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PURCHASE, CONSTRUCTION AND OWNERSHIP AGREEMENT BETWEEN CAROLINA POWER & LIGHT COMPANY AND NORTH CAROLINA MUNICIPAL POWER AGENCY NUMBER 3 A ND EXHIBITS i
i PURCHASE, CONSTRUCTION AND OWNERSHIP AGREEMENT BETWEEN CAROLINA POWER & LIGHT COMPANY AND NORTH CAROLINA MUNICIPAL POWER AGENCY NUMBER 3 A ND EXHIBITS i
JULY 30,1981 l
JULY 30,1981 l
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PURCIIAAE, CONSTRUCTION AND OWNERSHIP AGREEMENT This Agreement, dated as of July 30, 1981, is between CAROLINA POWER & LIGHT COMPANY ("CP&L"), a corporation organized and existing under Chapter 55 of ' ..e General Statutes of North Carolina, known as the Business Corporation Act, with offices in Raleigh, North Carolina, and NORTH CAROLINA MUNICIPAL POWER AGENCY NUMBER 3 (" Power Agency"), a public body and body corporate and politic organized and existing under Chapter 159B of the General Statutes of North Carolina, known c.s the Joint Municipal Electric Power and Energy Act, with offices in Raleigh, North Carolina.
PURCIIAAE, CONSTRUCTION AND OWNERSHIP AGREEMENT This Agreement, dated as of July 30, 1981, is between CAROLINA POWER & LIGHT COMPANY ("CP&L"), a corporation organized and existing under Chapter 55 of ' ..e General Statutes of North Carolina, known as the Business Corporation Act, with offices in Raleigh, North Carolina, and NORTH CAROLINA MUNICIPAL POWER AGENCY NUMBER 3 (" Power Agency"), a public body and body corporate and politic organized and existing under Chapter 159B of the General Statutes of North Carolina, known c.s the Joint Municipal Electric Power and Energy Act, with offices in Raleigh, North Carolina.
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W ci 1.31      Initial Fueling l              Initial Fueling is the prccess of acquiring and utilizing the Initial Fuel Cores.in the case of nuclear fuel, or the Initial Stockpile in-the case of fossil (coal and start-up. fuel oil) fuel, necessary,and sufficient for the. start-up and placing'into Commercial operation of the Harris Units and the Mayo Units, respectively, and for the operation for an
;
ci 1.31      Initial Fueling l              Initial Fueling is the prccess of acquiring and utilizing the Initial Fuel Cores.in the case of nuclear fuel, or the Initial Stockpile in-the case of fossil (coal and start-up. fuel oil) fuel, necessary,and sufficient for the. start-up and placing'into Commercial operation of the Harris Units and the Mayo Units, respectively, and for the operation for an
             ' initial period consistent with the fuel plan.for such Units j            (including the fuel cycle for nuclaar fuel and the stockpile
             ' initial period consistent with the fuel plan.for such Units j            (including the fuel cycle for nuclaar fuel and the stockpile
!            for fossil fuel). Initial Fueling shall include (but shall not be limited to), with respect to such fuel, the solici-tation and acceptance of bids for the supply thereof, the
!            for fossil fuel). Initial Fueling shall include (but shall not be limited to), with respect to such fuel, the solici-tation and acceptance of bids for the supply thereof, the securing o'f neces ary fuel-processing services, the trans-l          portation to a Harris Unit or.a Mayo Unit and the handling
;
securing o'f neces ary fuel-processing services, the trans-l          portation to a Harris Unit or.a Mayo Unit and the handling
             - and consumption at any Harris Unit or Mayo Unit. In the case of nuclear fuel, Initial Fueling does not include Reload Fuel, y            as defined-in Section 1.54. In the case of fossil fuel, Initial Fueling does not include Lassil fuel in excess of Initial Stockpiles. The owners' rights and obligations with respect to fossil fuel other than Initial Stockpiles are covered by the operating Agreement.
             - and consumption at any Harris Unit or Mayo Unit. In the case of nuclear fuel, Initial Fueling does not include Reload Fuel, y            as defined-in Section 1.54. In the case of fossil fuel, Initial Fueling does not include Lassil fuel in excess of Initial Stockpiles. The owners' rights and obligations with respect to fossil fuel other than Initial Stockpiles are covered by the operating Agreement.
ps 1.32      Initial Stockpile The Initial Stockpile shall be that coal and start-up fuel oil inventory (i) required for the initial start-up, testing l
ps 1.32      Initial Stockpile The Initial Stockpile shall be that coal and start-up fuel oil inventory (i) required for the initial start-up, testing l
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(    tools and equipment and any capitalized construction materials and supplies on hand, all as more completely described in the Bill of Sale, the form of which is prescribed in Exhibit SA-IV-1. The boundaries of the Mayo Plant, each unit thereof and certain of the support facilities are illustrated in Exhibit l
(    tools and equipment and any capitalized construction materials and supplies on hand, all as more completely described in the Bill of Sale, the form of which is prescribed in Exhibit SA-IV-1. The boundaries of the Mayo Plant, each unit thereof and certain of the support facilities are illustrated in Exhibit l
SA-XVII-1. Transmission facilities located at the site, includ-
SA-XVII-1. Transmission facilities located at the site, includ-
!    ing step-up transformers having a high side transmission voltage,
!    ing step-up transformers having a high side transmission voltage, are not included as part of the Mayo Plant.
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are not included as part of the Mayo Plant.
(-
(-
l    1.39      Mayo Unit Mayo Unit No. 1 or Mayo Unit No. 2, which are the l
l    1.39      Mayo Unit Mayo Unit No. 1 or Mayo Unit No. 2, which are the l
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A P
A P
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1.46              - Output-
1.46              - Output-
;                                              The' net. amount of' electric power, measured in kilowatt hours, supplied in any hour by a generating unit to the trans--
;                                              The' net. amount of' electric power, measured in kilowatt hours, supplied in any hour by a generating unit to the trans--
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1.67      Ultimate Ownership Interest Power Agency's Ultimate Ownership Interest in any Joint Facility is the Ownership Offering in such Joint Facility times the Commitment Ratio.
1.67      Ultimate Ownership Interest Power Agency's Ultimate Ownership Interest in any Joint Facility is the Ownership Offering in such Joint Facility times the Commitment Ratio.
1.68      Unit Brunswick Unit No. 1; Brunswick Unit No. 2; Mayo Unit No. 1; Mayo Unit No. 2; Harris Unit No. 1; Harris Unit No. 2; Harris Unit No. 3; Harris Unit No. 4; or Roxboro Unit No. 4.
1.68      Unit Brunswick Unit No. 1; Brunswick Unit No. 2; Mayo Unit No. 1; Mayo Unit No. 2; Harris Unit No. 1; Harris Unit No. 2; Harris Unit No. 3; Harris Unit No. 4; or Roxboro Unit No. 4.
1.69      Uranium Account The account established pursuant to section 7.5 of
1.69      Uranium Account The account established pursuant to section 7.5 of the Operating Agreement for Nuclear Fuel Material and Nuclear Fuel Services associated with all unenriched uranium material to which CP&L holds title (or has interest in or has the right to use by lease or otherwise) regardless of chemical form and which has not yet been designated to a specific unit in accor-dance with Section 3.2 of the Operating Agteement.
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the Operating Agreement for Nuclear Fuel Material and Nuclear Fuel Services associated with all unenriched uranium material to which CP&L holds title (or has interest in or has the right to use by lease or otherwise) regardless of chemical form and which has not yet been designated to a specific unit in accor-dance with Section 3.2 of the Operating Agteement.
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1-24


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(6)  The covenant not to sue, indemnification and release, substantially in the form prescribed in Exhibit SA-XI, has been duly executed and delivered by Power Agency and each Participant and is the legal, valid and binding obligation of each signatory and is enforceable against each such signatory in accordance with its terms.
(6)  The covenant not to sue, indemnification and release, substantially in the form prescribed in Exhibit SA-XI, has been duly executed and delivered by Power Agency and each Participant and is the legal, valid and binding obligation of each signatory and is enforceable against each such signatory in accordance with its terms.
(D)  Power Agency shrll have executed and delivered each of the Related Agreements and the Trust Agreement.
(D)  Power Agency shrll have executed and delivered each of the Related Agreements and the Trust Agreement.
(E)  Power Agency and each of its Participants shall have
(E)  Power Agency and each of its Participants shall have executed and delivered to CF&L a covenant not to sue, indem-nification and release, substantially in the form prescribed in l Exhibit SA-XI.
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executed and delivered to CF&L a covenant not to sue, indem-nification and release, substantially in the form prescribed in l Exhibit SA-XI.
(F)  All governmental and regulatory approvals required to be l
(F)  All governmental and regulatory approvals required to be l
obtained by this Agreemen'. and the Related Agreements prior to the First Closing by Power Agency and by CP&L shall have been l
obtained by this Agreemen'. and the Related Agreements prior to the First Closing by Power Agency and by CP&L shall have been l
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                                                                                                               ~
                                                                                                               ~
Mortgage.
Mortgage.
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substantially in the form attached as Exhibit SA-XIII.
substantially in the form attached as Exhibit SA-XIII.
3.2      Conditions Precedent to Power Agency's Obligations Unless Power Agency otherwise agrees .in writing, all ob-ligations of Power Agency to CP&L under this Agreement are sub-j ec t to the fu".fillment, prior to or upon the First Closing Date, of each of the following conditions:
3.2      Conditions Precedent to Power Agency's Obligations Unless Power Agency otherwise agrees .in writing, all ob-ligations of Power Agency to CP&L under this Agreement are sub-j ec t to the fu".fillment, prior to or upon the First Closing Date, of each of the following conditions:
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Agreement and the Related Agreements by CP&L have been duly and effectively authcrized by all requisite corporate action.
Agreement and the Related Agreements by CP&L have been duly and effectively authcrized by all requisite corporate action.
(3)  This Agreement and each of the Related Agreements 3~8
(3)  This Agreement and each of the Related Agreements 3~8
                                                                          ;


have been duly executed and delivered by CP&L and are the legal, valid and binding obligations of CP&L and are enforceable against it in accordance with their respective terms (subject to judicial
have been duly executed and delivered by CP&L and are the legal, valid and binding obligations of CP&L and are enforceable against it in accordance with their respective terms (subject to judicial
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(!!) Power Agency shall have been successful in selling or otherwise placing sufficient bonds, notes or other evidences of indebtedness as will provide Power Agency with funds adequate to make payment for the ownership interests to be purchased by Power Agency at the First Closing; provided, however, that thie 3-10
(!!) Power Agency shall have been successful in selling or otherwise placing sufficient bonds, notes or other evidences of indebtedness as will provide Power Agency with funds adequate to make payment for the ownership interests to be purchased by Power Agency at the First Closing; provided, however, that thie 3-10


