and the
effectiveness of such extension, each new Lender and Increasing Commitment
Lender shall make A Advances to the Company (A) in the case of each new Lender,
equal to such Lender's ratable portion of the A Advances outstanding immediately
prior to such Extension Date and (B) in the case of each Increasing Commitment
Lender, equal to such portion of such Lender's ratable portion of the A Advances
(assuming that such Lender's Commitment consists only of the increased portion
thereof) outstanding immediately prior to such Extension Date, in each case,
without giving effect to any repayment of A Advances to Declining Lenders made
on such Extension Date.
SECTION 2.17 Term Loan Conversion Option. At least 1 Business Day but not more than 45 Business Days prior to any Commitment Termination Date, and subject to the conditions set forth in Section 3.02 and delivery on or prior to such Commitment Termination Date of an opinion of counsel to the Company substantially in the form of Exhibit D-2 attached hereto, together with any necessary NCUC Order and the SCPSC Order referred to therein and attached thereto, to the Administrative Agent and each of the Lenders, by submission of a written notice (substantially in the form of Exhibit G) to the Administrative Agent, the Company may request that the Lenders convert all A Advances made hereunder into term loans. Upon satisfaction of such conditions and delivery of such notice (the "Term Loan Conversion Notice"), the A Advances shall convert into term loans on the then current Commitment Termination Date and all such A Advances shall become due and payable on the first anniversary of such Commitment Termination Date. Notwithstanding the foregoing, any Term Loan Conversion Notice may be delivered by the Company in conjunction with (and simultaneously with) any request for extension of the Commitment Termination Date pursuant to Section 2.16, above. If such
extension of the Commitment Termination Date shall occur as provided in Section 2.16, such Term Loan Conversion Notice shall be deemed withdrawn and shall be of no further effect.
ARTICLE III.
CONDITIONS OF LENDING
SECTION 3.01 Conditions Precedent to Closing. The Commitments of the Lenders shall not become effective unless and until (iv) the conditions precedent set forth in Section 3.01 of the $375,000,000 5-Year Revolving Credit Agreement, dated as of the date hereof, among the Company, the Banks, the Lenders from time to time party thereto and Citibank, N.A., as Administrative Agent shall have been satisfied, (v) the Existing Facilities shall have been terminated and all amounts outstanding thereunder shall have been paid in full and (vi) the Administrative Agent shall have received the following:
(a) The A Notes to the order of the Lenders, respectively.
(b) Certified copies of the resolutions of the Board of Directors of the Company approving this Agreement and the Notes, and of all documents evidencing other necessary corporate action and governmental approvals, including the NCUC Order and the SCPSC Order, with respect to this Agreement and the Notes.
(c) A certificate of the Secretary or an Assistant Secretary of the Company, dated as of the date hereof, certifying the names and true signatures of the officers of the Company authorized to sign this Agreement and the Notes and the other documents to be delivered hereunder.
(d) A certificate of a Responsible Officer of the Company, dated as of the date hereof, certifying (i) the accuracy of the representations and warranties contained herein and (ii) that no event has occurred and is continuing which constitutes an Event of Default or which would constitute an Event of Default but for the requirement that notice be given or time elapse, or both.
(e) Certified copies of all required governmental approvals and authorizations.
(f) Certified copy of the Restated Charter and By-Laws of the Company.
(g) A favorable opinion of counsel for the Company, substantially in the form of Exhibit D-1 hereto and as to such other matters as any Lender through the Administrative Agent may reasonably request.
(h) A favorable opinion of King & Spalding, counsel for the Administrative Agent, substantially in the form of Exhibit E hereto.
SECTION 3.02 Conditions Precedent to Each A Borrowing and to the Exercise
of the Term Loan Conversion Option. The obligation of each Lender to make an A
Advance on the occasion of each A Borrowing (including the initial A Borrowing)
and the obligation to convert the A Advances into term loans in accordance with
Section 2.17 shall be subject to the further conditions precedent that (i in the
case of the making of an A Advance, the Administrative Agent shall have received
the written confirmatory Notice of A Borrowing with respect thereto, and (ii on
the date of such A Borrowing or exercise of the Term Loan Conversion Option, as
the case may be, the following statements shall be true (and each of the giving
of the applicable Notice of A Borrowing or Term Loan Conversion Notice, as the
case may be, and the acceptance by the Company of the proceeds of such A
Borrowing, in the case of an A Borrowing, or the conversion of the A Advances
into term loans, in the case of such exercise, shall constitute a representation
and warranty by the Company that, on the date of such A Borrowing or exercise,
as the case may be, such statements are true):
(i) The representations and warranties contained in Section 4.01 (excluding those contained in Section 4.01(e)) are correct on and as of the date of such A Borrowing or the date of effectiveness of the Term Loan Conversion Option, as the case may be, before and after giving effect to (x) such A Borrowing and to the application of the proceeds therefrom or (y) such effectiveness, as the case may be, as though made on and as of such date; and
(j) No event has occurred and is continuing, or would result from such A Borrowing or from the application of the proceeds therefrom or the exercise of such Term Loan Conversion Option, as the case may be, which constitutes an Event of Default or which would constitute an Event of Default but for the requirement that notice be given or time elapse, or both.
SECTION 3.03. Conditions Precedent to Each B Borrowing. The obligation of each Lender which is to make a B Advance on the occasion of a B Borrowing (including the initial B Borrowing) to make such B Advance as part of such B Borrowing is subject to the conditions precedent that (i the Administrative Agent shall have received the written confirmatory Notice of B Borrowing with respect thereto, (ii on or before the date of such B Borrowing, but prior to such B Borrowing, the Administrative Agent shall have received a B Note payable to the order of such Lender for each of the one or more B Advances to be made by such Lender as part of such B Borrowing, in a principal amount equal to the principal amount of the B Advance to be evidenced thereby and otherwise on such terms as were agreed to for such B Advance in accordance with Section 2.03, and (iii on the date of such B Borrowing the following statements shall be true (and each of the giving of the applicable Notice of B Borrowing and the acceptance by the Company of the proceeds of such B Borrowing shall constitute a representation and warranty by the Company that, on the date of such B Borrowing, such statements are true):
(k) The representations and warranties contained in Section 4.01 (other than Section 4.01(e)) are true and correct on and as of the date of such B Borrowing, before and after giving effect to such B Borrowing and to the application of the proceeds therefrom, as though made on and as of such date; and
(l) No event has occurred and is continuing, or would result from such B Borrowing or from the application of the proceeds therefrom, which constitutes an Event of Default or which would constitute an Event of Default but for the requirement that notice be given or time elapse or both.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Company. The Company represents and warrants as follows:
(a) The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of North Carolina and is duly qualified to do business and in good standing under the laws of the State of South Carolina.
(b) The execution, delivery and performance by the Company of this Agreement and the Notes are within the Company's corporate powers, have been duly authorized by all necessary corporate action, and do not contravene (i the Company's charter or by-laws or (ii any law or contractual restriction binding on or affecting the Company.
(c) No authorization or approval or other action by, and no notice to or filing with any governmental authority or regulatory body is required for the due execution, delivery and performance by the Company of this Agreement or the Notes, other than the NCUC Order and the SCPSC Order, each of which has been duly issued, is final and in full force and effect, and all periods for review or appeal thereof have expired, and no such request for review or appeal has been filed and is pending.
(d) This Agreement is, and the Notes when delivered hereunder will be, legal, valid and binding obligations of the Company enforceable against the Company in accordance with their respective terms.
(e) The Consolidated balance sheet of the Company and the Subsidiaries as at December 31, 1997, and the related Consolidated statements of income and retained earnings of the Company and the Subsidiaries for the fiscal year then ended, copies of which have been furnished to each Lender, fairly present the financial condition of the Company and the Subsidiaries as at such date and the results of the operations of the Company and the Subsidiaries
for the period ended on such date, all in accordance with generally accepted accounting principles consistently applied. Since December 31, 1997, there has been no material adverse change in the financial condition, operations or properties of the Company.
(f) Except as described in the reports and registration statements which the Company has filed with the Securities and Exchange Commission prior to the date of this Agreement, there is no pending or threatened action or proceeding affecting the Company or any Subsidiary before any court, governmental agency or arbitrator, which may materially adversely affect the financial condition, operations or properties of the Company.
(g) No proceeds of any Advance will be used to acquire any security in any transaction which is subject to Sections 13 and 14 of the Securities Exchange Act of 1934.
(h) The Company is not engaged in the business of extending credit for the purpose of buying or carrying margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System), and no proceeds of any Advance will be used to buy or carry any margin stock or to extend credit to others for the purpose of buying or carrying any margin stock.
(i) Following application of the proceeds of each Advance, not more than 5
percent of the value of the assets (either of the Company only or of the Company
and the Subsidiaries on a Consolidated basis) subject to the provisions of
Section 5.02(a) or 5.02(e) will be margin stock (within the meaning of
Regulation U issued by the Board of Governors of the Federal Reserve System).
(j) No Termination Event has occurred or is reasonably expected to occur with respect to any Plan.
(k) The Company is not an "investment company" or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended.
(l) The Company is in substantial compliance with all applicable laws, rules, regulations and orders of any governmental authority, the noncompliance with which would materially and adversely affect the business or condition of the Company, such compliance to include, without limitation, substantial compliance with Environmental Laws and paying before the same become delinquent all material taxes, assessments and governmental charges imposed upon it or upon its property, except to the extent compliance with any of the foregoing is then being contested in good faith by appropriate legal proceedings.
ARTICLE V.
COVENANTS OF THE COMPANY
SECTION 5.01. Affirmative Covenants. So long as any Note shall remain unpaid or any Lender shall have any Commitment hereunder, the Company shall, unless the Majority Lenders shall otherwise consent in writing:
(a) Compliance with Laws, Etc. Except to the extent contested in good faith, comply, and cause each Subsidiary to comply, with all applicable laws, rules, regulations and orders (such compliance to include, without limitation, paying before the same become delinquent all taxes, assessments and governmental charges imposed upon it or upon its property), the non-compliance with which would materially adversely affect the Company's business or credit.
(b) Preservation of Corporate Existence, Etc. Preserve and maintain its corporate existence, rights (charter and statutory) and franchises.
(c) Visitation Rights. At any reasonable time and from time to time, permit the Administrative Agent or any of the Lenders or any agents or representatives thereof to examine and make copies of and abstracts from the records and books of account of, and visit the properties of, the Company and any of the Subsidiaries, and to discuss the affairs, finances and accounts of the Company and any of the Subsidiaries with any of their respective officers or directors.
(d) Keeping of Books. Keep, and cause each Subsidiary to keep, proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of the Company and such Subsidiary in accordance with generally accepted accounting principles consistently applied.
(e) Maintenance of Properties, Etc. Maintain and preserve, and cause each Subsidiary to maintain and preserve, all of its properties which are used or useful in the conduct of its business in good working order and condition, ordinary wear and tear excepted.
(f) Maintenance of Insurance. Maintain, and cause each Subsidiary to maintain, insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which the Company or such Subsidiary operates.
(g) Taxes. File, and cause each Subsidiary to file, all tax returns (federal, state and local) required to be filed and paid and pay all taxes shown thereon to be due, including interest
and penalties, or provide adequate reserves for payment thereof other than such taxes that the Company or such Subsidiary is contesting in good faith by appropriate legal proceedings.
(h) Material Obligations. Pay, and cause each Subsidiary to pay, promptly as the same shall become due each material obligation of the Company or such Subsidiary.
(i) Reporting Requirements. Furnish to the Lenders: (i as soon as available and in any event within 60 days after the end of each of the first three quarters of each fiscal year of the Company, a Consolidated balance sheet of the Company and the Subsidiaries as at the end of such quarter and Consolidated statements of income and retained earnings of the Company and the Subsidiaries for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, certified by the treasurer or the chief financial officer of the Company; (ii as soon as available and in any event within 100 days after the end of each fiscal year of the Company, a copy of the annual report for such year for the Company and the Subsidiaries, containing Consolidated financial statements for such year certified by Deloitte & Touche or other independent public accountants acceptable to the Majority Lenders; (iii promptly after the sending or filing thereof, copies of all reports which the Company sends to any of its security holders, and copies of all reports and registration statements which the Company or any Subsidiary files with the Securities and Exchange Commission or any national securities exchange; (iv immediately upon the Company's knowing of the occurrence of any Event of Default or any event which, with the giving of notice or lapse of time, or both, would constitute an Event of Default, a statement of the chief financial officer or treasurer of the Company setting forth details of such Event of Default or event and the action which the Company proposes to take with respect thereto; and (v such other information respecting the condition or operations, financial or otherwise, of the Company or any Subsidiary as any Lender through the Administrative Agent may from time to time reasonably request.
(j) Indebtedness to Total Capitalization. Maintain at all times a ratio of consolidated Indebtedness of the Company and its Subsidiaries to Total Capitalization of not more than 65%.
(k) Use of Proceeds. Use the proceeds of each Advance solely for general corporate purposes (including, without limitation, as a commercial paper back-up). No proceeds of any Advance will be used to acquire any equity security of a class that is registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended and in effect from time to time.
SECTION 5.02. Negative Covenants. So long as any Note shall remain unpaid or any Lender shall have any Commitment hereunder, the Company will not, without the written consent of the Majority Lenders:
(l) Liens, Etc. Create, incur, assume or suffer to exist, or permit any Subsidiary to create, incur, assume or suffer to exist, any lien, security interest or other charge or encumbrance, or any other type of preferential arrangement, upon or with respect to any of its properties, whether now owned or hereafter acquired, or assign, or permit any Subsidiary to assign, any
right to receive income, in each case to secure any Indebtedness of any Person,
other than (i liens, mortgages and security interests created by the Mortgage,
(ii liens and security interests affecting the fuel used by the Company in its
power generating operations, and (iii liens, mortgages and security interests
securing other Indebtedness not exceeding $100,000,000; provided, however, that,
in the event that and for so long as the First Mortgage Bonds are rated lower
than BBB- or Baa3 by S&P or Moody's, respectively, or, in the event that neither
of such corporations is in the business of rating the First Mortgage Bonds,
lower than an equivalent rating of the First Mortgage Bonds by another
nationally-recognized credit rating agency of similar standing, the Company's
right to continue to create, incur and suffer to exist liens, mortgages and
security interests securing other Indebtedness pursuant to the foregoing clause
(iii) shall be suspended.
(m) Indebtedness. Create, incur, assume or suffer to exist, or permit any Subsidiary to create, incur, assume or suffer to exist, any Indebtedness other than (i Indebtedness hereunder and under the Notes, (ii Indebtedness secured by liens and security interests permitted pursuant to clauses (ii) and (iii) of subsection 5.02(a), (iii Indebtedness evidenced by the First Mortgage Bonds and (iv unsecured Indebtedness, including guarantees issued in connection with the financing of pollution control facilities operated by the Company, guarantees of Indebtedness incurred by any wholly-owned Subsidiary and guarantees of debt securities issued by any financing Subsidiary established to secure debt financing in the offshore markets.
(n) Lease Obligations. Create, incur, assume or suffer to exist, or permit any Subsidiary to create, incur, assume or suffer to exist, any obligations for the payment of rental for any property under leases or agreements to lease having a term of one year or more which would cause the direct or contingent Consolidated liabilities of the Company and the Subsidiaries in respect of all such obligations payable in any calendar year to exceed 10% of the Consolidated operating revenues of the Company and the Subsidiaries for the immediately preceding calendar year.
(o) Mergers, Etc. Merge with or into or consolidate with or into, or acquire all or substantially all of the assets or securities of, any Person, unless, in each case, (i immediately after giving effect thereto, no event shall occur and be continuing which constitutes an Event of Default or an event which with the giving of notice or lapse of time, or both, would constitute an Event of Default, and (ii in the case of any such merger to which the Company is a party, such other Person is a utility company and the resulting or surviving corporation, if not the Company, (x) is organized and existing under the laws of the United States of America or any State thereof, (y) is a corporation satisfactory to the Majority Lenders, and (z) shall have expressly assumed, by an instrument satisfactory in form and substance to the Majority Lenders, the due and punctual payment of all amounts due under this Agreement and the Notes and the performance of every covenant and undertaking of the Company contained in this Agreement.
(p) Sales, Etc. of Assets. Sell, lease, transfer or otherwise dispose of, or permit any Subsidiary to sell, lease, transfer or otherwise dispose of, any of its assets, other than the
following sales: (i sales of generating capacity to the Company's wholesale customers, (ii sales of nuclear fuel, (iii sales of accounts receivable, (iv sales in connection with a transaction authorized by subsection (d) of this Section, (v sales of investments in securities with a maturity of less than one year, or (vi other sales not exceeding $150,000,000 in the aggregate in any fiscal year of the Company.
(q) Margin Stock. Use any proceeds of any Advance to buy or carry margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System).
ARTICLE VI.
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following events ("Events of Default") shall occur and be continuing:
(a) The Company shall fail to pay any installment of principal of any Note when due, or shall fail to pay any interest on any Note or any fees hereunder within five Business Days after such interest or fees shall become due; or
(b) Any representation or warranty made by the Company herein or by the Company (or any of its officers) in connection with this Agreement shall prove to have been incorrect in any material respect when made; or
(c) The Company shall fail to perform or observe any other term, covenant or agreement contained in Sections 5.01(b), 5.01(i)(iv), 5.01(j) or 5.02 on its part to be performed or observed; or the Company shall fail to perform or observe any other term, covenant or agreement contained in this Agreement on its part to be performed or observed and any such failure shall remain unremedied for 30 days after written notice thereof shall have been given to the Company by the Administrative Agent or any Lender; or
(d) The Company or any of the Subsidiaries shall fail to pay any amount in respect of any Indebtedness in excess of $10,000,000 (but excluding Indebtedness evidenced by the Notes) of the Company or such Subsidiary (as the case may be), or any interest or premium thereon, when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Indebtedness; or any other default under any agreement or instrument relating to any such Indebtedness, or any other event, shall occur and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such default or event is to accelerate, or to permit the acceleration of, the maturity of such Indebtedness; or any such Indebtedness shall be declared to be due and payable, or
required to be prepaid (other than by a regularly scheduled required prepayment), prior to the stated maturity thereof; or
(e) The Company or any of the Subsidiaries shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Company or any of the Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property; or the Company or any of the Subsidiaries shall take any corporate action to authorize any of the actions set forth above in this subsection (e); or
(f) Any judgment or order for the payment of money in excess of $10,000,000 shall be rendered against the Company or any of the Subsidiaries and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be any period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or
(g) Any Termination Event with respect to a Plan shall have occurred, and, 30 days after notice thereof shall have been given to the Company by the Administrative Agent, (i) such Termination Event (if correctable) shall not have been corrected and (ii) the then present value of such Plan's vested benefits exceeds the then current value of assets accumulated in such Plan by more than the amount of $20,000,000 (or in the case of a Termination Event involving the withdrawal of a "substantial employer" (as defined in Section 4001(a)(2) of ERISA), the withdrawing employer's proportionate share of such excess shall exceed such amount); or
(h) The Company or any of its Affiliates as employer under a Multiemployer Plan shall have made a complete or partial withdrawal from such Multiemployer Plan and the plan sponsor of such Multiemployer Plan shall have notified such withdrawing employer that such employer has incurred a withdrawal liability in an annual amount exceeding $20,000,000; or
then, and in any such event, the Administrative Agent shall at the request, or may with the consent, of the Majority Lenders, by notice to the Company, (i) declare the Commitments and the obligation of each Lender to make Advances to be terminated, whereupon the same shall forthwith terminate, and (ii) declare the Notes, all interest thereon and all other amounts payable under this Agreement to be forthwith due and payable, whereupon the Notes, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Company; provided, however, that in the event of an actual or deemed entry of an order for relief with respect to the Company or any of the Subsidiaries under the Federal Bankruptcy Code, (A) the obligation of each Lender to make Advances shall automatically be terminated and (B) the
Notes, all such interest and all such amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Company.
ARTICLE VII.
THE ADMINISTRATIVE AGENT;
THE DOCUMENTATION AGENT
SECTION 7.01. Authorization and Action. Each Lender hereby appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent by the terms hereof, together with such powers as are reasonably provided for by this Agreement (including, without limitation, enforcement or collection of the Notes), the Administrative Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Majority Lenders, and such instructions shall be binding upon all Lenders and all holders of Notes; provided, however, that the Administrative Agent shall not be required to take any action which exposes the Administrative Agent to personal liability or which is contrary to this Agreement or applicable law.
SECTION 7.02. Administrative Agent's Reliance, Etc. Neither the
Administrative Agent nor any of its directors, officers, agents or employees
shall be liable for any action taken or omitted to be taken by it or them under
or in connection with this Agreement, except for its or their own gross
negligence or willful misconduct. Without limitation of the generality of the
foregoing, the Administrative Agent: (i) may treat the payee of any Note as the
holder thereof until the Administrative Agent receives and accepts an Assignment
and Acceptance entered into by the Lender which is the payee of such Note, as
assignor, and an Eligible Assignee, as assignee, as provided in Section 8.07;
(ii) may consult with legal counsel (including counsel for the Company),
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts; (iii) makes
no warranty or representation to any Lender and shall not be responsible to any
Lender for any statements, warranties or representations made in or in
connection with this Agreement; (iv) shall not have any duty to ascertain or to
inquire as to the performance or observance of any of the terms, covenants or
conditions of this Agreement on the part of the Company or to inspect the
property (including the books and records) of the Company; (v) shall not be
responsible to any Lender for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any other
instrument or document furnished pursuant hereto; and (vi) shall incur no
liability under or in respect of this Agreement by acting upon any notice,
consent, certificate or other instrument or writing (which may be by telegram,
telecopy, cable or telex) believed by it to be genuine and signed or sent by the
proper party or parties.
SECTION 7.03. The Administrative Agent, the Documentation Agent and their Respective Affiliates. With respect to its Commitment, the Advances made by it and the Notes issued to it, the Administrative Agent and the Documentation Agent shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not the Administrative Agent or the Documentation Agent, as the case may be; and the term "Lender" or "Lenders" shall, unless otherwise expressly indicated, include each of Citibank and Wachovia in its individual capacity, as applicable. Citibank, Wachovia and their respective Affiliates may accept deposits from, lend money to, act as trustee under indentures of, and generally engage in any kind of business with, the Company, any of the Subsidiaries and any Person who may do business with or own securities of the Company or any Subsidiary, all as if Citibank or Wachovia, as the case may be, were not the Administrative Agent or the Documentation Agent, as applicable, and without any duty to account therefor to the Lenders.
SECTION 7.04. Lender Credit Decision. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent, the Documentation Agent or any other Lender and based on the financial statements referred to in Section 4.01(e) and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent, the Documentation Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement.
SECTION 7.05. Indemnification. The Lenders agree to indemnify the Administrative Agent and the Documentation Agent (to the extent not reimbursed by the Company), ratably according to the respective principal amounts of the Notes then held by each of them (or if no Notes are at the time outstanding, ratably according to the respective amounts of their Commitments), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against the Administrative Agent or the Documentation Agent, as the case may be, in any way relating to or arising out of this Agreement or any action taken or omitted by the Administrative Agent or the Documentation Agent, as the case may be, under this Agreement; provided that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Administrative Agent's or the Documentation Agent's, as the case may be, gross negligence or willful misconduct. Without limitation of the foregoing, each Lender agrees to reimburse the Administrative Agent promptly upon demand for its ratable share of any out-of-pocket expenses (including reasonable counsel fees) incurred by the Administrative Agent in connection with the preparation, execution, administration, or enforcement of, or legal advice in respect of rights or responsibility under, this Agreement, to the extent that the Administrative Agent is not reimbursed for such expenses by the Company.
SECTION 7.06. Successor Administrative Agent. The Administrative Agent may resign at any time by giving written notice thereof to the Lenders and the Company and may be removed at any time with or without cause by the Majority Lenders. Upon any such resignation or removal, the Majority Lenders shall have the right to appoint a successor Administrative Agent. If no successor Administrative Agent shall have been so appointed by the Majority Lenders, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent's giving of notice of resignation or the Majority Lenders' removal of the retiring Administrative Agent, appoint a successor Administrative Agent, which shall be a commercial bank organized under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $50,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Administrative Agent's resignation or removal hereunder as Administrative Agent, the provisions of this Article VII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement.
ARTICLE VIII.
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. No amendment or waiver of any provision of this Agreement or the Notes, nor consent to any departure by the Company therefrom, shall in any event be effective unless the same shall be in writing and signed by the Majority Lenders, in the case of any such amendment, waiver or consent of or in respect of this Agreement or any A Note, or the Lender which shall have made the B Advance to which such amendment, waiver or consent relates, in the case of any such amendment, waiver or consent of or in respect of the B Note to which such B Advance relates, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no amendment, waiver or consent shall, unless in writing and signed by all of the Lenders, do any of the following: (a) waive any of the conditions specified in Section 3.01, 3.02 or 3.03, (b) change the Commitment of any Lender or subject any Lender to any additional obligations, (c) reduce the principal of, or interest on, the A Notes or any fees hereunder, (d) postpone any date fixed for any payment of principal of, or interest on, the A Notes or any fees hereunder, (e) change the percentage of the Commitments or of the aggregate unpaid principal amount of the A Notes, or the number of Lenders, which shall be required for the Lenders or any of them to take any action under this Agreement, and (f) amend, waive, or in any way modify or suspend any provision of Section 2.16 or of this Section 8.01; and provided, further, that no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required hereinabove to take such action, affect the rights or duties of the Administrative Agent under this Agreement or any Note.
SECTION 8.02. Notices, Etc. All notices and other communications provided for hereunder shall, unless otherwise stated herein, be in writing (including telegraphic communication) and mailed, telecopied, telegraphed or delivered, if to the Company, at its address at 411 Fayetteville Street, Raleigh, North Carolina 27602, Attention: Manager of Financial Operations; if to any Lender, at its Domestic Lending Office set forth under its name on the signature pages hereof; and if to the Administrative Agent, at its address at One Court Square, 7th Floor, Zone 2, Long Island City, New York 11120, Attention: Bank Loan Syndications; or, as to each party, at such other address as shall be designated by such party in a written notice to the other parties. All such notices and communications shall be effective when received by the addressee thereof.
SECTION 8.03. No Waiver; Remedies. No failure on the part of any Lender or the Administrative Agent to exercise, and no delay in exercising, any right hereunder or under any Note shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder or under any Note preclude any other or further exercise thereof of the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.
SECTION 8.04. Costs, Expenses and Taxes. (a) The Company agrees to pay on demand all costs and expenses of the Administrative Agent in connection with (i) the preparation, execution and delivery of this Agreement, the Notes and the other documents to be delivered hereunder, (ii) the first Borrowing under this Agreement, (iii) any modification, amendment or supplement to this Agreement, the Notes and the other documents to be delivered hereunder and (iv the enforcement of the rights and remedies of the Lenders and the Administrative Agent under this Agreement, the Notes and the other documents to be delivered hereunder (whether through negotiations or legal proceedings), all the above costs and expenses to include, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Administrative Agent and each of the Lenders with respect thereto. In addition, the Company shall pay any and all stamp and other taxes payable or determined to be payable in connection with the execution and delivery of this Agreement, the Notes and the other documents to be delivered hereunder, and agrees to save the Administrative Agent and each Lender harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such taxes.
(a) If, due to payments made by the Company due to acceleration of the maturity of the Notes pursuant to Section 6.01 or due to any other reason, any Lender receives payments of principal of any Eurodollar Rate Advance based upon the Eurodollar Rate other than on the last day of the Interest Period for such A Advance, the Company shall, upon demand by such Lender (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender any amounts required to compensate such Lender for any additional losses, costs or expenses which it may reasonably incur as a result of such payment, including, without limitation, any loss (including loss of anticipated profits), cost or expense incurred by
reason of the liquidation or reemployment of deposits or other funds acquired by any Lender to fund or maintain such A Advance.
(b) Any and all payments by the Company hereunder or under the Notes shall be made, in accordance with Section 2.14, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Lender and the Administrative Agent, taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction under the laws of which such Lender or the Administrative Agent (as the case may be) is organized or any political subdivision thereof and, in the case of each Lender, taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction of such Lender's Applicable Lending Office or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If the Company shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Note to any Lender or the Administrative Agent, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 8.04) such Lender or the Administrative Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Company shall make such deductions and (iii) the Company shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law.
(c) The Company will indemnify each Lender and the Administrative Agent for the full amount of Taxes (including, without limitation, any Taxes imposed by any jurisdiction on amounts payable under this Section 8.04) paid by such Lender or the Administrative Agent (as the case may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally asserted. This indemnification shall be made within 30 days from the date such Lender or the Administrative Agent (as the case may be) makes written demand therefor.
(d) Prior to the date of the initial Borrowing or on the date of the Assignment and Acceptance pursuant to which it became a Lender, in the case of each Lender that becomes a Lender by virtue of entering into an Assignment and Acceptance, and from time to time thereafter if requested by the Company or the Administrative Agent, each Lender organized under the laws of a jurisdiction outside the United States shall provide the Administrative Agent and the Company with the forms prescribed by the Internal Revenue Service of the United States certifying that such Lender is exempt from United States withholding taxes with respect to all payments to be made to such Lender hereunder and under the Notes. If for any reason during the term of this Agreement, any Lender becomes unable to submit the forms referred to above or the information or representations contained therein are no longer accurate in any material respect, such Lender shall notify the Administrative Agent and the Company in writing to that effect. Unless the Company and the Administrative Agent have received forms or other documents satisfactory to them indicating that payment hereunder or under any Note are not subject to
United States withholding tax, the Company or the Administrative Agent shall withhold taxes from such payments at the applicable statutory rate in the case of payments to or for any Lender organized under the laws of a jurisdiction outside the United States.
(e) Any Lender claiming any additional amounts payable pursuant to Section 8.04(c) or (d) shall use its reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) (i) to change the jurisdiction of its Applicable Lending Office if the making of such a change would avoid the need for, or reduce the amount of, any such additional amounts which may thereafter accrue and would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender and (ii) to otherwise minimize the amounts due, or to become due, under Sections 8.04(c) and (d).
(f) If the Company makes any additional payment to any Lender pursuant to
Sections 8.04(c) and (d) in respect of any Taxes, and such Lender determines
that it has received (i) a refund of such Taxes or (ii) a credit against or
relief or remission for, or a reduction in the amount of, any tax or other
governmental charge solely as a result of any deduction or credit for any Taxes
with respect to which it has received payments under Sections 8.04(c) and (d),
such Lender shall, to the extent that it can do so without prejudice to the
retention of such refund, credit, relief, remission or reduction, pay to the
Company such amount as such Lender shall have determined to be attributable to
the deduction or withholding of such Taxes. If such Lender later determines that
it was not entitled to such refund, credit, relief, remission or reduction to
the full extent of any payment made pursuant to the first sentence of this
Section 8.04(g), the Company shall upon demand of such Lender promptly repay the
amount of such overpayment. Any determination made by such Lender pursuant to
this Section 8.04(g) shall in the absence of bad faith or manifest error be
conclusive, and nothing in this Section 8.04(g) shall be construed as requiring
any Lender to conduct its business or to arrange or alter in any respect its tax
or financial affairs so that it is entitled to receive such a refund, credit or
reduction or as allowing any Person to inspect any records, including tax
returns, of any Lender.
(g) Without prejudice to the survival of any other agreement of the Company
hereunder, the agreements and obligations of the Company contained in this
Section 8.04 shall survive the payment in full of principal and interest
hereunder and under the Notes.
SECTION 8.05. Right of Set-off. Upon (i) the occurrence and during the continuance of any Event of Default and (ii) the making of the request or the granting of the consent specified by Section 6.01 to authorize the Administrative Agent to declare the Notes due and payable pursuant to the provisions of Section 6.01, each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the credit or the account of the Company now or hereafter existing under this Agreement and the Notes held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement or such Note and although such obligations may be unmatured. Each Lender agrees promptly to notify the
Company after any such set-off and application made by such Lender; provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) which such Lender may have.
SECTION 8.06. Binding Effect. This Agreement shall become effective when it shall have been executed by the Company and the Administrative Agent and when the Administrative Agent shall have been notified by each Lender that such Lender has executed it and thereafter shall be binding upon and inure to the benefit of the Company, the Administrative Agent and each Lender and their respective successors and assigns, except that the Company shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of each Lender.
SECTION 8.07. Assignments and Participations. (a) Each Lender may, with the
consent of the Agent and the Borrower (such consent not to be unreasonably
withheld and, in the case of the Borrower, such consent shall not be required if
an Event of Default has occurred and is continuing), assign to one or more banks
or other entities all or a portion of its rights and obligations under this
Agreement (including, without limitation, all or a portion of its Commitment,
the A Advances owing to it and the A Note or Notes held by it); provided,
however, that (i) each such assignment shall be of a constant, and not a
varying, percentage of all rights and obligations under this Agreement (other
than any B Advances or B Notes), (ii) prior to the effectiveness of the Term
Loan Conversion Option, the amount of the Commitment of the assigning Lender
being assigned pursuant to each such assignment (determined as of the date of
the Assignment and Acceptance with respect to such assignment) shall in no event
be less than 50% of all such rights and obligations or less than the lesser of
(A) $10,000,000 and (B) all of such Lender's rights and obligations and, if the
preceding clause (A) is applicable, shall be an integral multiple of $1,000,000,
(iii) each such assignment shall be to an Eligible Assignee, and (iv the parties
to each such assignment shall execute and deliver to the Administrative Agent,
for its acceptance and recording in the Register, an Assignment and Acceptance,
together with any A Note or Notes subject to such assignment and a processing
and recordation fee of $3,500. Upon such execution, delivery, acceptance and
recording, from and after the effective date specified in each Assignment and
Acceptance, (x) the assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned to it pursuant
to such Assignment and Acceptance, have the rights and obligations of a Lender
hereunder and (y) the Lender assignor thereunder shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights and be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's rights
and obligations under this Agreement, such Lender shall cease to be a party
hereto).
(h) By executing and delivering an Assignment and Acceptance, the Lender assignor thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning
Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; (ii) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Company or the performance or observance by the Company of any of its obligations under this Agreement or any other instrument or document furnished pursuant hereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Section 4.01(e) and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon the Administrative Agent, such assigning Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi) such assignee appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent by the terms hereof, together with such powers as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement are required to be performed by it as a Lender.
(i) The Administrative Agent shall maintain at its address referred to in
Section 8.02 a copy of each Assignment and Acceptance (and copies of the related
consents of the Company and the Administrative Agent to such assignment)
delivered to and accepted by it and a register for the recordation of the names
and addresses of the Lenders and the Commitment of, and principal amount of the
A Advances owing to, each Lender from time to time (the"Register"). The entries
in the Register shall be conclusive and binding for all purposes, absent
manifest error, and the Company, the Administrative Agent and the Lenders may
treat each Person whose name is recorded in the Register as a Lender hereunder
for all purposes of this Agreement. The Register shall be available for
inspection by the Company or any Lender at any reasonable time and from time to
time upon reasonable prior notice.
(j) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an assignee representing that it is an Eligible Assignee,
together with any A Note or Notes subject to such assignment, the Administrative
Agent shall, if such Assignment and Acceptance has been completed and is in
substantially the form of Exhibit C hereto, (i) accept such Assignment and
Acceptance, (ii) record the information contained therein in the Register and
(iii) give prompt notice thereof to the Company. Within five Business Days after
its receipt of such notice, the Company, at its own expense, shall execute and
deliver to the Administrative Agent in exchange for the surrendered A Note or
Notes a new A Note to the order of such Eligible Assignee (x) if prior to the
effectiveness of the Term Loan Conversion Option, in an amount equal to the
Commitment assumed by it pursuant to such Assignment and Acceptance and (y) if
on or after the effectiveness of the Term Loan Conversion Option, in an amount
equal
to the amount of A Advances assigned pursuant to such Assignment and Assumption and, if the assigning Lender has retained a Commitment and/or a portion of the A Advances hereunder, a new A Note to the order of the assigning Lender in an amount equal to the Commitment, or, after the effectiveness of the Term Loan Conversion Option, such portion of the A Advances retained by it hereunder. Such new A Note or Notes shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered A Note or Notes, shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of Exhibit A-1 hereto.
(k) Each Lender may assign to one or more banks or other entities any B Note or Notes held by it.
(l) Each Lender may sell participations to one or more banks or other
entities in or to all or a portion of its rights and obligations under this
Agreement (including, without limitation, all or a portion of its Commitment,
the Advances owing to it and the Note or Notes held by it); provided, however,
that (i) such Lender's obligations under this Agreement (including, without
limitation, its Commitment to the Company hereunder) shall remain unchanged,
(ii) such Lender shall remain solely responsible to the other parties hereto for
the performance of such obligations, (iii) such Lender shall remain the holder
of any such Note for all purposes of this Agreement, (iv) the Company, the
Administrative Agent and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and (v) the holder of any such participation,
other than an Affiliate of such Lender, shall not be entitled to require such
Lender to take or omit to take any action hereunder, except action (A) extending
the time for payment of interest on, or the final maturity of any portion of the
principal amount of, the Notes or (B) reducing the principal amount of or the
rate of interest payable on the Notes. Without limiting the generality of the
foregoing: (i) such participating banks or other entities shall be entitled to
the cost protection provisions contained in Sections 2.08, 2.12 and 8.04(b) only
if, and to the same extent, the Lender from which such participating banks or
other entities acquired its participation would, at the time, be entitled to
claim thereunder; and (ii) such participating banks or other entities shall
also, to the fullest extent permitted by law, be entitled to exercise the rights
of set-off contained in Section 8.05 as if such participating banks or other
entities were Lenders hereunder.
(m) If any Lender (or any bank, financial institution, or other entity to which such Lender has sold a participation) shall make any demand for payment under Section 2.12(b), then within 30 days after any such demand (if, but only if, such demanded payment has been made by the Company), the Company may, with the approval of the Administrative Agent (which approval shall not be unreasonably withheld) and provided that no Event of Default or event which, with the passage of time or the giving of notice, or both, would constitute an Event of Default shall then have occurred and be continuing, demand that such Lender assign in accordance with this Section 8.07 to one or more Eligible Assignees designated by the Company all (but not less than all) of such Lender's Commitment (if any) and the Advances owing to it within the period ending on the later to occur of such 30th day and the last day of the longest of
the then current Interest Periods for such Advances. If any such Eligible Assignee designated by the Company shall fail to consummate such assignment on terms acceptable to such Lender, or if the Company shall fail to designate any such Eligible Assignees for all or part of such Lender's Commitment or Advances, then such demand by the Company shall become ineffective; it being understood for purposes of this subsection (g) that such assignment shall be conclusively deemed to be on terms acceptable to such Lender, and such Lender shall be compelled to consummate such assignment to an Eligible Assignee designated by the Company, if such Eligible Assignee (i) shall agree to such assignment by entering into an Assignment and Acceptance in substantially the form of Exhibit C hereto with such Lender and (ii) shall offer compensation to such Lender in an amount equal to all amounts then owing by the Company to such Lender hereunder and under the Notes made by the Company to such Lender, whether for principal, interest, fees, costs or expenses (other than the demanded payment referred to above and payable by the Company as a condition to the Company's right to demand such assignment), or otherwise.
(n) Any Lender may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 8.07, disclose to the assignee or participant or proposed assignee or participant, any information relating to the Company furnished to such Lender by or on behalf of the Company; provided that, prior to any such disclosure, the assignee or participant or proposed assignee or participant shall agree to preserve the confidentiality of any confidential information relating to the Company received by it from such Lender.
(o) Anything in this Section 8.07 to the contrary notwithstanding, any Lender may assign and pledge all or any portion of its Commitment and the Advances owing to it to any Federal Reserve Bank (and its transferees) as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any Operating Circular issued by such Federal Reserve Bank. No such assignment shall release the assigning Lender from its obligations hereunder.
SECTION 8.08. Governing Law. This Agreement and the Notes shall be governed by, and construed in accordance with, the laws of the State of New York. The Company (i) irrevocably submits to the non-exclusive jurisdiction of any New York State court or Federal court sitting in New York City in any action arising out of this Agreement or any Note, (ii) agrees that all claims in such action may be decided in such court, (iii) waives, to the fullest extent it may effectively do so, the defense of an inconvenient forum and (iv) consents to the service of process by mail. A final judgment in any such action shall be conclusive and may be enforced in other jurisdictions. Nothing herein shall affect the right of any party to serve legal process in any manner permitted by law or affect its right to bring any action in any other court.
SECTION 8.09. WAIVER OF JURY TRIAL. THE COMPANY, THE ADMINISTRATIVE AGENT, AND EACH LENDER EACH HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY AND LAWFULLY DO SO, ALL RIGHT TO TRIAL BY JURY AS TO ANY ISSUE RELATING TO THIS AGREEMENT OR ANY NOTE IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY NOTE, OR ANY OTHER INSTRUMENT OR DOCUMENT DELIVERED HEREUNDER OR THEREUNDER.
SECTION 8.10. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.
SECTION 8.11. Severability. Any provision of this Agreement which is prohibited, unenforceable or not authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition, unenforceability or non-authorization without invalidating the remaining provisions hereof or affecting the validity, enforceability or legality of such provision in any other jurisdiction.
SECTION 8.12. Headings. Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose.
SECTION 8.13. Entire Agreement. This Agreement and the Notes constitute the entire contract between the parties relative to the subject matter hereof. Any previous agreement among the parties with respect to the subject matter hereof is superseded by this Agreement and the Notes. Except as is expressly provided for herein, nothing in this Agreement or the Notes, expressed or implied, is intended to confer upon any party other than the parties hereto any rights, remedies, obligations or liabilities under or by reason of this Agreement or the Notes.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.
CAROLINA POWER & LIGHT
COMPANY
CITIBANK, N.A., as Administrative Agent and as a Lender
Title:
WACHOVIA BANK, NATIONAL
ASSOCIATION
Title:
THE CHASE MANHATTAN BANK
Title:
THE FIRST NATIONAL BANK OF
CHICAGO
Title:
FIRST UNION NATIONAL BANK
Title:
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
Title:
BRANCH BANKING AND TRUST
COMPANY, A NORTH CAROLINA
BANKING CORPORATION
Title:
THE FUJI BANK, LIMITED, ATLANTA
AGENCY
Title:
MELLON BANK, N.A.
Title:
NORDDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK/
CAYMAN ISLANDS BRANCH
Title:
Title:
SUNTRUST BANK, ATLANTA
Title:
UBS AG, NEW YORK BRANCH
Title:
Title:
SCHEDULE I
Existing Facilities
$165,000,000 5-Year Revolving Credit Facility, Citibank, N.A., Agent, December 29, 1995
$250,000,000 5-Year Revolving Credit Facility, Citibank, N.A., Agent, March 26, 1996
$100,000,000 364-Day Revolving Credit Facility, Citibank, N.A., Agent, March 26, 1996
$150,000,000 364-Day Revolving Credit Facility, Citibank, N.A.and Wachovia Bank, National Association, Co-Agents, April 1, 1998
EXHIBIT A-1
FORM OF A NOTE
The Company promises to pay interest on the unpaid principal amount of each A Advance from the date of such A Advance until such principal amount is paid in full, at such interest rates, and payable at such times, as are specified in the Credit Agreement.
Both principal and interest are payable in lawful money of the United States of America to Citibank, N.A., as Administrative Agent, at One Court Square, 7th Floor, Zone 2, Long Island City, New York 11120, Attention: Bank Loan Syndications, in same day funds. Each A Advance made by the Lender to the Company and the maturity thereof, and all payments made on account of principal hereof, shall be recorded by the Lender and, prior to any transfer hereof, endorsed on the grid attached hereto which is part of this Promissory Note, which endorsement shall constitute prima facie evidence of the accuracy of the information endorsed. No failure to make or error in making any such endorsement as authorized hereby shall affect the validity of the obligation to repay the unpaid principal amount of this Promissory Note with interest as provided in the Credit Agreement or the validity of any payment thereof made by the Company.
U.S. dollar amount first above mentioned, the indebtedness of the Company
resulting from each such Advance being evidenced by this Promissory Note, and
(ii) contains provisions for acceleration of the maturity hereof upon the
happening of certain stated events and also for prepayments on account of
principal hereof prior to the maturity hereof upon the terms and conditions
therein specified.
CAROLINA POWER & LIGHT COMPANY
By
Name:
Title:
ADVANCES, INTEREST PERIODS AND PAYMENTS OF PRINCIPAL
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Amount
Interest of
Period Principal Unpaid
Amount (if any) Paid or Principal
Date of of Prepaid Balance Notation
Advance Advance Made By
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EXHIBIT A-2
FORM OF B NOTE
FOR VALUE RECEIVED, the undersigned, CAROLINA POWER & LIGHT COMPANY, a North Carolina corporation (the "Company"), HEREBY PROMISES TO PAY to the order
of (the "Lender") for the account of its Applicable Lending Office
-------------
(as defined in the Credit Agreement referred to below), on , 19 , the
-------- --
principal amount of Dollars ($ ).
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The Company promises to pay interest on the unpaid principal amount hereof from the date hereof until such principal amount is paid in full, at the interest rate and payable on the interest payment date or dates provided below:
Interest Payment Date or Dates:
The Company hereby waives presentment, demand, protest and notice of any kind. No failure to exercise, and no delay in exercising, any rights hereunder on the part of the holder hereof shall operate as a waiver of such rights.
This Promissory Note shall be governed by, and construed in accordance with, the laws of the State of New York, United States.
CAROLINA POWER & LIGHT COMPANY
By
Name:
Title:
EXHIBIT B-1
NOTICE OF A BORROWING
[Date]
Citibank, N.A., as Administrative Agent
for the Lenders parties to the
Credit Agreement referred to below
One Court Square
7th Floor, Zone 2
Long Island City, New York 11120
Attention: Bank Loan Syndications
Gentlemen:
(ii) The Type of A Advances comprising the Proposed A Borrowing is
[Base Rate Advances][Eurodollar Rate Advances].
CAROLINA POWER & LIGHT COMPANY
By
Name:
Title:
EXHIBIT B-2
NOTICE OF B BORROWING
Citibank, N.A., as Administrative Agent
for the Lenders parties to the
Credit Agreement referred to below
One Court Square
7th Floor, Zone 2
Long Island City, New York 11120
Attention: Bank Loan Syndications
Gentlemen:
The undersigned, CAROLINA POWER & LIGHT COMPANY, refers to the $375,000,000 364-Day Revolving Credit Agreement, dated as of June __, 1998 (the "Credit Agreement", the terms defined therein being used herein as therein defined), among the undersigned, certain Lenders from time to time parties thereto and CITIBANK, N.A., as Administrative Agent for said Lenders, and hereby gives you notice pursuant to Section 2.03 of the Credit Agreement that the undersigned hereby requests a B Borrowing under the Credit Agreement, and in that connection sets forth the terms on which such B Borrowing (the "Proposed B Borrowing") is requested to be made:
The undersigned hereby certifies that the aggregate amount of the Proposed B Borrowing and all other Borrowings to be made on the same day under the Credit Agreement is within the aggregate amount of the unused Commitments of the Lenders.
The undersigned hereby confirms that the Proposed B Borrowing is to be made available to it in accordance with Section 2.03(a)(v) of the Credit Agreement.
Very truly yours,
CAROLINA POWER & LIGHT COMPANY
By
Name:
Title:
EXHIBIT B-3
NOTICE OF CONVERSION
[Date]
Citibank, N.A., as Administrative Agent
for the Lenders parties to the
Credit Agreement referred to below
One Court Square
7th Floor, Zone 2
Long Island City, New York 11120
Attention: Bank Loan Syndications
Gentlemen:
The undersigned, CAROLINA POWER & LIGHT COMPANY, refers to the $375,000,000 364-Day Revolving Credit Agreement, dated as of June __, 1998 (the "Credit Agreement", the terms defined therein being used herein as therein defined), among the undersigned, certain Lenders from time to time parties thereto and CITIBANK, N.A., as Administrative Agent for said Lenders, and hereby gives you notice pursuant to Section 2.10 of the Credit Agreement that the undersigned hereby requests a Conversion under the Credit Agreement, and in that connection sets forth the terms on which such Conversion (the "Proposed Conversion") is requested to be made:
(iii) The Type of Advance to which such Advances (or portions thereof) are proposed to be Converted:
------------------------.
The undersigned hereby certifies that, on the date hereof, and on the date of the Proposed Conversion, no event has occurred and is continuing, or would result from such Proposed Conversion, which constitutes an Event of Default.
Very truly yours,
CAROLINA POWER & LIGHT COMPANY
By
Name:
Title:
EXHIBIT C
ASSIGNMENT AND ACCEPTANCE
1. The Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, that interest in and to all of the Assignor's rights and obligations under the Credit Agreement as of the date hereof (other than in respect of B Advances and B Notes) which represents the percentage interest specified on Schedule 1 of all outstanding rights and obligations under the Credit Agreement (other than in respect of B Advances and B Notes), including, without limitation, such interest in the Assignor's Commitment (to the extent it has not been terminated), the A Advances owing to the Assignor, and the A Note[s] held by the Assignor. After giving effect to such sale and assignment, the Assignee's Commitment (if any) and the amount of the A Advances owing to the Assignee will be as set forth in Section 2 of Schedule 1.
2. The Assignor (i) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; (ii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other instrument or document furnished pursuant thereto; (iii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Company or the performance or observance by the Company of any of its obligations under the Credit Agreement or any other instrument or document furnished pursuant thereto; and (iv) attaches the A Note[s] referred to in paragraph 1 above and requests that the Administrative Agent exchange such A Note[s] for a new A Note payable to the order of the Assignee in an amount equal to the Commitment assumed by the Assignee pursuant hereto or new A Notes payable to the order of the Assignee in an amount equal to the Commitment assumed by the Assignee pursuant hereto and the Assignor in an amount equal to the Commitment retained by the Assignor under the Credit Agreement, respectively, as specified on Schedule 1 hereto.
3. The Assignee (i) confirms that it has received a copy of the Credit
Agreement, together with copies of the financial statements referred to in
Section 4.01(e) thereof and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Assignment and Acceptance; (ii) agrees that it will, independently and
without reliance upon the Administrative Agent, the Assignor or any other Lender
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under the Credit Agreement; (iii) confirms that it is an Eligible Assignee; (iv)
appoints and authorizes the Administrative Agent to take such action as agent on
its behalf and to exercise such powers under the Credit Agreement as are
delegated to the Administrative Agent by the terms thereof, together with such
powers as are reasonably incidental thereto; (v) agrees that it will perform in
accordance with their terms all of the obligations which by the terms of the
Credit Agreement are required to be performed by it as a Lender; [and] (vi)
specifies as its Domestic Lending Office (and address for notices) and
Eurodollar Lending Office the offices set forth beneath its name on the
signature pages hereof [and (vii) attaches the forms prescribed by the Internal
Revenue Service of the United States certifying as to the Assignee's status for
purposes of determining exemption from United States withholding taxes with
respect to all payments to be made to the Assignee under the Credit Agreement
and the Notes or such other documents as are necessary to indicate that all such
payments are subject to such rates at a rate reduced by an applicable tax
treaty]./1/
4. Following the execution of this Assignment and Acceptance by the Assignor and the Assignee, it will be delivered to the Administrative Agent for acceptance and recording by the Administrative Agent. The effective date of this Assignment and Acceptance shall be the date of acceptance thereof by the Administrative Agent, unless otherwise specified on Schedule 1 hereto (the "Effective Date").