l  crndition precedent shall in no way affect or diminish the
l  crndition precedent shall in no way affect or diminish the obligations imposed upon Power Agency by Sections 2.2(B) and 9.3.
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obligations imposed upon Power Agency by Sections 2.2(B) and 9.3.
l  3.3  Conditions Precedent to CP&L's Obligation to Proceed to
l  3.3  Conditions Precedent to CP&L's Obligation to Proceed to
!        Closings Subsequent to the First Closing Unless CP&L otherwise agrees in writing, CP&L's obligation-to proceed to any closing subsequent to the First Closing is sub-ject to the fulfillment, prior to or upon each Subsequent Closing Date, of each of the following conditions:
!        Closings Subsequent to the First Closing Unless CP&L otherwise agrees in writing, CP&L's obligation-to proceed to any closing subsequent to the First Closing is sub-ject to the fulfillment, prior to or upon each Subsequent Closing Date, of each of the following conditions:
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be L.bstantially in the form attached as Exhibit SA-XIII.
be L.bstantially in the form attached as Exhibit SA-XIII.
3.4  Conditions Precedent to Power Agency's Obligation to Proceed to Closings Subsequent to the First Closing l
3.4  Conditions Precedent to Power Agency's Obligation to Proceed to Closings Subsequent to the First Closing l
Unless Power Agancy otherwise agrees in writing,
Unless Power Agancy otherwise agrees in writing, Pcwer Agency's obligation to proceed to any closing subsequent to the First Closing is subject to the fulfillment, prior to or upon L each Subsequent Closing Date, of each of the following l
;
Pcwer Agency's obligation to proceed to any closing subsequent to the First Closing is subject to the fulfillment, prior to or upon L each Subsequent Closing Date, of each of the following l
conditions:
conditions:
(A)  Power Agency shall not have discovered any material error or material misstatement in the representations and warran-ties made by CP&L pursuant to this Agreement.
(A)  Power Agency shall not have discovered any material error or material misstatement in the representations and warran-ties made by CP&L pursuant to this Agreement.
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2.l(B)(3), 2.l(B)(4) and 9.3.
2.l(B)(3), 2.l(B)(4) and 9.3.
3.5    Additional' Condition Precedent to CP&L s, Obligations and to Power Agency's Obligations Unless CP&L and Power Agency shall otherwise agree in writing, all obligations of CP&L to Power Agency and all obliga-        l tions of Power Agency to CP&L under this Agreement are subject to i
3.5    Additional' Condition Precedent to CP&L s, Obligations and to Power Agency's Obligations Unless CP&L and Power Agency shall otherwise agree in writing, all obligations of CP&L to Power Agency and all obliga-        l tions of Power Agency to CP&L under this Agreement are subject to i
I    the further condition that Power Agency shall have entered into
I    the further condition that Power Agency shall have entered into Project Power Sales Agreements prior to the First Closing Date with sufficient Participants so that the Commitment Ratio is at least sixty-five percent (65%).
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Project Power Sales Agreements prior to the First Closing Date with sufficient Participants so that the Commitment Ratio is at least sixty-five percent (65%).
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i I
l 3-19 i
l 3-19 i
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(a)  for the gross plant investment, including AFUDC, as of December 31, ,1979, the product of $36,115,200 times the difference between (1) the Commitment Ratio times the Cumulative Closing Ratio times the Service Ratio and (ii) the Ownership Interests in Roxboro Unit No. 4 conveyed prior to such Subsequer.t Closing, plus (b)  the cost on CP&L's books, as of such mihrequent Closing Date, of any additions to gross plant investment for Roxboro Unit No. 4 made subsequent to December 31, 1979, including AFUDC associated with Roxboro Unit No. 4 accrued by CP&L after December 31, 1979, divided by CP&L's ownership interest in Roxboro Unit No. 4 immediatelv prior to such Subsequent Closing Date, times the ownership interest 40 be conveyed in Roxboro Unit No. 4 at such Subsequent Closing,                                                                                    as determined in accordance with Section 2.l(B)(1)(b)(i), plus (c) the actual net effect on CP&L's federal and state income taxes (including tax on capital gains) associated with the sale to Power Agency of such additional plant investment as  is attributable to such AFUDC accrued since December 31, 1979, such tax effect to be calculated in accordance with Exhibit SA-V-6, but excluding any taxes, fees and costs payable pursuant to Section 4.7.
(a)  for the gross plant investment, including AFUDC, as of December 31, ,1979, the product of $36,115,200 times the difference between (1) the Commitment Ratio times the Cumulative Closing Ratio times the Service Ratio and (ii) the Ownership Interests in Roxboro Unit No. 4 conveyed prior to such Subsequer.t Closing, plus (b)  the cost on CP&L's books, as of such mihrequent Closing Date, of any additions to gross plant investment for Roxboro Unit No. 4 made subsequent to December 31, 1979, including AFUDC associated with Roxboro Unit No. 4 accrued by CP&L after December 31, 1979, divided by CP&L's ownership interest in Roxboro Unit No. 4 immediatelv prior to such Subsequent Closing Date, times the ownership interest 40 be conveyed in Roxboro Unit No. 4 at such Subsequent Closing,                                                                                    as determined in accordance with Section 2.l(B)(1)(b)(i), plus (c) the actual net effect on CP&L's federal and state income taxes (including tax on capital gains) associated with the sale to Power Agency of such additional plant investment as  is attributable to such AFUDC accrued since December 31, 1979, such tax effect to be calculated in accordance with Exhibit SA-V-6, but excluding any taxes, fees and costs payable pursuant to Section 4.7.
4.2    Purchase Price of Mayo Units and Harris Units l
4.2    Purchase Price of Mayo Units and Harris Units l
I (A)    The purchase price of Power Agency's Ownership Interests
I (A)    The purchase price of Power Agency's Ownership Interests in the Mayo Units and the Harris Units shall be determined as t
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in the Mayo Units and the Harris Units shall be determined as t
follows:
follows:
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4-4
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I 6.3    Monthly Progress Payments l
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6.3    Monthly Progress Payments l
(A)  Power Agency shall pay a monthly cash advance to CP&L in - accordance with the . schedules and procedures set forth below,                    '
(A)  Power Agency shall pay a monthly cash advance to CP&L in - accordance with the . schedules and procedures set forth below,                    '
as moneys to be. applied to the costu and other payments specified.
as moneys to be. applied to the costu and other payments specified.
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,                made.
,                made.
The parties shall undertake to resolve challenges or corrections within a reasonable time and, if the matter is-unresolved for sixty (60) days after the challenge by Power Agency or correc& ion by CP&L is initiated, either party at any          !
The parties shall undertake to resolve challenges or corrections within a reasonable time and, if the matter is-unresolved for sixty (60) days after the challenge by Power Agency or correc& ion by CP&L is initiated, either party at any          !
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time after such sixty (60) day period may inform the other party 1
time after such sixty (60) day period may inform the other party 1
in writing that a formal dispute exists.      Within sixty (60) days following such notice, the party giving notice shall submit the dispute for arbitration pursuant to Article 11 and, if not submitted to arbitration within such sixty (60) day period, the I
in writing that a formal dispute exists.      Within sixty (60) days following such notice, the party giving notice shall submit the dispute for arbitration pursuant to Article 11 and, if not submitted to arbitration within such sixty (60) day period, the I
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Uniform System of Accounts and the amount each Owner has heretofore paid shall be furnished promptly to each Owner .                                                                                                                  Any cdditional costs of such construction account audits shall be borne by Power Agency.
Uniform System of Accounts and the amount each Owner has heretofore paid shall be furnished promptly to each Owner .                                                                                                                  Any cdditional costs of such construction account audits shall be borne by Power Agency.
(G)                            The costs of preparing the Construction Monthly Statement provided pursuant to this Section 6.3 are Costs of Construction of the Joint Facilities; except that Power Agency 6-12
(G)                            The costs of preparing the Construction Monthly Statement provided pursuant to this Section 6.3 are Costs of Construction of the Joint Facilities; except that Power Agency 6-12
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shall pay all costs of developing new accounting systems or modifying existing accounting systems required to prepare Construction Monthly Statements in accordaace with this i      Agreement. It CP&L sells ownership. interests in any of its generating - facilities to an entity other than Power Agency, and if such development of new accounting systems or such modifications to existing accounting systems are used in preparing construction billing statements for such other entity, CP&L shall pay .to Power Agency a portion of the- development or modification costs pr eviously paid by Power Agency for such development or modification. Such portion shall be equal to the proportion of such other owner's ownership interest in generating facilities jointly owned with CP&L (in megawatts) to the total
shall pay all costs of developing new accounting systems or modifying existing accounting systems required to prepare Construction Monthly Statements in accordaace with this i      Agreement. It CP&L sells ownership. interests in any of its generating - facilities to an entity other than Power Agency, and if such development of new accounting systems or such modifications to existing accounting systems are used in preparing construction billing statements for such other entity, CP&L shall pay .to Power Agency a portion of the- development or modification costs pr eviously paid by Power Agency for such development or modification. Such portion shall be equal to the proportion of such other owner's ownership interest in generating facilities jointly owned with CP&L (in megawatts) to the total
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[        party in fulfilling and discharging the responsibilities assumed under this Agreement.      This general undertaking of mutual cooperation and asaistance shall not be deemed to replace or l        modify in any respect the specific responsibilities and l-obligations of each Owner or +f CPat, as project manager as                ,
[        party in fulfilling and discharging the responsibilities assumed under this Agreement.      This general undertaking of mutual cooperation and asaistance shall not be deemed to replace or l        modify in any respect the specific responsibilities and l-obligations of each Owner or +f CPat, as project manager as                ,
!        described in this Agreement.
!        described in this Agreement.
Recognizing that the design, procurement, construction,
Recognizing that the design, procurement, construction, fueling and start-rplof electric generating plants are subject to applicable laws and regulations and, in the case of nuclear-fueled electric generating plants, to licensing by the 7-5.
;          .
fueling and start-rplof electric generating plants are subject to applicable laws and regulations and, in the case of
;
nuclear-fueled electric generating plants, to licensing by the 7-5.


United States Nuclear Regulatory Commission ("NRC"-), and that CP&L has been or will be authorized by the NRC to direct and l
United States Nuclear Regulatory Commission ("NRC"-), and that CP&L has been or will be authorized by the NRC to direct and l
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il)  Submission of Contracts for Power Agency Approval At least sirty (60) days prior Lo the First Closing Date, CP&L shall furnish to Power Agency a liet of contracts entered into by CP&L with third partian as of suel. date which relate to the Construction, Initial Fueling and placing 7-6
il)  Submission of Contracts for Power Agency Approval At least sirty (60) days prior Lo the First Closing Date, CP&L shall furnish to Power Agency a liet of contracts entered into by CP&L with third partian as of suel. date which relate to the Construction, Initial Fueling and placing 7-6