5. Upon such acceptance and recording by the Administrative Agent, as of the Effective Date, (i) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and (ii) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement.
6. Upon such acceptance and recording by the Administrative Agent, from and after the Effective Date, the Administrative Agent shall make all payments under the Credit
/1/ If the Assignee is organized under the laws of a jurisdiction outside the United States.
Agreement and the A Notes in respect of the interest assigned hereby (including, without limitation, all payments of principal, interest and commitment fees with respect thereto) to the Assignee. The Assignor and Assignee shall make all appropriate adjustments in payments under the Credit Agreement and the A Notes for periods prior to the Effective Date directly between themselves.
7. This Assignment and Acceptance shall be governed by, and construed in accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and Acceptance to be executed by their respective officers thereunto duly authorized, as of the date first above written, such execution being made on Schedule 1 hereto.
Schedule 1 to Assignment and Acceptance
Aggregate Outstanding Principal Amount of A Advances owing to Assignee: $
Principal Amount: $
Effective Date /2/
[NAME OF ASSIGNOR]
By
Title:
[NAME OF ASSIGNEE]
/2/ This date should be no earlier than the date of acceptance by the Administrative Agent.
By
Title:
Domestic Lending Office (and address for notices):
[Address]
Eurodollar Lending Office:
[Address]
Accepted this day of
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, 19
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CITIBANK, N.A.,
as Administrative Agent
By
Title:
CAROLINA POWER & LIGHT
COMPANY
By
Title:
EXHIBIT D-1
FORM OF OPINION OF COUNSEL FOR THE COMPANY
Carolina Power & Light Company
Gentlemen:
In connection with the preparation, execution and delivery of the Credit Agreement, I have examined or have had examined under my supervision:
(1) The Credit Agreement.
(2) The A Notes and the other documents furnished by the Company pursuant to Section 3.01 of the Credit Agreement.
(3) The form of the B Notes, attached as Exhibit A-2 to the Credit Agreement, to be executed and delivered by the Company in connection with any B Borrowing.
(4) The Restated Charter of the Company (the "Charter").
(5) The By-Laws of the Company and all amendments thereto (the "By-Laws").
(6) The NCUC Order and the SCPSC Order.
I have also examined the originals, or copies of such other corporate records of the Company, certificates of public officials and of officers of the Company and agreements, instruments and other documents as I have deemed necessary as a basis for the opinions expressed below. As to questions of fact material to such opinions, I have, when relevant facts were not independently established by me, relied upon certificates of the Company or its officers or of public officials. I have assumed the authenticity of all documents submitted to me as originals, the conformity to originals of all documents submitted as certified or photostatic copies and the authenticity of the originals, and the due execution and delivery, pursuant to due authorization, of the Credit Agreement by the Lenders, the Administrative Agent and the validity and binding effect thereof on such parties.
I am qualified to practice law in the State of North Carolina, and the opinions expressed herein are limited to the laws of the State of North Carolina, the laws of the State of South Carolina applicable to public utilities and the Federal laws of the United States. No opinion is expressed as to the choice of law provisions contained in Section 8.08 of the Credit Agreement.
Based upon the foregoing and upon such investigation as I have deemed necessary, I am of the following opinion:
1. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of North Carolina, and is duly qualified to do business and in good standing in the State of South Carolina.
2. The execution, delivery and performance by the Company of the Credit
Agreement and the Notes are within the Company's corporate powers, have
been duly authorized by all necessary corporate action, and do not
contravene (i) the Charter or the By-Laws or (ii) any law, rule or
regulation applicable to the Company (including, without limitation,
Regulation X of the Board of Governors of the Federal Reserve System) or
(iii) any contractual or legal restriction binding or affecting the
Company. The Credit Agreement and the A Notes have been duly executed and
delivered on behalf of the Company.
3. No authorization, approval or other action by, and no notice to or filing with any governmental authority or regulatory body is required for the due execution, delivery and performance by the Company of the Credit Agreement and the Notes, other than the NCUC Order and the SCPSC Order, each of which has been duly issued, is final and in full force and effect, and all periods for review or appeal thereof have expired, and no such request for review or appeal has been filed and is pending.
4. If in any action or proceeding arising out of or relating to the Credit Agreement or the Notes in any court of the State of North Carolina or in any federal court sitting in the State of North Carolina, such court were to hold that the Credit Agreement and the Notes are governed by, and to be construed in accordance with, the laws of the State of North Carolina, the Credit Agreement, the A Notes and, upon their completion, execution and delivery in accordance with the terms of the Credit Agreement, the B Notes would be, under the laws of the State of North Carolina, legal, valid and binding obligations of the Company enforceable against the Company in accordance with their respective terms.
5. To the best of my knowledge, except as described in the reports and registration statements which the Company has filed with the Securities and Exchange Commission, there are no pending or overtly threatened actions or proceedings against the Company or any of the Subsidiaries before any court, governmental agency or arbitrator which purport to affect the legality, validity, binding effect or enforceability of the Credit Agreement or any of the Notes or which are likely to have a materially adverse effect upon the financial condition or operations of the Company or any of the Subsidiaries.
The opinions set forth above are subject to the following qualifications:
(a) The enforceability of the Company's obligations under the Credit Agreement and the Notes is subject to the effect of any applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar law affecting creditors' rights generally.
(b) The enforceability of the Company's obligations under the Credit Agreement and the Notes is subject to the effect of general principles of equity, including (without limitation) concepts of materiality, reasonableness, good faith and fair dealing (regardless of whether considered in a proceeding in equity or at law). Such principles of equity are of general application, and, in applying such principles, a court, among other things, might not allow a contracting party to exercise remedies in respect of a default deemed immaterial, or might decline to order an obligor to perform covenants.
(c) In addition to the application of equitable principles described above, courts have imposed an obligation on contracting parties to act reasonably and in good faith in the exercise of their contractual rights and remedies, and may also apply public policy considerations in limiting the right of parties seeking to obtain indemnification under circumstances where the conduct of such parties is determined to have constituted negligence.
(d) No opinion is expressed herein as to (i) Section 8.05 of the Credit Agreement, (ii) the enforceability of provisions purporting to grant to a party conclusive rights of determination, (iii) the availability of specific performance or other equitable remedies, (iv) the enforceability of rights to indemnity under federal or state securities laws or (v) the enforceability of waivers by parties of their respective rights and remedies under law.
The foregoing opinion is solely for your benefit and may not be relied upon by any other Person other than (i) any other Person that may become a Lender under the Credit Agreement after the date hereof and (ii) King & Spalding, in connection with their opinion delivered on the date hereof under Section 3.01 of the Credit Agreement.
Very truly yours,
EXHIBIT D-2
FORM OF OPINION OF COUNSEL FOR THE COMPANY UPON EXTENSION OF THE COMMITMENT
TERMINATION DATE
AND EXERCISE OF THE TERM LOAN CONVERSION OPTION
Carolina Power & Light Company
Gentlemen:
In connection with the preparation, execution and delivery of the Credit Agreement, I have examined or have had examined under my supervision:
/2/ For use in connection with the Exercise.
(1) The Credit Agreement.
(2) The A Notes and the other documents furnished by the Company pursuant to Section 3.01 of the Credit Agreement.
(3) The form of the B Notes, attached as Exhibit A-2 to the Credit Agreement, to be executed and delivered by the Company in connection with any B Borrowing.
(5) The Restated Charter of the Company (the "Charter").
(6) The By-Laws of the Company and all amendments thereto (the "By-Laws").
I have also examined the originals, or copies of such other corporate records of the Company, certificates of public officials and of officers of the Company and agreements, instruments and other documents as I have deemed necessary as a basis for the opinions expressed below. As to questions of fact material to such opinions, I have, when relevant facts were not independently established by me, relied upon certificates of the Company or its officers or of public officials. I have assumed the authenticity of all documents submitted to me as originals, the conformity to originals of all documents submitted as certified or photostatic copies and the authenticity of the originals, and the due execution and delivery, pursuant to due authorization, of the Credit Agreement by the Lenders, the Administrative Agent and the Documentation Agent and the validity and binding effect thereof on such parties.
I have also reviewed the NCUC Order and the SCPSC Order, each of which is attached hereto.
I am qualified to practice law in the State of North Carolina, and the opinions expressed herein are limited to the laws of the State of North Carolina, the laws of the State of South Carolina applicable to public utilities and the Federal laws of the United States. No opinion is expressed as to the choice of law provisions contained in Section 8.08 of the Credit Agreement.
/2/ For use in connection with the Exercise.
Based upon the foregoing and upon such investigation as I have deemed necessary, I am of the following opinion:
1. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of North Carolina, and is duly qualified to do business and in good standing in the State of South Carolina.
2. The execution, delivery and performance by the Company of the Credit
Agreement and the Notes, [after giving effect to the Extension,]1 [after
giving effect to the Exercise,]2 are within the Company's corporate powers,
have been duly authorized by all necessary corporate action, and do not
contravene (i) the Charter or the By-Laws or (ii) any law, rule or
regulation applicable to the Company (including, without limitation,
Regulation X of the Board of Governors of the Federal Reserve System) or
(iii) any contractual or legal restriction binding or affecting the
Company. The Credit Agreement and the A Notes have been duly executed and
delivered on behalf of the Company.
3. No authorization, approval or other action by, and no notice to or filing with any governmental authority or regulatory body is required for the due execution, delivery and performance, by the Company of the Credit Agreement and the Notes, [after giving effect to the Extension,]1 [after giving effect to the Exercise,]2 other than the NCUC Order and the SCPSC Order, each of which has been duly issued, is final and in full force and effect, and all periods for review or appeal thereof have expired, and no request for review or appeal has been filed and is pending.
4. If in any action or proceeding arising out of or relating to the Credit Agreement or the Notes in any court of the State of North Carolina or in any federal court sitting in the State of North Carolina, such court were to hold that the Credit Agreement and the Notes are governed by, and to be construed in accordance with, the laws of the State of North Carolina, the Credit Agreement, the A Notes and, upon their completion, execution and delivery in accordance with the terms of the Credit Agreement, the B Notes would be, under the laws of the State of North Carolina and [after giving effect to the Extension,]1 [after giving effect to the Exercise,]2 legal, valid and binding obligations of the Company enforceable against the Company in accordance with their respective terms.
5. To the best of my knowledge, except as described in the reports and registration statements which the Company has filed with the Securities and Exchange Commission, there are no pending or overtly threatened actions or proceedings against the Company or any of the Subsidiaries before any court, governmental agency or arbitrator which purport to affect the legality, validity, binding effect or enforceability of the Credit Agreement or any of the Notes or which are likely to have a materially adverse effect upon the financial condition or operations of the Company or any of the Subsidiaries.
The opinions set forth above are subject to the following qualifications:
(a) The enforceability of the Company's obligations under the Credit Agreement and the Notes is subject to the effect of any applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar law affecting creditors' rights generally.
(b) The enforceability of the Company's obligations under the Credit Agreement and the Notes is subject to the effect of general principles of equity, including (without limitation) concepts of materiality, reasonableness, good faith and fair dealing (regardless of whether considered in a proceeding in equity or at law). Such principles of equity are of general application, and, in applying such principles, a court, among other things, might not allow a contracting party to exercise remedies in respect of a default deemed immaterial, or might decline to order an obligor to perform covenants.
(c) In addition to the application of equitable principles described above, courts have imposed an obligation on contracting parties to act reasonably and in good faith in the exercise of their contractual rights and remedies, and may also apply public policy considerations in limiting the right of parties seeking to obtain indemnification under circumstances where the conduct of such parties is determined to have constituted negligence.
(d) No opinion is expressed herein as to (i) Section 8.05 of the Credit Agreement, (ii) the enforceability of provisions purporting to grant to a party conclusive rights of determination, (iii) the availability of specific performance or other equitable remedies, (iv) the enforceability of rights to indemnity under federal or state securities laws or (v) the enforceability of waivers by parties of their respective rights and remedies under law.
The foregoing opinion is solely for your benefit and may not be relied upon by any other Person other than (i) any other Person that may become a Lender under the Credit Agreement after the date hereof and (ii) King & Spalding, in connection with their opinion delivered on the date hereof under Section 3.01 of the Credit Agreement.
Very truly yours,
EXHIBIT E
FORM OF OPINION OF COUNSEL
TO THE ADMINISTRATIVE AGENT
[DATE]
Re: Carolina Power & Light Company
Ladies and Gentlemen:
In this connection, we have examined the following documents:
1. a counterpart of the Credit Agreement, executed by the parties thereto;
2. the A Notes to the order of each Bank;
3. the form of the B Notes, attached as Exhibit A-2 to the Credit Agreement, to be executed and delivered by the Company in connection with any B Borrowing; and
4. the documents furnished by or on behalf of the Company pursuant to subsections (b) through (h) of Section 3.01 of the Credit Agreement, including, without
limitation, the opinion of the General Counsel to the Company (the "Company Opinion").
In our examination of the documents referred to above, we have assumed the authenticity of all such documents submitted to us as originals, the genuineness of all signatures, the due authority of the parties executing such documents and the conformity to the originals of all such documents submitted to us as copies. We have also assumed that you have independently evaluated, and are satisfied with, the creditworthiness of the Company and the business terms reflected in the Credit Agreement. We have relied, as to factual matters, on the documents we have examined.
To the extent that our opinions expressed below involve conclusions as to matters governed by law other than the law of the State of New York, we have relied upon the Company Opinion and have assumed without independent investigation the correctness of the matters set forth therein, our opinions expressed below being subject to the assumptions, qualifications and limitations set forth in the Company Opinion.
Based upon and subject to the foregoing, and subject to the qualifications set forth below, we are of the opinion that the Credit Agreement and the A Notes are, and upon their completion, execution and delivery in accordance with the terms of the Credit Agreement, the B Notes will be, the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms.
Our opinion is subject to the following qualifications:
(a) The enforceability of the Company's obligations under the Credit Agreement and the Notes is subject to the effect of any applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar law affecting creditors' rights generally.
(b) The enforceability of the Company's obligations under the Credit Agreement and the Notes is subject to the effect of general principles of equity, including (without limitation) concepts of materiality, reasonableness, good faith and fair dealing (regardless of whether considered in a proceeding in equity or at law). Such principles of equity are of general application, and, in applying such principles, a court, among other things, might not allow a contracting party to exercise remedies in respect of a default deemed immaterial, or might decline to order an obligor to perform covenants.
(c) We note further that, in addition to the application of equitable principles described above, courts have imposed an obligation on contracting parties to act reasonably and in good faith in the exercise of their contractual rights and remedies, and may also apply public policy considerations in limiting the right of parties seeking to obtain indemnification under circumstances where the conduct of such parties is determined to have constituted negligence.
(d) We express no opinion herein as to (i) the enforceability of Section 8.05 of the Credit Agreement, (ii) the enforceability of provisions purporting to grant to a party conclusive rights of determination, (iii) the availability of specific performance or other equitable remedies, (iv) the enforceability of rights to indemnity under federal or state securities laws or (v) the enforceability of waivers by parties of their respective rights and remedies under law.
(e) Our opinions expressed above are limited to the law of the State of New York, and we do not express any opinion herein concerning any other law.
The foregoing opinion is solely for your benefit and may not be relied upon by any other person or entity.
Very truly yours,
EXHIBIT F
FORM OF REQUEST FOR EXTENSION
OF THE COMMITMENT TERMINATION DATE
CAROLINA POWER & LIGHT COMPANY
(Company)
AND
CITIBANK, N.A.
(Administrative Agent)
Request for Extension of Commitment Termination Date and Certificate of Representations and Warranties and No Default
Witness my hand this day of , .
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EXHIBIT G
FORM OF REQUEST FOR
TERM LOAN CONVERSION OPTION
CAROLINA POWER & LIGHT COMPANY
(Company)
AND
CITIBANK, N.A.
(Administrative Agent)
Request for Term Loan Conversion Option
and
Certificate of Representations and Warranties and No Default
Witness my hand this day of , .
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[----------------] Vice President and Treasurer
Exhibit 10b(3)
EXECUTION COPY
AMENDMENT AND RESTATEMENT
AMENDMENT AND RESTATEMENT, dated as of June 29, 1999 (this "Amendment and Restatement"), to that certain 364-DAY REVOLVING CREDIT AGREEMENT, dated as of June 30, 1998, (the "Existing Agreement"; and as amended by this Amendment and Restatement, the "Amended and Restated Agreement"), among Carolina Power & Light Company (the "Borrower"), certain Lenders named therein (the "Lenders"), Citibank, N.A., as Administrative Agent (the "Agent"), Wachovia Bank, National Association, as Documentation Agent and Salomon Smith Barney Inc., as Arranger and Book Manager.
PRELIMINARY STATEMENT
The Borrower, the Lenders and the Agent previously entered into the Existing Agreement. The parties hereto now wish to amend the Existing Agreement in its entirety to read as set forth in the Existing Agreement with the amendments set forth below. The parties therefore agree as follows (capitalized terms used but not defined herein having the meanings assigned to such terms in the Existing Agreement):
SECTION 1. Amendment to Existing Agreement. The Existing Agreement is, effective as of the date hereof and subject to the satisfaction of the conditions precedent set forth in Section 2 hereof, hereby amended as follows:
(a) The definition of "Extension Date" in Section 1.01 is amended in its entirety to read as follows:
"`Extension Date' means June 27, 2000 and each subsequent date to
which the Commitment Termination Date has been extended pursuant to
Section 2.16."
(b) The definition of "Applicable Margin" set forth in Section 1.01 is amended by inserting the following provision immediately after the chart at the end of such definition:
"The Applicable Margin will increase (i) by .125% at any time that at least 25% but less than 50% of the Commitments are utilized, and (ii) by 0.25% at any time that more than 50% of the Commitments are utilized."
SECTION 2. Conditions of Effectiveness of Amendment. This Amendment shall become effective as of the date first written above when, and only when, the Agent shall have
received from the Borrower, on behalf of each Lender, (a) an upfront fee of .03% on such Lender's Commitment, (b) counterparts of this Amendment and Restatement, executed by the Borrower and the Lenders in sufficient quantity for each party to have a fully executed original, and (c) an opinion of counsel to the Borrower substantially in the form of Exhibit A attached hereto upon which each Lender and the Agent may rely.
SECTION 3. Representations and Warranties of the Borrower. The Borrower
represents and warrants that (a) the representations and warranties contained in
Section 4.01 of the Amended and Restated Agreement are true and correct on and
as of the date first above written as though made on and as of such date (except
that the representation and warranty contained in Section 4.01(e) shall be
deemed to refer to the Consolidated balance sheet of the Borrower and its
Subsidiaries as of December 31, 1998), and (b) no event has occurred and is
continuing, or would result from the execution and delivery of this Amendment
and Restatement, that constitutes an Event of Default or would constitute an
Event of Default but for the requirement that notice be given or time elapse, or
both.
SECTION 4. Reference to and Effect on the Existing Agreement. Upon the effectiveness of Section 1 hereof, on and after the date hereof each reference in the Existing Agreement or any Note to "this Agreement", "hereunder", "hereof" or words of like import referring to the Existing Agreement shall mean and be a reference to the Amended and Restated Agreement, as amended hereby. Except as specifically amended above, the Notes are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed. The execution, delivery and effectiveness of this Amendment and Restatement shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any Lender or the Agent under any Note, nor constitute a waiver of any provision of any Note.
SECTION 5. Costs, Expenses and Taxes. The Borrower agrees to pay on demand all costs and expenses of the Agent in connection with the preparation, execution and delivery of this Amendment and Restatement, and the other instruments and documents to be delivered hereunder, including, without limitation, the reasonable fees and out-of-pocket expenses of King & Spalding, counsel for the Agent with respect thereto and with respect to advising the Agent as to its rights and responsibilities hereunder and thereunder, and all costs and expenses (including, without limitation, reasonable counsel fees and expenses), if any, in connection with the enforcement (whether through negotiations, legal proceedings or otherwise) of this Amendment and Restatement. In addition, the Borrower agrees to pay any and all stamp and other taxes payable or determined to be payable in connection with the execution and delivery of this Amendment and Restatement, and the other instruments and documents to be delivered hereunder, and agree to save the Lenders and the Agent harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such taxes.
SECTION 6. Execution in Counterparts. This Amendment and Restatement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same instrument.
SECTION 7. Governing Law. This Amendment and Restatement shall be governed by, and construed in accordance with, the internal laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment and Restatement to be executed by their respective officers thereunto duly authorized, as of the date first above written.
CAROLINA POWER & LIGHT COMPANY
CITIBANK, N.A., as Administrative Agent and a Lender
Title:
SALOMON SMITH BARNEY INC.,
as Arranger and Book Manager
Title:
WACHOVIA BANK, NATIONAL ASSOCIATION
as Documentation Agent and a Lender
Title:
THE CHASE MANHATTAN BANK
Title:
THE FIRST NATIONAL BANK OF
CHICAGO
Title:
FIRST UNION NATIONAL BANK
Title:
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
Title:
BRANCH BANKING AND TRUST COMPANY,
A NORTH CAROLINA BANKING CORPORATION
Title:
NORDDEUTSCHE LANDESBANK GIROZENTRALE,
NEW YORK/CAYMAN ISLANDS BRANCH
Title:
Title:
SUNTRUST BANK, ATLANTA
Title:
MELLON BANK, N.A.
Title:
EXHIBIT A
To each of the Lenders parties to the
$375,000,000 364-Day Revolving Credit
Agreement, dated as of June 30, 1998, as
amended by the Amendment and
Restatement, dated as of June 29, 1999
(the "Amendment and Restatement") among
Carolina Power & Light Company, said
Lenders, Citibank, N.A., as
Administrative Agent for said Lenders,
Wachovia Bank, National Association, as
Documentation Agent and Salomon Smith
Barney Inc., as Arranger and Book
Manager
Carolina Power & Light Company
Ladies and Gentlemen:
This opinion is furnished to you by me as Senior Vice President and Corporate Secretary for Carolina Power & Light Company (the "Company") in connection with the Amendment and Restatement, dated as of June 29, 1999 (the "Amendment and Restatement") of the $375,000,000 364-Day Revolving Credit Agreement, dated as of June 30, 1998 (the "Credit Agreement", and as amended by the Amendment and Restatement, the "Amended and Restated Agreement"), among the Company, the lenders from time to time parties thereto (the "Lenders") and Citibank, N.A. ("Citibank"), as Administrative Agent for the Lenders (the "Administrative Agent"),Wachovia Bank, National Association, as Documentation Agent and Salomon Smith Barney Inc., as Arranger and Book Manager. Terms defined in the Credit Agreement are used herein as therein defined.
In connection with the preparation, execution and delivery of the Credit Agreement, I have examined or have had examined under my supervision:
(1) The Credit Agreement.
(2) The Amendment and Restatement.
(3) The A Notes and the other documents furnished by the Company pursuant to Section 3.01 of the Credit Agreement.
(4) The form of the B Notes, attached as Exhibit A-2 to the Credit Agreement, to be executed and delivered by the Company in connection with any B Borrowing.
(5) The Restated Charter of the Company (the "Charter").
(6) The By-Laws of the Company and all amendments thereto (the "By-Laws").
I have also examined the originals, or copies of such other corporate records of the Company, certificates of public officials and of officers of the Company and agreements, instruments and other documents as I have deemed necessary as a basis for the opinions expressed below. As to questions of fact material to such opinions, I have, when relevant facts were not independently established by me, relied upon certificates of the Company or its officers or of public officials. I have assumed the authenticity of all documents submitted to me as originals, the conformity to originals of all documents submitted as certified or photostatic copies and the authenticity of the originals, and the due execution and delivery, pursuant to due authorization, of the Amended and Restated Agreement by the Lenders, the Administrative Agent and the Documentation Agent and the validity and binding effect thereof on such parties.
I have also reviewed the NCUC Order and the SCPSC Order, each of which is attached hereto.
I am qualified to practice law in the State of North Carolina, and the opinions expressed herein are limited to the laws of the State of North Carolina, the laws of the State of South Carolina applicable to public utilities and the Federal laws of the United States. No opinion is expressed as to the choice of law provisions contained in Section 8.08 of the Amended and Restated Agreement.
Based upon the foregoing and upon such investigation as I have deemed necessary, I am of the following opinion:
SECTION 8. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of North Carolina, and is duly qualified to do business and in good standing in the State of South Carolina.
SECTION 9. The execution, delivery and performance by the Company of the Amendment and Restatement are within the Company's corporate powers, have been duly authorized by all necessary corporate action, and do not contravene (i) the Charter or the By-Laws or (ii) any law, rule or regulation applicable to the Company (including, without limitation, Regulation X of the Board of Governors of the Federal Reserve System) or (iii) any
contractual or legal restriction binding or affecting the Company. The Amendment and Restatement has been duly executed and delivered on behalf of the Company.
SECTION 10. No authorization, approval or other action by, and no notice to or filing with any governmental authority or regulatory body is required for the due execution and delivery by the Company of the Amendment and Restatement or the performance by the Company of the Amended and Restated Agreement, other than the NCUC Order and the SCPSC Order, each of which has been duly issued, is final and in full force and effect, and all periods for review or appeal thereof have expired, and no request for review or appeal has been filed and is pending.
SECTION 11. If in any action or proceeding arising out of or relating to the Amended and Restated Agreement or the Notes in any court of the State of North Carolina or in any federal court sitting in the State of North Carolina, such court were to hold that the Amended and Restated Agreement and the Notes are governed by, and to be construed in accordance with, the laws of the State of North Carolina, the Amended and Restated Agreement, the A Notes and, upon their completion, execution and delivery in accordance with the terms of the Amended and Restated Agreement, the B Notes would be, under the laws of the State of North Carolina, legal, valid and binding obligations of the Company enforceable against the Company in accordance with their respective terms.
SECTION 12. To the best of my knowledge, except as described in the reports and registration statements which the Company has filed with the Securities and Exchange Commission, there are no pending or overtly threatened actions or proceedings against the Company or any of the Subsidiaries before any court, governmental agency or arbitrator which purport to affect the legality, validity, binding effect or enforceability of the Amended and Restated Agreement or any of the Notes or which are likely to have a materially adverse effect upon the financial condition or operations of the Company or any of the Subsidiaries.
The opinions set forth above are subject to the following qualifications:
(a) The enforceability of the Company's obligations under the Amended and Restated Agreement and the Notes is subject to the effect of any applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar law affecting creditors' rights generally.
(b) The enforceability of the Company's obligations under the Amended and Restated Agreement and the Notes is subject to the effect of general principles of equity, including (without limitation) concepts of materiality, reasonableness, good faith and fair dealing (regardless of whether considered in a proceeding in equity or at law). Such principles of equity are of general application, and, in applying such principles, a court, among other things, might not allow a contracting party to exercise remedies in respect of a default deemed immaterial, or might decline to order an obligor to perform covenants.
(c) In addition to the application of equitable principles described above, courts have imposed an obligation on contracting parties to act reasonably and in good faith in the exercise of their contractual rights and remedies, and may also apply public policy considerations in limiting the right of parties seeking to obtain indemnification under circumstances where the conduct of such parties is determined to have constituted negligence.
(d) No opinion is expressed herein as to (i) Section 8.05 of the Amended and Restated Agreement, (ii) the enforceability of provisions purporting to grant to a party conclusive rights of determination, (iii) the availability of specific performance or other equitable remedies, (iv) the enforceability of rights to indemnity under federal or state securities laws or (v) the enforceability of waivers by parties of their respective rights and remedies under law.
The foregoing opinion is solely for your benefit and may not be relied upon by any other Person other than any other Person that may become a Lender under the Amended and Restated Agreement after the date hereof.
Very truly yours,
Exhibit 10b(4)
November 7, 2001
Citibank, N.A., as Administrative Agent
388 Greenwich Street, 21st Floor
New York, New York 10013
Attention: Mr. J. Nicholas McKee
Vice President
Dear Mr. McKee:
Pursuant to Section 2.05 of the $375,000,000 364-Day Revolving Credit Agreement, dated as of June 30, 1998, and as amended by the Amendment and Restatement, dated as of June 29, 1999 (collectively, the "Credit Agreement"), among Carolina Power & Light Company, a North Carolina corporation (the "Borrower"), certain Lenders named therein (the "Lenders") and Citibank, N. A., as administrative agent (the Administrative Agent") for the Lenders, Carolina Power & Light Company hereby gives notice to the Administrative Agent that it is exercising its right to request a reduction in the Commitments of the Lenders of $175,000,000.00, effective November 13, 2001 to be applied to reduce the Lenders' respective Commitments ratably.
Please acknowledge receipt by signing and returning the enclosed copy of this notice to my attention.
Sincerely,
Thomas R. Sullivan Treasurer
CITIBANK, N. A., as Administrative Agent
Enclosure
Exhibit 10b(5)
EXECUTION COPY
$500,000,000
(364-DAY FACILITY)
CREDIT AGREEMENT
Dated as of November 13, 2001
PROGRESS ENERGY, INC.
(Borrower)
and
THE BANKS LISTED ON THE SIGNATURE PAGES HEREOF
(Banks)
and
CITIBANK, N.A.
(Administrative Agent)
J.P. MORGAN SECURITIES INC. and SALOMON SMITH BARNEY INC.
(Joint Lead Arrangers)
JPMORGAN CHASE BANK
(Syndication Agent)
BANK OF AMERICA, N.A.,
THE BANK OF TOKYO-MITSUBISHI TRUST COMPANY,
and
BANK ONE, NA
(Co-Documentation Agents)
Section Page
------- -----
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms........................................................1
SECTION 1.02. Computation of Time Periods.................................................12
SECTION 1.03. Accounting Terms............................................................12
ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Advances...............................................................12
SECTION 2.02. Making the Advances.........................................................12
SECTION 2.03. Fees........................................................................14
SECTION 2.04. Reduction of the Commitments................................................14
SECTION 2.05. Repayment of Advances.......................................................15
SECTION 2.06. Interest on Advances........................................................16
SECTION 2.07. Additional Interest on Eurodollar Rate Advances.............................16
SECTION 2.08. Interest Rate Determination.................................................16
SECTION 2.09. Voluntary Conversion of Advances............................................18
SECTION 2.10. Prepayments of Advances.....................................................18
SECTION 2.11. Increased Costs.............................................................19
SECTION 2.12. Illegality..................................................................19
SECTION 2.13. Payments and Computations...................................................20
SECTION 2.14. Sharing of Payments, Etc....................................................21
SECTION 2.15. Extension of Commitment Termination Date...................................21
SECTION 2.16. Term Loan Conversion Option.................................................23
ARTICLE III CONDITIONS OF LENDING
SECTION 3.01. Conditions Precedent to Closing.............................................24
SECTION 3.02. Conditions Precedent to Each Borrowing and to the Exercise of the Term
Loan Conversion Option..................................................25
ARTICLE IV REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower..............................25
ARTICLE V COVENANTS OF THE COMPANY
SECTION 5.01. Affirmative Covenants.......................................................27
SECTION 5.02. Negative Covenants..........................................................30
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ARTICLE VI EVENTS OF DEFAULT
SECTION 6.01. Events of Default...........................................................31
ARTICLE VII THE AGENT
SECTION 7.01. Authorization and Action....................................................33
SECTION 7.02. The Agent's Reliance, Etc...................................................33
SECTION 7.03. The Administrative Agent and its Affiliates.................................34
SECTION 7.04. Lender Credit Decision......................................................34
SECTION 7.05. Indemnification.............................................................34
SECTION 7.06. Successor Administrative Agent..............................................34
ARTICLE VIII MISCELLANEOUS
SECTION 8.01. Amendments, Etc.............................................................35
SECTION 8.02. Notices, Etc................................................................36
SECTION 8.03. No Waiver; Remedies.........................................................36
SECTION 8.04. Costs, Expenses, Taxes and Indemnification..................................36
SECTION 8.05. Right of Set-off............................................................39
SECTION 8.06. Binding Effect..............................................................39
SECTION 8.07. Assignments and Participations..............................................39
SECTION 8.08. Governing Law...............................................................43
SECTION 8.09. WAIVER OF JURY TRIAL........................................................43
SECTION 8.10. Execution in Counterparts...................................................44
SECTION 8.11. Severability................................................................44
SECTION 8.12. Headings....................................................................44
SECTION 8.13. Entire Agreement............................................................44
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Schedule I - List of Commitments and Applicable Lending Offices Schedule II - Permitted Existing Indebtedness
A-1 Form of Notice of Borrowing
A-2 Form of Notice of Conversion
B Form of Assignment and Acceptance
C-1 Form of Opinion of General Counsel to the Borrower
C-2 Form of Opinion of Special Counsel for the Borrower
C-3 Form of Opinion of General Counsel to the Borrower upon Extension of the
Commitment Termination Date or Exercise of the Term Loan Conversion Option
C-4 Form of Opinion of Special Counsel for the Borrower upon Extension of the
Commitment Termination Date or Exercise of the Term Loan Conversion Option
D Form of Opinion of Counsel for the Administrative Agent and the Arrangers
E Form of Request for Extension of Commitment Termination Date
F Form of Term Loan Conversion Notice
G Form of Compliance Certificate
CREDIT AGREEMENT
Dated as of November 13, 2001
This CREDIT AGREEMENT (this "Agreement") is made by PROGRESS ENERGY, INC., a North Carolina corporation (the "Borrower"), the banks listed on the signature pages hereof (the "Banks") and CITIBANK, N.A. ("Citibank"), as administrative agent (the "Administrative Agent") for the Lenders (as hereinafter defined).
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms.
As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):
"Additional Lender" shall have the meaning assigned such term in Section 2.04(b).
"Administrative Agent" has the meaning specified in the introductory paragraph of this Agreement.
"Advance" means an advance by a Lender to the Borrower as part of a Borrowing and refers to a Base Rate Advance or a Eurodollar Rate Advance, each of which shall be a "Type" of Advance.
"Affiliate" means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by, or is under common control with such Person or is a director or officer of such Person.
"Applicable Lending Office" means, with respect to each Lender, (i) such Lender's Domestic Lending Office in the case of a Base Rate Advance, or (ii) such Lender's Eurodollar Lending Office, in the case of a Eurodollar Rate Advance.
"Applicable Margin" means for each Type of Advance at all times during which any Applicable Rating Level set forth below is in effect, the interest rate per annum set forth below next to such Applicable Rating Level :
-------------------------------------------------------
Applicable Margin Applicable Margin
Applicable for Eurodollar for Base Rate
Rating Level Rate Advances Advances
-------------------------------------------------------
1 0.295% 0%
-------------------------------------------------------
2 0.410% 0%
-------------------------------------------------------
3 0.650% 0%
-------------------------------------------------------
4 0.750% 0%
-------------------------------------------------------
5 0.950% 0%
-------------------------------------------------------
6 1.300% 0%
-------------------------------------------------------
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provided, that
(i) the Applicable Margins for Eurodollar Rate Advances set forth above for each Applicable Rating Level shall increase by 0.125% at any time following the exercise of the Term Loan Conversion Option,
(ii) the Applicable Margins for Eurodollar Rate Advances set forth above for each Applicable Rating Level shall increase at any time the aggregate principal amount of Advances outstanding is greater than 33% of the aggregate Commitments by 0.125% at Levels 1, 2, 3, 4 and 5 and by 0.250% at Level 6,
(iii) the Applicable Margins set forth above for each Applicable Rating Level shall increase upon the occurrence and during the continuance of any Event of Default by 2.0%, and
(iv) any change in the Applicable Margin resulting from a change in the Applicable Rating Level shall become effective upon the date of announcement of a change in the Moody's Rating or the S&P Rating that results in a change in the Applicable Rating Level.
"Applicable Rating Level" at any time shall be determined in accordance with the then-applicable S&P Rating and the then-applicable Moody's Rating as follows:
------------------------------------------------------ S&P Rating/Moody's Rating Applicable Rating Level ------------------------------------------------------ A or higher or A2 or higher 1 ------------------------------------------------------ A- or A3 2 ------------------------------------------------------ BBB+ or Baa1 3 ------------------------------------------------------ BBB or Baa2 4 ------------------------------------------------------ BBB- and Baa3 5 ------------------------------------------------------ lower than BBB- and Baa3 or unrated 6 ------------------------------------------------------ |
In the event that the S&P Rating and the Moody's Rating are not at the same Applicable Rating Level but differ by only one Applicable Rating Level, then the higher of the two ratings shall determine the Applicable Rating Level. In the event that the S&P Rating and the Moody's Rating differ by more than one Applicable Rating Level, then the Applicable Rating Level immediately below the higher of the two ratings shall be the Applicable Rating Level. The Applicable Rating Level shall be redetermined on the date of announcement of a change in the S&P Rating or the Moody's Rating.
"Assignment and Acceptance" means an assignment and acceptance entered into by a Lender and an Eligible Assignee, and accepted by the Administrative Agent, in substantially the form of Exhibit B hereto.
"Banks" has the meaning specified in the introductory paragraph of this Agreement.
"Base Rate" means, for any Interest Period or any other period, a fluctuating interest rate per annum as shall be in effect from time to time, which rate per annum shall at all times be equal to the higher from time to time of:
(i) the rate of interest announced publicly by Citibank in New York, New York, from time to time, as Citibank's base rate; and
(ii) 1/2 of one percent per annum above the Federal Funds Rate in effect from time to time.
"Base Rate Advance" means an Advance that bears interest as provided in
Section 2.06(a).
"Borrower" has the meaning specified in the introductory paragraph of this Agreement.
"Borrowing" means a borrowing consisting of simultaneous Advances of the same Type made by each of the Lenders pursuant to Section 2.01 or Converted pursuant to Section 2.08 or 2.09.
"Business Day" means a day of the year on which banks are not required or authorized to close at the principal office of any Lender and, if the applicable Business Day relates to any Eurodollar Rate Advances, on which dealings are carried on in the London interbank market.
"Change of Control" means the occurrence, after the date of this Agreement, of (i) any Person or "group" (within the meaning of Rule 13(d) or 14(d) of the Securities and Exchange Commission under the Exchange Act), directly or indirectly, acquiring beneficial ownership of or control over securities of the Borrower (or other securities convertible into such securities) representing 30% or more of the combined voting power of all securities of the Borrower entitled to vote in the election of directors.
"Citibank" has the meaning specified in the introductory paragraph of this Agreement.
"Commitment" has the meaning specified in Section 2.01.
"Commitment Increase" shall have the meaning assigned such term in Section 2.04(b).
"Commitment Increase Approvals" means any governmental approval, resolution of the Board of Directors of the Borrower or resolution of the Board of Directors of any Subsidiary not obtained by or on behalf of the Borrower or such Subsidiary, as applicable, and in full force and effect on the date hereof, which governmental approval or resolution is required to be obtained in order to authorize the Commitment Increase and the performance by the Borrower and the Subsidiaries of their respective obligations under this Agreement after giving effect to the Commitment Increase.
"Commitment Termination Date" means, with respect to a Lender, the earlier to occur of (i) the Extension Date, or as to any Lender that has extended its Commitment pursuant to Section 2.15, such later date that may be established pursuant to Section 2.15, and (ii) the date of termination in whole of the Commitments pursuant to Section 2.04 or 6.01.
"Consolidated" refers to the consolidation of the accounts of the Borrower and its subsidiaries in accordance with generally accepted accounting principles, including principles of consolidation, consistent with those applied in the preparation of the financial statements referred to in Section 4.01(e).
"Convert", "Conversion" and "Converted" each refers to a conversion of Advances of one Type into Advances of another Type, or the selection of a new, or the renewal of the same, Interest Period for Eurodollar Rate Advances, pursuant to Section 2.08(g) or 2.09.
"CP&L" means the Carolina Power & Light Company.
"Declining Lender" has the meaning assigned to that term in Section 2.15.
"Domestic Lending Office" means, with respect to any Lender, the office of such Lender specified as its "Domestic Lending Office" opposite its name on Schedule I hereto or in the Assignment and Acceptance pursuant to which it became a Lender, or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Administrative Agent.
"Eligible Assignee" means (i) any other Lender or any Affiliate of a Lender meeting the criteria set forth in clause (ii) hereof and (ii) (A) any other commercial bank organized under the laws of the United States, or any State thereof, and having a combined capital and surplus of at least $250,000,000 (as established in its most recent report of condition to its primary regulator), (B) a savings and loan association or savings bank organized under the laws of the United States, or any State thereof, and having a combined capital and surplus of at least $250,000,000 (as established in its most recent report of condition to its primary regulator), (C) a commercial bank organized under the laws of any other country that is a member of the OECD or has concluded special lending arrangements with the International Monetary Fund associated with its General Arrangements to Borrow of the Cayman Islands, or a political subdivision of any such country, and having a combined capital and surplus of at least $250,000,000 (as established in its most recent report of condition to its primary regulator); provided that such bank is acting through a branch or agency located in the United States or in the country in which it is organized or another country that is described in this clause (C), (D) the central bank of any country that is a member of the OECD, or (E) a finance company, insurance company or other financial institution or fund (whether a corporation, partnership or other entity) that is engaged in making, purchasing or otherwise investing in commercial loans in the ordinary course of its business, whose outstanding unsecured indebtedness is rated AA- or better by S&P or Aa3 or better by Moody's (or an equivalent rating by another nationally-recognized credit rating agency of similar standing if neither of such corporations is then in the business of rating unsecured indebtedness).
"Environmental Laws" means any federal, state or local laws, ordinances or codes, rules, orders, or regulations relating to pollution or protection of the environment, including, without limitation, laws relating to hazardous substances, laws relating to reclamation of land and waterways and laws relating to emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes into the environment (including, without limitation, ambient air, surface water, ground water, land surface or subsurface strata) or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollution, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder.
"Eurocurrency Liabilities" has the meaning assigned to that term in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time.
"Eurodollar Lending Office" means, with respect to each Lender, the office of such Lender specified as its "Eurodollar Lending Office" opposite its name on Schedule I hereto or in the Assignment and Acceptance pursuant to which it became a Lender (or, if no such office is specified, its Domestic Lending Office), or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Administrative Agent.
"Eurodollar Rate" means, for the Interest Period for each Eurodollar Rate Advance comprising part of the same Borrowing an interest rate per annum equal to the average (rounded upward to the nearest whole multiple of 1/8 of 1% per annum, if such average is not such a multiple) of the rates per annum at which deposits in U.S. dollars are offered by the principal
office of each of the Reference Banks in London, England to prime banks in the London Interbank market at 11:00 A.M. (London time) two Business Days before the first day of such Interest Period for a period equal to such Interest Period and in an amount substantially equal to the amount of such Eurodollar Rate Advance comprising part of such Borrowing to be outstanding during such Interest Period from such Reference Bank. The Eurodollar Rate for the Interest Period for each Eurodollar Rate Advance comprising part of the same Borrowing shall be determined by the Administrative Agent on the basis of the applicable rates furnished to and received by the Administrative Agent from the Reference Banks two Business Days before the first day of such Interest Period, subject, however, to the provisions of Section 2.08.
"Eurodollar Rate Advance" means an Advance that bears interest as provided in Section 2.06(b).
"Eurodollar Rate Reserve Percentage" of any Lender for the Interest Period for any Eurodollar Rate Advance means the reserve percentage applicable during such Interest Period (or if more than one such percentage shall be so applicable, the daily average of such percentages for those days in such Interest Period during which any such percentage shall be so applicable) under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for such Lender with respect to liabilities or assets consisting of or including Eurocurrency Liabilities having a term equal to such Interest Period.
"Events of Default" has the meaning assigned to that term in Section 6.01.
"Exchange Act" means the Securities Exchange Act of 1934, and the regulations promulgated thereunder, in each case as amended and in effect from time to time.
"Existing Credit Facilities" means, collectively, (i) the $3,750,000,000 364-Day Credit Agreement, dated as of November 15, 2000, as amended to the date hereof, among the Borrower, the lenders named therein, and Citibank, N.A., as agent for said lenders, (ii) the Fourth Amended and Restated Credit Agreement A, dated as of November 14, 2000, among Progress Capital, the Lenders identified therein and The Chase Manhattan Bank, as Agent, (iii) the Third Amended and Restated Credit Agreement B, dated as of November 17, 1998, as amended by a First Amendment, dated as of November 14, 2000, among Progress Capital, the Lenders identified therein and The Chase Manhattan Bank, as Agent, and (iv) the Credit Agreement C, dated as of July 13, 2000, as amended by a First Amendment, dated as of November 14, 2000, among Progress Capital, the Lenders identified therein and The Chase Manhattan Bank, as Agent.
"Extending Commitment Lender" has the meaning assigned to that term in
Section 2.15(b).
"Extension Date" means the 364th day following the date of this Agreement.
"Facility Fee Percentage" means, at all times during which any Applicable Rating Level set forth below is in effect, the rate per annum set forth below next to such Applicable Rating Level:
------------------------------
Applicable Facility Fee
Rating Level Percentage
------------------------------
1 0.080%
------------------------------
2 0.090%
------------------------------
3 0.100%
------------------------------
4 0.125%
------------------------------
5 0.175%
------------------------------
6 0.200%
------------------------------
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provided, that a change in the Facility Fee Percentage resulting from a change in the Applicable Rating Level shall become effective upon the date of announcement of a change in the Moody's Rating or the S&P Rating that results in a change in the Applicable Rating Level.
"Federal Funds Rate" means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.
"First Mortgage Bonds" means those bonds issued from time to time by CP&L pursuant to the Mortgage.
"Florida Power" means Florida Power Corporation.
"Florida Power Mortgage" means the Indenture, dated as of January 1, 1944, between Florida Power, Guaranty Trust Company of New York and the Florida National Bank of Jacksonville, as modified, amended or supplemented from time to time.
"Florida Power Mortgage Bonds" means those bonds issued from time to time by Florida Power pursuant to the Florida Power Mortgage.
"FPC" means Florida Progress Corporation.
"GenCo Financing" means up to $500,000,000 original principal amount of Indebtedness incurred by or created for the benefit of Progress GenCo Ventures, LLC, an indirect wholly owned Subsidiary of the Borrower, secured by liens and security interests on the property of Progress Ventures, Inc. and its Subsidiaries, including Progress GenCo Ventures, LLC, as to which neither the Borrower nor any Subsidiary of the Borrower that is not also a Subsidiary of Progress Ventures, Inc. shall be liable.
"Guaranty" of any Person means any obligation, contingent or otherwise, of such Person (i) to pay any Liability of any other Person or to otherwise protect, or having the practical effect of protecting, the holder of any such Liability against loss (whether such obligation arises by virtue of such Person being a partner of a partnership or participant in a joint venture or by agreement to pay, to keep well, to purchase assets, goods, securities or services or to take or pay, or otherwise) or (ii) incurred in connection with the issuance by a third Person of a Guaranty of any Liability of any other Person (whether such obligation arises by agreement to reimburse or indemnify such third Person or otherwise). The word "Guarantee" when used as a verb has the correlative meaning.
"Increasing Lender" shall have the meaning assigned such term in Section 2.04(b).
"Indebtedness" of any Person means (i) any obligation of such Person for
borrowed money, (ii) any obligation of such Person evidenced by a bond,
debenture, note or other similar instrument, (iii) any obligation of such Person
to pay the deferred purchase price of property or services, except a trade
account payable that arises in the ordinary course of business but only if and
so long as the same is payable on customary trade terms, (iv) any obligation of
such Person as lessee under a capital lease, (v) any Mandatorily Redeemable
Stock of such Person (the amount of such Mandatorily Redeemable Stock to be
determined for this purpose as the higher of the liquidation preference and the
amount payable upon redemption of such Mandatorily Redeemable Stock), (vi) any
obligation of such Person to purchase securities or other property that arises
out of or in connection with the sale of the same or substantially similar
securities or property, (vii) any non-contingent obligation of such Person to
reimburse any other Person in respect of amounts paid under a letter of credit
or other Guaranty issued by such other Person to the extent that such
reimbursement obligation remains outstanding after it becomes non-contingent,
(viii) any Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by) a
mortgage, lien, pledge, charge or other encumbrance on any asset of such Person,
(ix) any Liabilities in respect of unfunded vested benefits under plans covered
by Title IV of ERISA, (x) any Synthetic Lease Obligations of such Person and
(xi) any Indebtedness of others Guaranteed by such Person.
"Interest Period" means, for each Eurodollar Rate Advance comprising part of the same Borrowing, the period commencing on the date of such Advance or the date of the Conversion of any Advance into such an Advance and ending on the last day of the period selected by the Borrower pursuant to the provisions below and, thereafter, each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of the period selected by the Borrower pursuant to the provisions below. The duration of each such Interest Period shall be one, two, three or six months, as the Borrower may, in the Notice of Borrowing given by the Borrower to the Administrative Agent pursuant to Section 2.02, select; provided, however, that:
(i) the Borrower may not select any Interest Period that ends after the Commitment Termination Date;
(ii) Interest Periods commencing on the same date for Advances comprising the same Borrowing shall be of the same duration; and
(iii) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day; provided that if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the next preceding Business Day.
The Administrative Agent shall promptly advise each Lender by or telecopy transmission of each Interest Period so selected by the Borrower.
"Lenders" means the Lenders listed on the signature pages hereof and each Eligible Assignee that shall become a party hereto pursuant to Section 8.07.
"Liability" of any Person means any indebtedness, liability or obligation of or binding upon, such Person or any of its assets, of any kind, nature or description, direct or indirect, absolute or contingent, due or not due, contractual or tortious, liquidated or unliquidated, whether arising under contract, applicable law, or otherwise, whether now existing or hereafter arising.
"Majority Lenders" means at any time Lenders holding at least 66-2/3% of the aggregate principal amount of the Advances then outstanding, or, if no such principal amount is then outstanding, Lenders having at least 66-2/3% of the Commitments (provided that, for purposes hereof, neither the Borrower, nor any of its Affiliates, if a Lender, shall be included in (i) the Lenders holding such amount of the Advances or having such amount of the Commitments or (ii) determining the aggregate unpaid principal amount of the Advances or the total Commitments).
"Mandatorily Redeemable Stock" means, with respect to any Person, any share of such Person's capital stock to the extent that it is (i) redeemable, payable or required to be purchased or otherwise retired or extinguished, or convertible into any Indebtedness or other Liability of such Person, (A) at a fixed or determinable date, whether by operation of a sinking fund or otherwise, (B) at the option of any Person other than such Person or (C) upon the occurrence of a condition not solely within the control of such Person, such as a redemption required to be made out of future earnings or (ii) convertible into Mandatorily Redeemable Stock.
"Moody's" means Moody's Investors Service, Inc., or any successor thereto.
"Moody's Rating" means, on any date of determination, the debt rating most recently announced by Moody's with respect to the Borrower's long-term senior unsecured non-credit-enhanced debt.
"Mortgage" means the Mortgage and Deed of Trust, dated as of May 1, 1940, from CP&L to The Bank of New York (formerly Irving Trust Company) and to Frederick G. Herbst (W.T. Cunningham, successor), as modified, amended or supplemented from time to time.
"Multiemployer Plan" means a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA.
"Notice of Borrowing" has the meaning specified in Section 2.02(a).
"Notice of Conversion" has the meaning specified in Section 2.09.
"OECD" means the Organization for Economic Cooperation and Development.
"Person" means an individual, partnership, corporation (including a business trust), limited liability company, joint stock company, trust, unincorporated association, joint venture or other entity, or a foreign state or political subdivision thereof or any agency of such state or subdivision.
"Plan" means an employee benefit plan (other than a Multiemployer Plan) maintained for employees of the Borrower or any of its Affiliates and covered by Title IV of ERISA.
"Progress Capital" means Progress Capital Holdings, Inc.
"Portfolio Transaction" means the sale of Florida Progress's and CP&L's portfolio of affordable housing investments.
"Rail Transaction" means the sale of substantially all of the assets or capital stock of Progress Rail Services, Inc.
"Reference Banks" means Citibank and JPMorgan Chase Bank.
"Register" has the meaning specified in Section 8.07(c).
"Responsible Officer" means the President, any Vice President, the Chief Financial Officer, the Treasurer, the Controller or any Assistant Treasurer of the Borrower the signatures of whom, in each case, have been certified to the Administrative Agent and each other Lender pursuant to Section 3.01(d), or in a certificate delivered to the Administrative Agent replacing or amending such certificate. Each Lender may conclusively rely on each certificate so delivered until it shall have received a copy of a certificate from the Secretary or an Assistant Secretary of the Borrower amending, canceling or replacing such certificate.
"S&P" means Standard & Poor's Ratings Group or any successor thereto.
"S&P Rating" means, on any date of determination, the debt rating most recently announced by S&P with respect to the Borrower's long-term senior unsecured non-credit-enhanced debt.
"SEC Order" means Order Nos. 35-27440 and 70-9909 of the Securities and Exchange Commission issued September 20, 2001.
"Significant Subsidiary" means CP&L, FPC, Florida Power, Progress Capital and any other Subsidiary of the Borrower that at any time constitutes a "significant subsidiary", as such term is defined in Regulation S-X of the Securities and Exchange Commission as in effect on the date hereof (17 C.F.R.
Part 210).
"Subsidiary" means, with respect to any Person, any corporation or unincorporated entity of which more than 50% of the outstanding capital stock (or comparable interest) having
ordinary voting power (irrespective of whether at the time capital stock (or comparable interest) of any other class or classes of such corporation or entity shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned by said Person (whether directly or through one or more other Subsidiaries).
"Synthetic Lease" means a lease transaction under which the parties intend
that (i) the lease will be treated as an "operating lease" by the lessee
pursuant to Statement of Financial Accounting Standards No. 13, as amended, and
(ii) the lessee will be entitled to various tax and other benefits ordinarily
available to owners (as opposed to lessees) of like property.
"Synthetic Lease Obligations" means, with respect to any Person, the sum of
(i) all remaining rental obligations of such Person as lessee under Synthetic
Leases that are attributable to principal and, without duplication, (ii) all
rental and purchase price payment obligations of such Person under such
Synthetic Leases assuming such Person exercises the option to purchase the lease
property at the end of the lease term.
"Term Loan Conversion Notice" has the meaning assigned to that term in
Section 2.16.
"Term Loan Conversion Option" means the option of the Borrower to convert outstanding Advances into a term loan with a maturity of one year in accordance with Section 2.16.
"Termination Date" means, with respect to all Lenders, the Commitment Termination Date, unless the Term Loan Conversion Option has been effectively exercised in accordance with Section 2.16, in which case the Termination Date means the earliest to occur of (i) the date the Advances become due and payable in accordance with Section 2.16, (ii) the date of repayment in full of the Advances pursuant to Section 2.10(b), and (iii) the date of acceleration of the Borrower's payment obligations hereunder in accordance with Section 6.01.
"Termination Event" means (i) a Reportable Event described in Section 4043 of ERISA and the regulations issued thereunder (other than a Reportable Event not subject to the provision for 30-day notice to the Pension Benefit Guaranty Corporation under such regulations), or (ii) the withdrawal of the Borrower or any of its Affiliates from a Plan during a plan year in which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA, or (iii) the filing of a notice of intent to terminate a Plan or the treatment of a Plan amendment as a termination under Section 4041 of ERISA, or (iv) the institution of proceedings to terminate a Plan by the Pension Benefit Guaranty Corporation, or (v) any other event or condition that might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan.
"Total Capitalization" means the sum of the value of the common stock, retained earnings, and preferred and preference stock of the Borrower (in each case, determined in accordance with generally accepted accounting principles consistent with those applied in the preparation of the financial statements referred to in Section 4.01(e)), plus Consolidated Indebtedness of the Borrower.
SECTION 1.02. Computation of Time Periods.
In this Agreement in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each means "to but excluding".
SECTION 1.03. Accounting Terms.
All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles consistent with those applied in the preparation of the financial statements referred to in Section 4.01(e).
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Advances.
(a) Each Lender severally agrees, on the terms and conditions hereinafter
set forth, to make Advances to the Borrower from time to time on any Business
Day during the period from the date hereof to and including the Commitment
Termination Date, in an aggregate amount outstanding not to exceed at any time
the amount set forth opposite such Lender's name on Schedule I hereto or, if
such Lender has entered into any Assignment and Acceptance, set forth for such
Lender in the Register maintained by the Administrative Agent pursuant to
Section 8.07(c), as such amount may be reduced pursuant to Section 2.04(a) or
increased pursuant to Section 2.04(b) (such Lender's "Commitment"). Each
Borrowing shall be in an aggregate amount not less than $10,000,000 or an
integral multiple of $1,000,000 in excess thereof and shall consist of Advances
of the same Type made on the same day by the Lenders ratably according to their
respective Commitments. Until the Commitment Termination Date, within the limits
of each Lender's Commitment, the Borrower may from time to time borrow, repay
pursuant to Section 2.05 or prepay pursuant to Section 2.10(b) and reborrow
under this Section 2.01.
(b) Any Lender may request that any Advances made by it be evidenced by one or more promissory notes. In such event, the Borrower shall prepare, execute and deliver to such Lender one or more promissory notes payable to the order of such Lender (or, if requested by such Lender, to such Lender and its assignees) and in a form approved by the Administrative Agent.
SECTION 2.02. Making the Advances.
(a) Each Borrowing shall be made on notice, given not later than 10:00 A.M. (New York City time) on the day of such proposed Borrowing, in the case of a Borrowing comprised of Base Rate Advances, or on the third Business Day prior to the date of the proposed Borrowing, in the case of a Borrowing comprised of Eurodollar Rate Advances, by the Borrower to the Administrative Agent, which shall give to each Lender prompt notice thereof by telecopier. Each such notice of a Borrowing (a "Notice of Borrowing") shall be by telecopier, confirmed promptly in writing, in substantially the form of Exhibit A-1 hereto, specifying therein the
requested (i) date of such Borrowing, (ii) Type of Advances comprising such Borrowing, (iii) aggregate amount of such Borrowing, and (iv) in the case of a Borrowing comprised of Eurodollar Rate Advances, the Interest Period for each such Advance. In the case of a proposed Borrowing comprised of Eurodollar Rate Advances, the Administrative Agent shall promptly notify each Lender of the applicable interest rate under Section 2.06(b). Each Lender shall, before 12:00 P.M. (New York City time) on the date of such Borrowing, make available for the account of its Applicable Lending Office to the Administrative Agent at its address referred to in Section 8.02, in same day funds, such Lender's ratable portion of such Borrowing. After the Administrative Agent's receipt of such funds and upon fulfillment of the applicable conditions set forth in Article III, the Administrative Agent will make such funds available to the Borrower at the Administrative Agent's aforesaid address.
(b) Each Notice of Borrowing shall be irrevocable and binding on the Borrower and, in respect of any Borrowing comprised of Eurodollar Rate Advances, the Borrower shall indemnify each Lender against any loss or expense incurred by such Lender as a result of any failure by the Borrower to fulfill on or before the date specified for such Borrowing the applicable conditions set forth in Article III, including, without limitation, any loss (including loss of anticipated profits) or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the Advance to be made by such Lender as part of such Borrowing when such Advance, as a result of such failure, is not made on such date.
(c) Unless the Administrative Agent shall have received notice from a
Lender prior to the date of any Borrowing that such Lender will not make
available to the Administrative Agent such Lender's ratable portion of such
Borrowing, the Administrative Agent may assume that such Lender has made such
portion available to the Administrative Agent on the date of such Borrowing in
accordance with subsection (a) of this Section 2.02 and the Administrative Agent
may, in reliance upon such assumption, make available to the Borrower on such
date a corresponding amount. If and to the extent such Lender shall not have so
made such ratable portion available to the Administrative Agent, such Lender and
the Borrower severally agree to repay to the Administrative Agent (without
duplication), forthwith on demand, such corresponding amount, together with
interest thereon for each day from the date such amount is made available to the
Borrower until the date such amount is repaid to the Administrative Agent, at
(x) in the case of the Borrower, the interest rate applicable at the time to
Advances comprising such Borrowing and (y) in the case of such Lender, the
Federal Funds Rate. If such Lender shall repay to the Administrative Agent such
corresponding amount, such amount so repaid shall constitute such Lender's
Advance as part of such Borrowing for purposes of this Agreement.
(d) The failure of any Lender to make the Advance to be made by it as part of any Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its Advance on the date of such Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Advance to be made by such other Lender on the date of any Borrowing.
(e) If, for any reason, a Borrowing is not made on the date specified in any Notice of Borrowing, the Administrative Agent hereby agrees to repay to each Lender the amount, if any, that such Lender has made available to the Administrative Agent as such Lender's ratable portion
of such Borrowing, together with interest thereon for each day from the date such amount is made available to the Administrative Agent until the date such amount is repaid to such Lender, at the Federal Funds Rate.
SECTION 2.03. Fees.
(a) The Borrower agrees to pay to the Administrative Agent for the account of each Lender a facility fee on each Lender's Commitment, irrespective of usage, from the date hereof, in the case of each Bank, and from the effective date specified in the Assignment and Acceptance pursuant to which it became a Lender, in the case of each other Lender, until the Termination Date at the rate per annum equal to the Facility Fee Percentage from time to time in effect. Such fee shall be calculated on the basis of actual number of days elapsed in a year of 365 or 366 days. Such fee shall be payable quarterly in arrears on the last day of each March, June, September and December during the term of such Lender's Commitment, and on the Termination Date.
(b) The Borrower agrees to pay to the Administrative Agent an agency fee in such amounts and payable at such times, as shall be agreed to between them in writing.
SECTION 2.04. Reduction and Increase of the Commitments.
(a) The Borrower shall have the right, upon at least three Business Days' notice to the Administrative Agent, irrevocably to terminate in whole or reduce ratably in part the unused portions of the respective Commitments of the Lenders; provided that the aggregate amount of the Commitments of the Lenders shall not be reduced to an amount that is less than the aggregate principal amount of the Advances then outstanding; and provided, further, that each partial reduction of Commitments shall be in the aggregate amount of $10,000,000 or an integral multiple of $1,000,000 in excess thereof. Once terminated or reduced, the Commitments may not be reinstated.
(b) (i) At any time prior to the Termination Date, the Borrower may increase the aggregate amount of the Commitments by an amount not greater than $50,000,000 and to an amount not greater than $550,000,000 (any such increase, a "Commitment Increase") by designating either one or more of the existing Lenders (each of which, in its sole discretion, may determine whether and to what degree to offer to participate in such Commitment Increase) or one or more other banks or other financial institutions reasonably acceptable to the Administrative Agent that at the time agree, in the case of any such bank or financial institution that is an existing Lender to increase its Commitment (an "Increasing Lender") and, in the case of any other such bank or financial institution (an "Additional Lender"), to become a party to this Agreement. The sum of the increases in the Commitments of the Increasing Lenders pursuant to this subsection (b) plus the Commitments of the Additional Lenders upon giving effect to the Commitment Increase shall not in the aggregate exceed the amount of the Commitment Increase. The Borrower shall provide prompt notice of any proposed Commitment Increase pursuant to this Section 2.04(b) to the Administrative Agent, which shall promptly provide a copy of such notice to the Lenders.
(ii) Any Commitment Increase shall become effective upon (A) the receipt by the Administrative Agent of (1) an agreement in form and substance satisfactory to the
Administrative Agent signed by the Borrower, each Increasing Lender and each Additional Lender, setting forth the new Commitment of each such Lender and setting forth the agreement of each Additional Lender to become a party to this Agreement and to be bound by all the terms and provisions hereof binding upon each Lender, (2) certified copies of the Commitment Increase Approvals and such opinions of counsel for the Borrower with respect to the Commitment Increase as the Administrative Agent may reasonably request, and (3) a certificate (the statements contained in which shall be true) of a duly authorized officer of the Borrower stating that both before and after giving effect to such Commitment Increase (x) no Event of Default has occurred and is continuing, (y) all representations and warranties made by the Borrower in this Agreement are true and correct in all material respects, and (z) all Commitment Increase Approvals have been obtained and are in full force and effect, and (B) the funding by each Increasing Lender and Additional Lender of the Loan(s) to be made by each such Lender described in paragraph (iii) below.
(iii) Upon the effective date of any Commitment Increase, each
Increasing Lender and each Additional Lender shall provide funds to the
Administrative Agent in the manner described in Section 2.01 in an amount
equal to the product of (x) the aggregate principal amount of Advances
outstanding hereunder, expressed as a percentage of the Commitments
(calculated, in each case, immediately prior to such Commitment Increase)
and (y) the amount of such Lender's Commitment Increase. The funds so
provided by any Lender shall be deemed to be an Advance or Advances made by
such Lender on the date of such Commitment Increase, with such Advance(s)
being (A) in an amount equal to the product of (x) the aggregate
outstanding principal amount of each Advance expressed as a percentage of
the Commitments (calculated, in each case, immediately prior to such
Commitment Increase) and (y) the amount of such Lender's Commitment
Increase and (B) of the same Type(s) and having the same Interest Period(s)
as each Advance described in the preceding clause (A), such that after
giving effect to such Commitment Increase and the Advances(s) made on the
date of such Commitment Increase, each Advance outstanding hereunder shall
consist of Advances made by the Lenders ratably in accordance with their
pro rata shares of the Commitments.
(iv) Notwithstanding any provision contained herein to the contrary, from and after the date of any Commitment Increase and the making of any Advances on such date pursuant to paragraph (iii) above, all calculations and payments of interest on the Advance comprising any Advances shall take into account the actual Commitment of each Lender and the principal amount outstanding of each Advance made by such Lender during the relevant period of time.
SECTION 2.05. Repayment of Advances.
The Borrower shall repay the principal amount of each Advance made by each Lender on the Termination Date, subject to Section 2.16 hereof.
SECTION 2.06. Interest on Advances.
The Borrower shall pay interest on the unpaid principal amount of each Advance made by each Lender from the date of such Advance until such principal amount shall be paid in full, at the following rates per annum:
(a) Base Rate Advances. If such Advance is a Base Rate Advance, a rate per annum equal at all times to the Base Rate in effect from time to time, plus the Applicable Margin, payable quarterly in arrears on the last day of each March, June, September and December and on the date such Base Rate Advance shall be paid in full; provided, however, that if and for so long as an Event of Default has occurred and is continuing, interest on the unpaid principal amount of each Base Rate Advance shall be payable on demand.
(b) Eurodollar Rate Advances. If such Advance is a Eurodollar Rate Advance, a rate per annum equal at all times during each Interest Period for such Advance to the sum of the Eurodollar Rate for such Interest Period, plus the Applicable Margin for such Eurodollar Rate Advance in effect from time to time, payable on the last day of such Interest Period and, if such Interest Period for such Advance has a duration of more than three months, on each day that occurs during such Interest Period every three months from the first day of such Interest Period; provided, however, that if and for so long as an Event of Default has occurred and is continuing, interest on the unpaid amount of each Eurodollar Rate Advance shall be payable on demand.
SECTION 2.07. Additional Interest on Eurodollar Rate Advances.
The Borrower shall pay to each Lender additional interest on the unpaid principal amount of each Eurodollar Rate Advance of such Lender, from the date of such Advance until such principal amount is paid in full, at an interest rate per annum equal at all times to the remainder obtained by subtracting (i) the Eurodollar Rate for the Interest Period for such Advance from (ii) the rate obtained by dividing such Eurodollar Rate by a percentage equal to 100% minus the Eurodollar Rate Reserve Percentage of such Lender for such Interest Period, payable on each date on which interest is payable on such Advance. All claims for such additional interest shall be submitted by such Lender to the Borrower (with a copy to the Administrative Agent) as soon as is reasonably possible and in all events within 90 days after the first day of such Interest Period; provided, however, that if a claim is not submitted to the Borrower within such 90-day period, such Lender shall thereby waive its claim to such additional interest incurred during such 90-day period but not to any such additional interest incurred thereafter. A certificate as to the amount of such additional interest, submitted to the Borrower (with a copy to the Administrative Agent) by such Lender, shall be conclusive and binding for all purposes, absent manifest error.
SECTION 2.08. Interest Rate Determination.
(a) Each Reference Bank agrees to furnish to the Administrative Agent timely information for the purpose of determining the Eurodollar Rate. If any one or more of the Reference Banks shall not furnish such timely information to the Administrative Agent for determination of any such interest rate, the Administrative Agent shall determine such interest rate on the basis of timely information furnished by the remaining Reference Banks.
(b) The Administrative Agent shall give prompt notice to the Borrower and the Lenders of the applicable interest rate determined by the Administrative Agent for purposes of Section 2.06(a) or (b), and the applicable rate, if any, furnished by each Reference Bank for determining the applicable interest rate under Section 2.06(b).
(c) If fewer than two Reference Banks furnish timely information to the Administrative Agent for determining the Eurodollar Rate for any Eurodollar Rate Advances,
(i) the Administrative Agent shall forthwith notify the Borrower and the Lenders that the interest rate cannot be determined for such Eurodollar Rate Advances,
(ii) each such Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance (or if such Advance is then a Base Rate Advance, will continue as a Base Rate Advance), and
(iii) the obligation of the Lenders to make, or to Convert Advances into, Eurodollar Rate Advances shall be suspended until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist.
(d) If, with respect to any Eurodollar Rate Advances, the Majority Lenders notify the Administrative Agent that the Eurodollar Rate for any Interest Period for such Advances will not adequately reflect the cost to such Majority Lenders of making, funding or maintaining their respective Eurodollar Rate Advances for such Interest Period, the Administrative Agent shall forthwith so notify the Borrower and the Lenders, whereupon
(i) each Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance, and
(ii) the obligation of the Lenders to make, or to Convert Advances into, Eurodollar Rate Advances shall be suspended until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist.
(e) If the Borrower shall fail to select the duration of any Interest Period for any Eurodollar Rate Advances in accordance with the provisions contained in the definition of "Interest Period" in Section 1.01, the Administrative Agent will forthwith so notify the Borrower and the Lenders and such Advances will automatically, on the last day of the then existing Interest Period therefor, Convert into Base Rate Advances.
(f) On the date on which the aggregate unpaid principal amount of Advances comprising any Borrowing shall be reduced, by prepayment or otherwise, to less than $20,000,000, such Advances shall, if they are Advances of a Type other than Base Rate Advances, automatically Convert into Base Rate Advances, and on and after such date the right of the Borrower to Convert such Advances into Advances of a Type other than Base Rate Advances shall terminate; provided, however, that if and so long as each such Advance shall be of the same Type and have the same Interest Period as Advances comprising another Borrowing or other Borrowings, and the aggregate unpaid principal amount of all such Advances shall equal
or exceed $20,000,000, the Borrower shall have the right to continue all such Advances as, or to Convert all such Advances into, Advances of such Type having such Interest Period.
(g) If an Event of Default has occurred and is continuing, (i) each Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance and (ii) the obligation of the Lenders to make, or to Convert Advances into, Eurodollar Rate Advances shall be suspended.
SECTION 2.09. Voluntary Conversion of Advances.
The Borrower may, on any Business Day prior to the Termination Date (including any date occurring on and after the effectiveness of the Term Loan Conversion Option), upon notice given to the Administrative Agent not later than 10:00 A.M. (New York City time) on the third Business Day prior to the date of the proposed Conversion, in the case of any proposed Conversion into Eurodollar Rate Advances, and on the date of the proposed Conversion, in the case of any proposed Conversion into Base Rate Advances, and subject to the provisions of Sections 2.08 and 2.12, Convert all Advances of one Type comprising the same Borrowing into Advances of another Type; provided, however, that any Conversion of any Eurodollar Rate Advances into Advances of another Type shall be made on, and only on, the last day of an Interest Period for such Eurodollar Rate Advances, except as otherwise provided in Section 2.12. Each such notice of a Conversion (a "Notice of Conversion") shall be by telecopier, confirmed promptly in writing, in substantially the form of Exhibit A-2 hereto and shall, within the restrictions specified above, specify (i) the date of such Conversion, (ii) the aggregate amount of, Type of, and Interest Periods applicable to the Advances to be Converted, (iii) the Type of Advance to which such Advances (or portions thereof) are proposed to be Converted, and (iv) if such Conversion is into or with respect to Eurodollar Rate Advances, the duration of the Interest Period for each such Advance.
SECTION 2.10. Prepayments of Advances.
(a) The Borrower shall have no right to prepay any principal amount of any Advances other than as provided in subsection (b) below.
(b) The Borrower may, upon notice given to the Administrative Agent at
least two Business Days prior to the proposed prepayment, in the case of any
Eurodollar Rate Advance, and on the date of the proposed prepayment, in the case
of any Base Rate Advance, and if such notice is given the Borrower shall, prepay
the outstanding principal amounts of the Advances comprising the same Borrowing
in whole or ratably in part, together with accrued interest to the date of such
prepayment on the amount prepaid and, in the case of any Eurodollar Rate
Advance, any amount payable pursuant to Section 8.04(b); provided, however, that
(i) each partial prepayment shall be in an aggregate principal amount not less
than $5,000,000 and in integral multiples of $1,000,000 in excess thereof and
(ii) in the case of any such prepayment of a Eurodollar Rate Advance, the
Borrower shall be obligated to reimburse the Lenders in respect thereof pursuant
to Section 8.04(b) on the date of such prepayment.
SECTION 2.11. Increased Costs.
(a) If, due to either (i) the introduction of or any change (other than any change by way of imposition or increase of reserve requirements, in the case of Eurodollar Rate Advances, included in the Eurodollar Rate Reserve Percentage), in or in the interpretation of any law or regulation, or (ii) the compliance with any guideline or request from any central bank or other governmental authority (whether or not having the force of law), there shall be any increase in the cost to any Lender of agreeing to make or making, funding or maintaining Eurodollar Rate Advances, then the Borrower shall from time to time, upon demand by such Lender (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for account of such Lender additional amounts sufficient to reimburse such Lender for such increased cost. All claims for increased cost shall be submitted by such Lender to the Borrower (with a copy to the Administrative Agent) as soon as is reasonably possible and in all events within 90 days after such introduction, such change, or the beginning of such compliance, the occurrence of which resulted in such increased cost, and the Borrower shall make such payment within five Business Days after notice of such claim is received; provided, however, that if a claim is not submitted to the Borrower within such 90-day period, such Lender shall thereby waive its claim to such increased cost incurred during such 90-day period but not to any such increased cost incurred thereafter. A certificate as to the amount of such increased cost, submitted to the Borrower (with a copy to the Administrative Agent) by such Lender, shall be conclusive and binding for all purposes, absent manifest error.
(b) If any Lender determines that compliance with any law or regulation or any guideline or request from any central bank or other governmental authority (whether or not having the force of law) affects or would affect the amount of capital required or expected to be maintained by such Lender or any corporation controlling such Lender and that the amount of such capital is increased by or based upon the existence of such Lender's commitment to lend hereunder and other commitments of this type, then, upon demand by such Lender (with a copy of such demand to the Administrative Agent), the Borrower shall immediately pay to the Administrative Agent for the account of such Lender, from time to time as specified by such Lender, additional amounts sufficient to compensate such Lender or such corporation in the light of such circumstances, to the extent that such Lender reasonably determines such increase in capital to be allocable to the existence of such Lender's commitment to lend hereunder. All claims for such additional amounts shall be submitted by such Lender (with a copy to the Administrative Agent) as soon as is reasonably possible and in all events within 90 days after such determination by such Lender, and the Borrower shall make such payment within five Business Days after notice of such claim is received; provided, however, that if a claim is not submitted to the Borrower within such 90-day period, such Lender shall thereby waive its claim to such additional amounts incurred during such 90-day period but not to any such additional amounts incurred thereafter. A certificate as to such amounts submitted to the Borrower and the Administrative Agent by such Lender shall be conclusive and binding for all purposes, absent manifest error.
SECTION 2.12. Illegality.
Notwithstanding any other provision of this Agreement, if any Lender shall notify the Administrative Agent that the introduction of or any change in or in the interpretation of any law
or regulation makes it unlawful, or any central bank or other governmental
authority asserts that it is unlawful, for such Lender or its Eurodollar Lending
Office to perform its obligations hereunder to make Eurodollar Rate Advances or
to fund or maintain Eurodollar Rate Advances hereunder, (i) the obligation of
the Lenders to make Eurodollar Rate Advances or to Convert Advances into
Eurodollar Rate Advances shall be suspended until the Administrative Agent shall
notify the Borrower and the Lenders that the circumstances causing such
suspension no longer exist, and (ii) the Borrower shall forthwith prepay in full
all Eurodollar Rate Advances of all Lenders then outstanding, together with
interest accrued thereon, unless the Borrower, within five Business Days of
notice from the Administrative Agent, Converts all Eurodollar Rate Advances of
all Lenders then outstanding into Advances of another Type in accordance with
Section 2.09.
SECTION 2.13. Payments and Computations.
(a) The Borrower shall make each payment hereunder, without condition or deduction for any counterclaim, defense, recoupment or setoff, not later than 11:00 A.M. (New York City time) on the day when due in U.S. dollars to the Administrative Agent at its address referred to in Section 8.02 in same day funds. The Administrative Agent will promptly thereafter cause to be distributed like funds relating to the payment of principal or interest or fees (other than pursuant to Section 2.02(c), 2.07 or 2.11) ratably to the Lenders for the account of their respective Applicable Lending Offices, and like funds relating to the payment of any other amount payable to any Lender to such Lender for the account of its Applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement. Upon its acceptance of an Assignment and Acceptance and recording of the information contained therein in the Register pursuant to Section 8.07(d), from and after the effective date specified in such Assignment and Acceptance, the Administrative Agent shall make all payments hereunder in respect of the interest assigned thereby to the Lender assignee thereunder, and the parties to such Assignment and Acceptance shall make all appropriate adjustments in such payments for periods prior to such effective date directly between themselves.
(b) All computations of interest based on the base rate referred to in clause (i) of the definition of Base Rate shall be made by the Administrative Agent on the basis of a year of 365 or 366 days, as the case may be, and all computations of interest based on the Eurodollar Rate or Federal Funds Rate or of fees payable hereunder shall be made by the Administrative Agent, and all computations of interest pursuant to Section 2.07 shall be made by a Lender, on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period of which such interest or fees are payable. Each determination by the Administrative Agent (or, in the case of Section 2.07, by a Lender) of an interest rate hereunder shall be conclusive and binding for all purposes.
(c) Whenever any payment hereunder shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or fees, as the case may be; provided, however, that if such extension would cause payment of interest on or principal of Eurodollar Rate Advances to be made in the next following calendar month, such payment shall be made on the next preceding Business Day.
(d) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Lenders hereunder that the Borrower will not make such payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent the Borrower shall not have so made such payment in full to the Administrative Agent, each Lender shall repay to the Administrative Agent forthwith on demand such amount distributed to such Lender, together with interest thereon for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Administrative Agent at the Federal Funds Rate.
SECTION 2.14. Sharing of Payments, Etc.
If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of the Advances made by it (other than pursuant to Section 2.02(c), 2.07 or 2.11) in excess of its ratable share of payments on account of the Advances obtained by all the Lenders, such Lender shall forthwith purchase from the other Lenders such participation in the Advances made by them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender shall be rescinded and such Lender shall repay to the purchasing Lender the purchase price to the extent of such recovery, together with an amount equal to such Lender's ratable share (according to the proportion of (i) the amount of such Lender's required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section 2.14 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation.
SECTION 2.15. Extension of Commitment Termination Date.
(a) So long as no Event of Default shall have occurred and be continuing and the Commitment Termination Date shall not have occurred, then at least 30 days but not more than 45 days prior to the Extension Date, the Borrower may request that the Lenders, by written notice to the Administrative Agent (in substantially the form attached hereto as Exhibit E), consent to a 364-day extension of the Commitment Termination Date. Each Lender shall, in its sole discretion, determine whether to consent to such request and shall notify the Administrative Agent of its determination at least 20 days but not more than 30 days prior to such Extension Date. The failure to respond by any Lender within such time period shall be deemed a denial of such request. The Administrative Agent shall deliver a notice to the Borrower and the Lenders at least 15 days but not more than 20 days prior to the Extension Date of the identity of the Lenders that have consented to such extension and the Lenders that have declined such consent (the "Declining Lenders"). If Lenders holding in the aggregate 50% or less of the Commitments have consented to the requested extension, the Commitment Termination Date shall not be
extended, and the Commitments of all Lenders shall terminate on the then current Commitment Termination Date.
(b) If Lenders holding in the aggregate more than 50% but less than 85% of the Commitments have consented to the requested extension, subject to the conditions set forth in Section 2.15(c), the Borrower will within 5 Business Days after notice from the Administrative Agent of the Lenders' determinations irrevocably notify the Administrative Agent in writing whether it still requests an extension of the Commitment Termination Date. If the Borrower still requests such extension or if Lenders holding in the aggregate 85% or more of the Commitments have consented to the requested extension, subject to the conditions set forth in Section 2.15(c), the Commitment Termination Date shall be extended as to such consenting Lenders only (and not as to any Declining Lender) for a period of 364 days from the then current Commitment Termination Date, the Commitments of any Declining Lenders shall terminate on the Commitment Termination Date (as theretofore in effect), and all Advances of such Declining Lenders shall be repaid to them on such date. If the Borrower so requests, each Lender consenting to such request shall be given the opportunity at least seven days but not more than 15 days prior to such Extension Date, in each Lender's sole discretion, to commit to increase its Commitment by submission of a written notice setting forth the desired increase in such Lender's Commitment to the Administrative Agent in amounts such that the aggregate Commitments hereunder after giving effect to any such extension and increase in the Commitments shall not exceed the aggregate Commitments immediately prior to the Extension Date. If the Administrative Agent receives commitments to increase the Commitments from the Lenders, that, when aggregated with the existing Commitments, (i) are less than or equal to the Commitments immediately prior to the Extension Date, the Administrative Agent shall accept all such Commitments, (ii) are greater than the Commitments on the date hereof, the Administrative Agent may determine, in its reasonable discretion, which Commitments to accept and the amounts by which each submitting Lender's Commitments shall be increased so that the aggregate Commitments after the Extension Date shall equal the aggregate Commitments immediately prior to the Extension Date (any Lender whose commitment to increase its Commitment hereunder is accepted by the Administrative Agent, an "Extending Commitment Lender"). If Lenders do not consent to increase the aggregate Commitments to an amount equal to the Commitments immediately prior to the Extension Date, the Borrower may, at least two days but not more than seven days prior to the Extension Date, request that the Administrative Agent, in its sole discretion, accept the Commitment or Commitments of an Eligible Assignee or Eligible Assignees such that the aggregate Commitments hereunder after the Extension Date shall not be greater than the aggregate Commitments hereunder immediately prior to the Extension Date. If the Administrative Agent shall accept the Commitment of any Extending Commitment Lender or Eligible Assignee, the Commitments of the Declining Lenders shall terminate on the Extension Date, and any Advances made by such Declining Lenders shall be repaid on such date in accordance with this Agreement.
(c) Each such accepted Eligible Assignee and each Extending Commitment Lender shall deliver a signature page hereto indicating that it is bound by the terms hereof and setting forth its aggregate Commitment hereunder. Such new signature page shall constitute a part hereof upon acceptance by the Administrative Agent and, in the case of any signature page submitted by any Extending Commitment Lender, shall replace such Extending Commitment Lender's signature page. Any such extension shall become effective upon the Extension Date, if
the Borrower shall have delivered to the Administrative Agent and each Lender, on or prior to the Extension Date, (i) opinions of counsel to the Borrower substantially in the forms of Exhibits C-3 and C-4 attached hereto upon which each Lender and the Administrative Agent may rely, together with any governmental order referred to therein attached thereto and (ii) a certificate of a duly authorized officer of the Borrower (the statements contained in which shall be true) to the effect that (x) the representations and warranties contained in Section 4.01 are correct on and as of the Extension Date before and after giving effect to the extension of the Commitment Termination Date, as though made on and as of the Extension Date, and (y) no event has occurred and is continuing, or would result from such extension of the Commitment Termination Date, that constitutes an Event of Default or that would constitute an Event of Default but for the requirement that notice be given or time elapse, or both. Upon satisfaction of such conditions and the effectiveness of such extension, each new Lender and Extending Commitment Lender shall make Advances to the Borrower (A) in the case of each new Lender, equal to such Lender's ratable portion of the Advances outstanding immediately prior to the Extension Date and (B) in the case of each Extending Commitment Lender, equal to such portion of such Lender's ratable portion of the Advances (assuming that such Lender's Commitment consists only of the increased portion thereof) outstanding immediately prior to the Extension Date, in each case, without giving effect to any repayment of Advances to Declining Lenders made on the Extension Date.
SECTION 2.16. Term Loan Conversion Option.
At least one Business Day but not more than 45 Business Days prior to any Commitment Termination Date, and subject to the delivery on or prior to such Commitment Termination Date of an opinion of counsel to the Borrower substantially in the form of Exhibit C-3 attached hereto, together with any required governmental approvals referred to therein and attached thereto, to the Administrative Agent and each of the Lenders, by submission of a written notice (substantially in the form of Exhibit F, the "Term Loan Conversion Notice") to the Administrative Agent, the Borrower may request that the Lenders convert all Advances outstanding hereunder on such Commitment Termination Date into term loans. Upon satisfaction of such conditions and delivery of such Term Loan Conversion Notice), all Advances outstanding on the then current Commitment Termination Date shall convert into term loans on such Commitment Termination Date, and all such converted Advances shall become due and payable on the first anniversary of such Commitment Termination Date. Notwithstanding the foregoing, any Term Loan Conversion Notice may be delivered by the Borrower in conjunction with (and simultaneously with) any request for extension of the Commitment Termination Date pursuant to Section 2.15, above. If such extension of the Commitment Termination Date shall occur as provided in Section 2.15, such Term Loan Conversion Notice shall be deemed withdrawn and shall be of no further effect.
ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01. Conditions Precedent to Closing.
The Commitments of the Lenders shall not become effective unless and until all fees due and payable by the Borrower in connection with this Agreement have been paid and the Administrative Agent shall have received the following:
(a) Promissory notes, in a form acceptable to the Administrative Agent, payable to the order of each Lender that has requested such a note.
(b) Copies of the resolutions of the Board of Directors of the Borrower approving this Agreement and all documents evidencing other necessary corporate action, certified by the Secretary or an Assistant Secretary of the Borrower to be true and correct, and in full force and effect on and as of the date hereof.
(c) A certificate of the Secretary or an Assistant Secretary of the Borrower, dated as of the date hereof, certifying the names and true signatures of the officers of the Borrower authorized to sign this Agreement and the other documents to be delivered hereunder.
(d) A certificate of a Responsible Officer of the Borrower, dated as of the date hereof, certifying (i) the accuracy of the representations and warranties contained herein and (ii) that no event has occurred and is continuing that constitutes an Event of Default or that would constitute an Event of Default but for the requirement that notice be given or time elapse, or both.
(e) Certified copies of all governmental approvals and authorizations required to be obtained in connection with the execution, delivery and performance by the Borrower of this Agreement.
(f) Certified copies of the Restated Charter and By-Laws of the Borrower.
(g) Favorable opinions of William D. Johnson, General Counsel of the Borrower, and of Hunton & Williams, counsel for the Borrower, substantially in the forms of Exhibit C-1 and C-2, respectively, hereto and as to such other matters as any Lender through the Administrative Agent may reasonably request.
(h) A favorable opinion of King & Spalding, counsel for the Administrative Agent, substantially in the form of Exhibit D hereto.
(i) Evidence that all outstanding obligations of the Borrower under the Existing Credit Facilities have been paid in full and that the commitments of the lenders under such Existing Credit Facilities have been terminated.
SECTION 3.02. Conditions Precedent to Each Borrowing and to the Exercise of the Term Loan Conversion Option.
The obligation of each Lender to make an Advance on the occasion of each Borrowing (including the initial Borrowing) and to convert the Advances into term loans in accordance with Section 2.16 shall be subject to the further conditions precedent that (a) in the case of the making of an Advance, the Administrative Agent shall have received the written confirmatory Notice of Borrowing with respect thereto, (b) on the date of such Borrowing or exercise of the Term Loan Conversion Option, as the case may be, the following statements shall be true (and each of the giving of the Notice of Borrowing or Term Loan Conversion Notice, as the case may be, and the acceptance by the Borrower of the proceeds of such Borrowing, in the case of a Borrowing, or the conversion of the Advances into term loans, in the case of the exercise of the Term Loan Conversion Option, shall constitute a representation and warranty by the Borrower that, on the date of such Borrowing, exercise or request, as the case may be, such statements are true):
(i) The representations and warranties contained in Section 4.01 are correct on and as of the date of such Borrowing or the date of effectiveness of the Term Loan Conversion Option, as the case may be, before and after giving effect to (x) such Borrowing and to the application of the proceeds therefrom, or (y) such effectiveness, as the case may be, as though made on and as of such date; and
(ii) No event has occurred and is continuing, or would result from such Borrowing or from the application of the proceeds therefrom, or the exercise of such Term Loan Conversion Option, as the case may be, that constitutes an Event of Default or that would constitute an Event of Default but for the requirement that notice be given or time elapse, or both;
and (c) the Administrative Agent shall have received such other approvals, opinions and documents as any Lender through the Administrative Agent may reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower.
The Borrower represents and warrants as follows:
(a) Each of the Borrower and each Significant Subsidiary is a corporation duly incorporated, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated and is duly qualified to do business in and is in good standing under the laws of each other jurisdiction where the nature of its business or the nature of property owned or used by it makes such qualification necessary (except where failure to so qualify would not have a material adverse affect on the financial condition, operations or properties of the Borrower and its Subsidiaries, taken as a whole).
(b) The execution, delivery and performance by the Borrower of this Agreement are within the Borrower's corporate powers, have been duly authorized by all necessary corporate
action, and do not contravene (i) the Borrower's charter or by-laws or (ii) any law or contractual restriction binding on or affecting the Borrower or its properties.
(c) No authorization or approval or other action by, and no notice to or filing with any governmental authority or regulatory body is required for the due execution, delivery and performance by the Borrower of this Agreement, other than, the SEC Order, which has been duly issued and in full force and effect.
(d) This Agreement has been duly executed and delivered by the Borrower and is, and any promissory note when delivered pursuant to Section 2.01(b) will be, the legal, valid and binding obligations of the Borrower enforceable against the Borrower in accordance with their respective terms.
(e) The Consolidated balance sheets of the Borrower and its Subsidiaries as at December 31, 2000, and the related Consolidated statements of income and retained earnings of the Borrower and its Subsidiaries for the fiscal year then ended, and the Consolidated balance sheets of the Borrower and its Subsidiaries as at June 30, 2001, and the related Consolidated statements of income and retained earnings of the Borrower and its Subsidiaries, copies of each of which have been furnished to each Lender, fairly present (subject, in the case of such financial statements dated June 30, 2001, to year end adjustments) the financial condition of the Borrower and its Subsidiaries as at such dates and the results of the operations of the Borrower and its Subsidiaries for the periods ended on such dates, all in accordance with generally accepted accounting principles consistently applied. Since December 31, 2000, there has been no material adverse change in the financial condition, operations or properties of the Borrower and its Subsidiaries, taken as a whole.
(f) Except as described in the reports and registration statements that the Borrower, CP&L, FPC and Florida Power have filed with the Securities and Exchange Commission prior to the date of this Agreement, there is no pending or threatened action or proceeding affecting the Borrower or any Subsidiary before any court, governmental agency or arbitrator, that may materially adversely affect the financial condition, operations or properties of the Borrower and its Subsidiaries, taken as a whole.
(g) No proceeds of any Advance will be used to acquire any security in any transaction that is subject to Sections 13 and 14 of the Exchange Act.
(h) The Borrower is not engaged in the business of extending credit for the purpose of buying or carrying margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System), and no proceeds of any Advance will be used to buy or carry any margin stock or to extend credit to others for the purpose of buying or carrying any margin stock.
(i) Following application of the proceeds of each Advance, not more than 5% of the value of the assets (either of the Borrower only or of the Borrower and the Subsidiaries on a Consolidated basis) subject to the provisions of Section 5.02(a) or 5.02(e) will be margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System).
(j) No Termination Event has occurred or is reasonably expected to occur with respect to any Plan.
(k) The Borrower is not an "investment company" or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended.
(l) The Borrower is in substantial compliance with all applicable laws, rules, regulations and orders of any governmental authority, the noncompliance with which would materially and adversely affect the business or condition of the Borrower, such compliance to include, without limitation, substantial compliance with ERISA, Environmental Laws and paying before the same become delinquent all material taxes, assessments and governmental charges imposed upon it or upon its property, except to the extent compliance with any of the foregoing is then being contested in good faith by appropriate legal proceedings.
(m) All written information furnished by the Borrower to the Administrative Agent and the Lenders in connection with this Agreement (the "Disclosed Information") was (and all information furnished in the future by the Borrower to the Administrative Agent and the Lenders will be) complete and correct in all respects material to the creditworthiness of the Borrower when delivered. As of the date hereof, the Disclosed Information does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein not misleading in light of the circumstances under which made.
ARTICLE V
COVENANTS OF THE COMPANY
SECTION 5.01. Affirmative Covenants.
So long as any Advance or any other amount payable by the Borrower hereunder shall remain unpaid or any Lender shall have any Commitment hereunder, the Borrower shall, unless the Majority Lenders shall otherwise consent in writing:
(a) Compliance with Laws, Etc. Except to the extent contested in good faith, comply, and cause each Subsidiary to comply, with all applicable laws, rules, regulations and orders (such compliance to include, without limitation, paying before the same become delinquent all taxes, assessments and governmental charges imposed upon it or upon its property), the non-compliance with which would materially adversely affect the Borrower's business or credit.
(b) Preservation of Corporate Existence, Etc. Except as provided in Section
5.02 (d), preserve and maintain, and cause each Significant Subsidiary to
preserve and maintain, its corporate existence, rights (charter and statutory)
and franchises.
(c) Visitation Rights. At any reasonable time and from time to time, permit the Administrative Agent or any of the Lenders or any agents or representatives thereof to examine and make copies of and abstracts from the records and books of account of, and visit the properties of, the Borrower and any Subsidiary, and to discuss the affairs, finances and accounts of the Borrower and any Subsidiary with any of their respective officers or directors.
(d) Keeping of Books. Keep, and cause each Subsidiary to keep, proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of the Borrower and such Subsidiary in accordance with generally accepted accounting principles consistently applied.
(e) Maintenance of Properties, Etc. Maintain and preserve, and cause each Subsidiary to maintain and preserve, all of its properties that are used or useful in the conduct of its business in good working order and condition, ordinary wear and tear excepted.
(f) Maintenance of Insurance. Maintain, and cause each Subsidiary to maintain, insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which the Borrower or such Subsidiary operates.
(g) Taxes. File, and cause each Subsidiary to file, all tax returns (federal, state and local) required to be filed and paid and pay all taxes shown thereon to be due, including interest and penalties except, in the case of taxes, to the extent the Borrower or such Subsidiary is contesting the same in good faith and by appropriate proceedings and has set aside adequate reserves for the payment thereof in accordance with generally accepted accounting principles.
(h) Material Obligations. Pay, and cause each Subsidiary to pay, promptly as the same shall become due each material obligation of the Borrower or such Subsidiary.
(i) Reporting Requirements. Furnish to the Lenders:
(i) as soon as available and in any event within 60 days after the end of each of the first three quarters of each fiscal year of the Borrower, a Consolidated balance sheet of the Borrower and the Subsidiaries as at the end of such quarter and Consolidated statements of income and retained earnings of the Borrower and the Subsidiaries for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, certified by the treasurer or the chief financial officer of the Borrower, together with a certificate of the treasurer or chief financial officer of the Borrower, setting forth in reasonable detail the calculation of the Borrower's compliance with Section 5.01(j) and stating that no Event of Default and no event that, with the giving of notice or lapse of time or both, would constitute an Event of Default has occurred and is continuing, or if an Event of Default or such event has occurred and is continuing, a statement setting forth details of such Event of Default or event and the action that the Borrower has taken and proposes to take with respect thereto;
(ii) as soon as available and in any event within 120 days after the end of each fiscal year of the Borrower, a copy of the annual report for such year for the Borrower and the Subsidiaries, containing Consolidated financial statements for such year certified by Deloitte & Touche or other independent public accountants acceptable to the Majority Lenders, together with a certificate of the treasurer or chief financial officer of the Borrower, substantially in the form of Exhibit G hereto, setting forth in reasonable detail the calculation of the Borrower's compliance with Section 5.01(j) and stating that no
Event of Default and no event that, with the giving of notice or lapse of time or both, would constitute an Event of Default has occurred and is continuing, or if an Event of Default or such event has occurred and is continuing, a statement setting forth details of such Event of Default or event and the action that the Borrower has taken and proposes to take with respect thereto;
(iii) promptly after the sending or filing thereof, copies of all reports that the Borrower sends to any of its security holders, and copies of all reports and registration statements that the Borrower or any Subsidiary files with the Securities and Exchange Commission or any national securities exchange, to the extent not delivered by the Borrower pursuant to clause (i) or (ii) of this Section 5.01(i);
(iv) immediately upon any Responsible Officer's obtaining knowledge of the occurrence of any Event of Default or any event that, with the giving of notice or lapse of time, or both, would constitute an Event of Default, a statement of the chief financial officer or treasurer of the Borrower setting forth details of such Event of Default or event and the action that the Borrower proposes to take with respect thereto;
(v) immediately upon obtaining knowledge thereof, notice of any change in either the Moody's Rating or the S&P Rating;
(vi) as soon as possible and in any event within five days after the commencement thereof or any adverse determination or development therein, notice of all actions, suits and proceedings that may adversely affect the Borrower's ability to perform its obligations under this Agreement;
(vii) as soon as possible and in any event within five days after the occurrence of a Termination Event, notice of such Termination Event; and
(viii) such other information respecting the condition or operations, financial or otherwise, of the Borrower or any Subsidiary as any Lender through the Administrative Agent may from time to time reasonably request.
(j) Indebtedness to Total Capitalization. Maintain at all times a ratio of Consolidated Indebtedness of the Borrower and its Subsidiaries to Total Capitalization of not more than .70:1.0.
(k) Use of Proceeds. Use the proceeds of each Advance solely for general corporate purposes (including, in each case, without limitation, as a commercial paper back-up). No proceeds of any Advance will be used to acquire any equity security of a class that is registered pursuant to Section 12 of the Exchange Act, or any security in any transaction that is subject to Sections 13 and 14 of the Exchange Act.
(l) Ownership of Subsidiaries. Own at all times, directly or indirectly and free and clear of all liens and encumbrances, 100% of the common stock of CP&L, FPC and Florida Power.
SECTION 5.02. Negative Covenants.
So long as any Advance or any other amount payable by the Borrower hereunder shall remain unpaid or any Lender shall have any Commitment hereunder, the Borrower will not, without the written consent of the Majority Lenders:
(a) Liens, Etc. Create, incur, assume or suffer to exist, or permit any Subsidiary to create, incur, assume or suffer to exist, any lien, security interest or other charge or encumbrance, or any other type of preferential arrangement, upon or with respect to any of its properties, whether now owned or hereafter acquired, or assign, or permit any Subsidiary to assign, any right to receive income, in each case to secure any Indebtedness of any Person, other than (i) liens, mortgages and security interests created by the Mortgage and the Florida Power Mortgage, (ii) liens and security interests against the fuel used by the Borrower in its power generating operations in favor of the suppliers thereof, (iii) liens and security interests created in connection with the GenCo Financing, and (iv) liens, mortgages and security interests securing other Indebtedness of the Borrower and its Subsidiaries not exceeding $100,000,000 in the aggregate.
(b) Indebtedness. Create, incur, assume or suffer to exist, or permit any Subsidiary to create, incur, assume or suffer to exist, any Indebtedness other than (i) Indebtedness hereunder, (ii) Indebtedness secured by liens and security interests permitted pursuant to clauses (ii), (iii) and (iv) of subsection 5.02(a), (iii) Indebtedness evidenced by the First Mortgage Bonds and the Florida Power Mortgage Bonds, (iv) unsecured Indebtedness, including guarantees issued in connection with the financing of pollution control facilities operated by CP&L, FPC or Florida Power, guarantees of Indebtedness incurred by any wholly-owned Subsidiary and guarantees of debt securities issued by any financing Subsidiary established to secure debt financing in the offshore markets, and (v) other Indebtedness outstanding on the date of this Agreement, as described on Schedule II hereto.
(c) Lease Obligations. Create, incur, assume or suffer to exist, or permit any Subsidiary to create, incur, assume or suffer to exist, any obligations for the payment of rental for any property under leases or agreements to lease having a term of one year or more that would cause the direct or contingent Consolidated liabilities of the Borrower and its Subsidiaries in respect of all such obligations payable in any calendar year to exceed 10% of the Consolidated operating revenues of the Borrower and its Subsidiaries for the immediately preceding calendar year.
(d) Mergers, Etc. Merge with or into or consolidate with or into, or acquire all or substantially all of the assets or securities of, any Person, unless, in each case, (i) immediately after giving effect thereto, no event shall occur and be continuing that constitutes an Event of Default or an event that with the giving of notice or lapse of time, or both, would constitute an Event of Default, and (ii) in the case of any such merger to which the Borrower is a party, such other Person is a utility company and the resulting or surviving corporation, if not the Borrower, (x) is organized and existing under the laws of the United States of America or any State thereof, (y) is a corporation satisfactory to the Majority Lenders, and (z) shall have expressly assumed, by an instrument satisfactory in form and substance to the Majority Lenders, the due and
punctual payment of all amounts due under this Agreement and the performance of every covenant and undertaking of the Borrower contained in this Agreement.
(e) Sales, Etc. of Assets. Sell, lease, transfer or otherwise dispose of, or permit any Subsidiary to sell, lease, transfer or otherwise dispose of, any of its assets, other than the following sales: (i) sales of generating capacity to the wholesale customers of the Borrower and the Subsidiaries, (ii) sales of nuclear fuel, (iii) sales of accounts receivable, (iv) sales in connection with a transaction authorized by subsection (d) of this Section, (v) the Portfolio Transaction, (vi) the Rail Transaction, (vii) sales of investments in securities with a maturity of less than one year, or (viii) other sales not exceeding $150,000,000 in the aggregate in any fiscal year of the Borrower.
(f) Margin Stock. Use any proceeds of any Advance to buy or carry margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System).
(g) Change in Nature of Business. Engage, or cause or permit CP&L or Florida Power to engage, in a material manner in businesses other than those in which they are engaged on the date hereof and businesses reasonably related thereto.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default.