4 into Commercial Operation of the Harris and Mayo Units and which relate to the Construction of any additions or modifications to the ' Brunswick Units and Roxboro Unit No. 4 commenced or authorized prior to the First Closing Date, the aggregate contract prices of Which consititute at least eighty percent
4 into Commercial Operation of the Harris and Mayo Units and which relate to the Construction of any additions or modifications to the ' Brunswick Units and Roxboro Unit No. 4 commenced or authorized prior to the First Closing Date, the aggregate contract prices of Which consititute at least eighty percent (80%) of the total prices of all such contracts.            CP&L shall simultaneously furnish Power Agency with a copy of each contract referred to-on such list for Power Agency's approval.
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(80%) of the total prices of all such contracts.            CP&L shall simultaneously furnish Power Agency with a copy of each contract referred to-on such list for Power Agency's approval.
Within fifteen (15) days of its receipt of such
Within fifteen (15) days of its receipt of such
;  list, Power Agency may request' CP&L to add to the list any other                .
;  list, Power Agency may request' CP&L to add to the list any other                .
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JARTICLE 9-REPRESENTATIONS, WARRANTIES AND COVENANTS 9.1  Power Agency's Representations, Warranties and Covenants l
JARTICLE 9-REPRESENTATIONS, WARRANTIES AND COVENANTS 9.1  Power Agency's Representations, Warranties and Covenants l
Power- Agency hereby represents, warrants and covenants
Power- Agency hereby represents, warrants and covenants i    to CPEL-as follows:
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i    to CPEL-as follows:
(A)' Power Agency is a body corporate and politic and an instrumentality of the State of North Carolina, duly organized, validly existing and in good standing under the law of the State of North Carolina having corporate power and authority to per-form all its obligations under this Agreement, the Related Agreements and the Trust Agreem nt. and the requisite power and authority to conduct its operations as they are now conducted, including, without limitation, the implementation of this Agreement, tha Related Agre'ements and the Trust Agreement.        Power Agency shall take no action, including, without;1 imitation, amendment to its charter or By-Laws, the effect of which would
(A)' Power Agency is a body corporate and politic and an instrumentality of the State of North Carolina, duly organized, validly existing and in good standing under the law of the State of North Carolina having corporate power and authority to per-form all its obligations under this Agreement, the Related Agreements and the Trust Agreem nt. and the requisite power and authority to conduct its operations as they are now conducted, including, without limitation, the implementation of this Agreement, tha Related Agre'ements and the Trust Agreement.        Power Agency shall take no action, including, without;1 imitation, amendment to its charter or By-Laws, the effect of which would
(    change-its status as a body corporate and politic and an
(    change-its status as a body corporate and politic and an
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10.2  Approvals Obtained by Power Agency Power Agency shall use all reasonable efforts to obtain and maintain, or amend, as necessary, all required governmental and regulatory approvals for the purchase by Power Agency of ownership interests in the Joint Facilities, and for the Construction, Initial Fueling and placing into Commercial
10.2  Approvals Obtained by Power Agency Power Agency shall use all reasonable efforts to obtain and maintain, or amend, as necessary, all required governmental and regulatory approvals for the purchase by Power Agency of ownership interests in the Joint Facilities, and for the Construction, Initial Fueling and placing into Commercial
     ' Operation of the Joint Facilities. Such governmental and regula-tory approvals shall include, without limitation, those anprovals listed in Sections 3.l(F) and 3.3(D). CP&L shall cooperate fully with Power Agency in taking all actions required in order
     ' Operation of the Joint Facilities. Such governmental and regula-tory approvals shall include, without limitation, those anprovals listed in Sections 3.l(F) and 3.3(D). CP&L shall cooperate fully with Power Agency in taking all actions required in order to obtain, retain or amend all such approvals. Power Agency shall have the right to negotiate with any governmental or regu-latory agency and may agree on behalf of the Owners with respect to such approvals provided that such agreement is not incon-sistent with this Agreement or the Related Agreements. Power Agency shall bear all costs incurred by Power Agency or its Participants prior to the First Closing Date which are incurred in, or arise in connection with, obtaining governmental or regulatory approvals which are necessary for or :onnected with the purchase by Power Agency of ownership interests in the Joint Facilities.
  ;
to obtain, retain or amend all such approvals. Power Agency shall have the right to negotiate with any governmental or regu-latory agency and may agree on behalf of the Owners with respect to such approvals provided that such agreement is not incon-sistent with this Agreement or the Related Agreements. Power Agency shall bear all costs incurred by Power Agency or its Participants prior to the First Closing Date which are incurred in, or arise in connection with, obtaining governmental or regulatory approvals which are necessary for or :onnected with the purchase by Power Agency of ownership interests in the Joint Facilities.
All other costs incurred pursuant to this Section 10.2 shall be deemed Costs of Construction.
All other costs incurred pursuant to this Section 10.2 shall be deemed Costs of Construction.
10.3    Failure to Obtain Approvals (A)  In the event either Owner fails after the First Closing i
10.3    Failure to Obtain Approvals (A)  In the event either Owner fails after the First Closing i
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]        -value as determined through arbitration be higher than the amount j
]        -value as determined through arbitration be higher than the amount j
;        paid pursuant to Section 10.3(B)(3)(a), Power Agency shall nake i          such additional payment, in such manner as CP&L may reasonably i
;        paid pursuant to Section 10.3(B)(3)(a), Power Agency shall nake i          such additional payment, in such manner as CP&L may reasonably i
require, as will make the total purchase price equal to the fair
require, as will make the total purchase price equal to the fair 4        market value.          In addition, Power Agency shall pay to CP&L simple
;
4        market value.          In addition, Power Agency shall pay to CP&L simple
;          interest, calculated at the Compensatory Interest Rate, on the
;          interest, calculated at the Compensatory Interest Rate, on the
:        amount of such additional payment for the period beginning with 10-5 e
:        amount of such additional payment for the period beginning with 10-5 e
Line 1,086: Line 1,046:
the date of acquisition by Power Agency of title to CP&L's ownership interest in such Joint Facility and ending with the date of such additional payment. Such additional payment, p  including interest thereon, shall be paid as soon after the Arbitrator's decision as Power Agency can effect the necessary financing using reasonable best efforts.
the date of acquisition by Power Agency of title to CP&L's ownership interest in such Joint Facility and ending with the date of such additional payment. Such additional payment, p  including interest thereon, shall be paid as soon after the Arbitrator's decision as Power Agency can effect the necessary financing using reasonable best efforts.
: 14)  If an order, no longer subject to appeal, is entered denying the issuance, transfez or amendment of, or re-voking, any governmental or regulatory approval described in Section 10.3(A) on the basis, in whole or in part, of Power Agency's participation as an Owner, CP&L shall have the right to proceed on the following basis:
: 14)  If an order, no longer subject to appeal, is entered denying the issuance, transfez or amendment of, or re-voking, any governmental or regulatory approval described in Section 10.3(A) on the basis, in whole or in part, of Power Agency's participation as an Owner, CP&L shall have the right to proceed on the following basis:
(a)  CP&L shall have the right to purchase Power Agency's Ownership Interest in the Joint Facility affected and will succeed to the rights and obligations of Power Agency under this Agreement with respect to such Joint Facility. If the parties cannot agree upon a price within sixty (60) days after' such final order, the detenaination of the fair market value of
(a)  CP&L shall have the right to purchase Power Agency's Ownership Interest in the Joint Facility affected and will succeed to the rights and obligations of Power Agency under this Agreement with respect to such Joint Facility. If the parties cannot agree upon a price within sixty (60) days after' such final order, the detenaination of the fair market value of such Joint Facility may be submitted to arbitration. In such i
;
such Joint Facility may be submitted to arbitration. In such i
event, CP&L may obtain title at any time after giving Notice of intent to proceed with arbitration pursuant to Section 11.2(B)(1) by paying to Power Agency an amount which, together with amounts then on deposit under Power Agency's bond resolution or similar instrument and pledged for the security of holders of debt issued 1
event, CP&L may obtain title at any time after giving Notice of intent to proceed with arbitration pursuant to Section 11.2(B)(1) by paying to Power Agency an amount which, together with amounts then on deposit under Power Agency's bond resolution or similar instrument and pledged for the security of holders of debt issued 1
by Power Agency, will be sufficient to pay the interest on and i
by Power Agency, will be sufficient to pay the interest on and i
Line 1,161: Line 1,119:
Operation of the Brunswick Plant or the liarris Plant, or any part thereof. Only'the Approved Arbitr6 tors List consisting of f
Operation of the Brunswick Plant or the liarris Plant, or any part thereof. Only'the Approved Arbitr6 tors List consisting of f
l  persons qualified in the field of fossil-fired electric
l  persons qualified in the field of fossil-fired electric
;
!  generating plant engineering and construction shall be used for selection of an Arbitrator of any dispute relating to the
!  generating plant engineering and construction shall be used for selection of an Arbitrator of any dispute relating to the
;  Construction, Initial Fueling or placing into Commercial i  Operation of Roxboro Unit No. 4 or the Mayo Plant, or any part thereof. Only the Approved Arbitrators List consisting of persons qualified in the field of electric utility construction L
;  Construction, Initial Fueling or placing into Commercial i  Operation of Roxboro Unit No. 4 or the Mayo Plant, or any part thereof. Only the Approved Arbitrators List consisting of persons qualified in the field of electric utility construction L
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l                                                        (1) The award was procured by corruption, fraud or other unaue means; l
l                                                        (1) The award was procured by corruption, fraud or other unaue means; l
(2) There was' evident partiality by an l
(2) There was' evident partiality by an l
l                                  Arbitrator or corruption of an Arbitrator or misconduct
l                                  Arbitrator or corruption of an Arbitrator or misconduct prejudicing the rights of either party; (3) An Arbitrator exceeded his powers; or i
;
prejudicing the rights of either party; (3) An Arbitrator exceeded his powers; or i
(4) An Arbitrator refused to postpone the
(4) An Arbitrator refused to postpone the
,                                hearing upon sufficient cause being shown therefor or refused to hear evidence material to the controversy or otherwise so conducted the hearing, contrary to the provisions of Chapter 1, l                                  Article 45A of the General Statutes of North Carolina, as to prejudice substantially the rights of either party.
,                                hearing upon sufficient cause being shown therefor or refused to hear evidence material to the controversy or otherwise so conducted the hearing, contrary to the provisions of Chapter 1, l                                  Article 45A of the General Statutes of North Carolina, as to prejudice substantially the rights of either party.
Line 1,230: Line 1,185:
;            (A)  THE BRUNSWICK PLANT, THE HARRIS PLANT, THE MAYO PLANT AND ROXBORO UNIT NO. 4 ARE SOLD, CONSTRUCTED AND FUELED ON AN "AS IS" BASIS. CP&I: MAKES NO WARRANTY OR REPRESENTATION WilATSOEVER, EXPRESS, IMPLIED OR STATUTORY, AND DISCLAIMS ANY AND ALL WARRANTIES, INCLUDING WITHOUT LIMITATION, ANY REPRESENTATION l  OR WARRANTY AS TO TIIE VALUE, QUANTITY, QUALITY, CONDITION, SALEABILITY, OBSOLESCENCE, MERCilANTABILITY, FITNESS OR SUITABILITY l
;            (A)  THE BRUNSWICK PLANT, THE HARRIS PLANT, THE MAYO PLANT AND ROXBORO UNIT NO. 4 ARE SOLD, CONSTRUCTED AND FUELED ON AN "AS IS" BASIS. CP&I: MAKES NO WARRANTY OR REPRESENTATION WilATSOEVER, EXPRESS, IMPLIED OR STATUTORY, AND DISCLAIMS ANY AND ALL WARRANTIES, INCLUDING WITHOUT LIMITATION, ANY REPRESENTATION l  OR WARRANTY AS TO TIIE VALUE, QUANTITY, QUALITY, CONDITION, SALEABILITY, OBSOLESCENCE, MERCilANTABILITY, FITNESS OR SUITABILITY l
FOR USE OR WORKING ORDER OF ALL OR ANY PART OF THE BRUNSWICK PLANT, Tile llARRIS PLANT, THE t1AYO PLANT AND ROXBORO UNIT NO. 4, i
FOR USE OR WORKING ORDER OF ALL OR ANY PART OF THE BRUNSWICK PLANT, Tile llARRIS PLANT, THE t1AYO PLANT AND ROXBORO UNIT NO. 4, i
POWER AGENCY IS PURCHASING ITS INTERESTS IN THE BRUNSWICK PLANT, THE HARRIS PLANT, TIIE MAYO PLANT AND ROXBORO UNIT NO. 4 "AS IS"
POWER AGENCY IS PURCHASING ITS INTERESTS IN THE BRUNSWICK PLANT, THE HARRIS PLANT, TIIE MAYO PLANT AND ROXBORO UNIT NO. 4 "AS IS" AND IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THIS AGREEMENT.
;
AND IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THIS AGREEMENT.
POWSR AGENCY AGREES TilAT THIS DISCLAIMER OF WARRANTIES IIAS BEEN l
POWSR AGENCY AGREES TilAT THIS DISCLAIMER OF WARRANTIES IIAS BEEN l
SET OUT " CONSPICUOUSLY" AS REQUIRED BY THE UNIFORit COMMERCIAL
SET OUT " CONSPICUOUSLY" AS REQUIRED BY THE UNIFORit COMMERCIAL l  CODE, AND TliAT POWER AGENCY UNDERSTANDS THE LIMITED NATURE OF i
;
l  CODE, AND TliAT POWER AGENCY UNDERSTANDS THE LIMITED NATURE OF i
!  CP&L'S OBLIGATZONS flEREUNDER.
!  CP&L'S OBLIGATZONS flEREUNDER.
(B)  (1)  Forty-five (45) days prior to the First Closing Date, CP&L shall provide to Power Agency a list of actual or potential litigation, defects in construction, major licensing or other problems and controversies then known to CP&L's management Which in their judgment could affect the purchase, 12-1
(B)  (1)  Forty-five (45) days prior to the First Closing Date, CP&L shall provide to Power Agency a list of actual or potential litigation, defects in construction, major licensing or other problems and controversies then known to CP&L's management Which in their judgment could affect the purchase, 12-1
Line 1,292: Line 1,243:
losses, damages, injuries, costs and' expenses, inclu' ding expenses incurred by an Owner who is sued, its agents, servants and l
losses, damages, injuries, costs and' expenses, inclu' ding expenses incurred by an Owner who is sued, its agents, servants and l
l.
l.
;
employees, in connection with~ investigating any claim or defending any action, and including reasonable attorneys' fees incurred or suffared by the owner sued, its agents, servants or employees, by reason of the assertion of any such claim against
employees, in connection with~ investigating any claim or defending any action, and including reasonable attorneys' fees incurred or suffared by the owner sued, its agents, servants or employees, by reason of the assertion of any such claim against
!  the Owner r,ued, its agents, servant.s or employees.          The Owners may l
!  the Owner r,ued, its agents, servant.s or employees.          The Owners may l
Line 1,479: Line 1,429:
h          1 1
h          1 1
coverage insuring CP&L against liability to third persons and f              their property in limits of not less than $25,000,000 in excess
coverage insuring CP&L against liability to third persons and f              their property in limits of not less than $25,000,000 in excess
;
               -of a deductible (i.e., retention) of $1,,000,000. CP&L shall make e              reasonable efforts to have Power Agency included as an additional l
               -of a deductible (i.e., retention) of $1,,000,000. CP&L shall make e              reasonable efforts to have Power Agency included as an additional l
insured on its public liability insurance policy. Any additional
insured on its public liability insurance policy. Any additional
Line 1,656: Line 1,605:
l (2)  If CP&L elects to exercise thip right, the i
l (2)  If CP&L elects to exercise thip right, the i
purchase price of Power Agency's ownership Interests shall be an amount which, together with amounts then on deposit under Power Agency's bond resolution or similar instrument and pledged for the security-of holders of debt issued by Power Agency, will be sufficient to pay the interest on (including any interest in
purchase price of Power Agency's ownership Interests shall be an amount which, together with amounts then on deposit under Power Agency's bond resolution or similar instrument and pledged for the security-of holders of debt issued by Power Agency, will be sufficient to pay the interest on (including any interest in
     . arrears) and principal of each issue of debt outstanding on the date of CP&L's election, the proceeds of which have been or are designated to be used for making the payments under this Agreement to each such issue's maturity or to the first date
     . arrears) and principal of each issue of debt outstanding on the date of CP&L's election, the proceeds of which have been or are designated to be used for making the payments under this Agreement to each such issue's maturity or to the first date on which such issue may be called, whichever shall first occur, together with any premium payable upon such redemption.
;
on which such issue may be called, whichever shall first occur, together with any premium payable upon such redemption.
14-13
14-13