If any of the following events ("Events of Default") shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any Advance when due, or shall fail to pay any interest on the principal amount of any Advance or any fees or other amount payable hereunder within five Business Days after such interest or fees or other amount shall become due; or
(b) Any representation or warranty made by the Borrower herein or by the Borrower (or any of its officers) in any document delivered pursuant to this Agreement shall prove to have been incorrect in any material respect when made or deemed made; or
(c) The Borrower shall fail to perform or observe any other term, covenant or agreement contained in Section 5.01(b), 5.01(i)(iv), 5.01(j), 5.01(l) or 5.02 on its part to be performed or observed; or the Borrower shall fail to perform or observe any other term, covenant or agreement contained in this Agreement on its part to be performed or observed and any such failure shall remain unremedied for 30 days after written notice thereof shall have been given to the Borrower by the Administrative Agent or any Lender; or
(d) The Borrower or any Subsidiary shall fail to pay any amount in respect of any Indebtedness in excess of $10,000,000 (but excluding Indebtedness hereunder) of the Borrower or such Subsidiary (as the case may be), or any interest or premium thereon, when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) and such failure
shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Indebtedness; or any other default under any agreement or instrument relating to any such Indebtedness, or any other event, shall occur and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such default or event is to accelerate, or to permit the acceleration of, the maturity of such Indebtedness; or any such Indebtedness shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), prior to the stated maturity thereof; or
(e) The Borrower or any Subsidiary shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Borrower or any Subsidiary seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property; or the Borrower or any Subsidiary shall take any corporate action to authorize any of the actions set forth above in this subsection (e); or
(f) Any judgment or order for the payment of money in excess of $10,000,000 shall be rendered against the Borrower or any Subsidiary and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be any period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or
(g) Any Termination Event with respect to a Plan shall have occurred, and, 30 days after the occurrence thereof, (i) such Termination Event (if correctable) shall not have been corrected and (ii) the then present value of such Plan's vested benefits exceeds the then current value of assets accumulated in such Plan by more than the amount of $20,000,000 (or in the case of a Termination Event involving the withdrawal of a "substantial employer" (as defined in Section 4001(a)(2) of ERISA), the withdrawing employer's proportionate share of such excess shall exceed such amount); or
(h) The Borrower or any of its Affiliates as employer under a Multiemployer Plan shall have made a complete or partial withdrawal from such Multiemployer Plan and the plan sponsor of such Multiemployer Plan shall have notified such withdrawing employer that such employer has incurred a withdrawal liability in an annual amount exceeding $20,000,000; or
(i) A Change of Control shall occur;
then, and in any such event, the Administrative Agent shall at the request, or may with the consent, of the Majority Lenders, by notice to the Borrower, (i) declare the Commitments and the obligation of each Lender to make Advances to be terminated, whereupon the same shall forthwith terminate, and (ii) declare the principal amount of the Advances then outstanding, all interest thereon and all other amounts payable under this Agreement to be forthwith due and payable, whereupon such principal amount, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any
kind, all of which are hereby expressly waived by the Borrower; provided, however, that in the event of an actual or deemed entry of an order for relief with respect to the Borrower or any Subsidiary under the Federal Bankruptcy Code, (A) the obligation of each Lender to make Advances shall automatically be terminated and (B) the principal amount of the Advances then outstanding, all such interest and all such other amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower.
ARTICLE VII
THE AGENT
SECTION 7.01. Authorization and Action.
Each Lender hereby appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent by the terms hereof, together with such powers as are reasonably provided for by this Agreement (including, without limitation, enforcement or collection of the Advances), the Administrative Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Majority Lenders, and such instructions shall be binding upon all Lenders; provided, however, that the Administrative Agent shall not be required to take any action that exposes the Administrative Agent to personal liability or that is contrary to this Agreement or applicable law.
SECTION 7.02. The Agent's Reliance, Etc.
Neither the Administrative Agent nor any of its directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by each or any of them under or in connection with this Agreement, except for their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, the Administrative Agent: (i) may consult with legal counsel (including counsel for the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (ii) makes no warranty or representation to any Lender and shall not be responsible to any Lender for any statements, warranties or representations made in or in connection with this Agreement; (iii) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement on the part of the Borrower or to inspect the property (including the books and records) of the Borrower; (iv) shall not be responsible to any Lender for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; and (v) shall incur no liability under or in respect of this Agreement by acting upon any notice, consent, certificate or other instrument or writing (which may be by telegram, telecopy or e-mail) believed by it to be genuine and signed or sent by the proper party or parties.
SECTION 7.03. The Administrative Agent and its Affiliates.
With respect to its Commitments and, the Advances made by it, the Administrative Agent shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not an Administrative Agent; and the term "Lender" or "Lenders" shall, unless otherwise expressly indicated, include each Agent in its individual capacity, as applicable. The Administrative Agent and its Affiliates may accept deposits from, lend money to, act as trustee under indentures of, and generally engage in any kind of business with, the Borrower, any Subsidiary and any Person who may do business with or own securities of the Borrower or any Subsidiary, all as if the Administrative Agent were not the Administrative Agent and without any duty to account therefor to the Lenders.
SECTION 7.04. Lender Credit Decision.
Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on the financial statements referred to in Section 4.01(e) and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement.
SECTION 7.05. Indemnification.
The Lenders agree to indemnify the Administrative Agent (to the extent not reimbursed by the Borrower), ratably according to the respective principal amounts of the Advances then held by each of them (or if no Advances are at the time outstanding, ratably according to the respective amounts of their Commitments), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against the Administrative Agent in any way relating to or arising out of this Agreement or any action taken or omitted by the Administrative Agent under this Agreement; provided that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Administrative Agent's gross negligence or willful misconduct. Without limitation of the foregoing, each Lender agrees to reimburse the Administrative Agent promptly upon demand for its ratable share of any out-of-pocket expenses (including reasonable counsel fees) incurred by the Administrative Agent in connection with the preparation, execution, administration, or enforcement of, or legal advice in respect of rights or responsibility under, this Agreement, to the extent that the Administrative Agent is not reimbursed for such expenses by the Borrower.
SECTION 7.06. Successor Administrative Agent.
The Administrative Agent may resign at any time by giving written notice thereof to the Lenders and the Borrower and may be removed at any time with or without cause by the Majority Lenders. Upon any such resignation or removal, the Majority Lenders shall have the right to appoint a successor Administrative Agent. If no successor Administrative Agent shall
have been so appointed by the Majority Lenders, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent's giving of notice of resignation or the Majority Lenders' removal of the retiring Administrative Agent, the Administrative Agent may appoint a successor Administrative Agent, which shall be a commercial bank organized under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Administrative Agent's resignation or removal hereunder as Administrative Agent, the provisions of this Article VII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc.
No amendment or waiver of any provision of this Agreement, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Majority Lenders, in the case of any such amendment, waiver or consent of or in respect of this Agreement, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no amendment, waiver or consent shall, unless in writing and signed by all of the Lenders, do any of the following: (i) waive any of the conditions specified in Section 3.01 or 3.02, (ii) increase the Commitment of any Lender or subject any Lender to any additional obligations (other than pursuant to Section 2.04(b)), (iii) reduce, or waive the payment of, the principal of, or interest on, the Advances or any fees or other amounts payable to the Lenders ratably hereunder, (iv) postpone any date fixed for any payment of principal of, or interest on, the Advances or any fees or other amounts payable to the Lenders ratably hereunder, (v) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Advances, or the number of Lenders, which shall be required for the Lenders or any of them to take any action under this Agreement, or (vi) amend, waive, or in any way modify or suspend any provision requiring the pro rata application of payments or of Section 2.15 or of this Section 8.01; provided further, that no amendment, waiver or consent shall, unless in writing and signed by each Lender affected thereby, reduce, waive or postpone the date of payment of any amount payable to such Lender, other than any such amount payable to the Lenders ratably; and provided, further, that (A) no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required hereinabove to take such action, affect the rights or duties of such Administrative Agent under this Agreement and (B) this Agreement may be amended and restated without the consent of any Lender or the Administrative Agent if, upon giving effect to such amendment and restatement, such Lender or Administrative Agent, as the case may be, shall no longer be a party to this Agreement (as so amended and restated) or have any Commitment or other obligation hereunder and shall have been paid in full all amounts payable hereunder to such Lender or the Administrative Agent, as the case may be.
SECTION 8.02. Notices, Etc.
All notices and other communications provided for hereunder shall, unless
otherwise stated herein, be in writing (including telegraphic communication) and
mailed, telecopied, e-mailed or delivered, if to the Borrower, at its address at
410 S. Wilmington Street, PEB 19A3, Raleigh, North Carolina 27601, Attention:
Director of Financial Operations, Treasury Department, Facsimile no. (919)
546-7826, e-mail: charles.beuris@pgnmail.com; if to any Lender, at its Domestic
Lending Office set forth opposite its name on Schedule I hereto; and if to the
Administrative Agent, at its address at Two Penns Way, Suite 200, New Castle,
Delaware 19720, Attention: Bank Loan Syndications, Facsimile no.: (212)
816-8098, e-mail: j.nicholas.mckee@citi.com; or, as to each party, at such other
address as shall be designated by such party in a written notice to the other
parties. All such notices and communications shall be effective when received by
the addressee thereof.
SECTION 8.03. No Waiver; Remedies.
No failure on the part of any Lender or the Administrative Agent to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.
SECTION 8.04. Costs, Expenses, Taxes and Indemnification.
(a) The Borrower agrees to pay on demand all costs and expenses of the
Administrative Agent (and as described in clause (iv) below, the Lenders) in
connection with (i) the preparation, execution, negotiation, syndication and
delivery of this Agreement and the other documents to be delivered hereunder,
(ii) the first Borrowing under this Agreement, (iii) any modification, amendment
or supplement to this Agreement and the other documents to be delivered
hereunder and (iv) the enforcement of the rights and remedies of the Lenders and
the Administrative Agent under this Agreement and the other documents to be
delivered hereunder (whether through negotiations or legal proceedings), all the
above costs and expenses to include, without limitation, the reasonable fees and
out-of-pocket expenses of counsel for the Administrative Agent and each of the
Lenders with respect thereto. In addition, the Borrower shall pay any and all
stamp and other taxes payable or determined to be payable in connection with the
execution and delivery of this Agreement and the other documents to be delivered
hereunder, and agrees to save the Administrative Agent and each Lender harmless
from and against any and all liabilities with respect to or resulting from any
delay in paying or omission to pay such taxes.
(b) If (i) due to payments made by the Borrower due to the acceleration of the maturity of the Advances pursuant to Section 6.01 or due to any other reason, any Lender receives payments of principal of any Eurodollar Rate Advance based upon the Eurodollar Rate other than on the last day of the Interest Period for such Advance, or (ii) due to any Conversion of Eurodollar Advance other than on the last day of an Interest Period pursuant to Section 2.12, the Borrower shall, upon demand by such Lender (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender any
amounts required to compensate such Lender for any additional losses, costs or expenses that it may reasonably incur as a result of such payment, including, without limitation, any loss (including loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by any Lender to fund or maintain such Advance. In addition, if the Borrower fails to prepay any Advance on the date for which notice of prepayment has been given, the Borrower shall, upon demand by any Lender (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender any amounts required to compensate such Lender for any losses, costs or expenses (including loss of anticipated profits) that it may reasonably incur as a result of such prepayment not having been made on the date specified by the Borrower for such prepayment.
(c) Any and all payments by the Borrower hereunder shall be made, in
accordance with Section 2.13, free and clear of and without deduction for any
and all present or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding, in the case
of each Lender and the Administrative Agent, taxes imposed on its income, and
franchise taxes imposed on it, by the jurisdiction under the laws of which such
Lender or Agent (as the case may be) is organized or any political subdivision
thereof and, in the case of each Lender, taxes imposed on its income, and
franchise taxes imposed on it, by the jurisdiction of such Lender's Applicable
Lending Office or any political subdivision thereof (all such non-excluded
taxes, levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If the Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder to any Lender
or Agent, (i) the sum payable shall be increased as may be necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section 8.04) such Lender or Agent (as the
case may be) receives an amount equal to the sum it would have received had no
such deductions been made, (ii) the Borrower shall make such deductions and
(iii) the Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law.
(d) The Borrower will indemnify each Lender and the Administrative Agent for the full amount of Taxes (including, without limitation, any Taxes imposed by any jurisdiction on amounts payable under this Section 8.04) paid by such Lender or Agent (as the case may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally asserted. This indemnification shall be made within 30 days from the date such Lender or Agent (as the case may be) makes written demand therefor.
(e) Prior to the date of the initial Borrowing or on the date of the Assignment and Acceptance pursuant to which it became a Lender, in the case of each Lender that becomes a Lender by virtue of entering into an Assignment and Acceptance, and from time to time thereafter if requested by the Borrower or the Administrative Agent, each Lender organized under the laws of a jurisdiction outside the United States shall provide the Administrative Agent and the Borrower with the forms prescribed by the Internal Revenue Service of the United States certifying that such Lender is exempt from United States withholding taxes with respect to all payments to be made to such Lender hereunder. If for any reason during the term of this Agreement, any Lender becomes unable to submit the forms referred to above or the information or representations contained therein are no longer accurate in any material respect, such Lender
shall notify the Administrative Agent and the Borrower in writing to that effect. Unless the Borrower and the Administrative Agent have received forms or other documents satisfactory to them indicating that payments hereunder are not subject to United States withholding tax, the Borrower or the Administrative Agent shall withhold taxes from such payments at the applicable statutory rate in the case of payments to or for any Lender organized under the laws of a jurisdiction outside the United States.
(f) Any Lender claiming any additional amounts payable pursuant to Section 8.04(c) or (d) shall use its reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) (i) to change the jurisdiction of its Applicable Lending Office if the making of such a change would avoid the need for, or reduce the amount of, any such additional amounts that may thereafter accrue and would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender and (ii) to otherwise minimize the amounts due, or to become due, under Sections 8.04(c) and (d).
(g) If the Borrower makes any additional payment to any Lender pursuant to
Sections 8.04(c) and (d) in respect of any Taxes, and such Lender determines
that it has received (i) a refund of such Taxes or (ii) a credit against or
relief or remission for, or a reduction in the amount of, any tax or other
governmental charge solely as a result of any deduction or credit for any Taxes
with respect to which it has received payments under Sections 8.04(c) and (d),
such Lender shall, to the extent that it can do so without prejudice to the
retention of such refund, credit, relief, remission or reduction, pay to the
Borrower such amount as such Lender shall have determined to be attributable to
the deduction or withholding of such Taxes. If such Lender later determines that
it was not entitled to such refund, credit, relief, remission or reduction to
the full extent of any payment made pursuant to the first sentence of this
Section 8.04(g), the Borrower shall upon demand of such Lender promptly repay
the amount of such overpayment. Any determination made by such Lender pursuant
to this Section 8.04(g) shall in the absence of bad faith or manifest error be
conclusive, and nothing in this Section 8.04(g) shall be construed as requiring
any Lender to conduct its business or to arrange or alter in any respect its tax
or financial affairs so that it is entitled to receive such a refund, credit or
reduction or as allowing any Person to inspect any records, including tax
returns, of any Lender.
(h) The Borrower hereby agrees to indemnify and hold harmless each Lender, the Administrative Agent, counsel to the Administrative Agent and their respective officers, directors, partners, employees, Affiliates and advisors (each, an "Indemnified Person") from and against any and all claims, damages, losses, liabilities, costs, or expenses (including reasonable attorney's fees and expenses, whether or not such Indemnified Person is named as a party to any proceeding or is otherwise subjected to judicial or legal process arising from any such proceeding), joint and several, that may actually be incurred by or asserted or awarded against any Indemnified Person (including, without limitation, in connection with any investigation, litigation or proceeding or the preparation of a defense in connection therewith) in each case by reason of or in connection with the execution, delivery, or performance of this Agreement, or the use by the Borrower of the proceeds of any Advance, except to the extent that such claims, damages, losses, liabilities, costs, or expenses are determined in a final non-appealable judgment by a court of competent jurisdiction to have resulted solely from the gross negligence or willful misconduct of the party seeking indemnification.
(i) Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in this Section 8.04 shall survive the payment in full of principal and interest hereunder and the termination of the Commitments.
SECTION 8.05. Right of Set-off.
Upon (i) the occurrence and during the continuance of any Event of Default
and (ii) the making of the request or the granting of the consent specified by
Section 6.01 to authorize the Administrative Agent to declare the Advances due
and payable pursuant to the provisions of Section 6.01, each Lender is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other indebtedness at any
time owing by such Lender to or for the credit or the account of the Borrower
now or hereafter existing under this Agreement, irrespective of whether or not
such Lender shall have made any demand under this Agreement and although such
obligations may be unmatured. Each Lender agrees promptly to notify the Borrower
after any such set-off and application made by such Lender; provided that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of each Lender under this Section are in addition to
other rights and remedies (including, without limitation, other rights of
set-off) that such Lender may have.
SECTION 8.06. Binding Effect.
This Agreement shall become effective when it shall have been executed by the Borrower and the Administrative Agent and when the Administrative Agent shall have been notified by each Lender that such Lender has executed it and thereafter shall be binding upon and inure to the benefit of the Borrower, the Administrative Agent and each Lender and their respective successors and assigns, except that the Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of each Lender.
SECTION 8.07. Assignments and Participations.
(a) Each Lender may, with the consent of the Administrative Agent and the
Borrower (such consent not to be unreasonably withheld and, in the case of the
Borrower, such consent shall not be required if an Event of Default has occurred
and is continuing), assign to one or more banks or other entities all or a
portion of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitment and the Advances owing to it);
provided, however, that (i) each such assignment shall be of a constant, and not
a varying, percentage of all rights and obligations under this Agreement, (ii)
prior to the effectiveness of the Term Loan Conversion Option, the amount of the
Commitment of the assigning Lender being assigned pursuant to each such
assignment (determined as of the date of the Assignment and Acceptance with
respect to such assignment) shall in no event be less than the lesser of (A)
$10,000,000 and (B) all of such Lender's rights and obligations and, if the
preceding clause (A) is applicable, shall be an integral multiple of $1,000,000,
(iii) each such assignment shall be to an Eligible Assignee, and (iv) the
parties to each such assignment shall execute and deliver to the Administrative
Agent, for its acceptance and recording in the Register, an Assignment and
Acceptance and such parties (other than when Citibank is an assigning party)
shall also deliver to
the Administrative Agent a processing and recordation fee of $3,500. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, (x) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender hereunder and (y) the Lender assignor thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto).
(b) By executing and delivering an Assignment and Acceptance, the Lender
assignor thereunder and the assignee thereunder confirm to and agree with each
other and the other parties hereto as follows: (i) other than as provided in
such Assignment and Acceptance, such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other instrument or document furnished pursuant
hereto; (ii) such assigning Lender makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrower or the performance or observance by the Borrower of any of its
obligations under this Agreement or any other instrument or document furnished
pursuant hereto; (iii) such assignee confirms that it has received a copy of
this Agreement, together with copies of the financial statements referred to in
Section 4.01(e) and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (iv) such assignee will, independently and without
reliance upon the Administrative Agent, such assigning Lender or any other
Lender and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under this Agreement; (v) such assignee confirms that it is an Eligible
Assignee; (vi) such assignee appoints and authorizes the Administrative Agent to
take such action as agent on its behalf and to exercise such powers under this
Agreement as are delegated to the Administrative Agent by the terms hereof,
together with such powers as are reasonably incidental thereto; and (vii) such
assignee agrees that it will perform in accordance with their terms all of the
obligations that by the terms of this Agreement are required to be performed by
it as a Lender.
(c) The Administrative Agent shall maintain at its address referred to in
Section 8.02 a copy of each Assignment and Acceptance (and copies of the related
consents of the Borrower and the Administrative Agent to such assignment)
delivered to and accepted by it and a register for the recordation of the names
and addresses of the Lenders and the Commitment of, and principal amount of the
Advances owing to, each Lender from time to time (the "Register"). The entries
in the Register shall be conclusive and binding for all purposes, absent
manifest error, and the Borrower, the Administrative Agent and the Lenders may
treat each Person whose name is recorded in the Register as a Lender hereunder
for all purposes of this Agreement. The Register shall be available for
inspection by the Borrower or any Lender at any reasonable time and from time to
time upon reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an assignee representing that it is an Eligible Assignee, the Administrative Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit B hereto, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Borrower.
(e) Each Lender may assign to one or more banks or other entities any Advance made by it.
(f) Each Lender may sell participations to one or more banks or other
entities in or to all or a portion of its rights and obligations under this
Agreement (including, without limitation, all or a portion of its Commitment,
the Advances owing to it); provided, however, that (i) such Lender's obligations
under this Agreement (including, without limitation, its Commitment to the
Borrower hereunder) shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) such Lender shall remain the holder of any promissory note held pursuant
to Section 2.01(b) for all purposes of this Agreement, (iv) the Borrower, the
Administrative Agent and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and (v) the holder of any such participation,
other than an Affiliate of such Lender, shall not be entitled to require such
Lender to take or omit to take any action hereunder, except action (A) extending
the time for payment of interest on, or the final maturity of any portion of the
principal amount of, the Advances or (B) reducing the principal amount of or the
rate of interest payable on the Advances. Without limiting the generality of the
foregoing: (i) such participating banks or other entities shall be entitled to
the cost protection provisions contained in Sections 2.08, 2.12 and 8.04(b) only
if, and to the same extent, the Lender from which such participating banks or
other entities acquired its participation would, at the time, be entitled to
claim thereunder; and (ii) such participating banks or other entities shall
also, to the fullest extent permitted by law, be entitled to exercise the rights
of set-off contained in Section 8.05 as if such participating banks or other
entities were Lenders hereunder.
(g) If any Lender (or any bank, financial institution, or other entity to
which such Lender has sold a participation) shall make any demand for payment
under Section 2.11(b), then within 30 days after any such demand (if, but only
if, such demanded payment has been made by the Borrower), the Borrower may, with
the approval of the Administrative Agent (which approval shall not be
unreasonably withheld) demand that such Lender assign in accordance with this
Section 8.07 to one or more Eligible Assignees designated by the Borrower all
(but not less than all) of such Lender's Commitment (if any) and the Advances
owing to it within the period ending on the later to occur of such 30th day and
the last day of the longest of the then current Interest Periods for such
Advances, provided that (i) no Event of Default or event that, with the passage
of time or the giving of notice, or both, would constitute an Event of Default
shall then have occurred and be continuing, (ii) the Borrower shall have
satisfied all its presently due obligations to such Lender under this Agreement,
and (iii) if such Eligible Assignee designated by the Borrower is not an
existing Lender on the date of such demand, the Borrower shall have delivered to
the Administrative Agent an administrative fee of $3,500. If any such Eligible
Assignee designated by the Borrower shall fail to consummate such assignment on
terms acceptable to such Lender, or if the Borrower shall fail to designate any
such Eligible Assignees for all or part of such Lender's Commitment or Advances,
then such demand by the Borrower
shall become ineffective; it being understood for purposes of this subsection
(g) that such assignment shall be conclusively deemed to be on terms acceptable
to such Lender, and such Lender shall be compelled to consummate such assignment
to an Eligible Assignee designated by the Borrower, if such Eligible Assignee
(i) shall agree to such assignment by entering into an Assignment and Acceptance
in substantially the form of Exhibit B hereto with such Lender and (ii) shall
offer compensation to such Lender in an amount equal to all amounts then owing
by the Borrower to such Lender hereunder made by the Borrower to such Lender,
whether for principal, interest, fees, costs or expenses (other than the
demanded payment referred to above and payable by the Borrower as a condition to
the Borrower's right to demand such assignment), or otherwise.
(h) Any Lender may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 8.07, disclose to the assignee or participant or proposed assignee or participant, any information relating to the Borrower furnished to such Lender by or on behalf of the Borrower; provided that, prior to any such disclosure, the assignee or participant or proposed assignee or participant shall agree to preserve the confidentiality of any confidential information relating to the Borrower received by it from such Lender.
(i) Anything in this Section 8.07 to the contrary notwithstanding, any Lender may (i) assign and pledge all or any portion of its Commitment and the Advances owing to it to any Federal Reserve Bank (and its transferees) as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any Operating Circular issued by such Federal Reserve Bank; provided, that no such assignment shall release the assigning Lender from its obligations hereunder; or (ii) assign its Commitments, Advances and other rights and obligations hereunder to any of its Affiliates upon notice to, but without the consent of, the Borrower and the Administrative Agent.
(j) Notwithstanding anything to the contrary contained herein, any Lender
(a "Granting Lender") may grant to a special purpose funding vehicle (an "SPC")
of such Granting Lender identified as such in writing from time to time by the
Granting Lender to the Administrative Agent and the Borrower, the option to
provide to the Borrower all or any part of any Advance that such Granting Lender
would otherwise be obligated to make to the Borrower pursuant to this Agreement;
provided that (i) nothing herein shall constitute a commitment by any such SPC
to make any Advance, (ii) if such SPC elects not to exercise such option or
otherwise fails to provide all or any part of such Advance, the Granting Lender
shall be obligated to make such Advance pursuant to the terms hereof and (iii)
no SPC or Granting Lender shall be entitled to receive any greater amount
pursuant to Section 2.07 or 2.11 than the Granting Lender would have been
entitled to receive had the Granting Lender not otherwise granted such SPC the
option to provide any Advance to the Borrower. The making of an Advance by an
SPC hereunder shall utilize the Commitment of the Granting Lender to the same
extent, and as if, such Advance were made by such Granting Lender. Each party
hereto hereby agrees that no SPC shall be liable for any indemnity or similar
payment obligation under this Agreement for which a Lender would otherwise be
liable so long as, and to the extent that, the related Granting Lender provides
such indemnity or makes such payment. In furtherance of the foregoing, each
party hereto hereby agrees (which agreement shall survive the termination of
this Agreement) that, prior to the date that is one year and one day after the
payment in full of all outstanding commercial paper or other senior indebtedness
of any SPC, it will not institute against or join
any other person in instituting against such SPC any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under the laws of the United States or any State thereof. Notwithstanding the foregoing, the Granting Lender unconditionally agrees to indemnify the Borrower, the Administrative Agent and each Lender against all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be incurred by or asserted against the Borrower, the Administrative Agent or such Lender, as the case may be, in any way relating to or arising as a consequence of any such forbearance or delay in the initiation of any such proceeding against its SPC. Each party hereto hereby acknowledges and agrees that no SPC shall have the rights of a Lender hereunder, such rights being retained by the applicable Granting Lender. Accordingly, and without limiting the foregoing, each party hereby further acknowledges and agrees that no SPC shall have any voting rights hereunder and that the voting rights attributable to any Advance made by an SPC shall be exercised only by the relevant Granting Lender and that each Granting Lender shall serve as the administrative agent and attorney-in-fact for its SPC and shall on behalf of its SPC receive any and all payments made for the benefit of such SPC and take all actions hereunder to the extent, if any, such SPC shall have any rights hereunder. In addition, notwithstanding anything to the contrary contained in this Agreement any SPC may with notice to, but without the prior written consent of any other party hereto, assign all or a portion of its interest in any Advances to the Granting Lender. This Section may not be amended without the prior written consent of each Granting Lender, all or any part of whose Advance is being funded by an SPC at the time of such amendment.
SECTION 8.08. Governing Law.
This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York. The Borrower (i) irrevocably submits to the non-exclusive jurisdiction of any New York State court or Federal court sitting in New York City in any action arising out of this Agreement, (ii) agrees that all claims in such action may be decided in such court, (iii) waives, to the fullest extent it may effectively do so, the defense of an inconvenient forum and (iv) consents to the service of process by mail. A final judgment in any such action shall be conclusive and may be enforced in other jurisdictions. Nothing herein shall affect the right of any party to serve legal process in any manner permitted by law or affect its right to bring any action in any other court.
SECTION 8.09. WAIVER OF JURY TRIAL.
THE BORROWER, THE ADMINISTRATIVE AGENT AND EACH LENDER EACH HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY AND LAWFULLY DO SO, ALL RIGHT TO TRIAL BY JURY AS TO ANY ISSUE RELATING TO THIS AGREEMENT IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER INSTRUMENT OR DOCUMENT DELIVERED HEREUNDER OR THEREUNDER.
SECTION 8.10. Execution in Counterparts.
This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.
SECTION 8.11. Severability.
Any provision of this Agreement that is prohibited, unenforceable or not authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition, unenforceability or non-authorization without invalidating the remaining provisions hereof or affecting the validity, enforceability or legality of such provision in any other jurisdiction.
SECTION 8.12. Headings.
Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose.
SECTION 8.13. Entire Agreement.
This Agreement constitutes the entire contract between the parties relative to the subject matter hereof. Any previous agreement among the parties with respect to the subject matter hereof is superseded by this Agreement. Except as is expressly provided for herein, nothing in this Agreement, expressed or implied, is intended to confer upon any party other than the parties hereto any rights, remedies, obligations or liabilities under or by reason of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.
PROGRESS ENERGY, INC.
CITIBANK, N.A., as Administrative Agent and Lender
Title:
JPMORGAN CHASE BANK
Title:
BANK ONE, NA
Title:
BANK OF AMERICA, N.A.
Title:
BANK OF TOKYO-MITSUBISHI TRUST COMPANY
Title:
WACHOVIA BANK, N.A.
Title:
SUNTRUST BANK
Title:
THE INDUSTRIAL BANK OF JAPAN, LIMITED
Title:
MELLON BANK, N.A.
Title:
SCHEDULE I
PROGRESS ENERGY, INC.
List of Commitments and Applicable Lending Offices
Eurodollar Domestic
Name of Bank Lending Office Lending Office Commitment
------------ -------------- -------------- ----------
Citibank, N.A. Two Pennsway, Ste. 200 Same as Eurodollar Lending $89,473,684.22
New Castle, Delaware 19720 Office
Attention: Bank Loan Syndications
JPMorgan Chase Bank 270 Park Avenue Same as Eurodollar Lending $89,473,684.22
New York, NY 10017 Office
Attention:
Bank One, NA 1 Bank One Plaza, Suite 0363 Same as Eurodollar Lending $65,789,473.68
Chicago, Illinois 60670-0363 Office
Attention: Robert G. Bussa
Bank of America, N.A. Bank of America Plaza Same as Eurodollar Lending $76,315,789.47
901 Main Street Office
14th Floor, TX1-492-14-05
Dallas, Texas 75202-3714
Attention: Nora Taylor
Bank of Tokyo-Mitsubishi Trust 1251 Avenue of the Americas Same as Eurodollar Lending $65,789,473.68
Company 12th Floor Office
New York, New York 10020-1104
Attention: Nicholas R. Battista
Wachovia Bank. N.A. 191 Peachtree St. Same as Eurodollar Lending $47,368,421.05
Atlanta, Georgia 30303 Office
Attention: Loan Administration
SunTrust Bank 200 South Orange Avenue Same as Eurodollar Lending $26,315,789.47
Orlando, Florida 32801 Office
Attention: William Barr
The Industrial Bank of Japan, 1251 Avenue of the Americas Same as Eurodollar Lending $26,315,789.47
Limited New York, New York 10020 Office
Attention: Loan Administration
Mellon Bank, N.A. Three Mellon Center, Rm. 1203 Same as Eurodollar Lending $13,157,894.74
Pittsburgh, Pennsylvania 15259 Office
Attention: Brenda Leierzapf
|
SCHEDULE II
Permitted Existing Indebtedness
None.
EXHIBIT A-1
NOTICE OF BORROWING
[Date]
Citibank, N.A., as Administrative Agent
for the Lenders parties to the
Credit Agreement referred to below
Two Penns Way, Suite 200
New Castle, Delaware 19720
Attention: Bank Loan Syndications
Ladies and Gentlemen:
The undersigned, PROGRESS ENERGY, INC. refers to the Credit Agreement, dated as of November 13, 2001 (the "Credit Agreement", the terms defined therein being used herein as therein defined), among the undersigned, certain Lenders from time to time parties thereto, and CITIBANK, N.A., as Administrative Agent for the Lenders, and hereby gives you notice pursuant to Section 2.02 of the Credit Agreement that the undersigned hereby requests a Borrowing under the Credit Agreement, and in that connection sets forth below the information relating to such Borrowing (the "Proposed Borrowing") as required by Section 2.02(a) of the Credit Agreement:
(ii) The Type of Advances comprising the Proposed Borrowing is [Base Rate Advances][Eurodollar Rate Advances].
The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the Proposed Borrowing:
(i) the representations and warranties contained in Section 4.01 of the Credit Agreement are correct, before and after giving effect to the Proposed Borrowing and to the application of the proceeds therefrom, as though made on and as of such date; and
(ii) no event has occurred and is continuing, or would result from such Proposed Borrowing or from the application of the proceeds therefrom, that constitutes
A-1-1
an Event of Default or would constitute an Event of Default but for the requirement that notice be given or time elapse or both.
Very truly yours,
PROGRESS ENERGY, INC.
Title:
A-1-2
EXHIBIT A-2
NOTICE OF CONVERSION
[Date]
Citibank, N.A., as Administrative Agent
for the Lenders parties to the
Credit Agreement referred to below
Two Penns Way, Suite 200
New Castle, Delaware 19720
Attention: Bank Loan Syndications
Ladies and Gentlemen:
The undersigned, PROGRESS ENERGY, INC. refers to the Credit Agreement, dated as of November 13, 2001 (the "Credit Agreement", the terms defined therein being used herein as therein defined), among the undersigned, certain Lenders from time to time parties thereto, and CITIBANK, N.A., as Administrative Agent for the Lenders, and hereby gives you notice pursuant to Section 2.09 of the Credit Agreement that the undersigned hereby requests a Conversion under the Credit Agreement, and in that connection sets forth the terms on which such Conversion (the "Proposed Conversion") is requested to be made:
(iii) The Type of Advance to which such Advances (or portions thereof) are proposed to be Converted:
------------------------.
A-2-1
The undersigned hereby certifies that, on the date hereof, and on the date of the Proposed Conversion, no event has occurred and is continuing, or would result from such Proposed Conversion, that constitutes an Event of Default.
Very truly yours,
PROGRESS ENERGY, INC.
Title:
A-2-2
EXHIBIT B
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement, dated as of November 13, 2001 (as amended, modified and supplemented from time to time, the "Credit Agreement", the terms defined therein being used herein as therein defined), among PROGRESS ENERGY, INC., certain Lenders (as defined in the Credit Agreement) from time to time parties thereto, and CITIBANK, N.A., as Administrative Agent for the Lenders (the "Administrative Agent").
1. The Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, that interest in and to all of the Assignor's rights and obligations under the Credit Agreement as of the date hereof that represents the percentage interest specified on Schedule 1 of all outstanding rights and obligations under the Credit Agreement, including, without limitation, such interest in the Assignor's Commitment (to the extent it has not been terminated), the Advances owing to the Assignor. After giving effect to such sale and assignment, the Assignee's Commitment (if any) and the amount of the Advances owing to the Assignee will be as set forth in Section 2 of Schedule 1.
2. The Assignor (i) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; (ii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other instrument or document furnished pursuant thereto; and (iii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under the Credit Agreement or any other instrument or document furnished pursuant thereto.
3. The Assignee (i) confirms that it has received a copy of the Credit
Agreement, together with copies of the financial statements referred to in
Section 4.01(e) thereof and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Assignment and Acceptance; (ii) agrees that it will, independently and
without reliance upon the Administrative Agent, the Assignor or any other Lender
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under the Credit Agreement; (iii) confirms that it is an Eligible Assignee; (iv)
appoints and authorizes the Administrative Agent to take such action as agent on
its behalf and to exercise such powers under the Credit Agreement as are
delegated to the Administrative Agent by the terms thereof, together with such
powers as are reasonably incidental thereto; (v) agrees that it will perform in
accordance with their terms all of
the obligations that by the terms of the Credit Agreement are required to be performed by it as a Lender; [and] (vi) specifies as its Domestic Lending Office (and address for notices) and Eurodollar Lending Office the offices set forth beneath its name on the signature pages hereof [and (vii) attaches the forms prescribed by the Internal Revenue Service of the United States certifying as to the Assignee's status for purposes of determining exemption from United States withholding taxes with respect to all payments to be made to the Assignee under the Credit Agreement or such other documents as are necessary to indicate that all such payments are subject to such rates at a rate reduced by an applicable tax treaty]./1/
4. Following the execution of this Assignment and Acceptance by the Assignor and the Assignee, it will be delivered to the Administrative Agent for acceptance and recording by the Administrative Agent. The effective date of this Assignment and Acceptance shall be the date of acceptance thereof by the Administrative Agent, unless otherwise specified on Schedule 1 hereto (the "Effective Date").
5. Upon such acceptance and recording by the Administrative Agent, as of the Effective Date, (i) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and (ii) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement.
6. Upon such acceptance and recording by the Administrative Agent, from and after the Effective Date, the Administrative Agent shall make all payments under the Credit Agreement in respect of the interest assigned hereby (including, without limitation, all payments of principal, interest and commitment fees with respect thereto) to the Assignee. The Assignor and Assignee shall make all appropriate adjustments in payments under the Credit Agreement for periods prior to the Effective Date directly between themselves.
7. This Assignment and Acceptance shall be governed by, and construed in accordance with, the laws of the State of New York.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and Acceptance to be executed by their respective officers thereunto duly authorized, as of the date first above written, such execution being made on Schedule 1 hereto.
[NAME OF ASSIGNOR] [NAME OF ASSIGNEE]
By By
---------------------- --------------------------
Name: Name:
Title: Title:
Domestic Lending Office (and
address for notices):
[Address]
Eurodollar Lending Office:
[Address]
Accepted this day
----
of , 20
------------ --
|
CITIBANK, N.A.,
as Administrative Agent
PROGRESS ENERGY, INC./2/
SCHEDULE 1
TO
ASSIGNMENT AND ACCEPTANCE
Assignee's Commitment/3/: $
Aggregate Outstanding Principal Amount of Advances owing to Assignee [specify Facility]: $
Effective Date/4/
/4/ This date should be no earlier than the date of acceptance by the Administrative Agent.
EXHIBIT C-1
FORM OF OPINION OF GENERAL COUNSEL TO THE COMPANY
[November 13, 2001]
To each of the Lenders parties to the Credit Agreement referred to below and to Citibank, N.A., as Administrative Agent
Re: Progress Energy, Inc.
Ladies and Gentlemen:
This opinion is furnished to you by me as General Counsel to Progress Energy, Inc. (the "Borrower") pursuant to Section 3.01(g) of the Credit Agreement, dated as of November 13, 2001 (the "Credit Agreement", the terms defined therein being used herein as therein defined), among Progress Energy, Inc., certain lenders named therein (the "Lenders") and Citibank, N.A., as Administrative Agent for the Lenders.
In connection with the preparation, execution and delivery of the Credit Agreement, I have examined:
(1) The Credit Agreement.
(2) The documents furnished by the Borrower pursuant to Section 3.01 of the Credit Agreement.
(3) The Amended and Restated Articles of Incorporation of the Borrower (the "Charter").
(4) The By-Laws of the Borrower and all amendments thereto (the "By-Laws").
I have also examined the originals, or copies of such other corporate records of the Borrower, certificates of public officials and of officers of the Borrower and agreements, instruments and other documents as I have deemed necessary as a basis for the opinions expressed below. As to questions of fact material to such opinions, I have, when relevant facts were not independently established by me, relied upon certificates of the Borrower or its officers or of public officials. I have assumed the authenticity of all documents submitted to me as originals, the conformity to originals of all documents submitted as certified or photostatic copies and the authenticity of signatures (other than those of the Borrower), and the due execution and
C-1-1
delivery, pursuant to due authorization, of the Credit Agreement by the Lenders and the Agent and the validity and binding effect thereof on such parties. For purposes of my opinions expressed in paragraph 1 below as to existence and good standing, I have relied as of their respective dates on certificates of public officials, copies of which are attached hereto as Exhibit A. Whenever the phrase "to my knowledge" is used in this opinion it refers to my actual knowledge and the actual knowledge of the attorneys who work under my supervision and who were involved in the representation of the Borrower in connection with the transactions contemplated by the Credit Agreement.
I or attorneys working under my supervision are qualified to practice law in the States of North Carolina and Florida, and the opinions expressed herein are limited to the law of the States of North Carolina and Florida, the Federal law of the United States and, in reliance on a certificate issued by the Secretary of State of South Carolina and attached hereto as part of Exhibit A, the laws of the State of South Carolina for purposes of the first sentence of opinion paragraph 1 below.
Based upon the foregoing and upon such investigation as I have deemed necessary, I am of the following opinion:
1. Each of the Borrower and CP&L is a corporation duly organized, validly existing and in good standing under the laws of the State of North Carolina, and CP&L is duly qualified to do business and in good standing in the State of South Carolina. Each of Florida Power and FPC is a corporation duly organized, validly existing and in good standing under the laws of the State of Florida. Progress Capital is a corporation duly organized, validly existing and in good standing under the laws of the State of Florida. The Borrower has the corporate power and authority to enter into the transactions contemplated by the Credit Agreement.
2. The execution, delivery and performance of the Credit Agreement by the Borrower have been duly authorized by all necessary corporate action on the part of the Borrower and the Credit Agreement has been duly executed and delivered by the Borrower.
3. The execution, delivery and performance of the Credit Agreement by the Borrower will not (i) violate the Charter or the By-Laws or any law, rule or regulation applicable to the Borrower (including, without limitation, Regulation X of the Board of Governors of the Federal Reserve System) or (ii) result in a breach of, or constitute a default under, any judgment, decree or order binding on the Borrower, or any indenture, mortgage, contract or other instrument to which it is a party or by which it is bound.
4. No authorization, approval or other action by, and no notice to or filing with any governmental authority or regulatory body is required for the due execution, delivery and performance by the Borrower of the Credit Agreement, other than the SEC Order, which has been duly issued and is in full force and effect.
5. To my knowledge, except as described in the reports and registration statements that the Borrower, CP&L, FPC and Florida Power have filed with the Securities and Exchange
C-1-2
Commission, there are no pending or overtly threatened actions or proceedings against the Borrower or any of such Subsidiaries before any court, governmental agency or arbitrator, that may materially adversely affect the financial condition, operations or properties of the Borrower and its Subsidiaries, taken as a whole.
The opinions set forth above are subject to the qualification that no opinion is expressed herein as to the enforceability of the Credit Agreement or any other document.
The foregoing opinions are solely for your benefit and may not be relied upon by any other Person other than (i) any other Person that may become a Lender under the Credit Agreement after the date hereof and (ii) Hunton & Williams and King & Spalding, in connection with their respective opinions delivered on the date hereof under Section 3.01 of the Credit Agreement.
Very truly yours,
C-1-3
EXHIBIT C-2
FORM OF OPINION OF SPECIAL COUNSEL FOR THE COMPANY
[November 13, 2001]
To each of the Lenders parties to the Credit Agreement referred to below and to Citibank, N.A., as Administrative Agent
Re: Progress Energy, Inc.
Ladies and Gentlemen:
This opinion is furnished to you by us as counsel for Progress Energy, Inc. (the "Borrower") pursuant to Section 3.01(g) of the Credit Agreement, dated as of November 13, 2001 (the "Credit Agreement", the terms defined therein being used herein as therein defined), among Progress Energy, Inc., certain lenders named therein (the "Lenders") and Citibank, N.A., as Administrative Agent for the Lenders.
In connection with the preparation, execution and delivery of the Credit Agreement, we have examined:
(1) The Credit Agreement.
(2) The documents furnished by the Borrower pursuant to Section 3.01 of the Credit Agreement.
(3) The opinion letter of even date herewith, addressed to you by William D. Johnson, General Counsel to the Company and delivered in connection with the transactions contemplated by the Credit Agreement (the "Company Opinion Letter").
We have also examined the originals, or copies of such other corporate records of the Borrower, certificates of public officials and of officers of the Borrower and agreements, instruments and other documents as we have deemed necessary as a basis for the opinions expressed below. As to questions of fact material to such opinions, we have, when relevant facts were not independently established by us, relied upon certificates of the Borrower or its officers or of public officials. We have assumed the authenticity of all documents submitted to us as originals, the conformity to originals of all documents submitted as certified or photostatic copies and the authenticity of the originals (other than those of the Borrower), and the due execution and delivery, pursuant to due authorization, of the Credit Agreement by the Lenders and the
C-2-1
Agent and the validity and binding effect thereof on such parties. Whenever the phrase "to our knowledge" is used in this opinion it refers to the actual knowledge of the attorneys of this firm involved in the representation of the Borrower without independent investigation.
We are qualified to practice law in the States of North Carolina, Florida and New York, and the opinions expressed herein are limited to the law of the States of North Carolina, Florida and New York and the federal law of the United States. To the extent that our opinions expressed herein depend upon opinions expressed in paragraphs 1 through 4 of the Company Opinion Letter, we have relied without independent investigation on the accuracy of the opinions expressed in the Company Opinion Letter, subject to the assumptions, qualifications and limitations set forth in the Company Opinion Letter.
Based upon the foregoing and upon such investigation as we have deemed necessary, we are of the opinion that the Credit Agreement constitutes the legal, valid and binding obligation of the Borrower enforceable against the Borrower in accordance with its terms except as enforcement may be limited or otherwise affected by (a) bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium or other similar laws affecting the rights of creditors generally and (b) principles of equity, whether considered at law or in equity.
The opinion set forth above is subject to the following qualifications:
(a) In addition to the application of equitable principles described above, courts have imposed an obligation on contracting parties to act reasonably and in good faith in the exercise of their contractual rights and remedies, and may also apply public policy considerations in limiting the right of parties seeking to obtain indemnification under circumstances where the conduct of such parties is determined to have constituted negligence.
(b) No opinion is expressed herein as to (i) Section 8.05 of the Credit Agreement, (ii) the enforceability of provisions purporting to grant to a party conclusive rights of determination, (iii) the availability of specific performance or other equitable remedies, (iv) the enforceability of rights to indemnity under federal or state securities laws or (v) the enforceability of waivers by parties of their respective rights and remedies under law.
(c) No opinion is expressed herein as to provisions, if any, in the Credit Agreement, which (A) purport to excuse, release or exculpate a party for liability for or indemnify a party against the consequences of its own acts, (B) purport to make void any act done in contravention thereof, (C) purport to authorize a party to make binding determinations in its sole discretion, (D) relate to the effects of laws which may be enacted in the future, (E) require waivers, consents or amendments to be made only in writing, (F) purport to waive rights of offset or to create rights of set off other than as provided by statute, or (G) purport to permit acceleration of indebtedness and the exercise of remedies by reason of the occurrence of an immaterial breach of the Credit Agreement or any related document. Further, we express no opinion as to the necessity for any Lender, by reason of such Lender's particular circumstances, to qualify to transact business in the State of New York or as to any Lender's liability for taxes in any jurisdiction.
The foregoing opinion is solely for your benefit and may not be relied upon by any other Person other than (i) any other Person that may become a Lender under the Credit Agreement
C-2-2
after the date hereof in accordance with the provisions thereof and (ii) King &
Spalding, in connection with their opinion delivered on the date hereof under
Section 3.01 of the Credit Agreement.
Very truly yours,
C-2-3
EXHIBIT C-3
FORM OF OPINION OF GENERAL COUNSEL TO THE COMPANY UPON
EXTENSION OF THE COMMITMENT TERMINATION DATE
AND EXERCISE OF THE TERM LOAN CONVERSION OPTION
To each of the Lenders parties to the Credit Agreement referred to below and to Citibank, N.A., as Administrative Agent
Re: Progress Energy, Inc.
Ladies and Gentlemen:
In connection with the preparation, execution and delivery of the Credit Agreement, I have examined:
(1) The Credit Agreement.
(2) The documents furnished by the Borrower pursuant to Section 3.01 of the Credit Agreement.
(5) The Amended and Restated Articles of Incorporation of the Borrower (the"Charter").
/2/ For use in connection with the Exercise.
C-3-1
(6) The By-Laws of the Borrower and all amendments thereto (the "By-Laws").
I have also examined the originals, or copies of such other corporate records of the Borrower, certificates of public officials and of officers of the Borrower and agreements, instruments and other documents as I have deemed necessary as a basis for the opinions expressed below. As to questions of fact material to such opinions, I have, when relevant facts were not independently established by me, relied upon certificates of the Borrower or its officers or of public officials. I have assumed the authenticity of all documents submitted to me as originals, the conformity to originals of all documents submitted as certified or photostatic copies and the authenticity of the signatures (other than those of the Borrower), and the due execution and delivery, pursuant to due authorization, of the Credit Agreement by the Lenders and the Administrative Agent and the validity and binding effect thereof on such parties. For purposes of my opinions expressed in paragraph 1 below as to existence and good standing, I have relied as of their respective dates on certificates of public officials, copies of which are attached hereto as Exhibit A. Whenever the phrase "to my knowledge" is used in this opinion it refers to the my actual knowledge and the actual knowledge of the attorneys who work under my supervision and who were involved in the representation of the Borrower in connection with the transactions contemplated by the Credit Agreement.
[We have also reviewed the NCUC Order and the SCPSC Order, each of which is attached hereto.]
I or attorneys working under my supervision are qualified to practice law in the States of North Carolina and Florida, and the opinions expressed herein are limited to the law of the States of North Carolina and Florida, the Federal law of the United States and, in reliance on a certificate issued by the Secretary of State of South Carolina and attached hereto as part of Exhibit A, the laws of the State of South Carolina for purposes of the first sentence of opinion paragraph 1 below.
Based upon the foregoing and upon such investigation as I have deemed necessary, I am of the following opinion:
1. The Borrower is a corporation duly organized, validly existing and in good standing under the laws of the State of North Carolina, and is duly qualified to do business and in good standing in the State of South Carolina.
2. The execution, delivery and performance by the Borrower of the Credit Agreement, [after giving effect to the Extension,]/1/ [after giving effect to the Exercise,]/2/ are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, and do not violate (i) the Charter or the By-Laws or any law, rule or regulation applicable to the Borrower (including, without limitation, Regulation X of the Board of Governors of the Federal Reserve System) or (ii) result in breach of, or constitute a default under, any judgment, decree or order binding on the Borrower, or any indenture, mortgage, contract or other instrument to which it is a party or by which it is bound. The Credit Agreement has been duly executed and delivered on behalf of the Borrower.
/2/ For use in connection with the Exercise.
C-3-2
3. No authorization, approval or other action by, and no notice to or filing with any governmental authority or regulatory body is required for the due execution, delivery and performance, by the Borrower of the Credit Agreement, [after giving effect to the Extension,]/1/ [after giving effect to the Exercise,]/2/ other than the SEC Order, which has been duly issued and is in full force and effect.
4. To my knowledge, except as described in the reports and registration statements that the Borrower has filed with the Securities and Exchange Commission, there are no pending or overtly threatened actions or proceedings against the Borrower or any of the Subsidiaries before any court, governmental agency or arbitrator, that may materially adversely affect the financial condition, operations or properties of the Borrower and its Subsidiaries, taken as a whole.
The opinions set forth above are subject to the qualification that no opinion is expressed herein as to the enforceability of the Credit Agreement or any other document.
The foregoing opinions are solely for your benefit and may not be relied upon by any other Person other than (i) any other Person that may become a Lender under the Credit Agreement after the date hereof and (ii) Hunton & Williams and King & Spalding, in connection with their opinion delivered on the date hereof under Section 3.01 of the Credit Agreement.
Very truly yours,
/2/ For use in connection with the Exercise.