Line 1,671: Line 1,618:
From and after the date of CP&L's pure,hase of Power Agency's i    Ownership Interests in the Joint Facilities, CPkL shall supply Power Agency with Supplemental Capacity and Energy in the amounts necessary to mest its Participants' Hourly Resource Demands in accordance with the provisions of th~e Power Coordination Agreement. Any transaction described in this Section 14.3(E),
From and after the date of CP&L's pure,hase of Power Agency's i    Ownership Interests in the Joint Facilities, CPkL shall supply Power Agency with Supplemental Capacity and Energy in the amounts necessary to mest its Participants' Hourly Resource Demands in accordance with the provisions of th~e Power Coordination Agreement. Any transaction described in this Section 14.3(E),
l    however, shall be subject to any applicable governmental or regu-l l    latory approvals. Power Agency shall take all necessary actions and shall execute, and file where appropriate, all legal docu-ments which shall be reasonably requested by CP&L to complete any transaction described in this Section 14.3(E), including, without limiting the generality of the foregoing, using its best efforts to facilitate the repayment specified in Section 14.3(E)(2), and to obtain any governmental or regulatory appro-l vals which are necessary to the transaction.
l    however, shall be subject to any applicable governmental or regu-l l    latory approvals. Power Agency shall take all necessary actions and shall execute, and file where appropriate, all legal docu-ments which shall be reasonably requested by CP&L to complete any transaction described in this Section 14.3(E), including, without limiting the generality of the foregoing, using its best efforts to facilitate the repayment specified in Section 14.3(E)(2), and to obtain any governmental or regulatory appro-l vals which are necessary to the transaction.
;        (F)  In addition to all other righte under this Article 14,
;        (F)  In addition to all other righte under this Article 14, CP&L shall have the right to make any payraent, in its own name or
;
CP&L shall have the right to make any payraent, in its own name or
!    in the name of Power Agency, of any amounts required to be paid to the revenue bond trustees by Power Agency in respect to debt service on bonds for financing Power Agency's obligations hereunder which Power Agency fails to make when due, and in such case-to be reimbursed promptly in full therefor by Power Agency
!    in the name of Power Agency, of any amounts required to be paid to the revenue bond trustees by Power Agency in respect to debt service on bonds for financing Power Agency's obligations hereunder which Power Agency fails to make when due, and in such case-to be reimbursed promptly in full therefor by Power Agency
!                                  14-15
!                                  14-15
Line 1,783: Line 1,728:
:-      and shall either be paid directly to Power Agency by CP&L or credited to n.ymoucs due from Power Agency under this Agreement.
:-      and shall either be paid directly to Power Agency by CP&L or credited to n.ymoucs due from Power Agency under this Agreement.
i i
i i
;
O 15-1
O 15-1
* 1
* 1
Line 1,790: Line 1,734:
   .J ARTICLE 16 ALIENATION AND ASSIGNMENT 16.1  Right to Convey Ownership Interests Except to the extent such right is conditioned by Section 16.2, each owner shall have the right to sell, lease, convey, transfer, assign or alienate to any other party (hereinafter referred to as " Third Party") in any manner whatsoever its ownership interest, or any portion or portions thereof, in a Joint Facility.
   .J ARTICLE 16 ALIENATION AND ASSIGNMENT 16.1  Right to Convey Ownership Interests Except to the extent such right is conditioned by Section 16.2, each owner shall have the right to sell, lease, convey, transfer, assign or alienate to any other party (hereinafter referred to as " Third Party") in any manner whatsoever its ownership interest, or any portion or portions thereof, in a Joint Facility.
l    16.2  Conditions of Transfer (A)  Notwith Landing the foregoing, the right of each Owner to convey interests in the Joint Facilities is "onditioned as follows:
l    16.2  Conditions of Transfer (A)  Notwith Landing the foregoing, the right of each Owner to convey interests in the Joint Facilities is "onditioned as follows:
(1)  Each Owner shall have the right to convey a security interest in its ownership interest in a Joint Facility to secure loans, bonds or other evidences of indebted-l ness issued or to be issued by it without the consent of the
(1)  Each Owner shall have the right to convey a security interest in its ownership interest in a Joint Facility to secure loans, bonds or other evidences of indebted-l ness issued or to be issued by it without the consent of the other Owner if the proceeds from such loans, bonds or other I
;
other Owner if the proceeds from such loans, bonds or other I
evidences of indebtedness are tu be used to meet the Owner 's l    obligations under this Agreement or the Related Agreeraents . Each Owner shall notify the other Owner in writing as soon as possible after learning that any lien or security interest has been or will be imposed upon its ownership interest in a Joint Facility or has reason to believe that such lien or security interest is under discussion with a possible lender or other entity; 16-1 1
evidences of indebtedness are tu be used to meet the Owner 's l    obligations under this Agreement or the Related Agreeraents . Each Owner shall notify the other Owner in writing as soon as possible after learning that any lien or security interest has been or will be imposed upon its ownership interest in a Joint Facility or has reason to believe that such lien or security interest is under discussion with a possible lender or other entity; 16-1 1


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                                                                       ''      ~      "
                                                                       ''      ~      "
                                                                                ;
i:                                                ARTICLE 18 l
i:                                                ARTICLE 18 l
RIGIITS OF. ACCESS TO PROJECT RELATED INFORMATION AND MATERIALS; MEETINGS; PLANT VISITS l-18.1  Power Agency's Right of Access (A)' During the Construction, Initial Fueling and                      ,
RIGIITS OF. ACCESS TO PROJECT RELATED INFORMATION AND MATERIALS; MEETINGS; PLANT VISITS l-18.1  Power Agency's Right of Access (A)' During the Construction, Initial Fueling and                      ,
Line 1,888: Line 1,829:
(4)                Contracts, purchase orders and changes or amendments to contracts and purchase orders; (d)                  Materials relating to' contractor performance                                                                                                    ,
(4)                Contracts, purchase orders and changes or amendments to contracts and purchase orders; (d)                  Materials relating to' contractor performance                                                                                                    ,
18-2
18-2
                                                                                                                                                                        .;


assessments, including project progress reports, status repcrts, inspection reports, cost control or financial reports, reports concerning construction progress, official notes of meetings, productivity analyses and work sampling studies, and other simi-lar materials; (6)  Books, records, and other documents which set forth matters affecting the Joint Facilities in dealings between CP&L and any regulatory body or governmental agency including, but not limited to, the obtaining by CP&L of construction permits, operating licenses and all other essential regulatory approvals for any Joint Facility; and (7) Matters relating to the transactions and duties of CP&L described in this Agreement.
assessments, including project progress reports, status repcrts, inspection reports, cost control or financial reports, reports concerning construction progress, official notes of meetings, productivity analyses and work sampling studies, and other simi-lar materials; (6)  Books, records, and other documents which set forth matters affecting the Joint Facilities in dealings between CP&L and any regulatory body or governmental agency including, but not limited to, the obtaining by CP&L of construction permits, operating licenses and all other essential regulatory approvals for any Joint Facility; and (7) Matters relating to the transactions and duties of CP&L described in this Agreement.
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ARTICLE 19 AF,SISTANCE Bf CP&L IN AGENCY FINANCINGS 19.1  Assistance CP&L shall provide such assistance as set forth in this Article 19 as Power Agency may reasonably require in connection with the issuance or sale by Power Agency of any bonds, notes or other evidences of indebtedness, whether public i
ARTICLE 19 AF,SISTANCE Bf CP&L IN AGENCY FINANCINGS 19.1  Assistance CP&L shall provide such assistance as set forth in this Article 19 as Power Agency may reasonably require in connection with the issuance or sale by Power Agency of any bonds, notes or other evidences of indebtedness, whether public i
or private (including, without limitation, revolving or other
or private (including, without limitation, revolving or other credit facilities).
;
credit facilities).
19.2  Reports CP&L agrees that in connection with such issuance or sale, it will make available to Power Agency, to the managing i
19.2  Reports CP&L agrees that in connection with such issuance or sale, it will make available to Power Agency, to the managing i
underwriters of any such issuance or sale and to any other financing entity involved in such issuance or sale information relating to the Joint Facilities including, but not limited to, a current architectural and construction engineering report with respect to the Joint Facilities, prepared by CP&L, s3Lting forth the design of the Joint Facilities, a description of the Joint Facilities, the status of engineering, design and construction of l
underwriters of any such issuance or sale and to any other financing entity involved in such issuance or sale information relating to the Joint Facilities including, but not limited to, a current architectural and construction engineering report with respect to the Joint Facilities, prepared by CP&L, s3Lting forth the design of the Joint Facilities, a description of the Joint Facilities, the status of engineering, design and construction of l
Line 2,038: Line 1,976:
Agreement, all as shown in Exhibit SA-XXII.        As used in this l
Agreement, all as shown in Exhibit SA-XXII.        As used in this l
Artic'le 24, the word " children" shall have its generally accepted meaning of descendancs of the first degree.
Artic'le 24, the word " children" shall have its generally accepted meaning of descendancs of the first degree.
;                                                                        '
l 24-1
l 24-1


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h ARTICLE 26 .
h ARTICLE 26 .
i
i
;
                                       , ENTIRE AGREEMENT l-This Agreement and, as applicable, the Related Agreements, . shall constitute the entire understanding between the l
                                       , ENTIRE AGREEMENT l-This Agreement and, as applicable, the Related Agreements, . shall constitute the entire understanding between the l
l-      parties superseding any and all previous understandinga, oral or written, pertaining to the subject matter contained herein.
l-      parties superseding any and all previous understandinga, oral or written, pertaining to the subject matter contained herein.
Line 2,125: Line 2,061:


ARTICLE 28 SURVIVORSHIP OF OBLIGATIONS 28.1 Survivorship of Obligations The termination of this Agreement shall not discharge either party from any obligation it owes to the other party under this Agreement by reason of any transaction, loss, cost, damage, expense or liability (a) which shall occur or arise (or the circumstances, events or bases of which shall occur or arise) prior to such termination or (b) which shall occur or arise (or the circumstances, events or bases of which shall occur or arise) as a result of this Agreement after such termination. It is the intent of the parties that any such obligation owed pursuant to the proceding sentence (whether the same shall be known or unknown at the termination of this Agreement or whether the circumstances, events or bases of the same shall be known or unknown at the termination of this Agreement) shall survive the termination of this Agreement.
ARTICLE 28 SURVIVORSHIP OF OBLIGATIONS 28.1 Survivorship of Obligations The termination of this Agreement shall not discharge either party from any obligation it owes to the other party under this Agreement by reason of any transaction, loss, cost, damage, expense or liability (a) which shall occur or arise (or the circumstances, events or bases of which shall occur or arise) prior to such termination or (b) which shall occur or arise (or the circumstances, events or bases of which shall occur or arise) as a result of this Agreement after such termination. It is the intent of the parties that any such obligation owed pursuant to the proceding sentence (whether the same shall be known or unknown at the termination of this Agreement or whether the circumstances, events or bases of the same shall be known or unknown at the termination of this Agreement) shall survive the termination of this Agreement.
28.2  Survivorship of Provisions
28.2  Survivorship of Provisions The provisions of Article 12, incit' ding specifically, but without limitation, the indemnification provisions thereof, shall remain operative and in full force and effect, regardless of any termination or cancellation of this Agreement, except vith respect to actions of the Owners occurring after such termination or cancellation.
;
The provisions of Article 12, incit' ding specifically, but without limitation, the indemnification provisions thereof, shall remain operative and in full force and effect, regardless of any termination or cancellation of this Agreement, except vith respect to actions of the Owners occurring after such termination or cancellation.
28-1
28-1


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;    OWNERSHIP AGREEMENT i                                  !
;    OWNERSHIP AGREEMENT i                                  !
!            EXHIBITS l
!            EXHIBITS l
;
l i
l i
J
J
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l l
l l
( Format to be developed at least 30 days prior to the First Closing Date. The format agreed upon shall then be deemed Exhibit SA-V-2 and shall be substituted for this page.)
( Format to be developed at least 30 days prior to the First Closing Date. The format agreed upon shall then be deemed Exhibit SA-V-2 and shall be substituted for this page.)
I
I l
                                                                                                                .;
l l
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l L
L v                      _. _- ,  ..-- - ,      -          , . - _ , , - . , - , - _ - ,      .
v                      _. _- ,  ..-- - ,      -          , . - _ , , - . , - , - _ - ,      .


SA-V-3 Closing Statement - Harris and Mayo l
SA-V-3 Closing Statement - Harris and Mayo l
(Format to be developed at least 30 days prior to the First Closing Date. The format agreed upon shall then be deemed Exhibit SA-V-3 and shall be substituted for this page. )
(Format to be developed at least 30 days prior to the First Closing Date. The format agreed upon shall then be deemed Exhibit SA-V-3 and shall be substituted for this page. )
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i I
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I I
I I
e i
e i
;
k-
k-
   <        ~  ,,,.    - , - - . .
   <        ~  ,,,.    - , - - . .
Line 2,377: Line 2,306:
l approved August 27, 1894 (the Wilson Tariff Act); "An Act to supplement existing laws against unlawful restraints and monopolies, and for other purposes," approved October 15, 1914 (the Clayton Act); and "An Act to create a Federal Trade Commission, to define its powers and duties, and for other i
l approved August 27, 1894 (the Wilson Tariff Act); "An Act to supplement existing laws against unlawful restraints and monopolies, and for other purposes," approved October 15, 1914 (the Clayton Act); and "An Act to create a Federal Trade Commission, to define its powers and duties, and for other i
purposes," approved September 26, 1917 (the Federal Tra'de Commission Act).
purposes," approved September 26, 1917 (the Federal Tra'de Commission Act).
;.
                                 -                              ~
                                 -                              ~


Line 2,384: Line 2,312:
                 -(d)      " Antitrust laws of North Carolina and South Carolina" shall mean the following Acts and all amendments thereto:
                 -(d)      " Antitrust laws of North Carolina and South Carolina" shall mean the following Acts and all amendments thereto:
North Carolina Constitution, Article 1, Section 34; North Carolina General Statutes, Chapter 75 (including, but not limited to, 75-1, 75-1.1, 75-2, 75-4, 75-5, 75-6, 75-7, 75-8, 75-9, 75-10,
North Carolina Constitution, Article 1, Section 34; North Carolina General Statutes, Chapter 75 (including, but not limited to, 75-1, 75-1.1, 75-2, 75-4, 75-5, 75-6, 75-7, 75-8, 75-9, 75-10,
  ;                75-11, 75-12, 75-13, 75-14, 75-15, 75-15.1,
  ;                75-11, 75-12, 75-13, 75-14, 75-15, 75-15.1, j                75-15.2, 75-16, 75-16.1, 75-17, 75-18, 75-19, 75-27, and 75-28).
;
j                75-15.2, 75-16, 75-16.1, 75-17, 75-18, 75-19, 75-27, and 75-28).
p                South Carolina Constitution, Article IX, Sections 1 and 2 and Code of Laws of South Carolina, Title i
p                South Carolina Constitution, Article IX, Sections 1 and 2 and Code of Laws of South Carolina, Title i
39 (including, but not limited to, Sections
39 (including, but not limited to, Sections
Line 2,460: Line 2,386:
NOW THEREFORE, in consideration of the mutual covenants, agreements, representations and warranties herein set forth or noted, CP&L agrees as follows:
NOW THEREFORE, in consideration of the mutual covenants, agreements, representations and warranties herein set forth or noted, CP&L agrees as follows:
: 1. For purposes of this Covenant Not To Sue, Indemniff;ation and Release, each and every reference to the terms " Participant," "Special Claims" and " antitrust laws of the United States" shall have the following meaning respectively:
: 1. For purposes of this Covenant Not To Sue, Indemniff;ation and Release, each and every reference to the terms " Participant," "Special Claims" and " antitrust laws of the United States" shall have the following meaning respectively:
;
i (a)  " Participant" shall mean, severally and collectively, a municipality in North Carolina which (1) has
i (a)  " Participant" shall mean, severally and collectively, a municipality in North Carolina which (1) has


Line 2,507: Line 2,432:
SA-XII-8 Participant not contained in this document, the Sales Agreement, the Power Coordination Agreement or the Operating Agreement; and it fully understands that if the facts or law with respect to which this covenant Not To Sue, Indemnification and Release is executed are or may be found hereaf ter to be other than, or different from the facts or law in that connection now believed by CP& L to be true, CP&L expressly accepts and assumes the risk of such possible difference and agrees that the covenant not to sue, indemnification and release herein given shall be and remain effective notwithstanding any such difference.
SA-XII-8 Participant not contained in this document, the Sales Agreement, the Power Coordination Agreement or the Operating Agreement; and it fully understands that if the facts or law with respect to which this covenant Not To Sue, Indemnification and Release is executed are or may be found hereaf ter to be other than, or different from the facts or law in that connection now believed by CP& L to be true, CP&L expressly accepts and assumes the risk of such possible difference and agrees that the covenant not to sue, indemnification and release herein given shall be and remain effective notwithstanding any such difference.
: 5. CP&L acknowledges that the Sales Agreement, the Power Coordination Agreement, and the Operating Agreement may be l
: 5. CP&L acknowledges that the Sales Agreement, the Power Coordination Agreement, and the Operating Agreement may be l
amended from time to time. CP&L also acknowledges that CP&L may sell interests in the Joint Facilities to other entities on terms and conditions more or less f avorable to CP&L than those contained in the Sales Agreement, and in connection therewith
amended from time to time. CP&L also acknowledges that CP&L may sell interests in the Joint Facilities to other entities on terms and conditions more or less f avorable to CP&L than those contained in the Sales Agreement, and in connection therewith CP&L may assign to such entities certain of its rights and obligations under the Power Coordination Agreement and the Operating Agreement on terms or conditions more or less favorable than those contained .in such agreements for CP&L; and (b) that, under circumstances set forth in the Sales Agreement, Power Agency may under certain circumstances sell interests in the i
;
CP&L may assign to such entities certain of its rights and obligations under the Power Coordination Agreement and the Operating Agreement on terms or conditions more or less favorable than those contained .in such agreements for CP&L; and (b) that, under circumstances set forth in the Sales Agreement, Power Agency may under certain circumstances sell interests in the i


SA-XII-9 Joint _ Facilities to, and assign rights and obligations under such agreements to, other entities. CP&L expressly acknowledges that in the event of any such amendment, sale or assignment, the covenant not to sue, indemnification and release herein given shall be and remain in full force and effect as to Power Agency and each Participant.
SA-XII-9 Joint _ Facilities to, and assign rights and obligations under such agreements to, other entities. CP&L expressly acknowledges that in the event of any such amendment, sale or assignment, the covenant not to sue, indemnification and release herein given shall be and remain in full force and effect as to Power Agency and each Participant.
Line 2,535: Line 2,458:
I t'
I t'
i j'      ' Form of Release - Prom Trustee Under the Company' Mortgage I
i j'      ' Form of Release - Prom Trustee Under the Company' Mortgage I
;
(Format to be developed at least 30 days prior to the First Closing Date. The format agreed upon shall then be deemed Exhibit SA-XIII-l and shall be substituted for this page. )
(Format to be developed at least 30 days prior to the First Closing Date. The format agreed upon shall then be deemed Exhibit SA-XIII-l and shall be substituted for this page. )
I f
I f
Line 2,587: Line 2,509:
f Power Agency's capital related costs (expressed as a percent) for the purposes of Sections 1.15 and 1.29 of this l            Acreement shall be calculated as follows:
f Power Agency's capital related costs (expressed as a percent) for the purposes of Sections 1.15 and 1.29 of this l            Acreement shall be calculated as follows:
Formula is:                                                                  Percent = (A x B) -D (B - C)
Formula is:                                                                  Percent = (A x B) -D (B - C)
;
                       ,          9 i..-___-_--..-_--________ _ _ _ _ -
                       ,          9 i..-___-_--..-_--________ _ _ _ _ -


Revision as of 10:35, 17 February 2020

Purchase,Const & Ownership Agreement Between Cp&L & Nc Municipal Power Agency Number 3 & Exhibits.
ML20010F071
Person / Time
Site: Harris, Brunswick  Duke Energy icon.png
Issue date: 07/30/1981
From: Sitterson S, Shawn Smith
CAROLINA POWER & LIGHT CO., NORTH CAROLINA MUNICIPAL POWER AGENCIES
To:
Shared Package
ML18017B453 List:
References
NUDOCS 8109090334
Download: ML20010F071 (350)
v • d • e


Text

e Exhibit F s

PURCHASE, CONSTRUCTION AND OWNERSHIP AGREEMENT BETWEEN CAROLINA POWER & LIGHT COMPANY '

AND  :

NORTH CAROLINA MUNICIPAL POWER AGENCY NUMBER 3

! AND EXHIBITS l

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JULY 30,1981 l

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l D DO K O O 24 l 1 PDR \

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PURCHASE, CONSTRUCTION AND OWNERSHIP AGREEMENT BETWEEN CAROLINA POWER & LIGHT COMPANY AND NORTH CAROLINA MUNICIPAL POWER AGENCY NUMBER 3 A ND EXHIBITS i

JULY 30,1981 l

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. PURCHASE, CONSTRUCTION AND OWNERSHIP AGREEMENT TABLE OF CONTENTS Page RECITALS ....................................,........ 1 ARTICLE 1 DEFINITIONS ............................. 1-1 ARTICLE 2 SALE OF OWNERSHIP INTERESTS IN THE JOINT FACILITIES .................... 2-1 2.1 Sale to Power Agency .................... ,2-1 2.2 Closing ................................. 2-5 2.3 Dispute Regarding Closing ............... 2-5 ARTICLE 3 CONDITIONS PRECEDENT TO GBLIGATIONS HEREUNDER ................... 3-1 3.1 Conditions Precedent to CP&L's Obligations ............................. 3-1 3.2 Conditions Precedent to Power Agency's Obligations .................... 3-6 3.3 Conditions Precedent to CP&L's Obligation to Proceed to Closings Subsequent to the First Closing ........................... 3-11 3.4 Conditions Precedent to Power Agency's Obligation to Proceed to Closings subsequent to the First Closing ........................... 3-15 3.5 Additional Condition Precedent to CP&L's Obligations and to Power Agency's Obligations ........... 3-19 ARTICLE 4 PURCHASE PRICE .......................... 4-1 4.1 Purchase Price of the Brunswick Units and Roxboro Unit No. 4 .............................. 4-1 Page 4.2 Purchase Price of Mayo Units and !!arris Units ....................... 4-4 4.3 Ownership Interests in and Purchase Prices of Initial Fuel Cores and Reload Fuel .................. 4-6 4.4 Cost of Fuel for Roxboro Unit No. 4 .................................. 4-9 4.5 Cost of Fuel for Mayo Unit Nos. 1 and 2 ........................... 4-10 4.6 Allocation of Certain Costs ............ 4-11 4.7 Closing Costs .......................... 4-12 ARTICLE 5 TRANSFER OF SPARE PARTS, TOOLS -

, AND EQUIPMENT .......................... 5-1 5.1 Transfer or Fxchange of Spare Parts, Tools and Equipment ............. 5-1 5.2 Replacement of Spare Parts, Tools and Equipment .................... 5-2 ARTICLE 6 PAYMENTS ............................... 6-1 6.1 Closing Payment ........................ 6-1 6.2 Estimates of Anticipated Payments ............................... 6-4 6.3 Monthly Progress Payments .............. 6-7 6.4 No Offsets ............................. 6-14 ARTICLE 7 CONSTRUCTION AND C0NTROL ............... 7-1 71 Designation of Ch&L as Project Manager ................................ 7-1 7.2 General Obligations of CP&L as Project Manager ........................ 7-1 7.3 Mutual Obligations of CP&L and Power Agency Re lating to Construction and Con, trol ............... 7-5 11 -

Page 4

7.4 Construction and Initial Fueling ................................. 7-6 7.5 Relief from obligati7ns Under this Article ............................ 7-11 ARTICLE 8 RIGHT OF USE OF THE ROXBORO COMMON SUPPORT FACILITIES .......,.. .... 8-1 ARTICLE 9 REPRESENTATIONS, WARRANTIES AND COVENANTS ............................... 9-1 9.1 Power Agency's Representations, Warranties and Covenants ........................... 9-1 9.2 CP&L's Representations and Warranties ........,..................... 9-6 9.3 Covenants Concerning Financings ......... 9-6 9.4 Other Covenants ......................... 9-7 ARTICLE 10 GOVERNMENTAL AND REGULATORY APPROVALS ............................... 10-1 10.1 Approvals Obtained by CP&L .............. 10-1 10.2 Approvals Obtained by Power Agency .................................. 10-2 10.3 Failure to obtain Approvals ............. 10-2 ARTICLE 11 RESOLUTION OF DISPUTES .................. 11-1 11.1 Arbitration ............................. 11-1 11.2 Arbitration Procedure ................... 11-2 11.3 Court Proceedings ....................... 11-9 11.4 Payment of Fees and Costs ............... 11-9 ARTICLE 12 LIABILITY AND ALLOCATION OF RISK .................e.................. 12-1 12.1 "As Is" sale ............................ 12-1

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s Page 12.2- Reco 'nition of Allocation of Risk of Loss to Owners .................. 12-3 12.3 Liability of CP&L for Certain Loss or Damage .......................... 12-4 12.4 Indirect or Consequential Damages ................................. 12-5 12.5 Indemnitication ......................... 12-6 12.6 Insura nce ............................... 12-8 ARTICLE 13 FORCE MAJEURE ........................... 13-1 13.1 Excuse of Performance ................... 13-1 13.2 Definition .............................. 13-1 13.3 Continuation after Force Majeure Event ........................... 13-2 ARTICLE 14 DEFAULT ................................. 14-1 14.1 Events of Default ...................., . 14-1 14.2 Notice and Opportunity to Cure as Conditions Precedent to Invoking Remedies ....................... 14-3 14.3 Remedies on Default by Power Agency .................................. 14-4 14.4 Remedies on Default by CP&L Regarding Construction, Initial Fueling and Placing into Commerical Operation of the Harris Units and the Mayo Units ......... 14-16 14.5 Remedies on Default by CP&L Regarding Conveyance of Ownership Interests in the Brunswick Units and Roxboro Unit No. 4 .............................. 14-22 14.6 Excuse of Party's Failure to Perform Following Event af Default by Other Party .................. 14-23 14.7 Disputes Concerning Default ............. 14-23