C-3-3
EXHIBIT C-4
FORM OF OPINION OF SPECIAL COUNSEL TO THE COMPANY UPON
EXTENSION OF THE COMMITMENT TERMINATION DATE
AND EXERCISE OF THE TERM LOAN CONVERSION OPTION
To each of the Lenders parties to the Credit Agreement referred to below and to Citibank, N.A., as Administrative Agent
Re: Progress Energy, Inc.
Ladies and Gentlemen:
In connection with the preparation, execution and delivery of the Credit Agreement, we have examined:
(1) The Credit Agreement.
(2) The documents furnished by the Borrower pursuant to Section 3.01 of the Credit Agreement.
/2/ For use in connection with the Exercise.
C-4-1
(5) The opinion letter of even date herewith, addressed to you by [William D. Johnson], General Counsel to the Borrower and delivered in connection with the transactions contemplated by the Credit Agreement (the "Borrower Opinion Letter").
We have also examined the originals, or copies of such other corporate records of the Borrower, certificates of public officials and of officers of the Borrower and agreements, instruments and other documents as we have deemed necessary as a basis for the opinions expressed below. As to questions of fact material to such opinions, we have, when relevant facts were not independently established by us, relied upon certificates of the Borrower or its officers or of public officials. We have assumed the authenticity of all documents submitted to us as originals, the conformity to originals of all documents submitted as certified or photostatic copies and the authenticity of the originals (other than those of the Borrower), and the due execution and delivery, pursuant to due authorization, of the Credit Agreement by the Lenders and the Administrative Agent and the validity and binding effect thereof on such parties. Whenever the phrase "to our knowledge" is used in this opinion it refers to the actual knowledge of the attorneys of this firm involved in the representation of the Borrower without independent investigation.
[We have also reviewed the NCUC Order and the SCPSC Order, each of which is attached hereto.]
We are qualified to practice law in the States of North Carolina, Florida and New York, and the opinions expressed herein are limited to the law of the States of North Carolina, Florida and New York applicable to public utilities and the federal law of the United States. To the extent that our opinions expressed herein depend upon opinions expressed in paragraphs 1 through 4 of the Borrower Opinion Letter, we have relied without independent investigation on the accuracy of the opinions expressed in the Borrower Opinion Letter, subject to the assumptions, qualifications and limitations set forth in the Borrower Opinion Letter.
Based upon the foregoing and upon such investigation as we have deemed necessary, we are of the following opinion the Credit Agreement [after giving effect to the Extension] [after giving effect to the exercise of the Term Loan Conversion Option] constitutes the valid and binding obligation of the Borrower enforceable against the Borrower in accordance with its terms except as enforcement may be limited or otherwise affected by (a) bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium or other similar laws affecting the rights of creditors generally and (b) principles of equity, whether considered at law or in equity.
The opinion set forth above is subject to the following qualifications:
(a) In addition to the application of equitable principles described above, courts have imposed an obligation on contracting parties to act reasonably and in good faith in the exercise of their contractual rights and remedies, and may also apply public policy considerations in limiting the right of parties seeking to obtain indemnification under circumstances where the conduct of such parties is determined to have constituted negligence.
(b) No opinion is expressed herein as to (i) Section 8.05 of the Credit Agreement, (ii) the enforceability of provisions purporting to grant to a party conclusive rights of determination,
C-4-2
(iii) the availability of specific performance or other equitable remedies, (iv) the enforceability of rights to indemnity under federal or state securities laws or (v) the enforceability of waivers by parties of their respective rights and remedies under law.
(c) No opinion is expressed herein as to provisions, if any, in the Credit Agreement, which (A) purport to excuse, release or exculpate a party for liability for or indemnify a party against the consequences of its own acts, (B) purport to make void any act done in contravention thereof, (C) purport to authorize a party to make binding determinations in its sole discretion, (D) relate to the effects of laws which may be enacted in the future, (E) require waivers, consents or amendments to be made only in writing, (F) purport to waive rights of offset or to create rights of set off other than as provided by statute, or (G) purport to permit acceleration of indebtedness and the exercise of remedies by reason of the occurrence of an immaterial breach of the Credit Agreement or any related document. Further, we express no opinion as to the necessity for any Lender, by reason of such Lender's particular circumstances, to qualify to transact business in the State of New York or as to any Lender's liability for taxes in any jurisdiction.
The foregoing opinion is solely for your benefit and may not be relied upon by any other Person other than (i) any other Person that may become a Lender under the Credit Agreement after the date hereof in accordance with the provisions thereof and (ii) King & Spalding, in connection with their opinion delivered on the date hereof under Section 3.01 of the Credit Agreement.
Very truly yours,
C-4-3
EXHIBIT D
FORM OF OPINION OF COUNSEL
TO THE ADMINISTRATIVE AGENT
AND THE ARRANGERS
[DATE]
To Citibank, N.A. ("Citibank"), as Administrative Agent for the Lenders referred to below, and to each of the Arrangers and Lenders parties to the Credit Agreement referred to below
Re: Progress Energy, Inc.
Ladies and Gentlemen:
We have acted as counsel to the Administrative Agent and the Arrangers in connection with the preparation, execution and delivery of the Credit Agreement, dated as of November 13, 2001 (the "Credit Agreement", the terms defined therein being used herein as therein defined), among Progress Energy, Inc., certain Lenders from time to time parties thereto, and Citibank, N.A., as Administrative Agent for the Lenders.
In this connection, we have examined the following documents:
1. a counterpart of the Credit Agreement, executed by the parties thereto;
2. the documents furnished by or on behalf of the Borrower pursuant to subsections (b) through (g) of Section 3.01 of the Credit Agreement, including, without limitation, the opinion of Hunton & Williams (the "Borrower Opinion").
In our examination of the documents referred to above, we have assumed the authenticity of all such documents submitted to us as originals, the genuineness of all signatures, the due authority of the parties executing such documents and the conformity to the originals of all such documents submitted to us as copies. We have also assumed that you have independently evaluated, and are satisfied with, the creditworthiness of the Borrower and the business terms reflected in the Credit Agreement. We have relied, as to factual matters, on the documents we have examined.
To the extent that our opinions expressed below involve conclusions as to matters governed by law other than the law of the State of New York, we have relied upon the Borrower Opinion and have assumed without independent investigation the correctness of the matters set
forth therein, our opinions expressed below being subject to the assumptions, qualifications and limitations set forth in the Borrower Opinion.
Based upon and subject to the foregoing, and subject to the qualifications set forth below, we are of the opinion that the Credit Agreement is the legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms.
Our opinion is subject to the following qualifications:
(a) The enforceability of the Borrower's obligations under the Credit Agreement is subject to the effect of any applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar law affecting creditors' rights generally.
(b) The enforceability of the Borrower's obligations under the Credit Agreement is subject to the effect of general principles of equity, including (without limitation) concepts of materiality, reasonableness, good faith and fair dealing (regardless of whether considered in a proceeding in equity or at law). Such principles of equity are of general application, and, in applying such principles, a court, among other things, might not allow a contracting party to exercise remedies in respect of a default deemed immaterial, or might decline to order an obligor to perform covenants.
(c) We note further that, in addition to the application of equitable principles described above, courts have imposed an obligation on contracting parties to act reasonably and in good faith in the exercise of their contractual rights and remedies, and may also apply public policy considerations in limiting the right of parties seeking to obtain indemnification under circumstances where the conduct of such parties is determined to have constituted negligence.
(d) We express no opinion herein as to (i) the enforceability of Section 8.05 of the Credit Agreement, (ii) the enforceability of provisions purporting to grant to a party conclusive rights of determination, (iii) the availability of specific performance or other equitable remedies, (iv) the enforceability of rights to indemnity under federal or state securities laws, or (v) the enforceability of waivers by parties of their respective rights and remedies under law.
(e) Our opinions expressed above are limited to the law of the State of New York, and we do not express any opinion herein concerning any other law.
The foregoing opinion is solely for your benefit and may not be relied upon by any other person or entity.
Very truly yours,
EXHIBIT E
FORM OF REQUEST FOR EXTENSION OF
THE COMMITMENT TERMINATION DATE
$500,000,000
(364-DAY FACILITY )
CREDIT AGREEMENT
dated as of November 13, 2001
PROGRESS ENERGY, INC.
(Borrower)
AND
THE BANKS LISTED ON THE SIGNATURE PAGES HEREOF
(Banks)
and
CITIBANK, N.A.
(Administrative Agent)
Request for Extension of Commitment Termination Date and Certificate of Representations and Warranties and No Default
I, [______________], [_________________] of Progress Energy, Inc., do
hereby request that the Commitment Termination Date of the Credit Agreement, dated as of November 13, 2001 (the "Credit Agreement", the terms defined therein being used herein as therein defined), among Progress Energy, Inc., certain Lenders from time to time parties thereto, and Citibank, N.A., as Administrative Agent for the Lenders, be extended for an additional 364-day period (hereinafter the "Proposed Extension") pursuant to Section 2.15 of the Credit Agreement and, in connection therewith, hereby certify as follows:
(i) as of the date hereof, the representations and warranties set forth in Section 4.01 (including without limitation those regarding any required approvals of or notices to governmental bodies) of the Credit Agreement are and will be as of the
effective date of the Proposed Extension accurate both before and after giving effect to the Proposed Extension; and
(ii) as of the date hereof, no Event of Default, as defined in Section 6.01 of the Credit Agreement, has occurred, nor has any event occurred, that with the giving of notice or the passage of time or both, would constitute an Event of Default, in either case both before and after giving effect to the Proposed Extension.
Witness my hand this day of , .
------ --------- ----
------------------------
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[________________]
EXHIBIT F
FORM OF REQUEST FOR
TERM LOAN CONVERSION OPTION
$500,000,000
(364-DAY FACILITY)
CREDIT AGREEMENT
dated as of November 13, 2001
PROGRESS ENERGY, INC.
(Borrower)
AND
THE BANKS LISTED ON THE SIGNATURE PAGES HEREOF
(Banks)
and
CITIBANK, N.A.
(Administrative Agent)
Request for Term Loan Conversion Option
and
Certificate of Representations and Warranties and No Default
I, [______________], [_______________] of Progress Energy, Inc., do hereby exercise the Term Loan Conversion Option of the Credit Agreement, dated as of November 13, 2001 (the "Credit Agreement", the terms defined therein being used herein as therein defined), among Progress Energy, Inc., certain Lenders from time to time parties thereto the Banks, and Citibank, N.A., as Administrative Agent for the Lenders, pursuant to Section 2.16 of the Credit Agreement and, in connection therewith, hereby certify as follows:
(i) as of the date hereof, the representations and warranties set forth in Section 4.01 (including without limitation those regarding any required approvals of or notices to governmental bodies) of the Credit Agreement are and will be as of the effective date of the Term Loan Conversion Option accurate both before and after giving effect thereto; and
(ii) as of the date hereof, no Event of Default, as defined in Section 6.01 of the Credit Agreement, has occurred, nor has any event occurred, that with the giving of notice or the passage of time or both, would constitute an Event of Default, in either case both before and after giving effect to the effectiveness of the Term Loan Conversion Option.
Witness my hand this day of , .
------ --------- ----
------------------------
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[________________] Vice President and Treasurer
EXHIBIT G
FORM OF COMPLIANCE CERTIFICATE
[Letterhead of Progress Energy, Inc.]
[Date]
To the Lenders party to the
Credit Agreement referred
to below and to Citibank, N.A.
as Administrative Agent
Ladies and Gentlemen:
This compliance certificate is furnished to you pursuant to Section 5.01(i)(ii) of the Credit Agreement, dated as of November 13, 2001 (the "Credit Agreement"), among Progress Energy, Inc., a North Carolina corporation (the "Borrower"), the banks listed on the signature pages thereof (the "Banks"), and Citibank, N.A. ("Citibank"), as administrative agent (the "Administrative Agent") for the Lenders (as hereinafter defined). Terms defined in the Credit Agreement are used herein as therein defined.
A. Indebtedness as of such date was $ , calculated as follows:
--------
Current Indebtedness: Amount
------
[List all forms of current Debt]
---------------------------------- $
----------------------------------
----------------------------------
---------------------------------- ----------
Total current Indebtedness $
----------
Long-term Indebtedness : Amount
------
[list all forms of long-term Indebtedness ]
---------------------------------- $
----------------------------------
G-1
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----------------------------------
----------------------------------
Total long-term Indebtedness $
----------
Total Indebtedness (current Indebtedness plus long-term $
---- ----------
Indebtedness)
B. Total Capitalization as of such date was $ , calculated as follows:
-----
Consolidated Indebtedness $
Preferred Stock $
Common Stock $
Retained Earnings $
----------
|
2. As of [_______], 2001, and as of the date hereof, no Event of Default and no event that, with the giving of notice or lapse of time or both, will constitute an Event of Default, has occurred and in continuing.
I hereby certify that the calculations set forth in paragraph 1 hereof were
prepared in accordance with generally accepted accounting principles consistent
with those applied in the preparation of the financial statements referred to in
Section 4.01(e) of the Credit Agreement.
Very truly yours,
PROGRESS ENERGY, INC.
Title:
Exhibit 10b(6)
EXECUTION COPY
$450,000,000
(3-YEAR FACILITY)
CREDIT AGREEMENT
Dated as of November 13, 2001
PROGRESS ENERGY, INC.
(Borrower)
and
THE BANKS LISTED ON THE SIGNATURE PAGES HEREOF
(Banks)
and
CITIBANK, N.A.
(Administrative Agent)
J.P. MORGAN SECURITIES INC. and SALOMON SMITH BARNEY INC.
(Joint Lead Arrangers)
JPMORGAN CHASE BANK
(Syndication Agent)
BANK OF AMERICA, N.A.,
THE BANK OF TOKYO-MITSUBISHI TRUST COMPANY,
and
BANK ONE, NA
(Co-Documentation Agents)
TABLE OF CONTENTS
-----------------
Section Page
------- ----
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms............................................1
SECTION 1.02. Computation of Time Periods.....................................11
SECTION 1.03. Accounting Terms................................................11
ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Advances...................................................11
SECTION 2.02. Making the Advances.............................................11
SECTION 2.03. Fees.13
SECTION 2.04. Reduction of the Commitments....................................13
SECTION 2.05. Repayment of Advances...........................................13
SECTION 2.06. Interest on Advances............................................13
SECTION 2.07. Additional Interest on Eurodollar Rate Advances.................14
SECTION 2.08. Interest Rate Determination.....................................14
SECTION 2.09. Voluntary Conversion of Advances................................15
SECTION 2.10. Prepayments of Advances.........................................16
SECTION 2.11. Increased Costs.................................................16
SECTION 2.12. Illegality.17
SECTION 2.13. Payments and Computations.......................................17
SECTION 2.14. Sharing of Payments, Etc........................................18
ARTICLE III CONDITIONS OF LENDING
SECTION 3.01. Conditions Precedent to Closing.................................19
SECTION 3.02. Conditions Precedent to Each Borrowing..........................20
ARTICLE IV REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower..................20
ARTICLE V COVENANTS OF THE COMPANY
SECTION 5.01. Affirmative Covenants...........................................22
SECTION 5.02. Negative Covenants..............................................25
ARTICLE VI EVENTS OF DEFAULT
SECTION 6.01. Events of Default...............................................26
i
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ARTICLE VII THE AGENT
SECTION 7.01. Authorization and Action........................................28
SECTION 7.02. The Agent's Reliance, Etc.......................................28
SECTION 7.03. The Administrative Agent and its Affiliates.....................28
SECTION 7.04. Lender Credit Decision..........................................29
SECTION 7.05. Indemnification.................................................29
SECTION 7.06. Successor Administrative Agent..................................29
ARTICLE VIII MISCELLANEOUS
SECTION 8.01. Amendments, Etc.................................................30
SECTION 8.02. Notices, Etc.30
SECTION 8.03. No Waiver; Remedies.............................................31
SECTION 8.04. Costs, Expenses, Taxes and Indemnification......................31
SECTION 8.05. Right of Set-off................................................34
SECTION 8.06. Binding Effect..................................................34
SECTION 8.07. Assignments and Participations..................................34
SECTION 8.08. Governing Law...................................................38
SECTION 8.09. WAIVER OF JURY TRIAL............................................38
SECTION 8.10. Execution in Counterparts.......................................38
SECTION 8.11. Severability....................................................38
SECTION 8.12. Headings........................................................39
SECTION 8.13. Entire Agreement................................................39
SCHEDULES
---------
Schedule I - List of Commitments and Applicable Lending Offices
Schedule II - Permitted Existing Indebtedness
EXHIBITS
--------
A-1 Form of Notice of Borrowing
A-2 Form of Notice of Conversion
B Form of Assignment and Acceptance
C-1 Form of Opinion of General Counsel to the Borrower
C-2 Form of Opinion of Special Counsel for the Borrower
D Form of Opinion of Counsel for the Administrative Agent and the Arrangers
E Form of Compliance Certificate
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CREDIT AGREEMENT
Dated as of November 13, 2001
This CREDIT AGREEMENT (this "Agreement") is made by PROGRESS ENERGY, INC., a North Carolina corporation (the "Borrower"), the banks listed on the signature pages hereof (the "Banks") and CITIBANK, N.A. ("Citibank"), as administrative agent (the "Administrative Agent") for the Lenders (as hereinafter defined).
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms.
As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):
"Administrative Agent" has the meaning specified in the introductory paragraph of this Agreement.
"Advance" means an advance by a Lender to the Borrower as part of a Borrowing and refers to a Base Rate Advance or a Eurodollar Rate Advance, each of which shall be a "Type" of Advance.
"Affiliate" means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by, or is under common control with such Person or is a director or officer of such Person.
"Applicable Lending Office" means, with respect to each Lender, (i) such Lender's Domestic Lending Office in the case of a Base Rate Advance, or (ii) such Lender's Eurodollar Lending Office, in the case of a Eurodollar Rate Advance.
"Applicable Margin" means for each Type of Advance at all times during which any Applicable Rating Level set forth below is in effect, the interest rate per annum set forth below next to such Applicable Rating Level :
----------------------------------------------------------
Applicable Margin Applicable Margin
Applicable for Eurodollar for Base Rate
Rating Level Rate Advances Advances
----------------------------------------------------------
1 0.275% 0%
----------------------------------------------------------
2 0.390% 0%
----------------------------------------------------------
3 0.625% 0%
----------------------------------------------------------
4 0.725% 0%
----------------------------------------------------------
5 0.925% 0%
----------------------------------------------------------
6 1.250% 0%
----------------------------------------------------------
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provided, that
(i) the Applicable Margins for Eurodollar Rate Advances set forth above for each Applicable Rating Level shall increase at any time the aggregate principal amount of Advances outstanding is greater than 33% of the aggregate Commitments by 0.125% at Levels 1, 2, 3, 4 and 5 and by 0.250% at Level 6,
(ii) the Applicable Margins set forth above for each Applicable Rating Level shall increase upon the occurrence and during the continuance of any Event of Default by 2.0%, and
(iii) any change in the Applicable Margin resulting from a change in the Applicable Rating Level shall become effective upon the date of announcement of a change in the Moody's Rating or the S&P Rating that results in a change in the Applicable Rating Level.
"Applicable Rating Level" at any time shall be determined in accordance with the then-applicable S&P Rating and the then-applicable Moody's Rating as follows:
---------------------------------------------------------- S&P Rating/Moody's Rating Applicable Rating Level ---------------------------------------------------------- A or higher or A2 or 1 higher ---------------------------------------------------------- A- or A3 2 ---------------------------------------------------------- BBB+ or Baa1 3 ---------------------------------------------------------- BBB or Baa2 4 ---------------------------------------------------------- BBB- and Baa3 5 ---------------------------------------------------------- lower than BBB- and Baa3 6 or unrated ---------------------------------------------------------- |
In the event that the S&P Rating and the Moody's Rating are not at the same Applicable Rating Level but differ by only one Applicable Rating Level, then the higher of the two ratings shall determine the Applicable Rating Level. In the event that the S&P Rating and the Moody's Rating differ by more than one Applicable Rating Level, then the Applicable Rating Level immediately below the higher of the two ratings shall be the Applicable Rating Level. The Applicable Rating Level shall be redetermined on the date of announcement of a change in the S&P Rating or the Moody's Rating.
"Assignment and Acceptance" means an assignment and acceptance entered into by a Lender and an Eligible Assignee, and accepted by the Administrative Agent, in substantially the form of Exhibit B hereto.
"Banks" has the meaning specified in the introductory paragraph of this Agreement.
"Base Rate" means, for any Interest Period or any other period, a fluctuating interest rate per annum as shall be in effect from time to time, which rate per annum shall at all times be equal to the higher from time to time of:
(i) the rate of interest announced publicly by Citibank in New York, New York, from time to time, as Citibank's base rate; and
(ii) 1/2 of one percent per annum above the Federal Funds Rate in effect from time to time.
"Base Rate Advance" means an Advance that bears interest as provided in
Section 2.06(a).
"Borrower" has the meaning specified in the introductory paragraph of this Agreement.
"Borrowing" means a borrowing consisting of simultaneous Advances of the same Type made by each of the Lenders pursuant to Section 2.01 or Converted pursuant to Section 2.08 or 2.09.
"Business Day" means a day of the year on which banks are not required or authorized to close at the principal office of any Lender and, if the applicable Business Day relates to any Eurodollar Rate Advances, on which dealings are carried on in the London interbank market.
"Change of Control" means the occurrence, after the date of this Agreement, of (i) any Person or "group" (within the meaning of Rule 13(d) or 14(d) of the Securities and Exchange Commission under the Exchange Act), directly or indirectly, acquiring beneficial ownership of or control over securities of the Borrower (or other securities convertible into such securities) representing 30% or more of the combined voting power of all securities of the Borrower entitled to vote in the election of directors.
"Citibank" has the meaning specified in the introductory paragraph of this Agreement.
"Commitment" has the meaning specified in Section 2.01.
"Consolidated" refers to the consolidation of the accounts of the Borrower and its subsidiaries in accordance with generally accepted accounting principles, including principles of consolidation, consistent with those applied in the preparation of the financial statements referred to in Section 4.01(e).
"Convert", "Conversion" and "Converted" each refers to a conversion of Advances of one Type into Advances of another Type, or the selection of a new, or the renewal of the same, Interest Period for Eurodollar Rate Advances, pursuant to Section 2.08(g) or 2.09.
"CP&L" means the Carolina Power & Light Company.
"Domestic Lending Office" means, with respect to any Lender, the office of such Lender specified as its "Domestic Lending Office" opposite its name on Schedule I hereto or in the Assignment and Acceptance pursuant to which it became a Lender, or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Administrative Agent.
"Eligible Assignee" means (i) any other Lender or any Affiliate of a Lender meeting the criteria set forth in clause (ii) hereof and (ii) (A) any other commercial bank organized under the laws of the United States, or any State thereof, and having a combined capital and surplus of at least $250,000,000 (as established in its most recent report of condition to its primary regulator), (B) a savings and loan association or savings bank organized under the laws of the United States, or any State thereof, and having a combined capital and surplus of at least $250,000,000 (as established in its most recent report of condition to its primary regulator), (C) a commercial bank organized under the laws of any other country that is a member of the OECD or has concluded special lending arrangements with the International Monetary Fund associated with its General Arrangements to Borrow of the Cayman Islands, or a political subdivision of any such country, and having a combined capital and surplus of at least $250,000,000 (as established in its most recent report of condition to its primary regulator); provided that such bank is acting through a branch or agency located in the United States or in the country in which it is organized or another country that is described in this clause (C), (D) the central bank of any country that is a member of the OECD, or (E) a finance company, insurance company or other financial institution or fund (whether a corporation, partnership or other entity) that is engaged in making, purchasing or otherwise investing in commercial loans in the ordinary course of its business, whose outstanding unsecured indebtedness is rated AA- or better by S&P or Aa3 or better by Moody's (or an equivalent rating by another nationally-recognized credit rating agency of similar standing if neither of such corporations is then in the business of rating unsecured indebtedness).
"Environmental Laws" means any federal, state or local laws, ordinances or codes, rules, orders, or regulations relating to pollution or protection of the environment, including, without limitation, laws relating to hazardous substances, laws relating to reclamation of land and waterways and laws relating to emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes into the environment (including, without limitation, ambient air, surface water, ground water, land surface or subsurface strata) or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollution, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder.
"Eurocurrency Liabilities" has the meaning assigned to that term in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time.
"Eurodollar Lending Office" means, with respect to each Lender, the office of such Lender specified as its "Eurodollar Lending Office" opposite its name on Schedule I hereto or in the Assignment and Acceptance pursuant to which it became a Lender (or, if no such office is specified, its Domestic Lending Office), or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Administrative Agent.
"Eurodollar Rate" means, for the Interest Period for each Eurodollar Rate Advance comprising part of the same Borrowing an interest rate per annum equal to the average (rounded upward to the nearest whole multiple of 1/8 of 1% per annum, if such average is not such a multiple) of the rates per annum at which deposits in U.S. dollars are offered by the principal office of each of the Reference Banks in London, England to prime banks in the London Interbank market at 11:00 A.M. (London time) two Business Days before the first day of such Interest Period for a period equal to such Interest Period and in an amount substantially equal to the amount of such Eurodollar Rate Advance comprising part of such Borrowing to be outstanding during such Interest Period from such Reference Bank. The Eurodollar Rate for the Interest Period for each Eurodollar Rate Advance comprising part of the same Borrowing shall be determined by the Administrative Agent on the basis of the applicable rates furnished to and received by the Administrative Agent from the Reference Banks two Business Days before the first day of such Interest Period, subject, however, to the provisions of Section 2.08.
"Eurodollar Rate Advance" means an Advance that bears interest as provided in Section 2.06(b).
"Eurodollar Rate Reserve Percentage" of any Lender for the Interest Period for any Eurodollar Rate Advance means the reserve percentage applicable during such Interest Period (or if more than one such percentage shall be so applicable, the daily average of such percentages for those days in such Interest Period during which any such percentage shall be so applicable) under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for such Lender with respect to liabilities or assets consisting of or including Eurocurrency Liabilities having a term equal to such Interest Period.
"Events of Default" has the meaning assigned to that term in Section 6.01.
"Exchange Act" means the Securities Exchange Act of 1934, and the regulations promulgated thereunder, in each case as amended and in effect from time to time.
"Existing Credit Facilities" means, collectively, (i) the $3,750,000,000 364-Day Credit Agreement, dated as of November 15, 2000, as amended to the date hereof, among the Borrower, the lenders named therein, and Citibank, N.A., as agent for said lenders, (ii) the Fourth Amended and Restated Credit Agreement A, dated as of November 14, 2000, among Progress Capital, the
Lenders identified therein and The Chase Manhattan Bank, as Agent, (iii) the Third Amended and Restated Credit Agreement B, dated as of November 17, 1998, as amended by a First Amendment, dated as of November 14, 2000, among Progress Capital, the Lenders identified therein and The Chase Manhattan Bank, as Agent, and (iv) the Credit Agreement C, dated as of July 13, 2000, as amended by a First Amendment, dated as of November 14, 2000, among Progress Capital, the Lenders identified therein and The Chase Manhattan Bank, as Agent.
"Facility Fee Percentage" means, at all times during which any Applicable Rating Level set forth below is in effect, the rate per annum set forth below next to such Applicable Rating Level:
--------------------------------
Applicable Facility Fee
Rating Level Percentage
--------------------------------
1 0.100%
--------------------------------
2 0.110%
--------------------------------
3 0.125%
--------------------------------
4 0.150%
--------------------------------
5 0.200%
--------------------------------
6 0.250%
--------------------------------
|
provided, that a change in the Facility Fee Percentage resulting from a change in the Applicable Rating Level shall become effective upon the date of announcement of a change in the Moody's Rating or the S&P Rating that results in a change in the Applicable Rating Level.
"Federal Funds Rate" means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.
"First Mortgage Bonds" means those bonds issued from time to time by CP&L pursuant to the Mortgage.
"Florida Power" means Florida Power Corporation.
"Florida Power Mortgage" means the Indenture, dated as of January 1, 1944, between Florida Power, Guaranty Trust Company of New York and the Florida National Bank of Jacksonville, as modified, amended or supplemented from time to time.
"Florida Power Mortgage Bonds" means those bonds issued from time to time by Florida Power pursuant to the Florida Power Mortgage.
"FPC" means Florida Progress Corporation.
"GenCo Financing" means up to $500,000,000 original principal amount of Indebtedness incurred by or created for the benefit of Progress GenCo Ventures, LLC, an indirect wholly owned Subsidiary of the Borrower, secured by liens and security interests on the property of Progress Ventures, Inc. and its Subsidiaries, including Progress GenCo Ventures, LLC, as to which neither the Borrower nor any Subsidiary of the Borrower that is not also a Subsidiary of Progress Ventures, Inc. shall be liable.
"Guaranty" of any Person means any obligation, contingent or otherwise, of such Person (i) to pay any Liability of any other Person or to otherwise protect, or having the practical effect of protecting, the holder of any such Liability against loss (whether such obligation arises by virtue of such Person being a partner of a partnership or participant in a joint venture or by agreement to pay, to keep well, to purchase assets, goods, securities or services or to take or pay, or otherwise) or (ii) incurred in connection with the issuance by a third Person of a Guaranty of any Liability of any other Person (whether such obligation arises by agreement to reimburse or indemnify such third Person or otherwise). The word "Guarantee" when used as a verb has the correlative meaning.
"Indebtedness" of any Person means (i) any obligation of such Person for
borrowed money, (ii) any obligation of such Person evidenced by a bond,
debenture, note or other similar instrument, (iii) any obligation of such Person
to pay the deferred purchase price of property or services, except a trade
account payable that arises in the ordinary course of business but only if and
so long as the same is payable on customary trade terms, (iv) any obligation of
such Person as lessee under a capital lease, (v) any Mandatorily Redeemable
Stock of such Person (the amount of such Mandatorily Redeemable Stock to be
determined for this purpose as the higher of the liquidation preference and the
amount payable upon redemption of such Mandatorily Redeemable Stock), (vi) any
obligation of such Person to purchase securities or other property that arises
out of or in connection with the sale of the same or substantially similar
securities or property, (vii) any non-contingent obligation of such Person to
reimburse any other Person in respect of amounts paid under a letter of credit
or other Guaranty issued by such other Person to the extent that such
reimbursement obligation remains outstanding after it becomes non-contingent,
(viii) any Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by) a
mortgage, lien, pledge, charge or other encumbrance on any asset of such Person,
(ix) any Liabilities in respect of unfunded vested benefits under plans covered
by Title IV of ERISA, (x) any Synthetic Lease Obligations of such Person and
(xi) any Indebtedness of others Guaranteed by such Person.
"Interest Period" means, for each Eurodollar Rate Advance comprising part of the same Borrowing, the period commencing on the date of such Advance or the date of the Conversion of any Advance into such an Advance and ending on the last day of the period selected by the Borrower pursuant to the provisions below and, thereafter, each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of the period selected by the Borrower pursuant to the provisions below. The duration of each such Interest Period shall be one, two, three or six months, as the Borrower may, in the Notice of Borrowing given by the Borrower to the Administrative Agent pursuant to Section 2.02, select; provided, however, that:
(i) the Borrower may not select any Interest Period that ends after the Termination Date;
(ii) Interest Periods commencing on the same date for Advances comprising the same Borrowing shall be of the same duration; and
(iii) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day; provided that if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the next preceding Business Day.
The Administrative Agent shall promptly advise each Lender by or telecopy transmission of each Interest Period so selected by the Borrower.
"Lenders" means the Lenders listed on the signature pages hereof and each Eligible Assignee that shall become a party hereto pursuant to Section 8.07.
"Liability" of any Person means any indebtedness, liability or obligation of or binding upon, such Person or any of its assets, of any kind, nature or description, direct or indirect, absolute or contingent, due or not due, contractual or tortious, liquidated or unliquidated, whether arising under contract, applicable law, or otherwise, whether now existing or hereafter arising.
"Majority Lenders" means at any time Lenders holding at least 66-2/3% of the aggregate principal amount of the Advances then outstanding, or, if no such principal amount is then outstanding, Lenders having at least 66-2/3% of the Commitments (provided that, for purposes hereof, neither the Borrower, nor any of its Affiliates, if a Lender, shall be included in (i) the Lenders holding such amount of the Advances or having such amount of the Commitments or (ii) determining the aggregate unpaid principal amount of the Advances or the total Commitments).
"Mandatorily Redeemable Stock" means, with respect to any Person, any share of such Person's capital stock to the extent that it is (i) redeemable, payable or required to be purchased or otherwise retired or extinguished, or convertible into any Indebtedness or other Liability of such Person, (A) at a fixed or determinable date, whether by operation of a sinking fund or otherwise, (B) at the option of any Person other than such Person or (C) upon the occurrence of a condition not solely within the control of such Person, such as a redemption required to be made out of future earnings or (ii) convertible into Mandatorily Redeemable Stock.
"Moody's" means Moody's Investors Service, Inc., or any successor thereto.
"Moody's Rating" means, on any date of determination, the debt rating most recently announced by Moody's with respect to the Borrower's long-term senior unsecured non-credit-enhanced debt.
"Mortgage" means the Mortgage and Deed of Trust, dated as of May 1, 1940, from CP&L to The Bank of New York (formerly Irving Trust Company) and to Frederick G. Herbst (W.T. Cunningham, successor), as modified, amended or supplemented from time to time.
"Multiemployer Plan" means a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA.
"Notice of Borrowing" has the meaning specified in Section 2.02(a).
"Notice of Conversion" has the meaning specified in Section 2.09.
"OECD" means the Organization for Economic Cooperation and Development.
"Person" means an individual, partnership, corporation (including a business trust), limited liability company, joint stock company, trust, unincorporated association, joint venture or other entity, or a foreign state or political subdivision thereof or any agency of such state or subdivision.
"Plan" means an employee benefit plan (other than a Multiemployer Plan) maintained for employees of the Borrower or any of its Affiliates and covered by Title IV of ERISA.
"Progress Capital" means Progress Capital Holdings, Inc.
"Portfolio Transaction" means the sale of Florida Progress's and CP&L's portfolio of affordable housing investments.
"Rail Transaction" means the sale of substantially all of the assets or capital stock of Progress Rail Services, Inc.
"Reference Banks" means Citibank and JPMorgan Chase Bank.
"Register" has the meaning specified in Section 8.07(c).
"Responsible Officer" means the President, any Vice President, the Chief Financial Officer, the Treasurer, the Controller or any Assistant Treasurer of the Borrower the signatures of whom, in each case, have been certified to the Administrative Agent and each other Lender pursuant to Section 3.01(d), or in a certificate delivered to the Administrative Agent replacing or amending such certificate. Each Lender may conclusively rely on each certificate so delivered until it shall have received a copy of a certificate from the Secretary or an Assistant Secretary of the Borrower amending, canceling or replacing such certificate.
"S&P" means Standard & Poor's Ratings Group or any successor thereto.
"S&P Rating" means, on any date of determination, the debt rating most recently announced by S&P with respect to the Borrower's long-term senior unsecured non-credit-enhanced debt.
"SEC Order" means Order Nos. 35-27440 and 70-9909 of the Securities and Exchange Commission issued September 20, 2001.
"Significant Subsidiary" means CP&L, FPC, Florida Power, Progress Capital and any other Subsidiary of the Borrower that at any time constitutes a "significant subsidiary", as such
term is defined in Regulation S-X of the Securities and Exchange Commission as in effect on the date hereof (17 C.F.R. Part 210).
"Subsidiary" means, with respect to any Person, any corporation or unincorporated entity of which more than 50% of the outstanding capital stock (or comparable interest) having ordinary voting power (irrespective of whether at the time capital stock (or comparable interest) of any other class or classes of such corporation or entity shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned by said Person (whether directly or through one or more other Subsidiaries).
"Synthetic Lease" means a lease transaction under which the parties intend
that (i) the lease will be treated as an "operating lease" by the lessee
pursuant to Statement of Financial Accounting Standards No. 13, as amended, and
(ii) the lessee will be entitled to various tax and other benefits ordinarily
available to owners (as opposed to lessees) of like property.
"Synthetic Lease Obligations" means, with respect to any Person, the sum of
(i) all remaining rental obligations of such Person as lessee under Synthetic
Leases that are attributable to principal and, without duplication, (ii) all
rental and purchase price payment obligations of such Person under such
Synthetic Leases assuming such Person exercises the option to purchase the lease
property at the end of the lease term.
"Termination Date" means, with respect to a Lender, the earlier to occur of
(i) November 13, 2004 and (ii) the date of termination in whole of the
Commitments pursuant to Section 2.04 or 6.01.
"Termination Event" means (i) a Reportable Event described in Section 4043 of ERISA and the regulations issued thereunder (other than a Reportable Event not subject to the provision for 30-day notice to the Pension Benefit Guaranty Corporation under such regulations), or (ii) the withdrawal of the Borrower or any of its Affiliates from a Plan during a plan year in which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA, or (iii) the filing of a notice of intent to terminate a Plan or the treatment of a Plan amendment as a termination under Section 4041 of ERISA, or (iv) the institution of proceedings to terminate a Plan by the Pension Benefit Guaranty Corporation, or (v) any other event or condition that might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan.
"Total Capitalization" means the sum of the value of the common stock, retained earnings, and preferred and preference stock of the Borrower (in each case, determined in accordance with generally accepted accounting principles consistent with those applied in the preparation of the financial statements referred to in Section 4.01(e)), plus Consolidated Indebtedness of the Borrower.
SECTION 1.02. Computation of Time Periods.
In this Agreement in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each means "to but excluding".
SECTION 1.03. Accounting Terms.
All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles consistent with those applied in the preparation of the financial statements referred to in Section 4.01(e).
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Advances.
(a) Each Lender severally agrees, on the terms and conditions hereinafter set forth, to make Advances to the Borrower from time to time on any Business Day during the period from the date hereof to and including the Termination Date, in an aggregate amount outstanding not to exceed at any time the amount set forth opposite such Lender's name on Schedule I hereto or, if such Lender has entered into any Assignment and Acceptance, set forth for such Lender in the Register maintained by the Administrative Agent pursuant to Section 8.07(c), as such amount may be reduced pursuant to Section 2.04 (such Lender's "Commitment"). Each Borrowing shall be in an aggregate amount not less than $10,000,000 or an integral multiple of $1,000,000 in excess thereof and shall consist of Advances of the same Type made on the same day by the Lenders ratably according to their respective Commitments. Until the Termination Date, within the limits of each Lender's Commitment, the Borrower may from time to time borrow, repay pursuant to Section 2.05 or prepay pursuant to Section 2.10(b) and reborrow under this Section 2.01.
(b) Any Lender may request that any Advances made by it be evidenced by one or more promissory notes. In such event, the Borrower shall prepare, execute and deliver to such Lender one or more promissory notes payable to the order of such Lender (or, if requested by such Lender, to such Lender and its assignees) and in a form approved by the Administrative Agent.
SECTION 2.02. Making the Advances.
(a) Each Borrowing shall be made on notice, given not later than 10:00 A.M. (New York City time) on the day of such proposed Borrowing, in the case of a Borrowing comprised of Base Rate Advances, or on the third Business Day prior to the date of the proposed Borrowing, in the case of a Borrowing comprised of Eurodollar Rate Advances, by the Borrower to the Administrative Agent, which shall give to each Lender prompt notice thereof by telecopier. Each such notice of a Borrowing (a "Notice of Borrowing") shall be by telecopier, confirmed promptly in writing, in substantially the form of Exhibit A-1 hereto, specifying therein the requested (i) date of such Borrowing, (ii) Type of Advances comprising such Borrowing, (iii) aggregate amount of such Borrowing, and (iv) in the case of a Borrowing comprised of
Eurodollar Rate Advances, the Interest Period for each such Advance. In the case of a proposed Borrowing comprised of Eurodollar Rate Advances, the Administrative Agent shall promptly notify each Lender of the applicable interest rate under Section 2.06(b). Each Lender shall, before 12:00 P.M. (New York City time) on the date of such Borrowing, make available for the account of its Applicable Lending Office to the Administrative Agent at its address referred to in Section 8.02, in same day funds, such Lender's ratable portion of such Borrowing. After the Administrative Agent's receipt of such funds and upon fulfillment of the applicable conditions set forth in Article III, the Administrative Agent will make such funds available to the Borrower at the Administrative Agent's aforesaid address.
(b) Each Notice of Borrowing shall be irrevocable and binding on the Borrower and, in respect of any Borrowing comprised of Eurodollar Rate Advances, the Borrower shall indemnify each Lender against any loss or expense incurred by such Lender as a result of any failure by the Borrower to fulfill on or before the date specified for such Borrowing the applicable conditions set forth in Article III, including, without limitation, any loss (including loss of anticipated profits) or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the Advance to be made by such Lender as part of such Borrowing when such Advance, as a result of such failure, is not made on such date.
(c) Unless the Administrative Agent shall have received notice from a
Lender prior to the date of any Borrowing that such Lender will not make
available to the Administrative Agent such Lender's ratable portion of such
Borrowing, the Administrative Agent may assume that such Lender has made such
portion available to the Administrative Agent on the date of such Borrowing in
accordance with subsection (a) of this Section 2.02 and the Administrative Agent
may, in reliance upon such assumption, make available to the Borrower on such
date a corresponding amount. If and to the extent such Lender shall not have so
made such ratable portion available to the Administrative Agent, such Lender and
the Borrower severally agree to repay to the Administrative Agent (without
duplication), forthwith on demand, such corresponding amount, together with
interest thereon for each day from the date such amount is made available to the
Borrower until the date such amount is repaid to the Administrative Agent, at
(x) in the case of the Borrower, the interest rate applicable at the time to
Advances comprising such Borrowing and (y) in the case of such Lender, the
Federal Funds Rate. If such Lender shall repay to the Administrative Agent such
corresponding amount, such amount so repaid shall constitute such Lender's
Advance as part of such Borrowing for purposes of this Agreement.
(d) The failure of any Lender to make the Advance to be made by it as part of any Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its Advance on the date of such Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Advance to be made by such other Lender on the date of any Borrowing.
(e) If, for any reason, a Borrowing is not made on the date specified in any Notice of Borrowing, the Administrative Agent hereby agrees to repay to each Lender the amount, if any, that such Lender has made available to the Administrative Agent as such Lender's ratable portion of such Borrowing, together with interest thereon for each day from the date such amount is made available to the Administrative Agent until the date such amount is repaid to such Lender, at the Federal Funds Rate.
SECTION 2.03. Fees.
(a) The Borrower agrees to pay to the Administrative Agent for the account of each Lender a facility fee on each Lender's Commitment, irrespective of usage, from the date hereof, in the case of each Bank, and from the effective date specified in the Assignment and Acceptance pursuant to which it became a Lender, in the case of each other Lender, until the Termination Date at the rate per annum equal to the Facility Fee Percentage from time to time in effect. Such fee shall be calculated on the basis of actual number of days elapsed in a year of 365 or 366 days. Such fee shall be payable quarterly in arrears on the last day of each March, June, September and December during the term of such Lender's Commitment, and on the Termination Date.
(b) The Borrower agrees to pay to the Administrative Agent an agency fee in such amounts and payable at such times, as shall be agreed to between them in writing.
SECTION 2.04. Reduction of the Commitments.
The Borrower shall have the right, upon at least three Business Days' notice to the Administrative Agent, irrevocably to terminate in whole or reduce ratably in part the unused portions of the respective Commitments of the Lenders; provided that the aggregate amount of the Commitments of the Lenders shall not be reduced to an amount that is less than the aggregate principal amount of the Advances then outstanding; and provided, further, that each partial reduction of Commitments shall be in the aggregate amount of $10,000,000 or an integral multiple of $1,000,000 in excess thereof. Once terminated or reduced, the Commitments may not be reinstated.
SECTION 2.05. Repayment of Advances.
The Borrower shall repay the principal amount of each Advance made by each Lender on the Termination Date.
SECTION 2.06. Interest on Advances.
The Borrower shall pay interest on the unpaid principal amount of each Advance made by each Lender from the date of such Advance until such principal amount shall be paid in full, at the following rates per annum:
(a) Base Rate Advances. If such Advance is a Base Rate Advance, a rate per annum equal at all times to the Base Rate in effect from time to time, plus the Applicable Margin, payable quarterly in arrears on the last day of each March, June, September and December and on the date such Base Rate Advance shall be paid in full; provided, however, that if and for so long as an Event of Default has occurred and is continuing, interest on the unpaid principal amount of each Base Rate Advance shall be payable on demand.
(b) Eurodollar Rate Advances. If such Advance is a Eurodollar Rate Advance, a rate per annum equal at all times during each Interest Period for such Advance to the sum of the Eurodollar Rate for such Interest Period, plus the Applicable Margin for such Eurodollar Rate Advance in effect from time to time, payable on the last day of such Interest Period and, if such Interest Period for such Advance has a duration of more than three months, on each day that
occurs during such Interest Period every three months from the first day of such Interest Period; provided, however, that if and for so long as an Event of Default has occurred and is continuing, interest on the unpaid amount of each Eurodollar Rate Advance shall be payable on demand.
SECTION 2.07. Additional Interest on Eurodollar Rate Advances.
The Borrower shall pay to each Lender additional interest on the unpaid principal amount of each Eurodollar Rate Advance of such Lender, from the date of such Advance until such principal amount is paid in full, at an interest rate per annum equal at all times to the remainder obtained by subtracting (i) the Eurodollar Rate for the Interest Period for such Advance from (ii) the rate obtained by dividing such Eurodollar Rate by a percentage equal to 100% minus the Eurodollar Rate Reserve Percentage of such Lender for such Interest Period, payable on each date on which interest is payable on such Advance. All claims for such additional interest shall be submitted by such Lender to the Borrower (with a copy to the Administrative Agent) as soon as is reasonably possible and in all events within 90 days after the first day of such Interest Period; provided, however, that if a claim is not submitted to the Borrower within such 90-day period, such Lender shall thereby waive its claim to such additional interest incurred during such 90-day period but not to any such additional interest incurred thereafter. A certificate as to the amount of such additional interest, submitted to the Borrower (with a copy to the Administrative Agent) by such Lender, shall be conclusive and binding for all purposes, absent manifest error.
SECTION 2.08. Interest Rate Determination.
(a) Each Reference Bank agrees to furnish to the Administrative Agent timely information for the purpose of determining the Eurodollar Rate. If any one or more of the Reference Banks shall not furnish such timely information to the Administrative Agent for determination of any such interest rate, the Administrative Agent shall determine such interest rate on the basis of timely information furnished by the remaining Reference Banks.
(b) The Administrative Agent shall give prompt notice to the Borrower and the Lenders of the applicable interest rate determined by the Administrative Agent for purposes of Section 2.06(a) or (b), and the applicable rate, if any, furnished by each Reference Bank for determining the applicable interest rate under Section 2.06(b).
(c) If fewer than two Reference Banks furnish timely information to the Administrative Agent for determining the Eurodollar Rate for any Eurodollar Rate Advances,
(i) the Administrative Agent shall forthwith notify the Borrower and the Lenders that the interest rate cannot be determined for such Eurodollar Rate Advances,
(ii) each such Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance (or if such Advance is then a Base Rate Advance, will continue as a Base Rate Advance), and
(iii) the obligation of the Lenders to make, or to Convert Advances into, Eurodollar Rate Advances shall be suspended until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist.
(d) If, with respect to any Eurodollar Rate Advances, the Majority Lenders notify the Administrative Agent that the Eurodollar Rate for any Interest Period for such Advances will not adequately reflect the cost to such Majority Lenders of making, funding or maintaining their respective Eurodollar Rate Advances for such Interest Period, the Administrative Agent shall forthwith so notify the Borrower and the Lenders, whereupon
(i) each Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance, and
(ii) the obligation of the Lenders to make, or to Convert Advances into, Eurodollar Rate Advances shall be suspended until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist.
(e) If the Borrower shall fail to select the duration of any Interest Period for any Eurodollar Rate Advances in accordance with the provisions contained in the definition of "Interest Period" in Section 1.01, the Administrative Agent will forthwith so notify the Borrower and the Lenders and such Advances will automatically, on the last day of the then existing Interest Period therefor, Convert into Base Rate Advances.
(f) On the date on which the aggregate unpaid principal amount of Advances comprising any Borrowing shall be reduced, by prepayment or otherwise, to less than $20,000,000, such Advances shall, if they are Advances of a Type other than Base Rate Advances, automatically Convert into Base Rate Advances, and on and after such date the right of the Borrower to Convert such Advances into Advances of a Type other than Base Rate Advances shall terminate; provided, however, that if and so long as each such Advance shall be of the same Type and have the same Interest Period as Advances comprising another Borrowing or other Borrowings, and the aggregate unpaid principal amount of all such Advances shall equal or exceed $20,000,000, the Borrower shall have the right to continue all such Advances as, or to Convert all such Advances into, Advances of such Type having such Interest Period.
(g) If an Event of Default has occurred and is continuing, (i) each Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance and (ii) the obligation of the Lenders to make, or to Convert Advances into, Eurodollar Rate Advances shall be suspended.
SECTION 2.09. Voluntary Conversion of Advances.
The Borrower may, on any Business Day prior to the Termination Date, upon notice given to the Administrative Agent not later than 10:00 A.M. (New York City time) on the third Business Day prior to the date of the proposed Conversion, in the case of any proposed Conversion into Eurodollar Rate Advances, and on the date of the proposed Conversion, in the case of any proposed Conversion into Base Rate Advances, and subject to the provisions of Sections 2.08 and 2.12, Convert all Advances of one Type comprising the same Borrowing into Advances of another Type; provided, however, that any Conversion of any Eurodollar Rate Advances into Advances of another Type shall be made on, and only on, the last day of an Interest Period for such Eurodollar Rate Advances, except as otherwise provided in Section 2.12.
Each such notice of a Conversion (a "Notice of Conversion") shall be by telecopier, confirmed promptly in writing, in substantially the form of Exhibit A-2 hereto and shall, within the restrictions specified above, specify (i) the date of such Conversion, (ii) the aggregate amount of, Type of, and Interest Periods applicable to the Advances to be Converted, (iii) the Type of Advance to which such Advances (or portions thereof) are proposed to be Converted, and (iv) if such Conversion is into or with respect to Eurodollar Rate Advances, the duration of the Interest Period for each such Advance.
SECTION 2.10. Prepayments of Advances.
(a) The Borrower shall have no right to prepay any principal amount of any Advances other than as provided in subsection (b) below.
(b) The Borrower may, upon notice given to the Administrative Agent at
least two Business Days prior to the proposed prepayment, in the case of any
Eurodollar Rate Advance, and on the date of the proposed prepayment, in the case
of any Base Rate Advance, and if such notice is given the Borrower shall, prepay
the outstanding principal amounts of the Advances comprising the same Borrowing
in whole or ratably in part, together with accrued interest to the date of such
prepayment on the amount prepaid and, in the case of any Eurodollar Rate
Advance, any amount payable pursuant to Section 8.04(b); provided, however, that
(i) each partial prepayment shall be in an aggregate principal amount not less
than $5,000,000 and in integral multiples of $1,000,000 in excess thereof and
(ii) in the case of any such prepayment of a Eurodollar Rate Advance, the
Borrower shall be obligated to reimburse the Lenders in respect thereof pursuant
to Section 8.04(b) on the date of such prepayment.
SECTION 2.11. Increased Costs.