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r' s

e Pegs 14.8 Additional Obligations .................. 14-24 14.9 Equitable Legal Relief .................. 14-24 14.10 Waivers ................................. 14-25 14.11 Agreement to Pay All Costs to Cure Default ............................ 14-25 ARTICLE 15 GENERATIDM OF CL'.RGY PRIOR TO COMMERCIAL OPEEC? ION .................... 15-1 ARTICLE 16 ALIENATION AND ASSIGNMENT ............... 16-1 16.1 Right to Conv ey Ownership Interests ............................... 16-1 16.2 Conditions of Transfer .................. 16-1 16.3 Involuntary Allenation .................. 16-4 ARTICLE 17 ADDITIONAL USES OF BRUNSWICK, MAYO OR !!ARRIS .......................... 17-1 17.1 Land Use Charges Applicable to Power Agency's Undivided Ownership Interest in Land at the Joint Facilities .................... 17-1 17.2 Spent Fuel Storage Capability . . . . . . . . . . . 17-3 ARTICLE 18 RIGHTS OF ACCESS TO PROJECT RELATED INFORMATION AND MATERIALS; t1EETINGS ; PLANT VISITS .................................. 18-1

-18.1 Power Agency's Right of Access . . . . . . . . . . 18-1 18.2 - Types of Materials to be tiade Available to Power Agency Upon Request ..... ...................... 18-2 18.3 Additional Materials to be Prov id ed to Powe r Ag e nc y . . . . . . . . . . . . . . . . 18-3 18.4 Additional Rights of Power Agency .................................. 18-5

'18.5 CP&L's ' Right of Access .................. 18-6 v-

Page 18.6 Meetings Between CP&L and Power Agency ..,......................... 18-7 18.7 Plant Visits .- .......................... 18-11 ARTICLE 19 ASSISTA!!CM BY CP&L IN AGENCY FINANCIMQ3 .<............................ 19-1 19.1 Assistance ........... .................. 19-1 19.2 Reports ................................. 19'-l 19.3 Senior Personnel ........................ 19-2 19.4 Certification of Information by CP&L ................................. 19-3 19.5 Liability and costs ..................... 19-4 i ARTICLE 20 WAIVER OF PARTITION ..................... 20-1 l ARTICLE 21 INCORPORATION OF EXHIBITS ............... 21-1 ARTICLE 22 SEVERABILITY OF PROVISIONS .............. 22-1 22.1 Generally ................... ........... 22-1 22.2 Specifically as to article 12 ........... 22-1 22.3 Renegotiation ........................... 22-2 ARTICLE 23 APPLICABLE LAW .......................... 23-1 ARTICLC 24 TERM OF AGREEMENT ....................... 24-1 ARTICLE 25 DECOMMISSIONING OR CANCELLATION PRIOR TO COMMERCIAL OPERATION ........... 25-1 25.1 General ............a.................... 25-1

?5.2 Cocts of Decommissioning or Cancellation ............................ 25-2 25.3 Decommissioning or cancellation Agreement .................. 25-2 25.4 Repurchase .............................. 25-3 vi -

R Pagn ARTICLE 26 ENTIRE AGREEMENT ........................ 26-1 ARTICLE 27 MISCELLANEOUS ........................... 27-1 i 27 1 CP&L's Discharge of Obligations ......... 27-1 27.2 No Delay'................ 3 .............. 27-1 27.3 Further Documentation ................... 27-2 27.4 Notice .................................. 27-2 i 27.5 Headings Not to Af f ec t Mea ning . . . . . . . . . 27-3 27.6 No Partnership; Tax Matters ............. 27-3 i

j 27.7 Amendments .............................. 27-4 l

27.8 Successors and Assigns ..................

27-4 27.9 Counterparts ............................ 27-4 77.10 No Waiver ............................... 27-4 27.11 Singular to Include Plural and Plural to Include Singular .............. 27-5

[

27.12 References to Articles, Sections and Exhibits ................... 27-5 27.13 Sec u rity o f I n forma t ion . . . . . . . . . . . . . . . . . 27-5 27.14 Computation of Time ..................... 27-5 l ARTICLE 28 SURVIVORSHIP OF OBLIGATIONS ............. 28-1 l

l 28.1 Survivorship of Obligations ............. 28-1 l

l 28.2 Survivorship of Provisions .............. 28-1 t

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PURCIIAAE, CONSTRUCTION AND OWNERSHIP AGREEMENT This Agreement, dated as of July 30, 1981, is between CAROLINA POWER & LIGHT COMPANY ("CP&L"), a corporation organized and existing under Chapter 55 of ' ..e General Statutes of North Carolina, known as the Business Corporation Act, with offices in Raleigh, North Carolina, and NORTH CAROLINA MUNICIPAL POWER AGENCY NUMBER 3 (" Power Agency"), a public body and body corporate and politic organized and existing under Chapter 159B of the General Statutes of North Carolina, known c.s the Joint Municipal Electric Power and Energy Act, with offices in Raleigh, North Carolina.

RECITALS (A) CP&L is engaged in the business of generating, transmitting and distributing electric power in portio ~.s of the States of North Carolina and South Carolina and operates its own electric generation facilities.

(B) Power Agency is a joint agency organized by its member municipalities pursuant to Chapter 159B of the General Statutes of Nortn Carolinc., known as the Joint Municipal Power and Energy Act, to undertake to plan, finance, develop, own and oterate facilities for the generation, transmission, sale and supply o,f electric power and energy.

(C) CP&L presently owns and operates a nuclear-fueled electric generating facility known as the Brunswick Steam Electric Plant located near Gouthport, North Carolina, consisting of two units and ' support facilities. CP&L also presently owns and operates a fossi't-fired electric generating unit known as Roxboro Unit N

No. 4, which is part of CP&L's Roxboro Steam Electric Plant located near Roxboro, North Carolina. CP&L is constructing a fossil-fired electric generating facility known as the Mayo Electric Generating Plant, located in Person County, North Carolina, to consist of two units and support facilities and is constructing a nuclear-fueled electric generating facility known l as the Sheaton llarris Nuclear Power Plant located near New Hill, North Carolina, to consist of four units and support facilities.

(D) CP&L desires to sell and Pot 3r Agency desires to purchase undivided ownership intesests in the Brunswick Units, l

i the Mayo Units, the llarris Units, Roxboro Unit No. 4, and Associated Fuel for such Units (the " Joint Facilities").

(E) CP&L and Power Agency have entered into an Operating and Fuel Agreement of even date herewith to establish the terms and I I

conditions for the operation and fueling of the Joint Facilities by CP&L on behalf of itself and Power Agency.

(F) CP&L and Power Agency have entered into a Power coordination Agreement of even date herewith to establish the terms and conditions for provision by CP&L to Power Agency of certain power services and for other matters.

(G) Power Agency desires to have CP&L serve ar the project manager of the Joint Facilities and to fulfill the duties and obligations of project manager, and CP&L is willing to do so on the terms and conditions herein set forth, l .

SALES AGREEMENT ARTICLE 1 DEFINITIONS 1.1 Adjustment Interest Rate For any month, the prime rate being charged by the Chase Manhattan Bank of New York on the first day of such month, less one percentage point, Mivided by twelve, expressed in percentage points, to the nearest hundredth.

1.2 Allowance for Funds Used During Construction (AFUDC)

Capital carrying custs incurred by CP&L during con-struction which are capitalized as a cost of plant on the books of CP&L in accordance with the PERC Uniform System of Accounts.

For the purposes of this Agreement and the Related Agreements, such capital costs shall not reflect any credits associated with inclusion of constrtution ucrk in progress in the rate base for retail jurisdictions, but shall reflect credits associated with l inclusion of pollution control construction work in progress in the rate base for sale for resale jurisdictions.

1.3 Approved Arbitrators List Th e. 1.ist of Arbitrators to be used in resolution of dispurcs in accordance with Section 11.2(3)(3).

1.4 Associated fuel With reference to each Brunswick Unit, Associated Fuel ahall mean the Initial I'uel Core and Reload Fuel for such Bruns-wick Unit. With reference to each Harris Unit, Associated Fuel 1-1

shall mean the Initial Fuel Core and Reload Fuel for such Harri9 Unit. With reference to each Mayo Unit, Associated Fuel shall

,jmoan the 3nitial Stockpilt for such Mayo Unit, and Fossil Fuel Material obtained pursuant to the Operating Agreement for use in such Mayo Unit. With reference to Roxboro Unit No. 4, Asso-ciated Fuel shall mean the Initial Stockpile, coal and start-up f uel oil -to be used at Roxboro Unit No. 4, and Fossil Fuel Material outained pursuant to the Operating Agreement f.or Roxboro Unit No. 4.

1.5 Brunswick. Plant The Brunswick Plant, formally designated the 3runswick Steam Electric Plant, is an electric generating facility located near Southport, North Carolina, consisting of two operating nu-clear-fueled generating units designated erunswick Unit No. 1 and Brunswick Unit No. 2, support facilities, spare parts, tools and equipment and any capi'.alized construction *.naterials and supplies on hand, all as-more completely described in the Bill of Sale, the form of which is prescribed in Exhibit SA-IV-1.

The boundaries of the Brunswick Plant, each unit thereof and certain of the support facilities are illustrated in Exhibit SA-XV-1. Transmission facilities located at the site, including step-up transformers having a high side transmission voltage, are not included as part of the Brunswick Plant.

1-2

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1.6 Brunswick Unit Brunswick Unit No. 1 or Brunswick Unit No. 2, which.

are the individual nuclear-fueled electric generating units, u . associated support facilities, spare parts, tools and equipment and any capitalizef construction materials and supplies on hand,.

located at the Brunswick Plant. Brunswick Unit No. 1 and Bruns-wick Unit No. 2 are collectively referred to herein as the "Brunsw2cc' Units."

1.7 CP&L Operating Practice (A) CP&L Operating Practice means any practice, method or act which, in the exercise of reasonable judgment in light of i

the facts known at the time a decision is made, would be expected I

I to accomplish the desired result at a reasonable cost consistent with reliability and safety.

I The parties acknowledge and agree that in applying (3) i this Section 1.7 the following principles shall govern:

f (1) CP&L's ownership interests in the facili-l ties subject to this Agreement provide CP&L with the incentive to choose practices, methods and acts which meet the standard described in this section 1.7; (2) CP&L Operating Practice includes, but is not L

limited to, any practice, method or act engaged in or approved by a significant portion of the electric industry; and I

l-3

(3) CP&L Operating Practice includes, but is not f

l limited to, practices, methods or acts which are not used by other participants in the electric industry.

(C) CP&L Operating Practice is not limited to the opti-i mum practice, methoi or act, to the exclucion of all others, but rather includes a number of possible practices, methods or acts.

l l 1.8 CP&L System All facilities constructed, operated or owned (in whole or in part) by CP&L (except those owned by CP&L but leased I to Power Agency or a Participant pursuant to Section 13.3 of l

l the Power Coordination Agreement) or any subsidiary for the l

l purpose of generation, transmission or distribution of electric energy, or related thereto.

1.9 Closing Date l

l Each date on which a closing takes place pursuant to l

Article 2.

l i

l j 1.10 Closing Payment For any closing, the aggregate amount of all payments due pursuant to Section 6.1 of tnis Agreement and Article 9 of the Operating Agreement.

l l

l <l.11 Combined System l

l The Combined System, for purposes of this Agreement and l

the Related Agreements, shall consist of the generating facili-tica at the Joint Facilities, New Resources which ma,v be used

1-4

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1

~

to meet Hourly Resource Demand pursuant to Article 6 of the -

Power Coordination Agreement and all other generating and trans-

. s .

mission facilities owned and/or operated by CP&L at present'or in the future.

1.12 Commercial: Operation

~~

(A) For purposes of this Agreement and the Related -

l Agreements, Commercial operation commenced for the Brunswick i

Units and Roxboro Un,it No. 4 on the following dates:

Brunswick Unit No. 1 - March 18, 1977 Brunswick Unit No. 2 - November 3, 1975 Roxboro Unit No. 4 - September 16,,1980 (B)

For purposes of this Agreement and the Related' l - -

~

[ Agreements, Commercial Operation commencys for each Mayo Unit-b and Harris Unit at 12::01=A.M. the day af ter one of the following l

L conditions is met:

E (1) Continuous operation of the Unit for fif ty (50) hours at ninety-nine percent (99%) (nr greater of its unit design capability (in the case of a Mayo Unit) or one hundred l

N l

(100) hours-at ninety-nine percent (99%) or greater of its li-l consed reactor power level (in the case of a Harris Unit);

(2) Continuous operation for fifty (30) hours (in the case of a Mayo _ Unit), or one hundred (100) hours (in the case of a Harris Unit) within one, percent (1%) of any l -lower capability level established by regulatory or other operating restriction lhe_ time per,iod for which is expected to extend beyond " thirty (30) days; or ,

l-5

_ _ _ _ _ . - -[

e r, -

?

~

s.

(3) Continuous operation for fif ty (50) hours at a point bblow its unit design capability (in the case of a Mayo Unit) or one hundred (100) hours at a point below its li-censed reactor power level (in the case of^a Harris Unit) as mutually agreed upon by CP&L and Power Agency, provided that neither party shall unreasonably withhold its agreement.

i r l.13 Commitment Ratio Power Agency's Commitment Ratio is the ratio of the projected 1982 Annual Peak Resource Demand (as defined in Sec-

' tion 1.4 of the Power Coordination. Agreement) of Power Agency's l Participants to the projected 1982 Annual Peak Resource Demand l

of Power Agency's members listed in Exhibit SA-I-1. Such pro-jection shall be furnished to CP&L by Power Agency.at least

, sixty (60) days prior to the First Closing Date.

L 1.14 Company Mortgage L

The Company Mortgage is the mortgage created by and

, evidenced in the document entitled "Nortgage and Deed of Trust dated as of May 1, 1940, wi th Irving Trust Company and Fredrick G.  !!erbst (D.W. May, Successor) as Trustee, as supplemented."

1.15 Compensatory Interest Rate For any month, the capital related costs of the party

! to whom interest is owed as described in Exhibit SA-XXI-1, divided by twelve, expressed'in percentage points to the nearest hundredth.

s i

1-6 4

1.16 Construction As relates to the Mayo Units and the Harris Units, Construction shall mean the acquisition and construction of any portion of the Mayo Plant and the Harris Plant, and shall include, without limitation, the planning, design, engineering, licensing,

. completion and start-up of, and purchasing, accounting, training, quality assurance and administration for, such Units including any additions or modifications thereto commenced or authorized prior to ti:e date of Commercial Operation of the Mayo Unit or Harris Unit as to which such addition or modification relates. As re-lates to the Brunswick Units and Roxboro Unit No. 4, Construction

[ shall mean the acquisition and construction of any addition to-or me!!fication of the Brunswick Units or Roxboro Unit No. 4 l

L which was commenced or authorized prior to the First Closing Date and shall include, without limitation, the planning, f design, engineering and completion of, and purchasing, ac-

! counting, training, quality assurance and administration for, such addition or modification.

l t 1.17 Construction Period The Construction Period shall commence on the First Closing Date and shall end when all Costs of Construction have l

been paid.

1.18 Cost of Construction Cost of Construction is all costs incurred in connec-tion with Constr uction of the Joint Facilities, and shall include, 1-7

but'not be limited to, the following expenses, obligations and liabilities:

(A) All expenses in respect to the Construction of the Joint Facilities, and each portion thereof, which are properly recordable in appropriate accounts as set forth in FERC's Uniform System of Accounts Prescribed for Class A and Class B Public Utilities and Licenses, 18 C.F.R. Part 101, as it may be amended from time to time; provided, however, that if the construction accouating under the Uniform System is eliminated, then the Cost of Construction of the Joint Facilities shall be determined thereafter by applying the same methods and proce-dures used by CP&L, at the time such determination is made, in regard to the construction of its other generation facilities.

Any allowance for funds used during construction recorded by CP&L as of a Closing Date shall not be included as a Cost of Construction.

(B) The costs of all insurance obtained by CP&L in connection with the Construction of the Joint Facilities pur-suant to Section 12.6, adjusced as appropriate when Power Agency provides substitute insurance either through insurance coverage

or through self-insurance pursuant to Section 12.6(E)(2).

(C) All amounts payable by the Owners pursuant to Article 12, other than costs of insurance.

(D) All property, sales, use and othar similar taxes payable in connection with the Construction of the Joint Faci-i lities.

4 1-8

r-(E) All indirect costs and all other costs and expenses which are incurred in the Construction of the Joint Facilities.

The amount of such indirect and other costs shall be chargeable to each Joint Facility by applying the same allocation methods and procedures described in Section 4.6.

(F) Tne cost of employing CP&L managers and techni-cians and utilizing CP&L methods and technical expertise in the Construction of the Joint Facilities, measured by multiplying the costs identified in Sections 1.18(A), (B), (D), (E) and (G), less land, AFUDC, property taxes and retrospective insur-ance premium adjustments included therein, by 1.5 percent.

(G) Every other cost which is designated in this Agreement as a Cost of Construction.

1.19 Cumulative Closing Ratio The sum of the First Closing Ratio plus all Subsequent Closing Ratios through the closing to which a Subsequent Clos--

ing Ratio is applicable, without regard to the application of the Service Ratio.

1.20 Delivery Point The point on the transmission system of CP&L at 115 KV or higher voltage (except as otherwise agreed by the parties in a letter concerning certain Municipal Systems dated concurrently l

herewith) at which the delivery of power to Power Agency or a l Participant is to be measured.

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l.21 Events of Default The events described in Section 14.1.

1.22 Federal Energy Regulatory Commission (FERC)

The Federal Energy Regulatory Commission (FERC) is the commission that has jurisdiction over CP&L rates and charges contained in the Power Coordination Agreement and over the sys-tem of accounts used by CP&L. FERC shall also mean any successor regulatory commission, agency or department having jurisdiction over those rates, charges and accounting systems.

1.23 First Closing The closing, provided for in Section 2.l(B)(1)(a),

at and through which Power Agency shall first purchase and CP&L shall first convey a portion of Power Agency's Ultimate Owner-ship Interests in the Joint Facilities.

1.24 First Closing Date The closing date on which Power Agency first purchases, and CP&L first conveys, any part of the undivided ownership in-terests in Joint Facilities to which Power Agency is committed to purchase under this Agreement.

1.25 First Closing Ratio Power Agency's First Closing Ratio is the ratio of the portion of Power Agency's Ultimate Ownership Interests in the Joint Facilitieu which Power Agency shall purchase and CP&L l-10

1( a 5

e shall' convey on the First Closing Date (without regard' to the application of the Service Ratio),'t.o Power Agency's Ultimate Ownership Interest in each Joint Facility which Power Agency is committed to purchase under the Sales Agreement.

1.26 Force Majeure '

The events or circumstances described in Section 13.2.

1.27 Harris Plant The Harris Plant, formally designated the Shearon'-

- Harris Nuclear Power Plant, is an electric generating facility presently being constructed near New Hill, North Carolina,- which will consist of four nuclear-fueled generating units designated Harris Unit No. 1, Harris Unit No. 2, Harris Unit No. 3 and Harris Unit ..v. 4, support facilities, spare parts, tools and equipment and any capitalized construction materials and sup-plies on hand, all as more completely described in the Bill of Sale, the form of which is prescribed in Exhibit SA-IV-1 .

The boundaries of the Harris Plant, each unit thereof and certain of the support facilities are illustrated in Exhibit SA-XVI-1. Transmission facilities located at the site, in-

- cluding step-up tralsformers having a high side transmission voltage, are not included as part of the Harris Plant.

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a 1.28 Harris Unit Harris Unit No. 1, Harris Unit No. 2,HarrisUnjgj No. 3 or Harris Unit No. 4, which are the individual nuclear-fueled electric generating units, associated support facilities, spare parts, tools and equipment and any capitalized construction materials and supplies on hand, being constructed at the Harris Plant. Harris Unit No. 1, Harris Unit No. 2, Harris Unit No.

3 and Harris Unit No. 4 are collectively referred to herein as the " Harris Units."

1.29 Incentive Interest Rate For any month, one twelfth (1/12) of the sum of:

(i) the capital related costs of the party to whom interest is owed, as described in Exhibit SA-XXI-1; and (ii) the difference, ,

on the first day of such month, between the most recently pub-lished Moody's electric utility bond yield for the rating cate-gory in which CP&L's first mortgage bonds are rated and the corresponding electric utility bond yield for the next lowest rating category. The Incentive Interest Rate shall be expressed in pcreentage points to the nearect hundredth.

1.30 Initial Fuel-Core s

Nuclear Fuel Material and Nuclear Fuel Services asso-l ciated with those fuel batches in the reactors at the Brunswick Plant as of any closing and Nuclear Fuel Material and Nuclear Fuel Services associated with those fuel batches required:for the initial start-up and initial operation of the Harris Units. ,

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W ci 1.31 Initial Fueling l Initial Fueling is the prccess of acquiring and utilizing the Initial Fuel Cores.in the case of nuclear fuel, or the Initial Stockpile in-the case of fossil (coal and start-up. fuel oil) fuel, necessary,and sufficient for the. start-up and placing'into Commercial operation of the Harris Units and the Mayo Units, respectively, and for the operation for an

' initial period consistent with the fuel plan.for such Units j (including the fuel cycle for nuclaar fuel and the stockpile

! for fossil fuel). Initial Fueling shall include (but shall not be limited to), with respect to such fuel, the solici-tation and acceptance of bids for the supply thereof, the securing o'f neces ary fuel-processing services, the trans-l portation to a Harris Unit or.a Mayo Unit and the handling

- and consumption at any Harris Unit or Mayo Unit. In the case of nuclear fuel, Initial Fueling does not include Reload Fuel, y as defined-in Section 1.54. In the case of fossil fuel, Initial Fueling does not include Lassil fuel in excess of Initial Stockpiles. The owners' rights and obligations with respect to fossil fuel other than Initial Stockpiles are covered by the operating Agreement.

ps 1.32 Initial Stockpile The Initial Stockpile shall be that coal and start-up fuel oil inventory (i) required for the initial start-up, testing l

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and commencement of sustained operation of each coal-fired unit at the Mavo Plant,; and (ii) stored at the Roxboro Plant as of each closing Date-which is to be used in the operation of (or properly allocable to) Roxboro Unit No. 4.

1.33 ' Joint Facilities The Joint Facilities are the Brunswick Units,:the Harras Units, the Mayo Units, Roxboro Unit No. 4, and Asso-cioted Fuel for such Units, or any of them or any. portion thereof, ownership intereste in which are to be conveyed to Power Agency pursuant to this Agreement.

l 1.34 Joint Units The' Joint Units are Brunswick Unit No. 1 and Brunswick Unit No. 2, Mayo Unit No. 1 and Mayo Unit No. 2, Harris Unit No. 1, Harris Unit No. 2, Harris Unit No. 3 and Harris Unit No. 4 and Roxboro Unit No. 4, ownership interests in which are to be conveyed to Power Agency pursuar.t to this Agreement.

1.35 Late Payment Interest Rate For any month, the capital related costs of CP&L as descriled in. Exhibit SA-XXI-1, divided by twelve, expressed in percentage points to the nearest hundreath.

1.36 Liaison Representative

! The CP&L employee whose duties and responsibilities with respect to Power Agency are as described in Section 7.2(D).

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1.37 iMNDC Maximum Net Dependable Capability (MNDC) in-kilowatts f

(KW) shall be the dependably attainable value for main unit cap-ability less auxiliaries of the Brunswick Units, the Mayo Units, the Harris Units, and Roxboro Unit No. 4 as such level is estab-t lished from time to time af ter Zommercial operation in accordance with Article,12 of the Power Coordination Agreement.

- 1.38

, Mayo Plant i

i The Mayo Plant, formally designated the Mayo Electric

(

Generating Plant, is an electric generating facili ty presently being constructed in Person County, North Carolina, which will consist of two coal-fired generating units designated Mayo Unit No. I and Mayo Unit No. 2, support facilities, spare parts,

( tools and equipment and any capitalized construction materials and supplies on hand, all as more completely described in the Bill of Sale, the form of which is prescribed in Exhibit SA-IV-1. The boundaries of the Mayo Plant, each unit thereof and certain of the support facilities are illustrated in Exhibit l

SA-XVII-1. Transmission facilities located at the site, includ-

! ing step-up transformers having a high side transmission voltage, are not included as part of the Mayo Plant.

(-

l 1.39 Mayo Unit Mayo Unit No. 1 or Mayo Unit No. 2, which are the l

1 individual coal-fired electric generating units, associated 1-15

1 I

I support facilities, spare parts, tools and equipment and any capitalized construction materials and supplies on hand, being constructed at the Mayo Plant. Mayo Unit No. I and Mayo Unit No. 2 are collectively referred to herein as the " Mayo Units."

1.40 Municipal system A municipality ir. North Carolina which has become, or which'may hereafter become a member of Power Agency. A list of the Municipal Systems is attached as Exhibit SA-II-1, 1.41 North Carolina Utilities Commission (NCUC)

The North Carolina Utilities Commission (NCUC) or any successor regulatory commission, agency or department having jurisdiction over the retail sale of electricity by CP&L in North Carolina, 1.42 Nuclear Fuel Material Nuclear Fuel Material is material which is the source of fissionable nuclei required to produce power in nuclear units.