(a) If, due to either (i) the introduction of or any change (other than any change by way of imposition or increase of reserve requirements, in the case of Eurodollar Rate Advances, included in the Eurodollar Rate Reserve Percentage), in or in the interpretation of any law or regulation, or (ii) the compliance with any guideline or request from any central bank or other governmental authority (whether or not having the force of law), there shall be any increase in the cost to any Lender of agreeing to make or making, funding or maintaining Eurodollar Rate Advances, then the Borrower shall from time to time, upon demand by such Lender (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for account of such Lender additional amounts sufficient to reimburse such Lender for such increased cost. All claims for increased cost shall be submitted by such Lender to the Borrower (with a copy to the Administrative Agent) as soon as is reasonably possible and in all events within 90 days after such introduction, such change, or the beginning of such compliance, the occurrence of which resulted in such increased cost, and the Borrower shall make such payment within five Business Days after notice of such claim is received; provided, however, that if a claim is not submitted to the Borrower within such 90-day period, such Lender shall thereby waive its claim to such increased cost incurred during such 90-day period but not to any such increased cost incurred thereafter. A certificate as to the amount of such increased cost, submitted to the Borrower (with a copy to the Administrative Agent) by such Lender, shall be conclusive and binding for all purposes, absent manifest error.
(b) If any Lender determines that compliance with any law or regulation or any guideline or request from any central bank or other governmental authority (whether or not having the force of law) affects or would affect the amount of capital required or expected to be maintained by such Lender or any corporation controlling such Lender and that the amount of such capital is increased by or based upon the existence of such Lender's commitment to lend hereunder and other commitments of this type, then, upon demand by such Lender (with a copy of such demand to the Administrative Agent), the Borrower shall immediately pay to the Administrative Agent for the account of such Lender, from time to time as specified by such Lender, additional amounts sufficient to compensate such Lender or such corporation in the light of such circumstances, to the extent that such Lender reasonably determines such increase in capital to be allocable to the existence of such Lender's commitment to lend hereunder. All claims for such additional amounts shall be submitted by such Lender (with a copy to the Administrative Agent) as soon as is reasonably possible and in all events within 90 days after such determination by such Lender, and the Borrower shall make such payment within five Business Days after notice of such claim is received; provided, however, that if a claim is not submitted to the Borrower within such 90-day period, such Lender shall thereby waive its claim to such additional amounts incurred during such 90-day period but not to any such additional amounts incurred thereafter. A certificate as to such amounts submitted to the Borrower and the Administrative Agent by such Lender shall be conclusive and binding for all purposes, absent manifest error.
SECTION 2.12. Illegality.
Notwithstanding any other provision of this Agreement, if any Lender shall notify the Administrative Agent that the introduction of or any change in or in the interpretation of any law or regulation makes it unlawful, or any central bank or other governmental authority asserts that it is unlawful, for such Lender or its Eurodollar Lending Office to perform its obligations hereunder to make Eurodollar Rate Advances or to fund or maintain Eurodollar Rate Advances hereunder, (i) the obligation of the Lenders to make Eurodollar Rate Advances or to Convert Advances into Eurodollar Rate Advances shall be suspended until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist, and (ii) the Borrower shall forthwith prepay in full all Eurodollar Rate Advances of all Lenders then outstanding, together with interest accrued thereon, unless the Borrower, within five Business Days of notice from the Administrative Agent, Converts all Eurodollar Rate Advances of all Lenders then outstanding into Advances of another Type in accordance with Section 2.09.
SECTION 2.13. Payments and Computations.
(a) The Borrower shall make each payment hereunder, without condition or deduction for any counterclaim, defense, recoupment or setoff, not later than 11:00 A.M. (New York City time) on the day when due in U.S. dollars to the Administrative Agent at its address referred to in Section 8.02 in same day funds. The Administrative Agent will promptly thereafter cause to be distributed like funds relating to the payment of principal or interest or fees (other than pursuant to Section 2.02(c), 2.07 or 2.11) ratably to the Lenders for the account of their respective Applicable Lending Offices, and like funds relating to the payment of any other amount payable to any Lender to such Lender for the account of its Applicable Lending Office, in each case to be
applied in accordance with the terms of this Agreement. Upon its acceptance of an Assignment and Acceptance and recording of the information contained therein in the Register pursuant to Section 8.07(d), from and after the effective date specified in such Assignment and Acceptance, the Administrative Agent shall make all payments hereunder in respect of the interest assigned thereby to the Lender assignee thereunder, and the parties to such Assignment and Acceptance shall make all appropriate adjustments in such payments for periods prior to such effective date directly between themselves.
(b) All computations of interest based on the base rate referred to in clause (i) of the definition of Base Rate shall be made by the Administrative Agent on the basis of a year of 365 or 366 days, as the case may be, and all computations of interest based on the Eurodollar Rate or Federal Funds Rate or of fees payable hereunder shall be made by the Administrative Agent, and all computations of interest pursuant to Section 2.07 shall be made by a Lender, on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period of which such interest or fees are payable. Each determination by the Administrative Agent (or, in the case of Section 2.07, by a Lender) of an interest rate hereunder shall be conclusive and binding for all purposes.
(c) Whenever any payment hereunder shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or fees, as the case may be; provided, however, that if such extension would cause payment of interest on or principal of Eurodollar Rate Advances to be made in the next following calendar month, such payment shall be made on the next preceding Business Day.
(d) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Lenders hereunder that the Borrower will not make such payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent the Borrower shall not have so made such payment in full to the Administrative Agent, each Lender shall repay to the Administrative Agent forthwith on demand such amount distributed to such Lender, together with interest thereon for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Administrative Agent at the Federal Funds Rate.
SECTION 2.14. Sharing of Payments, Etc.
If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of the Advances made by it (other than pursuant to Section 2.02(c), 2.07 or 2.11) in excess of its ratable share of payments on account of the Advances obtained by all the Lenders, such Lender shall forthwith purchase from the other Lenders such participation in the Advances made by them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender shall be rescinded and such Lender shall repay to the purchasing Lender the purchase price to the extent of such recovery, together with an amount
equal to such Lender's ratable share (according to the proportion of (i) the amount of such Lender's required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section 2.14 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation.
ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01. Conditions Precedent to Closing.
The Commitments of the Lenders shall not become effective unless and until all fees due and payable by the Borrower in connection with this Agreement have been paid and the Administrative Agent shall have received the following:
(a) Promissory notes, in a form acceptable to the Administrative Agent, payable to the order of each Lender that has requested such a note.
(b) Copies of the resolutions of the Board of Directors of the Borrower approving this Agreement and all documents evidencing other necessary corporate action, certified by the Secretary or an Assistant Secretary of the Borrower to be true and correct, and in full force and effect on and as of the date hereof.
(c) A certificate of the Secretary or an Assistant Secretary of the Borrower, dated as of the date hereof, certifying the names and true signatures of the officers of the Borrower authorized to sign this Agreement and the other documents to be delivered hereunder.
(d) A certificate of a Responsible Officer of the Borrower, dated as of the date hereof, certifying (i) the accuracy of the representations and warranties contained herein and (ii) that no event has occurred and is continuing that constitutes an Event of Default or that would constitute an Event of Default but for the requirement that notice be given or time elapse, or both.
(e) Certified copies of all governmental approvals and authorizations required to be obtained in connection with the execution, delivery and performance by the Borrower of this Agreement.
(f) Certified copies of the Restated Charter and By-Laws of the Borrower.
(g) Favorable opinions of William D. Johnson, General Counsel of the Borrower, and of Hunton & Williams, counsel for the Borrower, substantially in the forms of Exhibit C-1 and C-2, respectively, hereto and as to such other matters as any Lender through the Administrative Agent may reasonably request.
(h) A favorable opinion of King & Spalding, counsel for the Administrative Agent, substantially in the form of Exhibit D hereto.
(i) Evidence that all outstanding obligations of the Borrower under the Existing Credit Facilities have been paid in full and that the commitments of the lenders under such Existing Credit Facilities have been terminated.
SECTION 3.02. Conditions Precedent to Each Borrowing.
The obligation of each Lender to make an Advance on the occasion of each Borrowing (including the initial Borrowing) shall be subject to the further conditions precedent that (a) in the case of the making of an Advance, the Administrative Agent shall have received the written confirmatory Notice of Borrowing with respect thereto, (b) on the date of such Borrowing, the following statements shall be true (and the giving of the Notice of Borrowing and the acceptance by the Borrower of the proceeds of such Borrowing shall constitute a representation and warranty by the Borrower that on the date of such Borrowing such statements are true):
(i) The representations and warranties contained in Section 4.01 are correct on and as of the date of such Borrowing before and after giving effect to such Borrowing and to the application of the proceeds therefrom, as though made on and as of such date; and
(ii) No event has occurred and is continuing, or would result from such Borrowing or from the application of the proceeds therefrom, that constitutes an Event of Default or that would constitute an Event of Default but for the requirement that notice be given or time elapse, or both;
and (c) the Administrative Agent shall have received such other approvals, opinions and documents as any Lender through the Administrative Agent may reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower.
The Borrower represents and warrants as follows:
(a) Each of the Borrower and each Significant Subsidiary is a corporation duly incorporated, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated and is duly qualified to do business in and is in good standing under the laws of each other jurisdiction where the nature of its business or the nature of property owned or used by it makes such qualification necessary (except where failure to so qualify would not have a material adverse affect on the financial condition, operations or properties of the Borrower and its Subsidiaries, taken as a whole).
(b) The execution, delivery and performance by the Borrower of this Agreement are within the Borrower's corporate powers, have been duly authorized by all necessary corporate
action, and do not contravene (i) the Borrower's charter or by-laws or (ii) any law or contractual restriction binding on or affecting the Borrower or its properties.
(c) No authorization or approval or other action by, and no notice to or filing with any governmental authority or regulatory body is required for the due execution, delivery and performance by the Borrower of this Agreement, other than, the SEC Order, which has been duly issued and in full force and effect.
(d) This Agreement has been duly executed and delivered by the Borrower and is, and any promissory note when delivered pursuant to Section 2.01(b) will be, the legal, valid and binding obligations of the Borrower enforceable against the Borrower in accordance with their respective terms.
(e) The Consolidated balance sheets of the Borrower and its Subsidiaries as at December 31, 2000, and the related Consolidated statements of income and retained earnings of the Borrower and its Subsidiaries for the fiscal year then ended, and the Consolidated balance sheets of the Borrower and its Subsidiaries as at June 30, 2001, and the related Consolidated statements of income and retained earnings of the Borrower and its Subsidiaries, copies of each of which have been furnished to each Lender, fairly present (subject, in the case of such financial statements dated June 30, 2001, to year end adjustments) the financial condition of the Borrower and its Subsidiaries as at such dates and the results of the operations of the Borrower and its Subsidiaries for the periods ended on such dates, all in accordance with generally accepted accounting principles consistently applied. Since December 31, 2000, there has been no material adverse change in the financial condition, operations or properties of the Borrower and its Subsidiaries, taken as a whole.
(f) Except as described in the reports and registration statements that the Borrower, CP&L, FPC and Florida Power have filed with the Securities and Exchange Commission prior to the date of this Agreement, there is no pending or threatened action or proceeding affecting the Borrower or any Subsidiary before any court, governmental agency or arbitrator, that may materially adversely affect the financial condition, operations or properties of the Borrower and its Subsidiaries, taken as a whole.
(g) No proceeds of any Advance will be used to acquire any security in any transaction that is subject to Sections 13 and 14 of the Exchange Act.
(h) The Borrower is not engaged in the business of extending credit for the purpose of buying or carrying margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System), and no proceeds of any Advance will be used to buy or carry any margin stock or to extend credit to others for the purpose of buying or carrying any margin stock.
(i) Following application of the proceeds of each Advance, not more than 5% of the value of the assets (either of the Borrower only or of the Borrower and the Subsidiaries on a Consolidated basis) subject to the provisions of Section 5.02(a) or 5.02(e) will be margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System).
(j) No Termination Event has occurred or is reasonably expected to occur with respect to any Plan.
(k) The Borrower is not an "investment company" or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended.
(l) The Borrower is in substantial compliance with all applicable laws, rules, regulations and orders of any governmental authority, the noncompliance with which would materially and adversely affect the business or condition of the Borrower, such compliance to include, without limitation, substantial compliance with ERISA, Environmental Laws and paying before the same become delinquent all material taxes, assessments and governmental charges imposed upon it or upon its property, except to the extent compliance with any of the foregoing is then being contested in good faith by appropriate legal proceedings.
(m) All written information furnished by the Borrower to the Administrative Agent and the Lenders in connection with this Agreement (the "Disclosed Information") was (and all information furnished in the future by the Borrower to the Administrative Agent and the Lenders will be) complete and correct in all respects material to the creditworthiness of the Borrower when delivered. As of the date hereof, the Disclosed Information does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein not misleading in light of the circumstances under which made.
ARTICLE V
COVENANTS OF THE COMPANY
SECTION 5.01. Affirmative Covenants.
So long as any Advance or any other amount payable by the Borrower hereunder shall remain unpaid or any Lender shall have any Commitment hereunder, the Borrower shall, unless the Majority Lenders shall otherwise consent in writing:
(a) Compliance with Laws, Etc. Except to the extent contested in good faith, comply, and cause each Subsidiary to comply, with all applicable laws, rules, regulations and orders (such compliance to include, without limitation, paying before the same become delinquent all taxes, assessments and governmental charges imposed upon it or upon its property), the non-compliance with which would materially adversely affect the Borrower's business or credit.
(b) Preservation of Corporate Existence, Etc. Except as provided in Section
5.02 (d), preserve and maintain, and cause each Significant Subsidiary to
preserve and maintain, its corporate existence, rights (charter and statutory)
and franchises.
(c) Visitation Rights. At any reasonable time and from time to time, permit the Administrative Agent or any of the Lenders or any agents or representatives thereof to examine and make copies of and abstracts from the records and books of account of, and visit the properties of, the Borrower and any Subsidiary, and to discuss the affairs, finances and accounts of the Borrower and any Subsidiary with any of their respective officers or directors.
(d) Keeping of Books. Keep, and cause each Subsidiary to keep, proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of the Borrower and such Subsidiary in accordance with generally accepted accounting principles consistently applied.
(e) Maintenance of Properties, Etc. Maintain and preserve, and cause each Subsidiary to maintain and preserve, all of its properties that are used or useful in the conduct of its business in good working order and condition, ordinary wear and tear excepted.
(f) Maintenance of Insurance. Maintain, and cause each Subsidiary to maintain, insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which the Borrower or such Subsidiary operates.
(g) Taxes. File, and cause each Subsidiary to file, all tax returns (federal, state and local) required to be filed and paid and pay all taxes shown thereon to be due, including interest and penalties except, in the case of taxes, to the extent the Borrower or such Subsidiary is contesting the same in good faith and by appropriate proceedings and has set aside adequate reserves for the payment thereof in accordance with generally accepted accounting principles.
(h) Material Obligations. Pay, and cause each Subsidiary to pay, promptly as the same shall become due each material obligation of the Borrower or such Subsidiary.
(i) Reporting Requirements. Furnish to the Lenders:
(i) as soon as available and in any event within 60 days after the end of each of the first three quarters of each fiscal year of the Borrower, a Consolidated balance sheet of the Borrower and the Subsidiaries as at the end of such quarter and Consolidated statements of income and retained earnings of the Borrower and the Subsidiaries for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, certified by the treasurer or the chief financial officer of the Borrower, together with a certificate of the treasurer or chief financial officer of the Borrower, setting forth in reasonable detail the calculation of the Borrower's compliance with Section 5.01(j) and stating that no Event of Default and no event that, with the giving of notice or lapse of time or both, would constitute an Event of Default has occurred and is continuing, or if an Event of Default or such event has occurred and is continuing, a statement setting forth details of such Event of Default or event and the action that the Borrower has taken and proposes to take with respect thereto;
(ii) as soon as available and in any event within 120 days after the end of each fiscal year of the Borrower, a copy of the annual report for such year for the Borrower and the Subsidiaries, containing Consolidated financial statements for such year certified by Deloitte & Touche or other independent public accountants acceptable to the Majority Lenders, together with a certificate of the treasurer or chief financial officer of the Borrower, substantially in the form of Exhibit E hereto, setting forth in reasonable detail the calculation of the Borrower's compliance with Section 5.01(j) and stating that no
Event of Default and no event that, with the giving of notice or lapse of time or both, would constitute an Event of Default has occurred and is continuing, or if an Event of Default or such event has occurred and is continuing, a statement setting forth details of such Event of Default or event and the action that the Borrower has taken and proposes to take with respect thereto;
(iii) promptly after the sending or filing thereof, copies of all reports that the Borrower sends to any of its security holders, and copies of all reports and registration statements that the Borrower or any Subsidiary files with the Securities and Exchange Commission or any national securities exchange, to the extent not delivered by the Borrower pursuant to clause (i) or (ii) of this Section 5.01(i);
(iv) immediately upon any Responsible Officer's obtaining knowledge of the occurrence of any Event of Default or any event that, with the giving of notice or lapse of time, or both, would constitute an Event of Default, a statement of the chief financial officer or treasurer of the Borrower setting forth details of such Event of Default or event and the action that the Borrower proposes to take with respect thereto;
(v) immediately upon obtaining knowledge thereof, notice of any change in either the Moody's Rating or the S&P Rating;
(vi) as soon as possible and in any event within five days after the commencement thereof or any adverse determination or development therein, notice of all actions, suits and proceedings that may adversely affect the Borrower's ability to perform its obligations under this Agreement;
(vii) as soon as possible and in any event within five days after the occurrence of a Termination Event, notice of such Termination Event; and
(viii) such other information respecting the condition or operations, financial or otherwise, of the Borrower or any Subsidiary as any Lender through the Administrative Agent may from time to time reasonably request.
(j) Indebtedness to Total Capitalization. Maintain at all times a ratio of Consolidated Indebtedness of the Borrower and its Subsidiaries to Total Capitalization of not more than .70:1.0.
(k) Use of Proceeds. Use the proceeds of each Advance solely for general corporate purposes (including, in each case, without limitation, as a commercial paper back-up). No proceeds of any Advance will be used to acquire any equity security of a class that is registered pursuant to Section 12 of the Exchange Act, or any security in any transaction that is subject to Sections 13 and 14 of the Exchange Act.
(l) Ownership of Subsidiaries. Own at all times, directly or indirectly and free and clear of all liens and encumbrances, 100% of the common stock of CP&L, FPC and Florida Power.
SECTION 5.02. Negative Covenants.
So long as any Advance or any other amount payable by the Borrower hereunder shall remain unpaid or any Lender shall have any Commitment hereunder, the Borrower will not, without the written consent of the Majority Lenders:
(a) Liens, Etc. Create, incur, assume or suffer to exist, or permit any Subsidiary to create, incur, assume or suffer to exist, any lien, security interest or other charge or encumbrance, or any other type of preferential arrangement, upon or with respect to any of its properties, whether now owned or hereafter acquired, or assign, or permit any Subsidiary to assign, any right to receive income, in each case to secure any Indebtedness of any Person, other than (i) liens, mortgages and security interests created by the Mortgage and the Florida Power Mortgage, (ii) liens and security interests against the fuel used by the Borrower in its power generating operations in favor of the suppliers thereof, (iii) liens and security interests created in connection with the GenCo Financing, and (iv) liens, mortgages and security interests securing other Indebtedness of the Borrower and its Subsidiaries not exceeding $100,000,000 in the aggregate.
(b) Indebtedness. Create, incur, assume or suffer to exist, or permit any Subsidiary to create, incur, assume or suffer to exist, any Indebtedness other than (i) Indebtedness hereunder, (ii) Indebtedness secured by liens and security interests permitted pursuant to clauses (ii), (iii) and (iv) of subsection 5.02(a), (iii) Indebtedness evidenced by the First Mortgage Bonds and the Florida Power Mortgage Bonds, (iv) unsecured Indebtedness, including guarantees issued in connection with the financing of pollution control facilities operated by CP&L, FPC or Florida Power, guarantees of Indebtedness incurred by any wholly-owned Subsidiary and guarantees of debt securities issued by any financing Subsidiary established to secure debt financing in the offshore markets, and (v) other Indebtedness outstanding on the date of this Agreement, as described on Schedule II hereto.
(c) Lease Obligations. Create, incur, assume or suffer to exist, or permit any Subsidiary to create, incur, assume or suffer to exist, any obligations for the payment of rental for any property under leases or agreements to lease having a term of one year or more that would cause the direct or contingent Consolidated liabilities of the Borrower and its Subsidiaries in respect of all such obligations payable in any calendar year to exceed 10% of the Consolidated operating revenues of the Borrower and its Subsidiaries for the immediately preceding calendar year.
(d) Mergers, Etc. Merge with or into or consolidate with or into, or acquire all or substantially all of the assets or securities of, any Person, unless, in each case, (i) immediately after giving effect thereto, no event shall occur and be continuing that constitutes an Event of Default or an event that with the giving of notice or lapse of time, or both, would constitute an Event of Default, and (ii) in the case of any such merger to which the Borrower is a party, such other Person is a utility company and the resulting or surviving corporation, if not the Borrower, (x) is organized and existing under the laws of the United States of America or any State thereof, (y) is a corporation satisfactory to the Majority Lenders, and (z) shall have expressly assumed, by an instrument satisfactory in form and substance to the Majority Lenders, the due and punctual payment of all amounts due under this Agreement and the performance of every covenant and undertaking of the Borrower contained in this Agreement.
(e) Sales, Etc. of Assets. Sell, lease, transfer or otherwise dispose of, or permit any Subsidiary to sell, lease, transfer or otherwise dispose of, any of its assets, other than the following sales: (i) sales of generating capacity to the wholesale customers of the Borrower and the Subsidiaries, (ii) sales of nuclear fuel, (iii) sales of accounts receivable, (iv) sales in connection with a transaction authorized by subsection (d) of this Section, (v) the Portfolio Transaction, (vi) the Rail Transaction, (vii) sales of investments in securities with a maturity of less than one year, or (viii) other sales not exceeding $150,000,000 in the aggregate in any fiscal year of the Borrower.
(f) Margin Stock. Use any proceeds of any Advance to buy or carry margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System).
(g) Change in Nature of Business. Engage, or cause or permit CP&L or Florida Power to engage, in a material manner in businesses other than those in which they are engaged on the date hereof and businesses reasonably related thereto.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default.
If any of the following events ("Events of Default") shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any Advance when due, or shall fail to pay any interest on the principal amount of any Advance or any fees or other amount payable hereunder within five Business Days after such interest or fees or other amount shall become due; or
(b) Any representation or warranty made by the Borrower herein or by the Borrower (or any of its officers) in any document delivered pursuant to this Agreement shall prove to have been incorrect in any material respect when made or deemed made; or
(c) The Borrower shall fail to perform or observe any other term, covenant or agreement contained in Section 5.01(b), 5.01(i)(iv), 5.01(j), 5.01(l) or 5.02 on its part to be performed or observed; or the Borrower shall fail to perform or observe any other term, covenant or agreement contained in this Agreement on its part to be performed or observed and any such failure shall remain unremedied for 30 days after written notice thereof shall have been given to the Borrower by the Administrative Agent or any Lender; or
(d) The Borrower or any Subsidiary shall fail to pay any amount in respect of any Indebtedness in excess of $10,000,000 (but excluding Indebtedness hereunder) of the Borrower or such Subsidiary (as the case may be), or any interest or premium thereon, when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Indebtedness; or any other default under any agreement or instrument relating to any such Indebtedness, or any other event, shall occur and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such default or
event is to accelerate, or to permit the acceleration of, the maturity of such Indebtedness; or any such Indebtedness shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), prior to the stated maturity thereof; or
(e) The Borrower or any Subsidiary shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Borrower or any Subsidiary seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property; or the Borrower or any Subsidiary shall take any corporate action to authorize any of the actions set forth above in this subsection (e); or
(f) Any judgment or order for the payment of money in excess of $10,000,000 shall be rendered against the Borrower or any Subsidiary and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be any period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or
(g) Any Termination Event with respect to a Plan shall have occurred, and, 30 days after the occurrence thereof, (i) such Termination Event (if correctable) shall not have been corrected and (ii) the then present value of such Plan's vested benefits exceeds the then current value of assets accumulated in such Plan by more than the amount of $20,000,000 (or in the case of a Termination Event involving the withdrawal of a "substantial employer" (as defined in Section 4001(a)(2) of ERISA), the withdrawing employer's proportionate share of such excess shall exceed such amount); or
(h) The Borrower or any of its Affiliates as employer under a Multiemployer Plan shall have made a complete or partial withdrawal from such Multiemployer Plan and the plan sponsor of such Multiemployer Plan shall have notified such withdrawing employer that such employer has incurred a withdrawal liability in an annual amount exceeding $20,000,000; or
(i) A Change of Control shall occur;
then, and in any such event, the Administrative Agent shall at the request, or may with the consent, of the Majority Lenders, by notice to the Borrower, (i) declare the Commitments and the obligation of each Lender to make Advances to be terminated, whereupon the same shall forthwith terminate, and (ii) declare the principal amount of the Advances then outstanding, all interest thereon and all other amounts payable under this Agreement to be forthwith due and payable, whereupon such principal amount, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower; provided, however, that in the event of an actual or deemed entry of an order for relief with respect to the Borrower or any Subsidiary under the Federal Bankruptcy Code, (A) the obligation of each Lender to make Advances shall automatically be terminated and (B) the principal amount of the Advances then
outstanding, all such interest and all such other amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower.
ARTICLE VII
THE AGENT
SECTION 7.01. Authorization and Action.
Each Lender hereby appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent by the terms hereof, together with such powers as are reasonably provided for by this Agreement (including, without limitation, enforcement or collection of the Advances), the Administrative Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Majority Lenders, and such instructions shall be binding upon all Lenders; provided, however, that the Administrative Agent shall not be required to take any action that exposes the Administrative Agent to personal liability or that is contrary to this Agreement or applicable law.
SECTION 7.02. The Agent's Reliance, Etc.
Neither the Administrative Agent nor any of its directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by each or any of them under or in connection with this Agreement, except for their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, the Administrative Agent: (i) may consult with legal counsel (including counsel for the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (ii) makes no warranty or representation to any Lender and shall not be responsible to any Lender for any statements, warranties or representations made in or in connection with this Agreement; (iii) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement on the part of the Borrower or to inspect the property (including the books and records) of the Borrower; (iv) shall not be responsible to any Lender for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; and (v) shall incur no liability under or in respect of this Agreement by acting upon any notice, consent, certificate or other instrument or writing (which may be by telegram, telecopy or e-mail) believed by it to be genuine and signed or sent by the proper party or parties.
SECTION 7.03. The Administrative Agent and its Affiliates.
With respect to its Commitments and, the Advances made by it, the Administrative Agent shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not an Administrative Agent; and the term "Lender" or "Lenders" shall, unless otherwise expressly indicated, include each Agent in its individual capacity, as applicable. The Administrative Agent and its Affiliates may accept deposits from,
lend money to, act as trustee under indentures of, and generally engage in any kind of business with, the Borrower, any Subsidiary and any Person who may do business with or own securities of the Borrower or any Subsidiary, all as if the Administrative Agent were not the Administrative Agent and without any duty to account therefor to the Lenders.
SECTION 7.04. Lender Credit Decision.
Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on the financial statements referred to in Section 4.01(e) and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement.
SECTION 7.05. Indemnification.
The Lenders agree to indemnify the Administrative Agent (to the extent not reimbursed by the Borrower), ratably according to the respective principal amounts of the Advances then held by each of them (or if no Advances are at the time outstanding, ratably according to the respective amounts of their Commitments), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against the Administrative Agent in any way relating to or arising out of this Agreement or any action taken or omitted by the Administrative Agent under this Agreement; provided that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Administrative Agent's gross negligence or willful misconduct. Without limitation of the foregoing, each Lender agrees to reimburse the Administrative Agent promptly upon demand for its ratable share of any out-of-pocket expenses (including reasonable counsel fees) incurred by the Administrative Agent in connection with the preparation, execution, administration, or enforcement of, or legal advice in respect of rights or responsibility under, this Agreement, to the extent that the Administrative Agent is not reimbursed for such expenses by the Borrower.
SECTION 7.06. Successor Administrative Agent.
The Administrative Agent may resign at any time by giving written notice thereof to the Lenders and the Borrower and may be removed at any time with or without cause by the Majority Lenders. Upon any such resignation or removal, the Majority Lenders shall have the right to appoint a successor Administrative Agent. If no successor Administrative Agent shall have been so appointed by the Majority Lenders, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent's giving of notice of resignation or the Majority Lenders' removal of the retiring Administrative Agent, the Administrative Agent may appoint a successor Administrative Agent, which shall be a commercial bank organized under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Administrative Agent's resignation or removal hereunder as Administrative Agent, the provisions of this Article VII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc.
No amendment or waiver of any provision of this Agreement, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Majority Lenders, in the case of any such amendment, waiver or consent of or in respect of this Agreement, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no amendment, waiver or consent shall, unless in writing and signed by all of the Lenders, do any of the following: (i) waive any of the conditions specified in Section 3.01 or 3.02, (ii) increase the Commitment of any Lender or subject any Lender to any additional obligations, (iii) reduce, or waive the payment of, the principal of, or interest on, the Advances or any fees or other amounts payable to the Lenders ratably hereunder, (iv) postpone any date fixed for any payment of principal of, or interest on, the Advances or any fees or other amounts payable to the Lenders ratably hereunder, (v) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Advances, or the number of Lenders, which shall be required for the Lenders or any of them to take any action under this Agreement, or (vi) amend, waive, or in any way modify or suspend any provision requiring the pro rata application of payments or of this Section 8.01; provided further, that no amendment, waiver or consent shall, unless in writing and signed by each Lender affected thereby, reduce, waive or postpone the date of payment of any amount payable to such Lender, other than any such amount payable to the Lenders ratably; and provided, further, that (A) no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required hereinabove to take such action, affect the rights or duties of such Administrative Agent under this Agreement and (B) this Agreement may be amended and restated without the consent of any Lender or the Administrative Agent if, upon giving effect to such amendment and restatement, such Lender or Administrative Agent, as the case may be, shall no longer be a party to this Agreement (as so amended and restated) or have any Commitment or other obligation hereunder and shall have been paid in full all amounts payable hereunder to such Lender or the Administrative Agent, as the case may be.
SECTION 8.02. Notices, Etc.
All notices and other communications provided for hereunder shall, unless
otherwise stated herein, be in writing (including telegraphic communication) and
mailed, telecopied, e-mailed or delivered, if to the Borrower, at its address at
410 S. Wilmington Street, PEB 19A3, Raleigh, North Carolina 27601, Attention:
Director of Financial Operations, Treasury Department, Facsimile no. (919)
546-7826, e-mail: charles.beuris@pgnmail.com; if to any Lender, at its
Domestic Lending Office set forth opposite its name on Schedule I hereto; and if to the Administrative Agent, at its address at Two Penns Way, Suite 200, New Castle, Delaware 19720, Attention: Bank Loan Syndications, Facsimile no.: (212) 816-8098, e-mail: j.nicholas.mckee@citi.com; or, as to each party, at such other address as shall be designated by such party in a written notice to the other parties. All such notices and communications shall be effective when received by the addressee thereof.
SECTION 8.03. No Waiver; Remedies.
No failure on the part of any Lender or the Administrative Agent to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.
SECTION 8.04. Costs, Expenses, Taxes and Indemnification.
(a) The Borrower agrees to pay on demand all costs and expenses of the
Administrative Agent (and as described in clause (iv) below, the Lenders) in
connection with (i) the preparation, execution, negotiation, syndication and
delivery of this Agreement and the other documents to be delivered hereunder,
(ii) the first Borrowing under this Agreement, (iii) any modification, amendment
or supplement to this Agreement and the other documents to be delivered
hereunder and (iv) the enforcement of the rights and remedies of the Lenders and
the Administrative Agent under this Agreement and the other documents to be
delivered hereunder (whether through negotiations or legal proceedings), all the
above costs and expenses to include, without limitation, the reasonable fees and
out-of-pocket expenses of counsel for the Administrative Agent and each of the
Lenders with respect thereto. In addition, the Borrower shall pay any and all
stamp and other taxes payable or determined to be payable in connection with the
execution and delivery of this Agreement and the other documents to be delivered
hereunder, and agrees to save the Administrative Agent and each Lender harmless
from and against any and all liabilities with respect to or resulting from any
delay in paying or omission to pay such taxes.
(b) If (i) due to payments made by the Borrower due to the acceleration of the maturity of the Advances pursuant to Section 6.01 or due to any other reason, any Lender receives payments of principal of any Eurodollar Rate Advance based upon the Eurodollar Rate other than on the last day of the Interest Period for such Advance, or (ii) due to any Conversion of Eurodollar Advance other than on the last day of an Interest Period pursuant to Section 2.12, the Borrower shall, upon demand by such Lender (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender any amounts required to compensate such Lender for any additional losses, costs or expenses that it may reasonably incur as a result of such payment, including, without limitation, any loss (including loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by any Lender to fund or maintain such Advance. In addition, if the Borrower fails to prepay any Advance on the date for which notice of prepayment has been given, the Borrower shall, upon demand by any Lender (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender any amounts required to compensate such Lender for any losses, costs or expenses (including loss of
anticipated profits) that it may reasonably incur as a result of such prepayment not having been made on the date specified by the Borrower for such prepayment.
(c) Any and all payments by the Borrower hereunder shall be made, in
accordance with Section 2.13, free and clear of and without deduction for any
and all present or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding, in the case
of each Lender and the Administrative Agent, taxes imposed on its income, and
franchise taxes imposed on it, by the jurisdiction under the laws of which such
Lender or Agent (as the case may be) is organized or any political subdivision
thereof and, in the case of each Lender, taxes imposed on its income, and
franchise taxes imposed on it, by the jurisdiction of such Lender's Applicable
Lending Office or any political subdivision thereof (all such non-excluded
taxes, levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If the Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder to any Lender
or Agent, (i) the sum payable shall be increased as may be necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section 8.04) such Lender or Agent (as the
case may be) receives an amount equal to the sum it would have received had no
such deductions been made, (ii) the Borrower shall make such deductions and
(iii) the Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law.
(d) The Borrower will indemnify each Lender and the Administrative Agent for the full amount of Taxes (including, without limitation, any Taxes imposed by any jurisdiction on amounts payable under this Section 8.04) paid by such Lender or Agent (as the case may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally asserted. This indemnification shall be made within 30 days from the date such Lender or Agent (as the case may be) makes written demand therefor.
(e) Prior to the date of the initial Borrowing or on the date of the Assignment and Acceptance pursuant to which it became a Lender, in the case of each Lender that becomes a Lender by virtue of entering into an Assignment and Acceptance, and from time to time thereafter if requested by the Borrower or the Administrative Agent, each Lender organized under the laws of a jurisdiction outside the United States shall provide the Administrative Agent and the Borrower with the forms prescribed by the Internal Revenue Service of the United States certifying that such Lender is exempt from United States withholding taxes with respect to all payments to be made to such Lender hereunder. If for any reason during the term of this Agreement, any Lender becomes unable to submit the forms referred to above or the information or representations contained therein are no longer accurate in any material respect, such Lender shall notify the Administrative Agent and the Borrower in writing to that effect. Unless the Borrower and the Administrative Agent have received forms or other documents satisfactory to them indicating that payments hereunder are not subject to United States withholding tax, the Borrower or the Administrative Agent shall withhold taxes from such payments at the applicable statutory rate in the case of payments to or for any Lender organized under the laws of a jurisdiction outside the United States.
(f) Any Lender claiming any additional amounts payable pursuant to Section 8.04(c) or (d) shall use its reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) (i) to change the jurisdiction of its Applicable Lending Office if the making of such a change would avoid the need for, or reduce the amount of, any such additional amounts that may thereafter accrue and would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender and (ii) to otherwise minimize the amounts due, or to become due, under Sections 8.04(c) and (d).
(g) If the Borrower makes any additional payment to any Lender pursuant to
Sections 8.04(c) and (d) in respect of any Taxes, and such Lender determines
that it has received (i) a refund of such Taxes or (ii) a credit against or
relief or remission for, or a reduction in the amount of, any tax or other
governmental charge solely as a result of any deduction or credit for any Taxes
with respect to which it has received payments under Sections 8.04(c) and (d),
such Lender shall, to the extent that it can do so without prejudice to the
retention of such refund, credit, relief, remission or reduction, pay to the
Borrower such amount as such Lender shall have determined to be attributable to
the deduction or withholding of such Taxes. If such Lender later determines that
it was not entitled to such refund, credit, relief, remission or reduction to
the full extent of any payment made pursuant to the first sentence of this
Section 8.04(g), the Borrower shall upon demand of such Lender promptly repay
the amount of such overpayment. Any determination made by such Lender pursuant
to this Section 8.04(g) shall in the absence of bad faith or manifest error be
conclusive, and nothing in this Section 8.04(g) shall be construed as requiring
any Lender to conduct its business or to arrange or alter in any respect its tax
or financial affairs so that it is entitled to receive such a refund, credit or
reduction or as allowing any Person to inspect any records, including tax
returns, of any Lender.
(h) The Borrower hereby agrees to indemnify and hold harmless each Lender, the Administrative Agent, counsel to the Administrative Agent and their respective officers, directors, partners, employees, Affiliates and advisors (each, an "Indemnified Person") from and against any and all claims, damages, losses, liabilities, costs, or expenses (including reasonable attorney's fees and expenses, whether or not such Indemnified Person is named as a party to any proceeding or is otherwise subjected to judicial or legal process arising from any such proceeding), joint and several, that may actually be incurred by or asserted or awarded against any Indemnified Person (including, without limitation, in connection with any investigation, litigation or proceeding or the preparation of a defense in connection therewith) in each case by reason of or in connection with the execution, delivery, or performance of this Agreement, or the use by the Borrower of the proceeds of any Advance, except to the extent that such claims, damages, losses, liabilities, costs, or expenses are determined in a final non-appealable judgment by a court of competent jurisdiction to have resulted solely from the gross negligence or willful misconduct of the party seeking indemnification.
(i) Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in this Section 8.04 shall survive the payment in full of principal and interest hereunder and the termination of the Commitments.
SECTION 8.05. Right of Set-off.
Upon (i) the occurrence and during the continuance of any Event of Default
and (ii) the making of the request or the granting of the consent specified by
Section 6.01 to authorize the Administrative Agent to declare the Advances due
and payable pursuant to the provisions of Section 6.01, each Lender is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other indebtedness at any
time owing by such Lender to or for the credit or the account of the Borrower
now or hereafter existing under this Agreement, irrespective of whether or not
such Lender shall have made any demand under this Agreement and although such
obligations may be unmatured. Each Lender agrees promptly to notify the Borrower
after any such set-off and application made by such Lender; provided that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of each Lender under this Section are in addition to
other rights and remedies (including, without limitation, other rights of
set-off) that such Lender may have.
SECTION 8.06. Binding Effect.
This Agreement shall become effective when it shall have been executed by the Borrower and the Administrative Agent and when the Administrative Agent shall have been notified by each Lender that such Lender has executed it and thereafter shall be binding upon and inure to the benefit of the Borrower, the Administrative Agent and each Lender and their respective successors and assigns, except that the Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of each Lender.
SECTION 8.07. Assignments and Participations.
(a) Each Lender may, with the consent of the Administrative Agent and the
Borrower (such consent not to be unreasonably withheld and, in the case of the
Borrower, such consent shall not be required if an Event of Default has occurred
and is continuing), assign to one or more banks or other entities all or a
portion of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitment and the Advances owing to it);
provided, however, that (i) each such assignment shall be of a constant, and not
a varying, percentage of all rights and obligations under this Agreement, (ii)
the amount of the Commitment of the assigning Lender being assigned pursuant to
each such assignment (determined as of the date of the Assignment and Acceptance
with respect to such assignment) shall in no event be less than the lesser of
(A) $10,000,000 and (B) all of such Lender's rights and obligations and, if the
preceding clause (A) is applicable, shall be an integral multiple of $1,000,000,
(iii) each such assignment shall be to an Eligible Assignee, and (iv) the
parties to each such assignment shall execute and deliver to the Administrative
Agent, for its acceptance and recording in the Register, an Assignment and
Acceptance and such parties (other than when Citibank is an assigning party)
shall also deliver to the Administrative Agent a processing and recordation fee
of $3,500. Upon such execution, delivery, acceptance and recording, from and
after the effective date specified in each Assignment and Acceptance, (x) the
assignee thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, have the rights and obligations of a Lender hereunder and (y) the
Lender assignor thereunder shall, to the extent that rights and obligations
hereunder have been assigned
by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto).
(b) By executing and delivering an Assignment and Acceptance, the Lender
assignor thereunder and the assignee thereunder confirm to and agree with each
other and the other parties hereto as follows: (i) other than as provided in
such Assignment and Acceptance, such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other instrument or document furnished pursuant
hereto; (ii) such assigning Lender makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrower or the performance or observance by the Borrower of any of its
obligations under this Agreement or any other instrument or document furnished
pursuant hereto; (iii) such assignee confirms that it has received a copy of
this Agreement, together with copies of the financial statements referred to in
Section 4.01(e) and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (iv) such assignee will, independently and without
reliance upon the Administrative Agent, such assigning Lender or any other
Lender and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under this Agreement; (v) such assignee confirms that it is an Eligible
Assignee; (vi) such assignee appoints and authorizes the Administrative Agent to
take such action as agent on its behalf and to exercise such powers under this
Agreement as are delegated to the Administrative Agent by the terms hereof,
together with such powers as are reasonably incidental thereto; and (vii) such
assignee agrees that it will perform in accordance with their terms all of the
obligations that by the terms of this Agreement are required to be performed by
it as a Lender.
(c) The Administrative Agent shall maintain at its address referred to in
Section 8.02 a copy of each Assignment and Acceptance (and copies of the related
consents of the Borrower and the Administrative Agent to such assignment)
delivered to and accepted by it and a register for the recordation of the names
and addresses of the Lenders and the Commitment of, and principal amount of the
Advances owing to, each Lender from time to time (the "Register"). The entries
in the Register shall be conclusive and binding for all purposes, absent
manifest error, and the Borrower, the Administrative Agent and the Lenders may
treat each Person whose name is recorded in the Register as a Lender hereunder
for all purposes of this Agreement. The Register shall be available for
inspection by the Borrower or any Lender at any reasonable time and from time to
time upon reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an assignee representing that it is an Eligible Assignee, the Administrative Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit B hereto, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Borrower.
(e) Each Lender may assign to one or more banks or other entities any Advance made by it.
(f) Each Lender may sell participations to one or more banks or other
entities in or to all or a portion of its rights and obligations under this
Agreement (including, without limitation, all or a portion of its Commitment,
the Advances owing to it); provided, however, that (i) such Lender's obligations
under this Agreement (including, without limitation, its Commitment to the
Borrower hereunder) shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) such Lender shall remain the holder of any promissory note held pursuant
to Section 2.01(b) for all purposes of this Agreement, (iv) the Borrower, the
Administrative Agent and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and (v) the holder of any such participation,
other than an Affiliate of such Lender, shall not be entitled to require such
Lender to take or omit to take any action hereunder, except action (A) extending
the time for payment of interest on, or the final maturity of any portion of the
principal amount of, the Advances or (B) reducing the principal amount of or the
rate of interest payable on the Advances. Without limiting the generality of the
foregoing: (i) such participating banks or other entities shall be entitled to
the cost protection provisions contained in Sections 2.08, 2.12 and 8.04(b) only
if, and to the same extent, the Lender from which such participating banks or
other entities acquired its participation would, at the time, be entitled to
claim thereunder; and (ii) such participating banks or other entities shall
also, to the fullest extent permitted by law, be entitled to exercise the rights
of set-off contained in Section 8.05 as if such participating banks or other
entities were Lenders hereunder.
(g) If any Lender (or any bank, financial institution, or other entity to
which such Lender has sold a participation) shall make any demand for payment
under Section 2.11(b), then within 30 days after any such demand (if, but only
if, such demanded payment has been made by the Borrower), the Borrower may, with
the approval of the Administrative Agent (which approval shall not be
unreasonably withheld) demand that such Lender assign in accordance with this
Section 8.07 to one or more Eligible Assignees designated by the Borrower all
(but not less than all) of such Lender's Commitment (if any) and the Advances
owing to it within the period ending on the later to occur of such 30th day and
the last day of the longest of the then current Interest Periods for such
Advances, provided that (i) no Event of Default or event that, with the passage
of time or the giving of notice, or both, would constitute an Event of Default
shall then have occurred and be continuing, (ii) the Borrower shall have
satisfied all its presently due obligations to such Lender under this Agreement,
and (iii) if such Eligible Assignee designated by the Borrower is not an
existing Lender on the date of such demand, the Borrower shall have delivered to
the Administrative Agent an administrative fee of $3,500. If any such Eligible
Assignee designated by the Borrower shall fail to consummate such assignment on
terms acceptable to such Lender, or if the Borrower shall fail to designate any
such Eligible Assignees for all or part of such Lender's Commitment or Advances,
then such demand by the Borrower shall become ineffective; it being understood
for purposes of this subsection (g) that such assignment shall be conclusively
deemed to be on terms acceptable to such Lender, and such Lender shall be
compelled to consummate such assignment to an Eligible Assignee designated by
the Borrower, if such Eligible Assignee (i) shall agree to such assignment by
entering into an Assignment and Acceptance in substantially the form of Exhibit
B hereto with such Lender and (ii) shall offer compensation to such Lender in an
amount equal to all amounts then owing by the
Borrower to such Lender hereunder made by the Borrower to such Lender, whether for principal, interest, fees, costs or expenses (other than the demanded payment referred to above and payable by the Borrower as a condition to the Borrower's right to demand such assignment), or otherwise.
(h) Any Lender may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 8.07, disclose to the assignee or participant or proposed assignee or participant, any information relating to the Borrower furnished to such Lender by or on behalf of the Borrower; provided that, prior to any such disclosure, the assignee or participant or proposed assignee or participant shall agree to preserve the confidentiality of any confidential information relating to the Borrower received by it from such Lender.
(i) Anything in this Section 8.07 to the contrary notwithstanding, any Lender may (i) assign and pledge all or any portion of its Commitment and the Advances owing to it to any Federal Reserve Bank (and its transferees) as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any Operating Circular issued by such Federal Reserve Bank; provided, that no such assignment shall release the assigning Lender from its obligations hereunder; or (ii) assign its Commitments, Advances and other rights and obligations hereunder to any of its Affiliates upon notice to, but without the consent of, the Borrower and the Administrative Agent.
(j) Notwithstanding anything to the contrary contained herein, any Lender
(a "Granting Lender") may grant to a special purpose funding vehicle (an "SPC")
of such Granting Lender identified as such in writing from time to time by the
Granting Lender to the Administrative Agent and the Borrower, the option to
provide to the Borrower all or any part of any Advance that such Granting Lender
would otherwise be obligated to make to the Borrower pursuant to this Agreement;
provided that (i) nothing herein shall constitute a commitment by any such SPC
to make any Advance, (ii) if such SPC elects not to exercise such option or
otherwise fails to provide all or any part of such Advance, the Granting Lender
shall be obligated to make such Advance pursuant to the terms hereof and (iii)
no SPC or Granting Lender shall be entitled to receive any greater amount
pursuant to Section 2.07 or 2.11 than the Granting Lender would have been
entitled to receive had the Granting Lender not otherwise granted such SPC the
option to provide any Advance to the Borrower. The making of an Advance by an
SPC hereunder shall utilize the Commitment of the Granting Lender to the same
extent, and as if, such Advance were made by such Granting Lender. Each party
hereto hereby agrees that no SPC shall be liable for any indemnity or similar
payment obligation under this Agreement for which a Lender would otherwise be
liable so long as, and to the extent that, the related Granting Lender provides
such indemnity or makes such payment. In furtherance of the foregoing, each
party hereto hereby agrees (which agreement shall survive the termination of
this Agreement) that, prior to the date that is one year and one day after the
payment in full of all outstanding commercial paper or other senior indebtedness
of any SPC, it will not institute against or join any other person in
instituting against such SPC any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings under the laws of the United States or any
State thereof. Notwithstanding the foregoing, the Granting Lender
unconditionally agrees to indemnify the Borrower, the Administrative Agent and
each Lender against all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever that may be incurred by or asserted against the Borrower, the
Administrative
Agent or such Lender, as the case may be, in any way relating to or arising as a consequence of any such forbearance or delay in the initiation of any such proceeding against its SPC. Each party hereto hereby acknowledges and agrees that no SPC shall have the rights of a Lender hereunder, such rights being retained by the applicable Granting Lender. Accordingly, and without limiting the foregoing, each party hereby further acknowledges and agrees that no SPC shall have any voting rights hereunder and that the voting rights attributable to any Advance made by an SPC shall be exercised only by the relevant Granting Lender and that each Granting Lender shall serve as the administrative agent and attorney-in-fact for its SPC and shall on behalf of its SPC receive any and all payments made for the benefit of such SPC and take all actions hereunder to the extent, if any, such SPC shall have any rights hereunder. In addition, notwithstanding anything to the contrary contained in this Agreement any SPC may with notice to, but without the prior written consent of any other party hereto, assign all or a portion of its interest in any Advances to the Granting Lender. This Section may not be amended without the prior written consent of each Granting Lender, all or any part of whose Advance is being funded by an SPC at the time of such amendment.
SECTION 8.08. Governing Law.
This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York. The Borrower (i) irrevocably submits to the non-exclusive jurisdiction of any New York State court or Federal court sitting in New York City in any action arising out of this Agreement, (ii) agrees that all claims in such action may be decided in such court, (iii) waives, to the fullest extent it may effectively do so, the defense of an inconvenient forum and (iv) consents to the service of process by mail. A final judgment in any such action shall be conclusive and may be enforced in other jurisdictions. Nothing herein shall affect the right of any party to serve legal process in any manner permitted by law or affect its right to bring any action in any other court.
SECTION 8.09. WAIVER OF JURY TRIAL.
THE BORROWER, THE ADMINISTRATIVE AGENT AND EACH LENDER EACH HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY AND LAWFULLY DO SO, ALL RIGHT TO TRIAL BY JURY AS TO ANY ISSUE RELATING TO THIS AGREEMENT IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER INSTRUMENT OR DOCUMENT DELIVERED HEREUNDER OR THEREUNDER.
SECTION 8.10. Execution in Counterparts.
This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.
SECTION 8.11. Severability.
Any provision of this Agreement that is prohibited, unenforceable or not authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or non-authorization without invalidating the remaining provisions hereof or affecting the validity, enforceability or legality of such provision in any other jurisdiction.
SECTION 8.12. Headings.
Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose.
SECTION 8.13. Entire Agreement.
This Agreement constitutes the entire contract between the parties relative to the subject matter hereof. Any previous agreement among the parties with respect to the subject matter hereof is superseded by this Agreement. Except as is expressly provided for herein, nothing in this Agreement, expressed or implied, is intended to confer upon any party other than the parties hereto any rights, remedies, obligations or liabilities under or by reason of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.
PROGRESS ENERGY, INC.
CITIBANK, N.A., as Administrative Agent and Lender
Title:
JPMORGAN CHASE BANK
Title:
BANK ONE, NA
Title:
BANK OF AMERICA, N.A.
Title:
BANK OF TOKYO-MITSUBISHI TRUST COMPANY
Title:
WACHOVIA BANK, N.A.
Title:
SUNTRUST BANK
Title:
THE INDUSTRIAL BANK OF JAPAN, LIMITED
Title:
MELLON BANK, N.A.
Title:
SCHEDULE I
PROGRESS ENERGY, INC.
List of Commitments and Applicable Lending Offices
Eurodollar Domestic
Name of Bank Lending Office Lending Office Commitment
------------ -------------- -------------- ----------
Citibank, N.A. Two Pennsway, Ste. 200 Same as Eurodollar Lending $80,526,315.78
New Castle, Delaware 19720 Office
Attention: Bank Loan Syndications
JPMorgan Chase Bank 270 Park Avenue Same as Eurodollar Lending $80,526,315.78
New York, NY 10017 Office
Attention:
Bank One, NA 1 Bank One Plaza, Suite 0363 Same as Eurodollar Lending $59,210,526.32
Chicago, Illinois 60670-0363 Office
Attention: Robert G. Bussa
Bank of America, N.A. Bank of America Plaza Same as Eurodollar Lending $68,684,210.53
901 Main Street Office
14th Floor, TX1-492-14-05
Dallas, Texas 75202-3714
Attention: Nora Taylor
Bank of Tokyo-Mitsubishi Trust 1251 Avenue of the Americas Same as Eurodollar Lending $59,210,526.32
Company 12th Floor Office
New York, New York 10020-1104
Attention: Nicholas R. Battista
Wachovia Bank. N.A. 191 Peachtree St. Same as Eurodollar Lending $42,631,578.95
Atlanta, Georgia 30303 Office
Attention: Loan Administration
SunTrust Bank 200 South Orange Avenue Same as Eurodollar Lending $23,684,210.53
Orlando, Florida 32801 Office
Attention: William Barr
The Industrial Bank of Japan, 1251 Avenue of the Americas Same as Eurodollar Lending $23,684,210.53
Limited New York, New York 10020 Office
Attention: Loan Administration
Mellon Bank, N.A. Three Mellon Center, Rm. 1203 Same as Eurodollar Lending $11,842,105.26
Pittsburgh, Pennsylvania 15259 Office
Attention: Brenda Leierzapf
|
SCHEDULE II
Permitted Existing Indebtedness
None.
EXHIBIT A-1
NOTICE OF BORROWING
[Date]
Citibank, N.A., as Administrative Agent
for the Lenders parties to the
Credit Agreement referred to below
Two Penns Way, Suite 200
New Castle, Delaware 19720
Attention: Bank Loan Syndications
Ladies and Gentlemen:
The undersigned, PROGRESS ENERGY, INC. refers to the Credit Agreement, dated as of November 13, 2001 (the "Credit Agreement", the terms defined therein being used herein as therein defined), among the undersigned, certain Lenders from time to time parties thereto, and CITIBANK, N.A., as Administrative Agent for the Lenders, and hereby gives you notice pursuant to Section 2.02 of the Credit Agreement that the undersigned hereby requests a Borrowing under the Credit Agreement, and in that connection sets forth below the information relating to such Borrowing (the "Proposed Borrowing") as required by Section 2.02(a) of the Credit Agreement:
(ii) The Type of Advances comprising the Proposed Borrowing is [Base Rate Advances][Eurodollar Rate Advances].
The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the Proposed Borrowing:
(i) the representations and warranties contained in Section 4.01 of the Credit Agreement are correct, before and after giving effect to the Proposed Borrowing and to the application of the proceeds therefrom, as though made on and as of such date; and
(ii) no event has occurred and is continuing, or would result from such Proposed Borrowing or from the application of the proceeds therefrom, that constitutes
A-1-1
an Event of Default or would constitute an Event of Default but for the requirement that notice be given or time elapse or both.
Very truly yours,
PROGRESS ENERGY, INC.
Title:
A-1-2
EXHIBIT A-2
NOTICE OF CONVERSION
[Date]
Citibank, N.A., as Administrative Agent
for the Lenders parties to the
Credit Agreement referred to below
Two Penns Way, Suite 200
New Castle, Delaware 19720
Attention: Bank Loan Syndications
Ladies and Gentlemen:
The undersigned, PROGRESS ENERGY, INC. refers to the Credit Agreement, dated as of November 13, 2001 (the "Credit Agreement", the terms defined therein being used herein as therein defined), among the undersigned, certain Lenders from time to time parties thereto, and CITIBANK, N.A., as Administrative Agent for the Lenders, and hereby gives you notice pursuant to Section 2.09 of the Credit Agreement that the undersigned hereby requests a Conversion under the Credit Agreement, and in that connection sets forth the terms on which such Conversion (the "Proposed Conversion") is requested to be made:
A-2-1
The undersigned hereby certifies that, on the date hereof, and on the date of the Proposed Conversion, no event has occurred and is continuing, or would result from such Proposed Conversion, that constitutes an Event of Default.
Very truly yours,
PROGRESS ENERGY, INC.
Title:
A-2-2
EXHIBIT B
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement, dated as of November 13, 2001 (as amended, modified and supplemented from time to time, the "Credit Agreement", the terms defined therein being used herein as therein defined), among PROGRESS ENERGY, INC., certain Lenders (as defined in the Credit Agreement) from time to time parties thereto, and CITIBANK, N.A., as Administrative Agent for the Lenders (the "Administrative Agent").
1. The Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, that interest in and to all of the Assignor's rights and obligations under the Credit Agreement as of the date hereof that represents the percentage interest specified on Schedule 1 of all outstanding rights and obligations under the Credit Agreement, including, without limitation, such interest in the Assignor's Commitment (to the extent it has not been terminated), the Advances owing to the Assignor. After giving effect to such sale and assignment, the Assignee's Commitment (if any) and the amount of the Advances owing to the Assignee will be as set forth in Section 2 of Schedule 1.
2. The Assignor (i) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; (ii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other instrument or document furnished pursuant thereto; and (iii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under the Credit Agreement or any other instrument or document furnished pursuant thereto.
3. The Assignee (i) confirms that it has received a copy of the Credit
Agreement, together with copies of the financial statements referred to in
Section 4.01(e) thereof and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Assignment and Acceptance; (ii) agrees that it will, independently and
without reliance upon the Administrative Agent, the Assignor or any other Lender
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under the Credit Agreement; (iii) confirms that it is an Eligible Assignee; (iv)
appoints and authorizes the Administrative Agent to take such action as agent on
its behalf and to exercise such powers under the Credit Agreement as are
delegated to the Administrative Agent by the terms thereof, together with such
powers as are reasonably incidental thereto; (v) agrees that it will perform in
accordance with their terms all of
the obligations that by the terms of the Credit Agreement are required to be performed by it as a Lender; [and] (vi) specifies as its Domestic Lending Office (and address for notices) and Eurodollar Lending Office the offices set forth beneath its name on the signature pages hereof [and (vii) attaches the forms prescribed by the Internal Revenue Service of the United States certifying as to the Assignee's status for purposes of determining exemption from United States withholding taxes with respect to all payments to be made to the Assignee under the Credit Agreement or such other documents as are necessary to indicate that all such payments are subject to such rates at a rate reduced by an applicable tax treaty]./1/
4. Following the execution of this Assignment and Acceptance by the Assignor and the Assignee, it will be delivered to the Administrative Agent for acceptance and recording by the Administrative Agent. The effective date of this Assignment and Acceptance shall be the date of acceptance thereof by the Administrative Agent, unless otherwise specified on Schedule 1 hereto (the "Effective Date").
5. Upon such acceptance and recording by the Administrative Agent, as of the Effective Date, (i) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and (ii) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement.
6. Upon such acceptance and recording by the Administrative Agent, from and after the Effective Date, the Administrative Agent shall make all payments under the Credit Agreement in respect of the interest assigned hereby (including, without limitation, all payments of principal, interest and commitment fees with respect thereto) to the Assignee. The Assignor and Assignee shall make all appropriate adjustments in payments under the Credit Agreement for periods prior to the Effective Date directly between themselves.
7. This Assignment and Acceptance shall be governed by, and construed in accordance with, the laws of the State of New York.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and Acceptance to be executed by their respective officers thereunto duly authorized, as of the date first above written, such execution being made on Schedule 1 hereto.
[NAME OF ASSIGNOR] [NAME OF ASSIGNEE]
By By
---------------------- --------------------------
Name: Name:
Title: Title:
Domestic Lending Office (and
address for notices):
[Address]
Eurodollar Lending Office:
[Address]
Accepted this day
----
of , 20
------------ ---
|
CITIBANK, N.A.,
as Administrative Agent
PROGRESS ENERGY, INC.2
SCHEDULE 1
TO
ASSIGNMENT AND ACCEPTANCE
Assignee's Commitment/3/: $
Aggregate Outstanding Principal Amount of Advances owing to Assignee [specify Facility]: $
Effective Date/4/
/4/ This date should be no earlier than the date of acceptance by the Administrative Agent.
EXHIBIT C-1
FORM OF OPINION OF GENERAL COUNSEL TO THE COMPANY
[November 13, 2001]
To each of the Lenders parties to the Credit Agreement referred to below and to Citibank, N.A., as Administrative Agent
Re: Progress Energy, Inc.
Ladies and Gentlemen:
This opinion is furnished to you by me as General Counsel to Progress Energy, Inc. (the "Borrower") pursuant to Section 3.01(g) of the Credit Agreement, dated as of November 13, 2001 (the "Credit Agreement", the terms defined therein being used herein as therein defined), among Progress Energy, Inc., certain lenders named therein (the "Lenders") and Citibank, N.A., as Administrative Agent for the Lenders.
In connection with the preparation, execution and delivery of the Credit Agreement, I have examined:
(1) The Credit Agreement.
(2) The documents furnished by the Borrower pursuant to Section 3.01 of the Credit Agreement.
(3) The Amended and Restated Articles of Incorporation of the Borrower (the "Charter").
(4) The By-Laws of the Borrower and all amendments thereto (the "By-Laws").
I have also examined the originals, or copies of such other corporate records of the Borrower, certificates of public officials and of officers of the Borrower and agreements, instruments and other documents as I have deemed necessary as a basis for the opinions expressed below. As to questions of fact material to such opinions, I have, when relevant facts were not independently established by me, relied upon certificates of the Borrower or its officers or of public officials. I have assumed the authenticity of all documents submitted to me as originals, the conformity to originals of all documents submitted as certified or photostatic copies and the authenticity of signatures (other than those of the Borrower), and the due execution and
C-1-1
delivery, pursuant to due authorization, of the Credit Agreement by the Lenders and the Agent and the validity and binding effect thereof on such parties. For purposes of my opinions expressed in paragraph 1 below as to existence and good standing, I have relied as of their respective dates on certificates of public officials, copies of which are attached hereto as Exhibit A. Whenever the phrase "to my knowledge" is used in this opinion it refers to my actual knowledge and the actual knowledge of the attorneys who work under my supervision and who were involved in the representation of the Borrower in connection with the transactions contemplated by the Credit Agreement.
I or attorneys working under my supervision are qualified to practice law in the States of North Carolina and Florida, and the opinions expressed herein are limited to the law of the States of North Carolina and Florida, the Federal law of the United States and, in reliance on a certificate issued by the Secretary of State of South Carolina and attached hereto as part of Exhibit A, the laws of the State of South Carolina for purposes of the first sentence of opinion paragraph 1 below.
Based upon the foregoing and upon such investigation as I have deemed necessary, I am of the following opinion:
1. Each of the Borrower and CP&L is a corporation duly organized, validly existing and in good standing under the laws of the State of North Carolina, and CP&L is duly qualified to do business and in good standing in the State of South Carolina. Each of Florida Power and FPC is a corporation duly organized, validly existing and in good standing under the laws of the State of Florida. Progress Capital is a corporation duly organized, validly existing and in good standing under the laws of the State of Florida. The Borrower has the corporate power and authority to enter into the transactions contemplated by the Credit Agreement.
2. The execution, delivery and performance of the Credit Agreement by the Borrower have been duly authorized by all necessary corporate action on the part of the Borrower and the Credit Agreement has been duly executed and delivered by the Borrower.
3. The execution, delivery and performance of the Credit Agreement by the Borrower will not (i) violate the Charter or the By-Laws or any law, rule or regulation applicable to the Borrower (including, without limitation, Regulation X of the Board of Governors of the Federal Reserve System) or (ii) result in a breach of, or constitute a default under, any judgment, decree or order binding on the Borrower, or any indenture, mortgage, contract or other instrument to which it is a party or by which it is bound.
4. No authorization, approval or other action by, and no notice to or filing with any governmental authority or regulatory body is required for the due execution, delivery and performance by the Borrower of the Credit Agreement, other than the SEC Order, which has been duly issued and is in full force and effect.
5. To my knowledge, except as described in the reports and registration statements that the Borrower, CP&L, FPC and Florida Power have filed with the Securities and Exchange
C-1-2
Commission, there are no pending or overtly threatened actions or proceedings against the Borrower or any of such Subsidiaries before any court, governmental agency or arbitrator, that may materially adversely affect the financial condition, operations or properties of the Borrower and its Subsidiaries, taken as a whole.
The opinions set forth above are subject to the qualification that no opinion is expressed herein as to the enforceability of the Credit Agreement or any other document.
The foregoing opinions are solely for your benefit and may not be relied upon by any other Person other than (i) any other Person that may become a Lender under the Credit Agreement after the date hereof and (ii) Hunton & Williams and King & Spalding, in connection with their respective opinions delivered on the date hereof under Section 3.01 of the Credit Agreement.
Very truly yours,
C-1-3
EXHIBIT C-2
FORM OF OPINION OF SPECIAL COUNSEL FOR THE COMPANY
[November 13, 2001]
To each of the Lenders parties to the Credit Agreement referred to below and to Citibank, N.A., as Administrative Agent
Re: Progress Energy, Inc.
Ladies and Gentlemen:
This opinion is furnished to you by us as counsel for Progress Energy, Inc. (the "Borrower") pursuant to Section 3.01(g) of the Credit Agreement, dated as of November 13, 2001 (the "Credit Agreement", the terms defined therein being used herein as therein defined), among Progress Energy, Inc., certain lenders named therein (the "Lenders") and Citibank, N.A., as Administrative Agent for the Lenders.
In connection with the preparation, execution and delivery of the Credit Agreement, we have examined:
(1) The Credit Agreement.
(2) The documents furnished by the Borrower pursuant to Section 3.01 of the Credit Agreement.
(3) The opinion letter of even date herewith, addressed to you by William D. Johnson, General Counsel to the Company and delivered in connection with the transactions contemplated by the Credit Agreement (the "Company Opinion Letter").
We have also examined the originals, or copies of such other corporate records of the Borrower, certificates of public officials and of officers of the Borrower and agreements, instruments and other documents as we have deemed necessary as a basis for the opinions expressed below. As to questions of fact material to such opinions, we have, when relevant facts were not independently established by us, relied upon certificates of the Borrower or its officers or of public officials. We have assumed the authenticity of all documents submitted to us as originals, the conformity to originals of all documents submitted as certified or photostatic copies and the authenticity of the originals (other than those of the Borrower), and the due execution and delivery, pursuant to due authorization, of the Credit Agreement by the Lenders and
C-2-1
the Agent and the validity and binding effect thereof on such parties. Whenever the phrase "to our knowledge" is used in this opinion it refers to the actual knowledge of the attorneys of this firm involved in the representation of the Borrower without independent investigation.
We are qualified to practice law in the States of North Carolina, Florida and New York, and the opinions expressed herein are limited to the law of the States of North Carolina, Florida and New York and the federal law of the United States. To the extent that our opinions expressed herein depend upon opinions expressed in paragraphs 1 through 4 of the Company Opinion Letter, we have relied without independent investigation on the accuracy of the opinions expressed in the Company Opinion Letter, subject to the assumptions, qualifications and limitations set forth in the Company Opinion Letter.
Based upon the foregoing and upon such investigation as we have deemed necessary, we are of the opinion that the Credit Agreement constitutes the legal, valid and binding obligation of the Borrower enforceable against the Borrower in accordance with its terms except as enforcement may be limited or otherwise affected by (a) bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium or other similar laws affecting the rights of creditors generally and (b) principles of equity, whether considered at law or in equity.
The opinion set forth above is subject to the following qualifications:
(a) In addition to the application of equitable principles described above, courts have imposed an obligation on contracting parties to act reasonably and in good faith in the exercise of their contractual rights and remedies, and may also apply public policy considerations in limiting the right of parties seeking to obtain indemnification under circumstances where the conduct of such parties is determined to have constituted negligence.
(b) No opinion is expressed herein as to (i) Section 8.05 of the Credit Agreement, (ii) the enforceability of provisions purporting to grant to a party conclusive rights of determination, (iii) the availability of specific performance or other equitable remedies, (iv) the enforceability of rights to indemnity under federal or state securities laws or (v) the enforceability of waivers by parties of their respective rights and remedies under law.
(c) No opinion is expressed herein as to provisions, if any, in the Credit Agreement, which (A) purport to excuse, release or exculpate a party for liability for or indemnify a party against the consequences of its own acts, (B) purport to make void any act done in contravention thereof, (C) purport to authorize a party to make binding determinations in its sole discretion, (D) relate to the effects of laws which may be enacted in the future, (E) require waivers, consents or amendments to be made only in writing, (F) purport to waive rights of offset or to create rights of set off other than as provided by statute, or (G) purport to permit acceleration of indebtedness and the exercise of remedies by reason of the occurrence of an immaterial breach of the Credit Agreement or any related document. Further, we express no opinion as to the necessity for any Lender, by reason of such Lender's particular circumstances, to qualify to transact business in the State of New York or as to any Lender's liability for taxes in any jurisdiction.
The foregoing opinion is solely for your benefit and may not be relied upon by any other Person other than (i) any other Person that may become a Lender under the Credit Agreement
C-2-2
after the date hereof in accordance with the provisions thereof and (ii) King &
Spalding, in connection with their opinion delivered on the date hereof under
Section 3.01 of the Credit Agreement.
Very truly yours,
C-2-3
EXHIBIT D
FORM OF OPINION OF COUNSEL
TO THE ADMINISTRATIVE AGENT
AND THE ARRANGERS
[DATE]
To Citibank, N.A. ("Citibank"), as Administrative Agent for the Lenders referred to below, and to each of the Arrangers and Lenders parties to the Credit Agreement referred to below
Re: Progress Energy, Inc.
Ladies and Gentlemen:
We have acted as counsel to the Administrative Agent and the Arrangers in connection with the preparation, execution and delivery of the Credit Agreement, dated as of November 13, 2001 (the "Credit Agreement", the terms defined therein being used herein as therein defined), among Progress Energy, Inc., certain Lenders from time to time parties thereto, and Citibank, N.A., as Administrative Agent for the Lenders.
In this connection, we have examined the following documents:
1. a counterpart of the Credit Agreement, executed by the parties thereto;
2. the documents furnished by or on behalf of the Borrower pursuant to subsections (b) through (g) of Section 3.01 of the Credit Agreement, including, without limitation, the opinion of Hunton & Williams (the "Borrower Opinion").
In our examination of the documents referred to above, we have assumed the authenticity of all such documents submitted to us as originals, the genuineness of all signatures, the due authority of the parties executing such documents and the conformity to the originals of all such documents submitted to us as copies. We have also assumed that you have independently evaluated, and are satisfied with, the creditworthiness of the Borrower and the business terms reflected in the Credit Agreement. We have relied, as to factual matters, on the documents we have examined.
To the extent that our opinions expressed below involve conclusions as to matters governed by law other than the law of the State of New York, we have relied upon the Borrower Opinion and have assumed without independent investigation the correctness of the matters set
forth therein, our opinions expressed below being subject to the assumptions, qualifications and limitations set forth in the Borrower Opinion.
Based upon and subject to the foregoing, and subject to the qualifications set forth below, we are of the opinion that the Credit Agreement is the legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms.
Our opinion is subject to the following qualifications:
(a) The enforceability of the Borrower's obligations under the Credit Agreement is subject to the effect of any applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar law affecting creditors' rights generally.
(b) The enforceability of the Borrower's obligations under the Credit Agreement is subject to the effect of general principles of equity, including (without limitation) concepts of materiality, reasonableness, good faith and fair dealing (regardless of whether considered in a proceeding in equity or at law). Such principles of equity are of general application, and, in applying such principles, a court, among other things, might not allow a contracting party to exercise remedies in respect of a default deemed immaterial, or might decline to order an obligor to perform covenants.
(c) We note further that, in addition to the application of equitable principles described above, courts have imposed an obligation on contracting parties to act reasonably and in good faith in the exercise of their contractual rights and remedies, and may also apply public policy considerations in limiting the right of parties seeking to obtain indemnification under circumstances where the conduct of such parties is determined to have constituted negligence.
(d) We express no opinion herein as to (i) the enforceability of Section 8.05 of the Credit Agreement, (ii) the enforceability of provisions purporting to grant to a party conclusive rights of determination, (iii) the availability of specific performance or other equitable remedies, (iv) the enforceability of rights to indemnity under federal or state securities laws, or (v) the enforceability of waivers by parties of their respective rights and remedies under law.
(e) Our opinions expressed above are limited to the law of the State of New York, and we do not express any opinion herein concerning any other law.
The foregoing opinion is solely for your benefit and may not be relied upon by any other person or entity.
Very truly yours,
EXHIBIT E
FORM OF COMPLIANCE CERTIFICATE
[Letterhead of Progress Energy, Inc.]
[Date]
To the Lenders party to the
Credit Agreement referred
to below and to Citibank, N.A.
as Administrative Agent
Ladies and Gentlemen:
This compliance certificate is furnished to you pursuant to Section 5.01(i)(ii) of the Credit Agreement, dated as of November 13, 2001 (the "Credit Agreement"), among Progress Energy, Inc., a North Carolina corporation (the "Borrower"), the banks listed on the signature pages thereof (the "Banks"), and Citibank, N.A. ("Citibank"), as administrative agent (the "Administrative Agent") for the Lenders (as hereinafter defined). Terms defined in the Credit Agreement are used herein as therein defined.
A. Indebtedness as of such date was $ , calculated as follows:
--------
Current Indebtedness: Amount
------
[List all forms of current Debt]
---------------------------------- $
----------------------------------
----------------------------------
---------------------------------- ----------
Total current Indebtedness $
----------
Long-term Indebtedness : Amount
------
[list all forms of long-term Indebtedness ]
---------------------------------- $
----------------------------------
|
Consolidated Indebtedness $
Preferred Stock $
Common Stock $
2. As of [_______], 2001, and as of the date hereof, no Event of Default and no event that, with the giving of notice or lapse of time or both, will constitute an Event of Default, has occurred and in continuing.
I hereby certify that the calculations set forth in paragraph 1 hereof were
prepared in accordance with generally accepted accounting principles consistent
with those applied in the preparation of the financial statements referred to in
Section 4.01(e) of the Credit Agreement.
Very truly yours,
PROGRESS ENERGY, INC.
Title:
Exhibit 10b(7)
EXECUTION COPY
AMENDMENT
Dated as of February 13, 2002
To the Lenders parties to the Credit Agreement and the Administrative Agent referred to below
Ladies and Gentlemen:
Reference is made to the 364-Day Credit Agreement, dated as of November 13, 2001 (the "Credit Agreement"), among Progress Energy, Inc. (the "Borrower"), the Lenders parties thereto and Citibank, N.A. ("Citibank"), as Administrative Agent. Capitalized terms used herein and not otherwise defined herein have the meanings given such terms in the Credit Agreement. The Borrower hereby requests that the Credit Agreement be amended, as provided below, so that certain provisions apply to only the Significant Subsidiaries of the Borrower, rather than to all Subsidiaries of the Borrower.
Section 1. Amendments. The parties agree that, subject to the satisfaction of the conditions precedent to effectiveness set forth below, the Credit Agreement is, as of the date hereof, hereby amended as follows:
(a) Subsection (h) of Section 5.01 is amended and restated in its entirety to read as follows:
"(h) Material Obligations. Pay, and cause each Significant Subsidiary to pay, promptly as the same shall become due each material obligation of the Borrower or such Significant Subsidiary."
(b) Subsections (d), (e) and (f) of Section 6.01 of the Credit Agreement are amended and restated in their entirety to read as follows:
"(d) The Borrower or any Significant Subsidiary shall fail to pay any amount in respect of any Indebtedness in excess of $10,000,000 (but excluding Indebtedness hereunder) of the Borrower or such Significant Subsidiary (as the case may be), or any interest or premium thereon, when due (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise) and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Indebtedness; or any other default under any agreement or instrument relating to any such Indebtedness, or any other event, shall occur and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such default or event is to accelerate, or to permit the acceleration of, the maturity of such Indebtedness; or any such Indebtedness shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), prior to the stated maturity thereof; or
(e) The Borrower or any Significant Subsidiary shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Borrower or any Significant Subsidiary seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property; or the Borrower or any Significant Subsidiary shall take any corporate action to authorize any of the actions set forth above in this subsection (e); or
(f) Any judgment or order for the payment of money in excess of $10,000,000 shall be rendered against the Borrower or any Significant Subsidiary and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be any period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or"
Section 2. Conditions to Effectiveness. Section 1 of this Amendment shall be effective as of the date hereof when and if (i) the Borrower and the Majority Lenders shall have executed and delivered to the Administrative Agent executed counterparts of this Amendment, and (ii) the representations and warranties of the Borrower set forth in Section 3 below shall be true and correct on and as of such date of effectiveness as though made on and as of such date.
Section 3. Representations and Warranties. The Borrower represents and warrants that (i) the representations and warranties contained in Article IV of the Credit Agreement, as amended hereby (with each reference therein to "this Agreement", "hereunder" and words of like import referring to the Credit Agreement being deemed to be a reference to this Amendment and the Credit Agreement, as amended hereby), are true and correct on and as of the date hereof as though made on and as of such date, and (ii) no event has occurred and is continuing, or would result from the execution and delivery of this Amendment, that constitutes an Event of Default.
Section 4. Effect on the Credit Agreement. If you consent and agree to the foregoing, please evidence such consent and agreement by executing and returning six counterparts of this Amendment to King & Spalding, 1185 Avenue of the Americas, New York, New York 10036, Attention: Elizabeth T. Wubneh (fax no. 212-556-2222). The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of any Lender or the Administrative Agent under the Credit Agreement, nor constitute a waiver of any provision of any of the Credit Agreement. Except as expressly amended above, the Credit Agreement is and shall continue to be in full force and effect and is hereby in all respects ratified and confirmed. This Amendment shall be binding on the parties hereto and their respective successors and permitted assigns under the Credit Agreement.
Section 4. Counterparts. This Amendment may be executed in any number of counterparts and by any combination of the parties hereto in separate counterparts, each of which counterparts shall constitute an original, and all of which taken together shall constitute one and the same instrument.
Section 5. Governing Law. This Amendment shall be governed by, and construed in accordance with, the laws of the State of New York.
Very truly yours,
PROGRESS ENERGY, INC.
Title:
The undersigned hereby consent
and agree to the foregoing:
CITIBANK, N.A.
JPMORGAN CHASE BANK
BANK ONE, NA
BANK OF AMERICA, N.A.
BANK OF TOKYO-MITSUBISHI TRUST COMPANY
WACHOVIA BANK, N.A.
SUNTRUST BANK
THE INDUSTRIAL BANK OF JAPAN, LIMITED
MELLON BANK, N.A.
BARCLAYS BANK PLC
Exhibit 10b(8)
EXECUTION COPY
AMENDMENT
Dated as of February 13, 2002
To the Lenders parties to the Credit Agreement and the Administrative Agent referred to below
Ladies and Gentlemen:
Reference is made to the Three-Year Credit Agreement, dated as of November 13, 2001 (the "Credit Agreement"), among Progress Energy, Inc. (the "Borrower"), the Lenders parties thereto and Citibank, N.A. ("Citibank"), as Administrative Agent. Capitalized terms used herein and not otherwise defined herein have the meanings given such terms in the Credit Agreement. The Borrower hereby requests that the Credit Agreement be amended, as provided below, so that certain provisions apply to only the Significant Subsidiaries of the Borrower, rather than to all Subsidiaries of the Borrower.
Section 1. Amendments. The parties agree that, subject to the satisfaction of the conditions precedent to effectiveness set forth below, the Credit Agreement is, as of the date hereof, hereby amended as follows:
(a) Subsection (h) of Section 5.01 is amended and restated in its entirety to read as follows:
"(h) Material Obligations. Pay, and cause each Significant Subsidiary to pay, promptly as the same shall become due each material obligation of the Borrower or such Significant Subsidiary."
(b) Subsections (d), (e) and (f) of Section 6.01 of the Credit Agreement are amended and restated in their entirety to read as follows:
"(d) The Borrower or any Significant Subsidiary shall fail to pay any amount in respect of any Indebtedness in excess of $10,000,000 (but excluding Indebtedness hereunder) of the Borrower or such Significant Subsidiary (as the case may be), or any interest or premium thereon, when due (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise) and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Indebtedness; or any other default under any agreement or instrument relating to any such Indebtedness, or any other event, shall occur and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such default or event is to accelerate, or to permit the acceleration of, the maturity of such Indebtedness; or any such Indebtedness shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), prior to the stated maturity thereof; or
(e) The Borrower or any Significant Subsidiary shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Borrower or any Significant Subsidiary seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property; or the Borrower or any Significant Subsidiary shall take any corporate action to authorize any of the actions set forth above in this subsection (e); or
(f) Any judgment or order for the payment of money in excess of $10,000,000 shall be rendered against the Borrower or any Significant Subsidiary and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be any period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or"
Section 2. Conditions to Effectiveness. Section 1 of this Amendment shall be effective as of the date hereof when and if (i) the Borrower and the Majority Lenders shall have executed and delivered to the Administrative Agent executed counterparts of this Amendment, and (ii) the representations and warranties of the Borrower set forth in Section 3 below shall be true and correct on and as of such date of effectiveness as though made on and as of such date.
Section 3. Representations and Warranties. The Borrower represents and warrants that (i) the representations and warranties contained in Article IV of the Credit Agreement, as amended hereby (with each reference therein to "this Agreement", "hereunder" and words of like import referring to the Credit Agreement being deemed to be a reference to this Amendment and the Credit Agreement, as amended hereby), are true and correct on and as of the date hereof as though made on and as of such date, and (ii) no event has occurred and is continuing, or would result from the execution and delivery of this Amendment, that constitutes an Event of Default.
Section 4. Effect on the Credit Agreement. If you consent and agree to the foregoing, please evidence such consent and agreement by executing and returning six counterparts of this Amendment to King & Spalding, 1185 Avenue of the Americas, New York, New York 10036, Attention: Elizabeth T. Wubneh (fax no. 212-556-2222). The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of any Lender or the Administrative Agent under the Credit Agreement, nor constitute a waiver of any provision of any of the Credit Agreement. Except as expressly amended above, the Credit Agreement is and shall continue to be in full force and effect and is hereby in all respects ratified and confirmed. This Amendment shall be binding on the parties hereto and their respective successors and permitted assigns under the Credit Agreement.
Section 4. Counterparts. This Amendment may be executed in any number of counterparts and by any combination of the parties hereto in separate counterparts, each of which counterparts shall constitute an original, and all of which taken together shall constitute one and the same instrument.
Section 5. Governing Law. This Amendment shall be governed by, and construed in accordance with, the laws of the State of New York.
Very truly yours,
PROGRESS ENERGY, INC.
Title:
The undersigned hereby consent
and agree to the foregoing:
CITIBANK, N.A.
JPMORGAN CHASE BANK
BANK ONE, NA
BANK OF AMERICA, N.A.
BANK OF TOKYO-MITSUBISHI TRUST COMPANY
Name:
Title:
WACHOVIA BANK, N.A.
SUNTRUST BANK
THE INDUSTRIAL BANK OF JAPAN, LIMITED
MELLON BANK, N.A.
Exhibit 10c(9)
Amended and Restated
Carolina Power & Light Company
Restoration Retirement Plan
Carolina Power & Light Company (the "Sponsor") established the Carolina Power & Light Company Restoration Retirement Plan (the "Plan"), effective as of January 1, 1998 ("Effective Date"), and amended and restated the Plan effective January 1, 1999.
The Sponsor hereby restates and amends the Plan effective as of January 1, 2000.
ARTICLE I.
The purpose of the Plan is to provide a means by which certain employees may be provided benefits which otherwise would be provided under the Carolina Power & Light Company Supplemental Retirement Plan, as amended (the "Retirement Plan"), in the absence of certain restrictions imposed by applicable law on benefits which may be provided under the Retirement Plan. The Plan is intended to constitute an unfunded retirement plan for a select group of management or highly compensated employees within the meaning of Title I of the Employee Retirement Income Security Act of 1974, as amended.
ARTICLE II
Capitalized terms which are not defined herein shall have the meaning ascribed to them in the Retirement Plan.
2.1 "Actuarial Value" shall mean an equivalent lump sum value as of the Benefit Commencement Date using the average 30-year Treasury Rate for the month of August immediately preceding the calendar year the determination is made and the GAM 83 mortality table (50% male, 50% female).
2.2 "Affiliated Company" shall mean any corporation or other entity that is
required to be aggregated with the Sponsor pursuant to Sections 414(b), (c),
(m), or (o) of the Code, but only to the extent so required.
2.3 "Benefit Commencement Date" shall mean the effective date for the payment of a Participant's Accrued Benefit under the Retirement Plan, whether in the form of a lump sum or an annuity.
2.4 "Board" shall mean the Board of Directors of the Sponsor.
2.5 "Code" shall mean the Internal Revenue Code of 1986, as amended.
2.6 "Committee" shall mean a committee selected by the Plan Administrator to hear claim disputes under Article IV of the Plan.
2.7 "Company" shall mean Carolina Power & Light Company or any successor to it in the ownership of substantially all of its assets and each Affiliated Company that, with the consent of the Board, adopts the Plan and is included in Appendix A, as in effect from time to time. Appendix A shall set forth any limitations
imposed on employees of Affiliated Companies that adopt the Plan including any limitations on benefit accruals, notwithstanding any provision in the Plan to the contrary.
2.8 "Compensation and Benefit Limitations" shall mean (a) the limitation on compensation under the Retirement Plan in accordance with Section 401(a)(17) of the Code and (b) any limits on benefits paid under the Retirement Plan that are necessary for compliance with Section 415 of the Code.
2.9 "Continuing Directors" shall mean the members of the Board as of the Effective Date; provided, however, that any person becoming a director subsequent to such date whose election or nomination for election was supported by 75 percent or more of the directors who then comprised Continuing Directors shall be considered to be a Continuing Director.
2.10 "Deferrals" shall mean a Participant's deferrals of compensation under the MDCP to the extent not utilized in calculating a Participant's Accrued Benefit under the Retirement Plan.
2.11 "Eligible Employee" shall mean any member of the Retirement Plan who is not a Participant in the Sponsor's Supplemental Senior Executive Retirement Plan and who has not retired or terminated his or her employment with the Company prior to the Effective Date.
2.12 "MDCP" shall mean the Carolina Power & Light Company Management Deferred Compensation Plan effective as of January 1, 2000 and as thereafter amended.
2.13 "Participant" shall mean an Eligible Employee who participates in the Plan pursuant to Article III. An Eligible Employee shall remain a Participant under the Plan
until the earlier of (a) all amounts payable on his or her behalf under the Plan have been paid, (b) the Eligible Employee no longer has a Restoration Accrued Benefit, (c) the Eligible Employee has a Termination without a Vested Restoration Accrued Benefit, or (d) the Eligible Employee becomes a Participant in the Sponsor's Supplemental Senior Executive Retirement Plan.
2.14 "Restoration Accrued Benefit" shall mean, as of any determination date, the excess of (a) a Participant's Accrued Benefit calculated under the Retirement Plan (i) assuming a Participant's Compensation under the Retirement Plan includes Deferrals of a Participant and (ii) without regard to the Compensation and Benefit Limitations, over (b) a Participant's Accrued Benefit calculated under the Retirement Plan. For purposes of this Section 2.14, a Participant's Accrued Benefit for purposes of clauses (a) and (b) above shall be calculated in the form of a Single Life Annuity for a Participant who does not have a Spouse and in the form of a 50% Qualified Joint and Survivor Annuity for a Participant who has a Spouse, with such calculation performed without regard to any other form of benefit elected by a Participant under the Retirement Plan.
2.15 "Retirement Plan" shall mean the Carolina Power & Light Company Supplemental Retirement Plan, as it may be amended from time to time, or any successor plan.
2.16 "Sponsor" shall mean Carolina Power & Light Company.
2.17 "Spouse" shall mean the spouse of a Participant as would be determined at the applicable time under the definition of Spouse in the Retirement Plan (or any successor provisions).
2.18 "Termination" shall mean a termination of employment with the Sponsor and all Affiliated Companies.
2.19 "Vested Restoration Accrued Benefit" shall mean a Participant's Restoration Accrued Benefit when the Participant becomes fully vested under the provisions of the Retirement Plan (or any successor provisions) or as provided in Article VI of the Plan.
Unless the context clearly indicates to the contrary in interpreting the Plan, any references to the masculine alone shall include the feminine and the singular shall include the plural.
ARTICLE III
form of a 50% Joint and Survivor Annuity if the Participant has a Spouse, with the Spouse determined at the Benefit Commencement Date entitled to any survivor benefit upon the death of the Participant.
being 100% vested under the Retirement Plan shall not be eligible to receive any benefits under the Plan and shall forfeit his or her Restoration Accrued Benefit. Any Participant ceasing to be an Eligible Employee because he or she becomes a Participant in the Supplemental Senior Executive Retirement Plan shall forfeit his or her Restoration Accrued Benefit.
Notwithstanding any other provision of the Plan, no benefit shall be payable under the Plan with respect to an Eligible Employee whose employment with the Sponsor or any of its Affiliated Companies is terminated for Cause. As used herein, the term "Cause" shall be limited to (a) action by the Eligible Employee involving willful malfeasance having a material adverse effect on the Sponsor or any of its Affiliated Companies (b) substantial and continuing willful refusal by the Eligible Employee to perform the duties ordinarily performed by an employee in the same position and having similar duties as the Eligible Employee, (c) the Eligible Employee being convicted of a felony, or (d) willful failure to comply with the Sponsor or the applicable Affiliated Company's Code of Conduct or other Policy or Procedure.
For a Participant (or spouse) whose benefit under the Retirement Plan is based on the Final Average Pay Formula Pension, the lump sum shall be equal to the Actuarial Value of the annuity payments that would otherwise be made to the Participant (or spouse) under Sections 3.2 or 3.3, as the case may be.
ARTICLE IV
is denied, the written notice of denial shall set forth the reasons for such denial, refer to pertinent Plan provisions on which the denial is based, describe any additional material or information necessary for the claimant to realize the claim, and explain the claim review procedure under the Plan.
ARTICLE V
amount equal to the equivalent actuarial value, to be determined in the sole discretion of the Committee, of such Vested Restoration Accrued Benefit under another plan, program or practice adopted by a Company. In the event the Plan is terminated, the Sponsor shall determine whether to pay Vested Restoration Accrued Benefits in the form of an actuarial equivalent lump sum payment or defer the payment of Vested Restoration Accrued Benefits until the payment of Early Retirement Pensions or Normal Retirement Pensions under the Retirement Plan.
taken hereunder shall create, or be construed to create, a trust of any kind, or a fiduciary relationship between a Company and the Participants, terminated Participants, beneficiaries, or any other persons. Any funds which may be accumulated by a Company in order to meet any obligations under the Plan shall for all purposes continue to be a part of the general assets of a Company; provided, however, that a Company may establish a trust to hold funds intended to provide benefits hereunder to the extent the assets of such trust become subject to the claims of the general creditors of such Company in the event of bankruptcy or insolvency of such Company. To the extent that any Participant, terminated Participant, or beneficiary acquires a right to receive payments from a Company under the Plan, such rights shall be no greater than the rights of any unsecured general creditor of such Company.
right or claim to any benefits beyond those which are expressly provided herein and all rights and claims hereunder are limited as set forth in the Plan.
liabilities of the Plan with respect to the Recipient.
ARTICLE VI
The provisions of this Article VI shall become effective immediately upon occurrence of a Change in Control (as defined in Section 6.1).
(a) the acquisition by any person (including a group, within the meaning of Section 13(d) or 14(d)(2) of the Securities Exchange Act of 1934) of beneficial ownership of 15% or more of the Sponsor's then outstanding voting securities;
(b) a tender offer is made and consummated for the ownership of 51% or more of the Sponsor's then outstanding voting securities;
(c) the first day on which less than 66 2/3 percent of the total membership of the Board are Continuing Directors; or
(d) approval by stockholders of the Sponsor of a merger,
consolidation, liquidation or dissolution of the Sponsor, or of the sale of all or substantially all of the assets of the Sponsor.
A Change in Control shall not be deemed to have occurred until the
Plan Administrator receives written certification from the President and Chief
Executive Officer of the Sponsor or, in the event of his or her inability to
act, the Chief Financial Officer, or any Executive or Senior Vice President of
the Sponsor that one of the events set forth above in (a) through (d) of this
Section 6.1 has occurred. The officers referred to in the previous sentence
shall be those officers in office immediately prior to the occurrence of one of
the events set forth above in (a) through (d) of this Section 6.1. Any
determination that an event described above in (a) through (d) of this Section
6.1 has occurred shall, if made in good faith on the basis of information
available at that time, be conclusive and binding on the Plan Administrator, the
Committee, the Sponsor, any Company and the Eligible Employees and their
beneficiaries for all purposes of the Plan.
* * *
APPENDIX A
North Carolina Natural Gas Company solely with respect to accrued benefits on or after January 1, 2000 so that no Restoration Accrued Benefit is calculated under the Plan with respect to employment prior to January 1, 2000.
Exhibit 10c(11)
EXHIBIT A
TO
1997 EQUITY INCENTIVE PLAN
(As Revised and Restated January 1, 2001)
This Performance Share Sub-Plan ("Sub-Plan") sets forth the rules and regulations adopted by the Committee for issuance of Performance Share Awards under Section 10 of the 1997 Equity Incentive Plan ("Plan"). Capitalized terms used in this Sub-Plan that are not defined herein shall have the meaning given in the Plan. In the event of any conflict between this Sub-Plan and the Plan, the terms and conditions of the Plan shall control. No Award Agreement shall be required for participation in this Sub-Plan.
Section 1. Definitions
When used in this Sub-Plan, the following terms shall have the meanings as set forth below, and are in addition to the definitions set forth in the Plan.
(a) becoming 65 years old with at least 5 years of service;
(b) becoming 55 years old with at least 15 years of service; or
(c) achieving at least 35 years of service, regardless of age.
Section 2. Sub-Plan Participation and Awards
----------------------------------------------------------------
Participant Award Limitation
----------------------------------------------------------------
CEO/COO 150% of Salary
----------------------------------------------------------------
Presidents*/Executive VPs* 100% of Salary
----------------------------------------------------------------
Senior VPs* 85% of Salary
----------------------------------------------------------------
Department Heads and Key Managers**
Level I 75% of Salary
----------------------------------------------------------------
2
|
---------------------------------------------------------------- Level II 50% of Salary Level III 40% of Salary ---------------------------------------------------------------- |
* Senior Management Committee level position **Levels shall be determined in the sole discretion of the Committee
(a) One half of the Award shall be adjusted as follows:
(i) The Total Shareholder Return for the Company shall be determined for each Year during the Performance Period, and shall then be averaged (the "Company TSR").
(ii) The average Total Shareholder Return for all Peer Group utilities shall be determined for each Year during the Performance Period, and shall then be averaged ( the "Peer Group TSR").
(iii) The Peer Group TSR for the Performance Period shall be subtracted from the Company TSR for the Performance Period. The remainder shall then be used to determine the number of vested Performance Shares using the Performance Schedule, based on one half of the number of Performance Shares in the Participant's Account.
(b) The other half of the Award shall be adjusted as follows:
(i) The EBITDA Growth for the Company shall be determined for each Year during the Performance Period, and shall then be averaged (the Company EBITDA Growth").
(ii) The average EBITDA Growth for all Peer Group utilities shall be determined for each Year during the Performance period, and shall be averaged (the Peer Group EBITDA Growth").
(iii) The Peer Group EBITDA Growth for the Performance Period shall be subtracted from the Company EBITDAGrowth for the Performance Period. The remainder shall then be used to determine the number of vested Performance Shares using the Performance Schedule, based on one half of the number of Performance Shares in the Participant's Account.
(c) The total number of vested Performance Shares payable to the Participant shall be the sum of the amounts determined in accordance with subsections (a) and (b) above.
(d) The Performance Measures and the Performance Schedule will not change during any Performance Period with regard to any Awards that have already been granted. The Committee reserves the right to modify or adjust the Performance Measures and/or the Performance Schedule in the Committee's sole discretion with regard to future grants.
(a) 100% on or about April 1 of the Year immediately following expiration of the Performance Period; or
(b) in accordance with an alternative payment election made by Participant substantially in the form attached hereto as Attachment 2, provided that such election is executed by the Participant and returned to the Vice President, Human Resources Department no later than the end of the first Year of the Performance Period. Once made, this election is irrevocable.
Section 3. Early Vesting and Forfeiture
Participant's Award shall immediately become vested, and the aggregate value of the Award shall be paid in cash after being adjusted accordance with the following procedure.
(a) One half of the Award shall be adjusted as follows:
(i) The Total Shareholder Return for the Company shall be determined for each Year or partial Year, and a weighted average Total Shareholder Return for the Company shall be calculated for the period between the first day of the Performance Period and the date the Participant Retires, dies or becomes Disabled, or the date of the Divestiture, or the date that the Change in Control becomes effective (the "Prorated Company TSR").
(ii) The average Total Shareholder Return for all Peer Group utilities shall be determined for each Year or partial Year, and a weighted average Total Shareholder Return shall be calculated for the period between the first day of the Performance Period and the date the Participant Retires, dies or becomes Disabled, or the date of the Divestiture, or the date that the Change in Control becomes effective ( the "Prorated Peer Group TSR").
(iii) The Prorated Peer Group TSR for the Performance Period shall be subtracted from the Prorated Company TSR for the Performance Period. The remainder shall then be used to determine the vested Performance Shares using the Performance Schedule, based on one half of the number of Performance Shares in the Participant's Account.
(b) The other half of the Award shall be adjusted as follows:
(i) The EBITDA Growth for the Company shall be determined for each Year or partial Year, and a weighted average EBITDA Growth for the Company shall be calculated for the period between the first day of the Performance Period and the end of the calendar quarter immediately preceding the date that the Participant Retires, dies or becomes Disabled, or end of the calendar quarter immediately preceding the date of the Divestiture, or the date that the Change in Control becomes effective (the "Prorated Company EBITDA Growth").
(ii) The average EBITDA Growth for all Peer Group utilities shall be determined for each Year or partial Year, and a weighted average EBITDA Growth shall be calculated for the period between the first day of the Performance Period and the end of the calendar quarter immediately preceding the date the Participant Retires, dies or becomes Disabled, or the end of the calendar quarter immediately preceding the date of the
Divestiture, or the date that the Change in Control becomes effective ( the "Prorated Peer Group EBITDA Growth").
(iii) The Prorated Peer Group EBITDA Growth for the Performance Period shall be subtracted from the Prorated Company EBITDA Growth for the Performance Period. The remainder shall then be used to determine the vested Performance Shares using the Performance Schedule, based on one half of the number of Performance Shares in the Participant's Account.
(c) The total number of vested Performance Shares payable to the Participant shall be the sum of the amounts determined in accordance with subsections (a) and (b) above.
(d) If the Participant Retires, the Award shall be paid in accordance with
the Participant's election as provided in Section 2.6. If the Participant dies
or becomes disabled, or in the event of a Divestiture or Change in Control,
payment shall be made in cash within a reasonable time after the Participant
dies or becomes Disabled, or within a reasonable time after the Divestiture or
Change in Control becomes effective, notwithstanding any election under Section
2.6. Payment upon death shall be made to the Participant's Designated
Beneficiary. The aggregate value of the vested Performance Shares shall be
determined in accordance with section 3.2.
4. Non-Assignability of Awards
The Awards and any right to receive payment under the Plan and this Sub-Plan may not be anticipated, alienated, pledged, encumbered, or subject to any charge or legal process, and if any attempt is made to do so, or a Participant becomes bankrupt, then in the sole discretion of the Committee, any Award made to the Participant which has not vested as provided in Sections 2 and 3 shall be forfeited.
5. Amendment and Termination
This Sub-Plan shall be subject to amendment, suspension, or termination as provided in the Plan.
The following table shall be used to adjust one half of the Participant's Award in accordance with Section 2.5(a) or Section 3.1(a) of the Plan:
If the Company TSR/2/ minus Then the 50% of the vested
the Peer Group TSR/2/ is: Performance Share Award
shall be multiplied by:
5% or better 2.00
4.0 - 4.99 1.75
3.0 - 3.99 1.50
2.0 - 2.99 1.25
1.0 - 1.99 1.00
(0.99) - 0.99 .50
(1.0) - (1.99) .25
(2.0) or less 0.00
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The following table shall be used to adjust one half of the Participant's Award in accordance with Section 2.5(b) or Section 3.1(b) of the Plan:
If the Company EBITDA Growth/2/ minus Then the 50% of the vested
the Peer Group EBITDA Growth/2/ is: Performance Share Award
shall be multiplied by:
5% or better 2.00
4.0 - 4.99 1.75
3.0 - 3.99 1.50
2.0 - 2.99 1.25
1.0 - 1.99 1.00
0.00 - 0.99 .50
Less than 0 0
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/1/ The number of Performance Shares as calculated above shall be paid in accordance with the provisions of Section 2.5 and 2.6 of the Sub-Plan.
/2/ For purposes of Section 3, the Prorated Company TSR and EBITDA Growth and Prorated Peer Group TSR and EBITDA Growth shall be used, and the number of Performance Shares as calculated above shall be paid in accordance with the provisions of Section 3.1 of the Sub-Plan.
[ ] 100% of the Award [ ] 50% of the Award
[ ] 75% of the Award [ ] 25% of the Award
Upon vesting, I understand that my Award shall continue be recorded in my Account as Performance Shares as described in the Sub-Plan and adjusted to reflect the payment and reinvesting of the Company's common stock dividends over the deferral period, until paid in full.
I hereby elect to defer receipt (or commencement of receipt) of my Award until the date specified below, or as soon as practical thereafter [CHECK ONE]:
[ ] the April 1 following the date of retirement
[ ] the April 1 following the first anniversary of my date of retirement
* Notwithstanding my election above, if I elect a date certain distribution and I retire before that date certain, I understand that the Company will commence distribution of my account no later than the April 1 following the first anniversary of the date of retirement, or as soon as practical thereafter, even though said date is earlier than 5 years from expiration of the Performance Period.
I hereby elect to be paid as described in the Sub-Plan in the form of [CHECK ONE]:
[ ] a single payment [ ] annual payments commencing on the date set forth above and payable on the anniversary date thereof over:
[ ] a two year period [ ] a three year period
[ ] a four year period [ ] a five year period
I understand that I will receive "earnings" on those deferred amounts when they are paid to me.
I understand that the election made as indicated herein is irrevocable and that all deferral elections are subject to the provisions of the Sub-Plan, including provisions that may affect timing of distributions.
I understand and acknowledge that my interests herein and my rights to receive distribution of the deferred amounts may not be anticipated, alienated, sold, transferred, assigned, pledged, encumbered, or subjected to any charge or legal process, and if any attempt is made to do so, or I become bankrupt, my interest may be terminated by the Committee, which, in his sole discretion. I further understand that nothing in the Sub-Plan shall be interpreted or construed to require the Company in any manner to fund any obligation to me, or to my beneficiary(ies) in the event of my death.
----------------------------------- -----------------------------------
(Signature) (Date)
----------------------------------- -----------------------------------
(Print Name) (Company Location)
Received:
Agent of Chief Executive Officer
----------------------------------- -----------------------------------
(Signature) (Date)
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Exhibit 10c(15)
AMENDED MANAGEMENT INCENTIVE COMPENSATION PLAN
OF
PROGRESS ENERGY, INC.
AS AMENDED JANUARY 1, 2002
TABLE OF CONTENTS
Page
----
ARTICLE I PURPOSE....................................................1
ARTICLE II DEFINITIONS................................................1
ARTICLE III ADMINISTRATION.............................................4
ARTICLE IV PARTICIPATION..............................................5
ARTICLE V AWARDS.....................................................5
ARTICLE VI DISTRIBUTION AND DEFERRAL OF AWARDS........................9
ARTICLE VII TERMINATION OF EMPLOYMENT..................................15
ARTICLE VIII MISCELLANEOUS..............................................15
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The purpose of the Management Incentive Compensation Plan (the "Plan") of
Progress Energy, Inc. (the "Sponsor") is to promote the financial interest of
the Sponsor and its Affiliated Companies, including its growth, by (i)
attracting and retaining executive officers and other management-level employees
who can have a significant positive impact on the success of the Sponsor and its
Affiliated Companies; (ii) motivating such personnel to help the Sponsor and its
Affiliated Companies achieve annual incentive, performance and safety goals;
(iii) motivating such personnel to improve their own as well as their business
unit/work group's performance through the effective implementation of human
resource strategic initiatives; and (iv) providing annual cash incentive
compensation opportunities that are competitive with those of other major
corporations.
The Sponsor amends the Plan effective January 1, 2001.
The following definitions are applicable to the Plan:
ARTICLE III
The Plan shall be administered by the Chief Executive Officer of the
Sponsor. Except as otherwise provided herein, the Chief Executive Officer of the
Sponsor shall have sole and complete authority to (i) select the Participants;
(ii) establish and adjust (either before or during the relevant Year) a
Participant's Performance Measures, their relative percentage weight, and the
performance criteria necessary for attainment of various performance levels;
(iii) approve Awards; (iv) establish from time to time regulations for the
administration of the Plan; and (v) interpret the Plan and make all
determinations deemed necessary or advisable for the administration of the Plan,
all subject to its express provisions. Notwithstanding the foregoing, with
respect to Participants who are at or above the Department Head level in any
Company, the performance criteria and Awards shall be subject to the specific
approval of the Compensation Committee. In addition, the Compensation Committee
shall have the sole authority to determine the total payout under the Plan up to
a maximum of four percent (4%) of the Sponsor's after-tax income for a relevant
Year.
A majority of the Compensation Committee shall constitute a quorum, and the acts of a majority of the members present at any meeting at which a quorum is present, or acts approved in writing by a majority of the members of the Committee without a meeting, shall be the acts of such Committee.
The Chief Executive Officer of the Sponsor shall select from time to time the Participants in the Plan for each Year from those employees of each Company who, in his opinion, have the capacity for contributing in a substantial measure to the successful performance of the Company that Year. No employee shall at any time have a right to be selected as a Participant in the Plan for any Year nor, having been selected as a Participant for one Year, have the right to be selected as a Participant in any other Year.
equity and EBITDA Growth is the weighted average of a Peer Group of utilities, averaged over the most recent three-year period. To satisfy threshold performance, the Sponsor must be above the three-year average with respect to return on common equity and EBITDA Growth.
--------------------------------------------------------------------------------
Participation Target Award 0pportunities
--------------------------------------------------------------------------------
Chief Executive Officer of Sponsor 65%
--------------------------------------------------------------------------------
Chief Operating Officer of Sponsor 65%
--------------------------------------------------------------------------------
Presidents*/Executive Vice Presidents* 45%
--------------------------------------------------------------------------------
Senior Vice Presidents* 40%
--------------------------------------------------------------------------------
Department Heads 35%
--------------------------------------------------------------------------------
Other Participants:
Key Managers 25%
Other Managers 20%
--------------------------------------------------------------------------------
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*Senior Management Committee level positions.
The Target Award Opportunity for the Chief Executive Officer of the Sponsor shall be 65%; however, the Compensation Committee of the Board shall be authorized to change that amount from year to year, or to award an amount of compensation based on other considerations, in its complete discretion.
--------------------------------------------------------------------------------
Participants Corporate Noncorporate
Component Component
--------------------------------------------------------------------------------
Chief Executive Officer of Sponsor 100% --
--------------------------------------------------------------------------------
Chief Operating Officer of Sponsor 100% --
--------------------------------------------------------------------------------
Presidents*/Executive Vice Presidents* 75% 25%
--------------------------------------------------------------------------------
Senior Vice Presidents* 75% 25%
--------------------------------------------------------------------------------
Department Heads 50% 50%
--------------------------------------------------------------------------------
Other Participants 50% 50%
--------------------------------------------------------------------------------
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*Senior Management Committee lel positions.
writing prior to the beginning of an applicable Year, or within thirty (30) days after a Participant first becomes eligible to participate in the Plan, and shall be determined pursuant to authority granted in Article III hereof. The payout percentages to be applied to each Participant's Target Award Opportunity are as follows:
Performance Level Payout Percentage
----------------- -----------------
Outstanding 150%
Target 100%
Threshold 50%
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Payout percentages shall be adjusted for performance between the designated performance levels, provided, however, that performance which falls below the "Threshold" performance level results in a payout percentage of zero unless the Chief Executive Officer of Sponsor directs otherwise.
discretion of the Chief Executive Officer of Sponsor, employees may become Participants during a Year based on promotions and may receive an Award prorated based on the length of time served in the qualifying job and the Performance Measures achieved while in the qualifying job.
ARTICLE VI
be paid as soon as practicable after the Year during which it was earned. A Participant's deferral election may apply to 100%, 75%, 50%, or 25% of the Plan Award; provided, however, that in no event shall the amount deferred be less than $1,000.
The election to defer shall be irrevocable as to the Award earned during the particular Year.
be forfeited by the Participant if he or she terminates employment either voluntarily or involuntarily other than for death or retirement prior to five years from March 15 of the Year in which payment would have been made if the Award had not been deferred.
Each Participant shall receive an annual statement of the balance of his Plan Deferral Account, which shall include the Incentive Performance Units and associated earnings and adjustments that are subject to being forfeited as provided above.
distribution date specified by the Participant in accordance with Section 3. To convert the Performance Units in a Participant's Plan Deferral Account to a cash payment amount, Performance Units shall be multiplied by the average of the opening and closing price of the Sponsor's Common Stock on the last trading day preceding the payment of the Deferred Plan Award. Except as otherwise provided below, deferred amounts will be paid either in a single lump-sum payment or in up to five (5) annual payments.
In the event that a Participant elects to receive the deferred Plan Award in equal annual payments, the amount of the Award to be received in each year shall be determined as follows:
(a) To determine the amount of the initial annual payment, the number of Performance Units in the Participant's Plan Deferral Account will be divided by the total number of annual payments to be received, and the result will be multiplied by the average of the opening and closing price of the Sponsor's Common Stock on the last trading day preceding the due date of the initial payment.
(b) To determine the amount of each successive annual payment, the Plan Deferral Account balance will be divided by the number of annual payments remaining, and the result will be multiplied by the average of the opening and closing price of the Sponsor's Common Stock on the last trading day preceding the due date of the annual payment.
pledged, encumbered, or subjected to any charge or legal process, and if any attempt is made to do so, or a Participant becomes bankrupt, the interests of the Participant under this Article VI may be terminated by the Chief Executive Officer of Sponsor, which, in his sole discretion, may cause the same to be held or applied for the benefit of one or more of the dependents of such Participant or make any other disposition of such interests that he deems appropriate.
A Participant must be actively employed by a Company on the next January 1 immediately following the Year for which a Plan Award is earned in order to be entitled to payment of the full amount of any Award for that Year. In the event the active employment of a Participant shall terminate or be terminated for any reason before the next January 1 immediately following the Year for which a Plan Award is earned, such Participant shall receive his or her Award for the year, if any, in an amount that the Chief Executive Officer of the Sponsor deems appropriate.
EXHIBIT A
(to be supplied)
EXHIBIT B
Carolina Power & Light Company
Progress Energy Service Company LLC
Progress Ventures, Inc.
North Carolina Natural Gas Company
Florida Power Corporation
DESIGNATION OF BENEFICIARY
MANAGEMENT INCENTIVE COMPENSATION PLAN
OF
PROGRESS ENERGY, INC.
As provided in the Management Incentive Compensation Plan of Progress
Energy, Inc., I hereby designate the following person as my beneficiary in the
event of my death before a full distribution of my Deferral Account is made.
PRIMARY BENEFICIARY:
CONTINGENT BENEFICIARY:
Any and all prior designations of one or more beneficiaries by me under the Management Incentive Compensation Plan of Progress Energy, Inc. are hereby revoked and superseded by this designation. I understand that the primary and contingent beneficiaries named above may be changed or revoked by me at any time by filing a new designation in writing with the Sponsor's Human Resources Department.
The Participant named above executed this document in our presence on the date set forth above
Exhibit 10c(16)
PROGRESS ENERGY, INC.
AMENDED AND RESTATED
MANAGEMENT DEFERRED COMPENSATION PLAN
Adopted as of January 1, 2000
(As Revised and Restated effective January 1, 2002)
TABLE OF CONTENTS
Page
PREAMBLE...............................................................................................1
ARTICLE I. DEFINITIONS..........................................................................2
1.1 Account Balance......................................................................2
1.2 Additional Deferral Election.........................................................2
1.3 Board................................................................................2
1.3 Affiliated Company...................................................................2
1.5 Board Committee......................................................................2
1.6 Change of Control....................................................................2
1.7 Change-of-Form Election..............................................................3
1.8 Change-of-Investment Election........................................................3
1.9 Code.................................................................................4
1.10 Committee............................................................................4
1.11 Company..............................................................................4
1.12 Company Incentive Plans..............................................................4
1.13 Continuing Directors.................................................................4
1.14 Deemed Investment Return.............................................................4
1.15 Deferral Election....................................................................5
1.16 Deferrals............................................................................5
1.17 Effective Date.......................................................................5
1.18 Eligible Employee....................................................................5
1.19 Employee Stock Incentive Plan........................................................5
1.20 Enrollment Form......................................................................5
1.21 ERISA................................................................................5
1.22 Incentive Matching Allocations.......................................................6
1.23 Investment Election..................................................................6
1.24 Matching Allocation..................................................................6
1.25 Matured Plan Year Company Account....................................................6
1.26 Net Salary...........................................................................6
1.27 Participant..........................................................................6
1.28 Participant Accounts.................................................................6
1.29 Participant Company Account..........................................................7
1.30 Participant Deferral Account.........................................................7
1.31 Participant Matchable Deferral.......................................................7
1.32 Payment Commencement.................................................................7
1.33 Phantom Investment Fund..............................................................8
1.34 Phantom Funds Account................................................................8
1.35 Phantom Investment Subaccount........................................................8
1.36 Phantom Stock Unit...................................................................8
1.37 Plan.................................................................................8
1.38 Plan Year............................................................................8
1.39 Plan Year Accounts...................................................................9
1.40 Progress Energy 401(k) Savings & Stock Ownership Plan................................9
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Page
1.41 Retirement Date.......................................................................9
1.42 Salary................................................................................9
1.43 SMC Participant.......................................................................9
1.44 Sponsor...............................................................................9
1.45 SSERP.................................................................................9
1.46 Valuation Date.......................................................................10
1.47 Value................................................................................10
1.48 Years of Service.....................................................................10
ARTICLE II. PARTICIPATION........................................................................11
2.1 Eligibility..........................................................................11
2.2 Commencement of Participation........................................................11
2.3 Annual Participation Agreement.......................................................11
2.4 Election of Phantom Investment Subaccounts...........................................12
ARTICLE III. DEFERRAL ELECTIONS...................................................................13
3.1 Participant Deferred Salary Elections................................................13
3.2 Matching Allocations.................................................................14
3.3 Incentive Matching Allocations.......................................................15
ARTICLE IV. ACCOUNTS.............................................................................16
4.1 Maintenance of Accounts..............................................................16
4.2 Separate Plan Year Accounts..........................................................16
4.3 Phantom Investment Subaccounts.......................................................16
4.4 Administration of Deferral Accounts..................................................16
4.5 Administration of Company Accounts...................................................17
4.6 Change of Phantom Investment Subaccounts and Phantom Stock Units.....................18
4.7 Transferred Accounts.................................................................19
ARTICLE V. VESTING..............................................................................20
5.1 Vesting..............................................................................20
ARTICLE VI. DISTRIBUTIONS........................................................................21
6.1 Distribution Elections...............................................................21
6.2 Change-of-Form Elections and Additional Deferral Elections...........................21
6.3 Payment..............................................................................22
6.4 Hardships............................................................................22
6.5 Termination of Employment............................................................23
6.6 Taxes................................................................................23
6.7 Acceleration of Payment..............................................................24
ARTICLE VII. DEATH BENEFITS.......................................................................25
7.1 Designation of Beneficiaries.........................................................25
7.2 Death Benefit........................................................................25
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Page
ARTICLE VIII. CLAIMS...............................................................................26
8.1 Claims Procedure.....................................................................26
8.2 Claims Review Procedure..............................................................26
ARTICLE IX. ADMINISTRATION.......................................................................28
9.1 Committee............................................................................28
9.2 Authority............................................................................28
ARTICLE X. AMENDMENT AND TERMINATION OF THE PLAN................................................30
10.1 Amendment of the Plan................................................................30
10.2 Termination of the Plan..............................................................30
10.3 No Impairment of Benefits............................................................30
ARTICLE XI. FUNDING AND CLAIM STATUS.............................................................31
11.1 General Provisions...................................................................31
ARTICLE XII. EFFECT ON EMPLOYMENT OR ENGAGEMENT...................................................33
12.1 General..............................................................................33
ARTICLE XIII. GOVERNING LAW........................................................................34
13.1 General..............................................................................34
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PREAMBLE
The Progress Energy, Inc. Management Deferred Compensation Plan (the "Plan") was originally adopted by Carolina Power & Light Company effective as of January 1, 2000, and was transferred to Progress Energy, Inc. (the "Sponsor") effective August 1, 2000. The Plan is unfunded and will benefit only a select group of management or highly compensated employees within the meaning of Title I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
Article I
DEFINITIONS
The value in terms of a dollar amount of a Participant's Deferral Account or Company Account, as the case may be, as of the last Valuation Date.
The election by a Participant under Section 6.2 to defer distribution from a Plan Year Account.
Any corporation or other entity that is required to be aggregated with the Sponsor pursuant to Sections 414(b), (c), (m), or (o) of the Code.
The Board of Directors of the Sponsor.
The Organization and Compensation Committee of the Board.
The first to occur of the following circumstances:
(i) the acquisition by any person (including a group, within the meaning of Section 13(d) of the Securities Exchange Act of 1934, as amended), of beneficial ownership of 15% or more of the Company's then outstanding voting securities;
(ii) a tender offer is made and consummated for the ownership of 51% or more of the Sponsor's then outstanding voting securities;
(iii) the first day on which less than 66-2/3 percent of the total membership of the Board are Continuing Directors;
(iv) approval by the stockholders of the Sponsor of a merger, consolidation, liquidation or dissolution of the Sponsor, or the sale of all or substantially all of the assets of the Sponsor.
A Change of Control shall not be deemed to have occurred until the
Board or a committee or subcommittee of the Board receives written certification
from the Sponsor's President and Chief Executive Officer or, in the event of his
or her inability to act, the Sponsor's Chief Financial Officer, or any Executive
or Senior Vice President of the Sponsor that one of the events set forth in
Section 1.5(i) through (iv) has occurred. The officers referred to in the
previous sentence shall be those officers in office immediately prior to the
occurrence of one of the events set forth above in Section 1.5(i) through (iv)
above. Any determination under the Plan that an event described in Section
1.5(i) through (iv) above has occurred shall be made in good faith by the Board
Committee on the basis of information available at the time and be conclusive
and binding for all purposes of the Plan.
The election by a Participant under Section 6.2 to change the form of distribution of a Plan Year Account.
The election by a Participant under Section 4.6 to change a Phantom Subaccount for the Participant Deferral Account or Company Account.
The Internal Revenue Code of 1986, as amended, or any successor statute.
The Administrative Committee described in Section 9.1 for administering the Plan.
Progress Energy, Inc. or any successor to it in the ownership of substantially all of its assets and each Affiliated Company that, with the consent of the Compensation Committee, adopts the Plan and is included in Exhibit A, as in effect from time to time.
The Sponsor's Management Incentive Compensation Plan, or any Company sales incentive plans, marketing incentive plans, and any other cash incentive plans as determined by the Committee.
The members of the Board at the Effective Date; provided, however, that any person becoming a director subsequent to such whose election or nomination for election was supported by 75% or more of the directors who then comprised Continuing Directors shall be considered to be a Continuing Director.
The amounts that are credited (or charged) from time to time to each Participant's Deferral Account and Company Account to reflect deemed investment gains and losses of Phantom Investment Subaccounts.
An election to defer Salary pursuant to Section 3.1.
The deferrals of Salary of a Participant pursuant to Section 3.1.
January 1, 2000.
An employee of the Company (a) who is eligible to participate in the Sponsor's Management Incentive Compensation Plan, or (b) who is eligible to participate in any other eligible Company Incentive Plan and is determined by the Committee to be eligible to be a Participant; and who is not excluded from participation pursuant to Section 2.1(b).
The Employee Stock Incentive Plan as adopted by the Board and any successor to such plan which provides additional matching allocations under the Progress Energy 401(k) Savings & Stock Ownership Plan.
The enrollment form prepared by the Company which a Participant must execute to have Deferrals with respect to a Plan Year.
The Employee Retirement Income Security Act of 1974, as amended.
The additional match allocation which is to be allocated to a Participant's Company Account in accordance with Section 3.3.
The election by a Participant under Sections 2.4 and 4.6 of the Phantom Investment Subaccounts in which the Participant's Deferral Accounts and Company Accounts will be allocated.
A match allocation to a Participant's Company Account of a Participant's Matchable Deferrals in accordance with Section 3.2.
A Plan Year Company Account of a Participant which has matured in accordance with Section 5.1(c).
The Salary of a Participant projected to be payable (assuming no deferral elections under the Plan or the Progress Energy 401(k) Savings & Stock Ownership Plan) with respect to a Plan Year reduced by the projected Deferrals of a Participant for the Plan Year under the Plan.
An Eligible Employee participating in the Plan pursuant to Article II.
The aggregate of a Participant's Deferral Account and Participant's Company Accounts.
The notational bookkeeping account maintained under Sections 4.1 and 4.5 to record Matching Allocations and Incentive Matching Allocations on behalf of a Participant and the Deemed Investment Return thereon pursuant to the provisions of the Plan.
The notational bookkeeping account maintained under Section 4.1 of the Plan to record Deferrals of a Participant and the Deemed Investment Return thereon pursuant to the provisions of the Plan.
6% of the amount of Deferrals of a Participant for a Plan Year but no greater than 6% of (A-B) where A is the compensation limit under Section 401(a)(17) of the Code for the Plan Year and B is the Net Salary of a Participant for the Plan Year(with any negative differences equating to $0 for purposes of this calculation); provided, however, that the Participant Matchable Deferrals for an SMC Participant for a Plan Year shall be an amount equal to 6% of (C - D) where C is the projected Salary of a Participant for the Plan Year and D is the compensation limit under Section 401(a)(17) of the Code for the Plan Year. Participant Matchable Deferrals for a Plan Year shall be determined for each payroll period during the Plan Year based on projected Matchable Deferrals for the entire Plan Year.
The date payments are to commence with respect to a Plan Year Account in accordance with Section 6.1.
A deemed investment option for purposes of the Plan, each of which shall be the same as those investment options generally available to all participants in the Progress Energy 401(k) Savings & Stock Ownership Plan, or as otherwise selected by the Committee.
Notational bookkeeping accounts maintained under the Plan at the direction of the Committee representing allocations of Participants of Phantom Investment Subaccounts in a Phantom Investment Fund.
A notational bookkeeping account maintained under the Plan at the direction of the Committee representing a deemed investment in one or more Phantom Investment Funds as directed by the Participant under Sections 2.4 and 4.6.
A hypothetical share of common stock of the Sponsor or its parent company, as applicable.
The Progress Energy, Inc. Management Deferred Compensation Plan as set forth herein and as amended from time to time.
The twelve (12) consecutive month periods beginning January 1 and ending the following December 31 commencing with the Effective Date.
The separate Participant Deferral Account and Participant Company Account maintained under the Plan pursuant to Section 4.2 with respect to a Participant for each Plan Year a Participant has Deferrals.
The Progress Energy 401(k) Savings & Stock Ownership Plan of the Company adopted by the Board, as amended from time to time, and any successor to such plan.
The date a Participant retires from the Company on or after attaining
(i) age 65 with 5 years of service, (ii) age 55 with 15 years of service, (iii)
35 years of service or (iv) eligibility for retirement under the SSERP if
covered under such plan .
The amount of an Eligible Employee's regular annual base salary, payable from time to time by the Company prior to a Deferral Election under the Plan and prior to any deferral election under the Progress Energy 401(k) Savings & Stock Ownership Plan.
A senior executive officer of the Company who is a member of the "Senior Management Committee" of the Sponsor.
Progress Energy, Inc. and its successors in interest.
The Supplemental Senior Executive Retirement Plan of the Company.
The last day of each calendar month and such other dates as selected by the Committee, in its sole discretion.
The value of an account maintained under the Plan based on the fair market value of notational investments of Phantom Investment Subaccounts and Phantom Stock Units, as the case may be, as of the last Valuation Date. For purposes of calculating Value as of the end of a Plan Year, accrued but unallocated Incentive Matching Allocations shall be taken into consideration with respect to Participant Company Accounts.
Years of service of a Participant as calculated under the Progress Energy 401(k) Savings & Stock Ownership Plan.
ARTICLE II
PARTICIPATION
(a) Participation in the Plan shall be limited to Eligible Employees.
(b) The Committee, in its sole discretion, may at any time limit the participation of an Eligible Employee in the Plan so as to assure that the Plan will not be subject to the provisions of parts 2, 3 and 4 of Title I of ERISA.
Each Eligible Employee on the Effective Date may elect to become a Participant as of the Effective Date by completing and submitting an Enrollment Form to the Sponsor's designated agent by November 30, 1999. An employee of the Company first becoming an Eligible Employee after January 1, 2000 may elect to become a Participant effective as of thirty days after first becoming an Eligible Employee by completing and submitting an Enrollment Form to the Sponsor's designated agent within such thirty-day period. An Eligible Employee who is not a Participant may elect to become a Participant as of the first day of a Plan Year commencing after December 31, 2000 by completing and submitting an Enrollment Form to the Sponsor's designated agent by November 30 prior to the commencement of the Plan Year.
Each Participant shall complete a new Enrollment Form with respect to a Plan Year by November 30 prior to the commencement of the Plan Year. If the Participant does not complete such form and submit it to the Sponsor's designated agent by November 30, the Participant will have no Deferrals for the following Plan Year.
Each Participant shall elect on his Enrollment Form the allocation of his Plan Year Participant Deferral Account among the Phantom Investment Subaccounts.
Article III
DEFERRAL ELECTIONS
(a) A Participant completing an Enrollment Form in accordance with Sections 2.2 or 2.3 may make an election, pursuant to this Section 3.1, to defer his or her Salary (a "Deferral Election") in accordance with the Plan. A Deferral Election shall apply only to the Participant's Salary for the Plan Year specified in the Enrollment Form.
(b) The amount of Salary that may be deferred by a Participant shall be based on their target incentive level under the Sponsor's Management Incentive Compensation Plan ("MICP"); or, for Participants in Company Incentive Plans other than the MICP, their target incentive level assuming that they participated in the MICP. Deferral Elections shall be made in writing on the Enrollment Form for the applicable Plan Year pursuant to the following limitations:
(i) A Participant who is (or would be) eligible for a bonus at the 20% of salary target incentive level (the "Target") for the Plan Year under the MICP may defer up to 15% of Salary.
(ii) A Participant who is (or would be) eligible for a bonus at the 25% of salary Target for the Plan Year under the MICP may defer up to 25% of Salary.
(iii) A Participant who is (or would be) eligible for a bonus at the 35% or more of salary Target under the MICP may defer up to 50% of Salary.
All Deferrals shall be in increments of 5% of Salary. The minimum projected Deferrals for a Plan Year for a Participant who commences Deferrals after the beginning of a Plan Year in accordance with Section 2.2 shall be $1,000.
(c) A Deferral Election once made with respect to a Plan Year, cannot be changed or revoked. In the case of a new Participant, the Deferral Election will apply only to amounts that are both paid after the election is made and earned for services performed after the election is made. The amount of Salary that is deferred pursuant to a Deferral Election will reduce the Participant Salary proportionately throughout the applicable Plan Year or, in the case of a new Participant, throughout the portion of the Plan Year to which the Deferral Election is applicable.
(d) A dollar amount equal to the Salary deferred pursuant to this
Section 3.1 ("Deferrals") at each applicable payroll date shall be credited
to the Participant's Deferral Account within ten business days following
the applicable payroll date.
A Participant who has made a Deferral Election with respect to a Plan Year and has Participant Matchable Deferrals for such Plan Year shall receive a credit to his Participant Company Account of a Matching Allocation for such Plan Year. The Matching Allocation with respect to a Plan Year shall equal 50% of the Participant Matchable Deferrals. Matching Allocations shall be credited to the Participant Company Account within ten business days following the applicable payroll date, based on a pro-
rata portion of projected Matchable Deferrals for the Plan Year applicable to each payroll period during the Plan Year.
Participants with Matchable Deferrals for a Plan Year shall receive a credit to their Participant Company Account for the Plan Year of an Incentive Matching Allocation if an "Incentive Matching Allocation" is provided under the Progress Energy 401(k) Savings & Stock Ownership Plan for the Plan Year. The Incentive Matching Allocation shall equal that percentage of the Participant Matchable Deferrals for the Plan Year equal to the "Incentive Matching Allocation" (stated as a percentage) provided (or that would have been provided if the Participant participated) under the Progress Energy 401(k) Savings & Stock Ownership Plan for such Plan Year. Incentive Matching Allocations with respect to a Plan Year, if any, shall be credited to a Participant's Company Account in accordance with Section 4.5 pursuant to rules and procedures adopted by the Committee approximately coincident with the credit under the Progress Energy 401(k) Savings & Stock Ownership Plan of "Incentive Matching Allocations" following the end of a Plan Year; provided, however, no such allocation shall be made if a Participant is not employed at the end of the applicable Plan Year, unless the Participant retired, died, or became disabled during the Plan Year.
ARTICLE IV
ACCOUNTS
The Committee shall maintain a Participant Deferral Account and a Participant Company Account for each Participant. There shall be credited to a Participant's Deferral Account all Deferrals by a Participant under the Plan and there shall be credited to a Participant's Company Account all Matching Allocations and Incentive Matching Allocations with respect to a Participant under the Plan in accordance with Sections 3.1 and 3.2.
The Committee shall maintain a separate Participant Deferral Account and Participant Company Account for each Plan Year a Participant has Deferrals (separately a "Plan Year Deferral Account" and a "Plan Year Company Account" and together the "Plan Year Account").
The Committee shall maintain separate Phantom Investment Subaccounts representing deemed investments in Phantom Investment Funds as directed by the Participant. Phantom Investment Subaccounts shall be valued as of each Valuation Date based on the notional investments of each such account, pursuant to rules and procedures adopted by the Committee.
(a) A Participant's Deferral Accounts shall be comprised in total, of units in Phantom Investment Subaccounts.
(b) Participants shall allocate their Deferrals among Phantom Investment Subaccounts pursuant to elections under Section 2.4.
(c) The Value of that portion of a Participant's Deferral Account allocated to a Phantom Investment Subaccount shall be changed on each Valuation Date to reflect the new Value of the Phantom Investment Subaccount.
(d) The interest of a Participant's Deferral Account in a Phantom Investment Subaccount shall be stated in a unit value or dollar amount, as determined by the Committee.
(a) A Participant's Company Account shall be comprised of Phantom
Stock Units or fractions thereof, and of units in Phantom Investment
Subaccounts pursuant to an election by the Participant under Section
4.6(b). All Matching Allocations and Incentive Matching Allocations shall
be deemed invested in Phantom Stock Units on the date of allocations under
the Plan based on the closing price of a share of common stock of the
Sponsor on the New York Stock Exchange on the date of such allocation.
(b) The number of Phantom Stock Units allocated to a Participant's Company Account shall be adjusted periodically to reflect the deemed reinvestment of dividends on Sponsor common stock in additional Phantom Stock Units.
(c) In the event there is any change in the common stock of the Sponsor, through merger, consolidation, reorganization, recapitalization (other than pursuant to bankruptcy proceedings), stock dividend, stock split, reverse stock
split, split-up, split-off, spin-off, combination of shares, exchange of shares, dividend in kind or other like change in capital structure (an "Adjustment Event"), the number of Phantom Stock Units subject to the Plan shall be adjusted by the Committee in its sole judgment so as to give appropriate effect to such Adjustment Event. Any fractional units resulting from such adjustment may be eliminated. Each successive Adjustment Event shall result in the consideration by the Committee of whether any adjustment to the number of Phantom Stock Units subject to the Plan is necessary in the Committee's judgment. Issuance of common stock or securities convertible into common stock for value will not be deemed to be an Adjustment Event unless otherwise expressly determined by the Committee.
(a) A Participant may elect to reallocate the value of his Phantom Investment Subaccounts comprising his Deferral Accounts among other Phantom Investment Subaccounts and change the allocation of future Deferrals among Phantom Investment Subaccounts once per calendar month, pursuant to uniform rules and procedures adopted by the Committee.
(b) A Participant may elect to reallocate (i) the Phantom Stock Units which are part of a Matured Plan Year Company Account among Phantom Investment Subaccounts and (ii) Phantom Investment Subaccounts comprising part of his Company Account, once per calendar month, pursuant to uniform rules adopted by the Committee.
(a) Effective as of the Effective Date, the Value of a SMC Participant's Company Account shall include the value of such Participant's deferral account as of such date (being a "Transferred Account") under the Carolina Power & Light Executive Deferred Compensation Plan, but only to the extent the Participant acknowledges in writing he has no further interest in the Executive Deferred Compensation Plan.
(b) Effective on the Effective Date, the Value of any Participant's Company Account shall include the value of such Participant's additional benefits (currently recorded as phantom Company stock units) granted under Article VIII.2. (also being a "Transferred Account") under the Company's Deferred Compensation Plan for Key Management Employees, but only to the extent the Participant acknowledges in writing that he has no further interest in these benefits in the Company's Deferred Compensation Plan for key Management Employees.
(c) The total value of the Transferred Accounts as described in this
Section 4.7 shall be deemed a vested Matured Plan Year Company Account for
all purposes of the Plan.
ARTICLE V
VESTING
(a) A Participant's Deferral Accounts shall be 100% vested at all times. A Participant's Company Accounts shall vest in accordance with the following schedule:
Years of Service Percent of Vesting ---------------- ------------------ Less than 1 0 1 or more 100% |
(b) A Participant's Plan Year Company Account shall be deemed a Matured Plan Year Company Account two years after the end of the applicable Plan Year.
ARTICLE VI
DISTRIBUTIONS
A Participant when making a Deferral Election pursuant to an
Enrollment Form with respect to a Plan Year shall elect on such Enrollment Form
(a) to defer the payment of his Plan Year Accounts with respect to such Plan
Year, in accordance with the Plan until (i) the April 1 following the date that
is five years from the last day of such Plan Year, (ii) the April 1 following
the Participant's Retirement or (iii) the April 1 following the first
anniversary of the Participant's Retirement (each a "Payment Commencement Date")
and (b) to provide for the payment of such Plan Year Account in the form of (i)
a lump sum or (ii) approximately equal installments over a period extending from
two years to ten years (by paying a fraction of the account balance each year
during such period), as elected by the Participant. Except as otherwise provided
in this ARTICLE VI, such elections may not be changed or revoked.
Any Participant who has made elections under Section 6.1 with respect to Plan Year Accounts may elect at least one year prior to the Payment Commencement Date with respect to such accounts a new Payment Commencement Date that either is five years from the then current Payment Commencement Date or otherwise is permitted under Section 6.1(a)(ii) or (iii). Only one such Additional Deferral Election will be permitted with respect to Plan Year Accounts relating to a particular Plan Year. In addition a Participant may elect to change the form of distribution to any of the forms permitted under Section 6.1(b) by completing a Change-of-Form Elections with respect
to Plan Year Accounts at least one year prior to the applicable Payment Commencement Date for such accounts.
Upon occurrence of an event specified in the Participant's
distribution election under Section 6.1 (a "Distribution Event") with respect to
Plan Year Accounts, as modified by any applicable subsequent Additional Deferral
Election under Section 6.2, the Account Balance of a Participant's Plan Year
Accounts shall be paid by the Company to the Participant in the form elected
under Section 6.1 as modified by any subsequent Change-of-Form Election under
Section 6.2. Such payments shall commence as soon as practicable and in no event
more than 30 days following the occurrence of the Distribution Event.
In case of an unforeseeable emergency, a Participant may request the Committee, on a form to be provided by the Committee or its delegate, that payment of the vested portion of Participant Accounts be made earlier than the date provided under the Plan.
An "unforeseeable emergency" shall be limited to a severe financial hardship to the Participant resulting from a sudden and unexpected illness or accident of the Participant or of a dependent (as defined in Section 152(a) of the Code) of the Participant, loss of the Participant's property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. The circumstances that will constitute an unforeseeable emergency will depend upon the facts of each case, but, in any case, payment may not be
made to the extent that such hardship is or may be relieved: (i) through reimbursement or compensation by available insurance or otherwise or (ii) by liquidation of the Participant's assets, to the extent the liquidation of such assets would not itself cause severe financial hardship.
The Committee shall consider any requests for payment under this
Section 6.4 on a uniform and nondiscriminatory basis and in accordance with the
standards of interpretation described in Section 457 of the Code and the
regulations thereunder.
In the event of a hardship determination by the Committee, the Company shall pay out in a lump sum to the Participant such portion of the Participant Accounts as determined by the Committee and Deferrals by the Participant for the Plan Year in which the hardship distribution is made will cease.
In the event of the termination of the employment of a Participant with the Company and any parent, subsidiary or affiliate for any reason, other than Retirement or death, the vested portion of the Participant Accounts of such Participant shall be paid in a lump sum to such Participant based on the Value of such accounts on the Valuation Date immediately following the termination date. Such payment shall be made as soon as administratively practicable following the Participant's termination date as determined under the Company's normal administrative practices. The nonvested portion of a terminated Participant's Company Account shall be forfeited by the Participant.
The Company shall deduct from all payments under the Plan federal, state and local income and employment taxes, as required by applicable law. Deferrals will be
taken into account for purposes of any tax or withholding obligation under the Federal Insurance Contributions Act and Federal Unemployment Tax Act in the year of the Deferrals, as required by Sections 3121(v) and 3306(r) of the Code and the regulations thereunder. Amounts required to be withheld in the year of the Deferrals pursuant to Sections 3121(v) and 3306(r) shall be withheld out of current wages or other compensation paid by the Company to the Participant.
Notwithstanding any provision contained in the Plan to the contrary, the Committee may, in its sole discretion, accelerate the distribution in a lump sum of the Value of all Participant Accounts on the date of a Change of Control. Such payment shall be made by the Company, to the extent practicable, on the date of such Change of Control.
ARTICLE VII
DEATH BENEFITS
The Participant's beneficiary under this Plan entitled to receive benefits under the Plan in the event of the Participant's death shall be designated by the Participant on a form provided by the Committee. In the absence of such designation or in the event the designated beneficiary has predeceased the Participant, the beneficiary shall be deemed the estate of the Participant.
In the event of the death of a Participant prior to the payout of his Participant Accounts, the Value of the remaining portion of the Participant Accounts shall be paid by the Company in a lump sum to the Participant's beneficiary (as defined under Section 7.1) based on the Value of such accounts on the Valuation Date immediately following the date of death. Payment shall be made as soon as administratively practicable following such Valuation Date pursuant to rules and procedures adopted by the Committee.
ARTICLE VIII
CLAIMS
If any Participant or his or her beneficiary has a claim for benefits which is not being paid, such claimant may file with the Committee a written claim setting forth the amount and nature of the claim, supporting facts, and the claimant's address. The Committee shall notify each claimant of its decision in writing by registered or certified mail within sixty (60) days after its receipt of a claim or, under special circumstances, within ninety (90) days after its receipt of a claim. If a claim is denied, the written notice of denial shall set forth the reasons for such denial, refer to pertinent Plan provisions on which the denial is based, describe any additional material or information necessary for the claimant to realize the claim, and explain the claims review procedure under the Plan.
A claimant whose claim has been denied, or such claimant's duly authorized representative, may file, within sixty (60) days after notice of such denial is received by the claimant, a written request for review of such claim by the Committee. If a request is so filed, the Committee shall review the claim and notify the claimant in writing of its decision within sixty (60) days after receipt of such request. In special circumstances, the Committee may extend for up to sixty (60) additional days the deadline for its decision. The notice of the final decision of the Committee shall include the reasons for its decision and specific references
to the Plan provisions on which the decision is based. The decision of the Committee shall be final and binding on all parties.
ARTICLE IX
ADMINISTRATION
The Administrative Committee consisting of not less than three (3) or more than seven (7) persons appointed by the Board Committee or its delegate to administer the Plan.
(a) The Committee shall have the exclusive right to interpret the Plan to the maximum extent permitted by law, to prescribe, amend and rescind rules and regulations relating to it, and to make all other determinations necessary or advisable for the administration of the Plan, including the determination under Section 9.2(b) herein. The decisions, actions and records of the Committee shall be conclusive and binding upon the Company and all persons having or claiming to have any right or interest in or under the Plan
(b) The Committee may delegate to one or more agents, or to the Company such administrative duties as it may deem advisable. The Committee may employ such legal or other counsel and consultants as it may deem desirable for the administration of the Plan and may rely upon any opinion or determination received from counsel or consultant.
(c) No member of the Committee shall be directly or indirectly responsible or otherwise liable for any action taken or any failure to take action as a member of the Committee, except for such action, default, exercise or failure to exercise resulting from such member's gross negligence or willful misconduct.
No member of the Committee shall be liable in any way for the acts or defaults of any other member of the Committee, or any of its advisors, agents or representatives.
(d) The Company shall indemnify and hold harmless each member of the Committee against any and all expenses and liabilities arising out of his or her own activities relating to the Committee, except for expenses and liabilities arising out of a member's gross negligence or willful misconduct.
(e) The Company shall furnish to the Committee all information the Committee may deem appropriate for the exercise of its powers and duties in the administration of the Plan. The Committee shall be entitled to rely on any information provided by the Company without any investigation thereof.
(f) No member of the Committee may act, vote or otherwise influence a decision of such Committee relating to his or her benefits, if any, under the Plan.
ARTICLE X
AMENDMENT AND TERMINATION OF THE PLAN
The Plan may be wholly or partially amended or otherwise modified at any time by the Board or the Board Committee.
The Plan may be terminated at any time by written action of the Board or the Board Committee or by the Committee as provided under the Plan. On termination of the Plan, the Committee may (but shall not be required to) direct the immediate payment of all benefits under the Plan by the Company employing each respective Participant.
Notwithstanding the provisions of Sections 10.1 and 10.2, no amendment to or termination of the Plan shall impair any rights to benefits which theretofore accrued hereunder; provided, however, an immediate payout of all Plan benefits on termination of the Plan, pursuant to Section 10.2, or a change of any Phantom Investment Funds or creation of a substitute for Phantom Investment Funds as a result of a Plan amendment or action of the Committee shall not constitute an impairment of any rights or benefits.
Article XI
FUNDING AND CLAIM STATUS
(a) The Company shall make no provision for the funding of any Participant Accounts payable hereunder that (i) would cause the Plan to be a funded plan for purposes of Section 404(a)(5) of the Code or for purposes of Title I of ERISA, or (ii) would cause the Plan to be other than an "unfunded and unsecured promise to pay money or other property in the future" under Treasury Regulationsss. 1.83-3(e); and, except in the case of a Change of Control of the Sponsor, the Company shall have no obligation to make any arrangements for the accumulation of funds to pay any amounts under this Plan. Subject to the restrictions of this Section 11.1, the Company, in its sole discretion, may establish one or more grantor trusts described in Treasury Regulationsss.1.677(a)-1(d) to accumulate funds to pay amounts under this Plan, provided that the assets of such trust(s) shall be required to be used to satisfy the claims of the Company's general creditors in the event of the Company's bankruptcy or insolvency.
(b) In the case of a Change of Control, the Company shall, subject to the restrictions in this paragraph and in Section 11.1, irrevocably set aside funds in one or more such grantor trusts in an amount that is sufficient to pay each Participant employed by such Company (or beneficiary) the net present value as of the date on which the Change of Control occurs, of the benefits to which Participants (or their beneficiaries) would be entitled pursuant to the terms of the
Plan if the Value of their Participant Account would be paid in a lump sum upon the Change of Control.
(c) In the event that the Company shall decide to establish an advance accrual reserve on its books against the future expense of payments from any Participant, such reserve shall not under any circumstances be deemed to be an asset of this Plan but, at all times, shall remain a part of the general assets of the Company, subject to claims of the Company's creditors.
(d) Participants, their legal representatives and their beneficiaries shall have no right to anticipate, alienate, sell, assign, transfer, pledge or encumber their interests in the Plan, nor shall such interests be subject to attachment, garnishment, levy or execution by or on behalf of creditors of the Participants or of their beneficiaries.
(e) Participants shall have no right, title, or interest whatsoever in or to any investments which the Company may make to aid it in meeting its obligations under the Plan. Nothing contained in the Plan, and no action taken pursuant to its provisions, shall create a trust of any kind, or a fiduciary relationship between the Company and any Participant, beneficiary, legal representative or any other person. To the extent that any person acquires a right to receive payments from the Company under the Plan, such right shall be no greater than the right of an unsecured general creditor of the Company. All payments to be made hereunder with respect to a Participant shall be paid from the general funds of the Company employing such Participant.
Article XII EFFECT ON EMPLOYMENT OR ENGAGEMENT
Nothing contained in the Plan shall affect, or be construed as affecting, the terms of employment or engagement of any Participant except to the extent specifically provided herein. Nothing contained in the Plan shall impose, or be construed as imposing, an obligation on the Company to continue the employment or engagement of any Participant.
ARTICLE XIII
GOVERNING LAW
The Plan and all actions taken in connection with the Plan shall be governed by and construed in accordance with the laws of the State of North Carolina without reference to principles of conflict of laws, except as superseded by applicable federal law.
* * *
Carolina Power & Light Company
Progress Energy Service Company LLC
Progress Energy Ventures, Inc.
North Carolina Natural Gas Company
Florida Power Corporation
Progress Telecom, LLC
Electric Fuels Corporation (corporate employees only)
PROGRESS ENERGY, INC.
EXHIBIT NO. 12
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND
PREFERRED DIVIDENDS COMBINED AND RATIO OF EARNINGS TO FIXED CHARGES
---------------------------------------------------------
Years Ended December 31,
---------------------------------------------------------
2001 2000 1999 1998 1997
---------- ------- -------- -------- --------
(Thousands of Dollars)
Earnings, as defined:
---------------------
Net income $ 541,610 478,361 $379,288 $396,271 382,265
Fixed charges, as below 728,205 296,419 207,210 196,445 203,013
Income taxes, as below (159,792) 194,625 250,272 249,180 225,491
---------------------------------------------------------
Total earnings, as defined $1,110,023 969,405 $836,770 $841,896 $810,769
=========== ======= ======== ======== ========
Fixed Charges, as defined:
--------------------------
Interest on long-term debt $ 592,477 237,494 $180,676 $169,901 $163,468
Other interest 110,355 45,459 10,298 11,156 18,743
Imputed interest factor in rentals-charged
principally to operating expenses 20,897 8,756 11,517 10,775 11,421
Preferred dividend requirements of subsidiaries (a) 4,476 4,710 4,719 4,613 9,381
---------------------------------------------------------
Total fixed charges, as defined $ 728,205 296,419 $207,210 $196,445 $203,013
=========== ======= ======== ======== ========
Income Taxes:
-------------
Income tax expense (151,643) 202,774 258,421 257,494 233,716
Included in AFUDC - deferred taxes in
book depreciation (8,149) (8,149) (8,149) (8,314) (8,225)
---------------------------------------------------------
Total income taxes $ (159,792) 194,625 $250,272 $249,180 $225,491
=========== ======= ======== ======== ========
Ratio of Earnings to Fixed Charges 1.52 3.27 4.04 4.29 3.99
|
(a) Presented on a pretax basis based on effective income tax rate
CAROLINA POWER & LIGHT COMPANY
EXHIBIT NO. 12
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND
PREFERRED DIVIDENDS COMBINED AND RATIO OF EARNINGS TO FIXED CHARGES
---------------------------------------------------------
Years Ended December 31,
---------------------------------------------------------
2001 2000 1999 1999 1997
-------- ------- --------- --------- --------
(Thousands of Dollars)
Earnings, as defined:
---------------------
Net income $364,231 461,028 $382,255 $399,238 388,317
Fixed charges, as below 270,305 248,759 202,491 191,832 193,632
Income taxes, as below 215,084 282,122 250,272 249,180 225,491
--------- ------- -------- -------- --------
Total earnings, as defined $849,620 991,909 $835,018 $840,250 $807,440
========= ======= ======== ======== ========
Fixed Charges, as defined:
--------------------------
Interest on long-term debt $245,808 223,562 $180,676 $169,901 $163,468
Other interest 11,333 16,441 10,298 11,156 18,743
Imputed interest factor in rentals-charged
principally to operating expenses 13,163 8,756 11,517 10,775 11,421
--------- ------- -------- -------- --------
Total fixed charges, as defined $270,304 248,759 $202,491 $191,832 $193,632
========= ======= ======== ======== ========
Earnings Before Income Taxes $579,316 743,150 $632,527 $648,418 $613,808
========= ======= ======== ======== ========
Ratio of Earnings Before Income Taxes to Net Income 1.59 1.61 1.66 1.62 1.58
Income Taxes:
-------------
Income tax expense 223,233 290,271 258,421 257,494 233,716
Included in AFUDC - deferred taxes in
book depreciation (8,149) (8,149) (8,149) (8,314) (8,225)
--------- ------- -------- -------- --------
Total income taxes $215,084 282,122 $250,272 $249,180 $225,491
========= ======= ======== ======== ========
Fixed Charges and Preferred Dividends Combined:
-----------------------------------------------
Preferred dividend requirements $ 2,964 2,966 $ 2,967 $ 2,967 $ 6,052
Portion deductible for income tax purposes (312) (312) (312) (312) (312)
--------- ------- -------- -------- --------
Preferred dividend requirements not deductible $ 2,652 2,654 $ 2,655 $ 2,655 $ 5,740
========= ======= ======== ======== ========
Preferred dividend factor:
--------------------------
Preferred dividends not deductible times ratio of
Earnings before income taxes to net income $ 4,217 4,273 $ 4,407 $ 4,301 $ 9,069
Preferred dividends deductible for income taxes 312 312 312 312 312
Fixed charges, as above 270,305 248,759 202,491 191,832 193,632
--------- ------- -------- -------- --------
Total fixed charges and preferred dividends combined $274,834 253,344 $207,210 $196,445 $203,013
========= ======= ======== ======== ========
Ratio of Earnings to Fixed Charges 3.14 3.99 4.12 4.38 4.17
Ratio of Earnings to Fixed Charges and Preferred
Dividends Combined 3.09 3.92 4.03 4.28 3.98
|
Exhibit 21
SUBSIDIARIES OF PROGRESS ENERGY, INC.
AT DECEMBER 31, 2001
The following is a list of certain direct and indirect subsidiaries of Progress Energy, Inc. and their respective states of incorporation:
Carolina Power & Light Company North Carolina
Caronet, Inc. North Carolina
Florida Progress Corporation Florida
Florida Power Corporation Florida
Progress Telecommunications Corporation Florida
Progress Capital Holdings, Inc. Florida
Progress Fuels Corporation Florida
Progress Rail Services Corporation Alabama
North Carolina Natural Gas Corporation Delaware
Progress Ventures, Inc. North Carolina
Strategic Resource Solutions Corp. North Carolina
Progress Energy Service Company, LLC North Carolina
|
Exhibit 23(a)
We consent to the incorporation by reference in Registration Statement No. 33-33520 on Form S-8, Amendment 1 to Registration Statement No. 33-38349 on Form S-3, Amendment 1 to Registration Statement No. 333-81278 on Form S-3, Amendment 1 to Registration Statement No. 333-81278-01 on Form S-3, Amendment 1 to Registration Statement No. 333-81278-02 on Form S-3, Amendment 1 to Registration Statement No. 333-81278-03 on Form S-3, Amendment 1 to Registration Statement No. 333-69738 on Form S-3, Registration Statement No. 333-70332 on Form S-8, Amendment 1 to Registration Statement No. 333-47910 on Form S-3, Registration Statement No. 333-52328 on Form S-8, Amendment 1 to Registration Statement No. 333-89685 on Form S-8, and Registration Statement No. 333-48164 on Form S-8 of Progress Energy, Inc. of our report dated February 15, 2002, appearing in this Annual Report on Form 10-K of Progress Energy, Inc. for the year ended December 31, 2001
We also consent to the incorporation by reference in Registration Statement No. 333-58800 on Form S-3 of Carolina Power & Light Company of our report dated February 15, 2002, appearing in the Annual Report on Form 10-K for Carolina Power & Light Company for the year ended December 31, 2001.
/s/ Deloitte & Touche LLP DELOITTE & TOUCHE LLP Raleigh, North Carolina March 27, 2002 |
Exhibit 23(b)
Board of Directors
Progress Energy, Inc.:
We consent to the incorporation by reference in the registration statements No. 33-33520 on Form S-8, No. 33-38349 on Form S-3, No. 333-89685 on Form S-8, No. 333-47910 on Form S-3, No. 333-52328 on Form S-8, No. 333-48164 on Form S-8, No. 333-69738 on Form S-3, No. 333-81278 on Form S-3, No. 333-81278-01 on Form S-3, No. 333-81278-02 on Form S-3, No. 333-81278-03 on Form S-3, and No. 333-70332 on Form S-8 of Progress Energy, Inc. of our report dated February 15, 2001, with respect to the consolidated balance sheet and schedule of capitalization of Florida Progress Corporation as of December 31, 2000, which report appears in the December 31, 2001 annual report on Form 10-K of Progress Energy, Inc.
/s/ KPMG LLP KPMG LLP St. Petersburg, Florida March 25, 2002 |