1.43 Nuc1 car Fuel Services Nuclear Fuel Services for the Brunswick and liarris Units shall be deemed to include, but not be limited to, such services as the following:

(1) Conversion of U 3g0 to UF 6 (uranium hexa-fluoride);

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(2) Enrichment of UF 6 in the isotope U-235 (whether provided by the Department of Energy, by any successor agency or department, or by another enrichment facility);

(3) Fabrication of fuel assemblies, including spares, which shall include, but not be limited to, the following:

(i) all materials, labor and services (with the exception of Nuclear Fuel Material) necessary to produce fin-ished fool assemblies suitable for insertion into a Brunswick or Harris Unit; (ii) such fuel design, fuel management, and fuel-related licensing services as may be obtained under an applicable CP&L contract for the fabrication of fuel assemblies; (4) Supply of nuclear fuel-related material and hardware, such as burnable poisons, replacement or additional control rods, channels, orifice rods, neutron sources, and other such components; (5) All transportation, storage, weighing, sam-pling, and other services used to carry out the above activities; (6) Any special handling, processing, insurance and safeguards which are used; and (7) In addition, Nuclear Fuel Services shall include back-en'd services. The parties recognize that certain back-end services must be performed on the Initial Fuel Cores and Reload Fuel and other related fuel hardware after discharge from the Brunswick Units and the Harris Units. These services are presently envisioned to include, but are not limited to:

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. _ = _

k (i) spent fuel storage; (ii) spent fuel shipping; (iii) spent fuel processing; (iv) waste disposal and/or management; (v) uranium hexafluoride conversion; (vi) plutonium oxide conversion; (vii) plutonium storage; (viii) safeguards and insurance; and (ix) weighing, sampling and assaying associated with the above.

1.44 Nuclear Regulatory Commission (NRO)

The Nuclear Regulatory Commission (NRC) is the commis-sion that has s urisdiction over the construction and operation i

of-nuclear power plants. NRC shall also mean any successor federal regulatory commission, agency or department having jurisdiction over the construction and operation of nuclear power plants.

1.45 Operating Agreement The agreement, dated concurrently herewith, between CP&L and Power Agency establishing the terms and conditions for the operation and fueling of the Joint Facilities by CP&L on behalf of itself and Power Agency, which is entitled the operating and Fuel Agreement.

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1.46 - Output-

The' net. amount of' electric power, measured in kilowatt hours, supplied in any hour by a generating unit to the trans--

mission system. Output-is' determined by subtracting all aux-iliary: power used by the unit during each hour from the metered gross kilowatt hours generated by the unit during each such hour,.

but, as used'in this Agreement, shall not be less than zero.

- 1.47 Owner Either CP&L (in CP&L's capacity as an owner of interests in Joint Facilities) or Power Agency.

i 1.48 Ownership Interest Power Agency's Ownership Interest in any Joint Faci-lity;at any time is the aggregate of the undivided ownership interests (expressed as percentages) which Power Agency has

! purchased, and CP&L has conveyed to Power Agency, at and l ,

I through the closings provided for in Article 2. l

}

o Ownership Interest in the Mayo Units and the Harris  !

l l' Units at any time shall be a percentage equal to the product of ,

I i the Ultimate Ownership Interest times the Cumulative Closing l

[ Ratio; provided, however, that at all times, Power Agency's I

(.iiership Interest in the Mayo Units and the Harris Units shall be subject to adjustment as set forth in Sections 14.3, 14.4 and 25.1. Ownership Interest in the Brunswick Plant and noxboro f Unit No. 4 shall be a percentage equal to the product of the l

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, . , _ _ , - -N;y .-v... , -

,.y , + 'y4.. -,&e .-,-- -m-. , y , ~.,, ,..n.

Ultimate Ownership Interest timet the Cumulative Closing Ratio ,

I times the Service Ratio; provided, however, that at all times, Power Agency's Ownership Interest in the Brunswick Units and Roxboro Unit No. 4 shall be subject to adjustment in accordance with Sections 14.3 and 14.4. Following the Final Closing Date, Ownership Interest in any Joint Facility shall be equal to the Ultimate Ownership Interest except as Ownership Interest may be modified pursuant to Sections 14.3, 14.4 or 25.1.

1.49 Ownership Offering As relates to any Joint Facility, the Ownership Offering in a unit or other facility is the undivided ownership interest (expressed as a perecntage) which CP&L has made available for purchase by Power Agency pursuant to this Agreement. The Owner-ship Offering in eac.4 of the Joint Facilities is set forth in Section 2.l(A).

1.50 Participant A Municipal System which prior to the First Closing Date has entered into a Project Power Sales Agreement and a Supplemental Power Sales Agreement with Power Agency, in the forms prescribed in Exhibits SA-VII and SA-VIII, for the supply by Power Agency of capacity and energy to such Participant.

1.51 Power Coordination Agreement The agreement, dated concurrently herewith, between CP&L and Power Agency establishing the terms and conditions 1-20 l

C ___. ._ -

for provision by CP&L to Power Agency of certain power services and other matters, which is. entitled the Power Coordination Agreement.

1.52 . Project Power Sales Agreement An agreement which is in the form of Exhibit SA-VII between Power Agency and a Participant.

1.53 Related Agreements Those agreements described in Sections 1.45 and

'l.51.

1.54 Reload Fuel Nuclear Fuel Material and Nuclear Fuel Services asso-ciated with those fuel aatches which are not part of the Initial Puel cores for the Brunswick and Harris Units, but which have been specifically designated to a particular Brunswick or Harris Unit in accordance with Section 3.2 of the Operating' Agreement.

1.55 Retained Capacity The capacity retained by Power Agency pursuant to Article 5 of the Power Coordination Agreement.

1.56 Roxboro Common Support Facilities The Roxboro Common Support Facilities are the support facilities located at the Roxboro Steam Electric Plant nteded in the operation of Roxboro Unit No. 4 and not directly asso-ciated solely with Roxboro Ur.it No. 4.

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1.57 Roxboro Unit No. 4 Roxboro Unit No. 4 is the individual coal-fired elec-tric generating unit placed in Commercial Operation in 1980 at the Roxboro Steam Electric Plant near Roxboro, North Carolina, the support facilities directly associated solely with such unit, spare parts, tools and equipment and any capitalized construction materials and supplies on hand, all as more completely described in the Bill of Sale, the form of which is prescribed in Exhibit SA-IV-1. The boundaries of Roxboro Unit No. 4 ~ are illustrated in Exhibit SA-XVIII-1. Transmission facilities located at the site, including stcp-up transformers having a high side transmission voltage, are not included as part of Roxboro Unit No. 4.

1.58 Service Ratio For the period beginning with the First Closing Date l

t through November 30, 1982, the Service Ratio used in any closing ,

shall be a decimal fraction equal to .69 divided by the Cumula-tive Closing Ratio, but not greater than 1.0. For the period beginning with December 1,1982, the Service Ratio used in any closing shall be 1.0.

1.59 Site Representative TP.e Power Agency representative whose duties and responsibilities are described in Section 7.2(E).

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l 1.60 Subsequent closing Date Each date on wh'ich a Subsequent Closing takes place pursuant to. Article 2.

1.61 Subsequent Closing Ratio As is applicable to each Subsequent Closing, Power Agency's subsequent closing Patio is the ratio of the portion of Power Agency's Ultimate Ownership Interest in the Joint

Facilities which Power Agency shall purchase and CP&L shall 1

convey at such subsequent Closing (without regard to the application of the Service Ratio) to Power Agency's Ultimate Ownership Interest in each Joint Facility.

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1.62 Subsequent Closings The closings provided for in Section 2.l(B)(1)(b) after the First Closing Date at and through which Power Agency 1

shall purchase and CP&L shall convey the remaining portion of Power Agency's Ultimate Ownership Interest in each Joint Facility.

1.63 Supplemental Power Sales Agreement l

An agreement in the form of Exhibit SA-VIII between Power Agency and a Participant.

1.64 Transition Period The period between the First Closing Date and a date in the month of December 1983 to be specified by Power Agency at least ten (10) days before such date.

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1.65 Trust Agreement The agreement referred to in Section 6.1 between Power Agency and the Trustee as defined in Section 1.66.

1.66 Trustee The national banking association, whose identit y shall be determined prior to the First Closing Date, which shall be the trustee under the Trust Agreement referred to in Section 6.1.

1.67 Ultimate Ownership Interest Power Agency's Ultimate Ownership Interest in any Joint Facility is the Ownership Offering in such Joint Facility times the Commitment Ratio.

1.68 Unit Brunswick Unit No. 1; Brunswick Unit No. 2; Mayo Unit No. 1; Mayo Unit No. 2; Harris Unit No. 1; Harris Unit No. 2; Harris Unit No. 3; Harris Unit No. 4; or Roxboro Unit No. 4.

1.69 Uranium Account The account established pursuant to section 7.5 of the Operating Agreement for Nuclear Fuel Material and Nuclear Fuel Services associated with all unenriched uranium material to which CP&L holds title (or has interest in or has the right to use by lease or otherwise) regardless of chemical form and which has not yet been designated to a specific unit in accor-dance with Section 3.2 of the Operating Agteement.

1-24

ARTICLE 2 SALE OF OWNERSHIP INTERESTS IN THE JOINT FACILITIES 2.1 Sale to Power Agency (A) On the Closing Dates provided for in this Article 2, and subject to all the applicable terms and conditions >f this Agreement, CP&L shall sell and convey to Power Agency undivided ownership interests in the Joint Facilities in accordance with Sections 2.l(B)(1)(a) and 2.l(B)(1)(b) and Article 4. At least sixty (60) days prior to the First Closing Date, Power Agency shall notify CP&L of its Commitment Ratio which shall be multiplied times the Ownership Offering listed below for each of the Joint Facilities to determine Power Agency's Ultimate Ownership Interest in each of the Joint Facilities:

Ownership Offering-(s)

Roxboro Unit No. 4 13.20 Mayo Units 16.50 Brunswick Units 18.70 Harris Units 16.50 provided, however, if, prior to the First Closing Date, CP&L officially announces the cancellation of Harris Unit No. 3 or Harris Unit No. 4, or both such Units, the Ownership Offering with respect to such Unit or Units shall be 13.20%.

2-1

.Such. conveyances shall be by (1) general warranty deeds, substantially in the form annexed hereto as Exhibit SA-III, conveying such undivided interests in land, improvements thereon, and easements and rights of way described in such Exhibit; and (2) Bills of Sale, substantially in the form prescribed in Exhibit SA-IV, conveying such undivided interests as are described therein. '

(B) (1) Power Agency shall purchase its ownership Interests in the Joint Facilities through separate closings, as follows :

(a) First Closing (i) At and Enrough the First Closing, and subject to all the applicable terms and conditions of this Agreement, CP&L shall sell and convey to Power Agency a portion of Power Agency's Ultimate Ownership Interests in the Joint Facilities. The ownership interests in the Mayo Units and the Harris Units which are to be conveyed at the First Closing shall be determined by multiplying Power Agency's Ultimate Ownership Interest in each duch Joint Facility times the First Closing Ratio. The ownership int 3 rests in the Brunswick Units and in Roxboro Unit No. 4 which-are to be conveyed at the First Closing shall be determined by multiplying Power Agency's Ultimate ownership Interest in nach such Joint Facility times such First Closing Ratio times the Service Ratio. The ownership interests in Associated Fuel which are to be conveyed at the First . Closing are set forth in Sections 4.3, 4.4 and 4.5.

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(ii) Power Agency shall inform CP&L as to the closing ratio that Power Agency anticipates at First Closing at least forty-five (45) days prior to the First Closing Date and shall notify CP&L of the actual First Closing Ratio at least seven (7) days pricr to the First Closing Date; provided, however, that the First Closing Ratio uhal; not be less than 0 .'3 0 .

(b) Subsequent Closings (i) At and through each Subsequent Closing, and subject to all the applicable terms and conditions of this Agreement, CP&L shall sell and convey to Power Agency an additional portion of Power Agency's Ultimate Ownership Interests in the Joint l

Facilities. The ownership interests in the Mayo Units and the

! Ilacris Units which are to be conveyed at each Subsequent Closing

! shall be . determined by multiplying Power Agency's Ultimate Ownership Interest in each such Joint Facility times the applicable Subsequent Closing Ratio. The ownership interests in the ' Brunswick Units and in Roxboro Unit No. 4 which are to be conveyed at each Subsequent Closing shall be determined by multiplying Power Agency's Ultimate Ownership Interest in each such Joint Facility times the Cumulative Closing Ratio times the l Service Ratio and subtracting frora such product che Ownership i

Interests conveyed prior to such Subsequent Closing. The ownership interests in Associated Fuel which are to be conveyed at each Subsequent Closing are set forth in Sections 4. 3, 4.4 and 4.5.

2-3 r

(ii) Power Agency shall inform CP&L as to the closing ratio that Power Agency anticipates at each Subsequent Closing at least forty-five (45) days prior to such , Subsequent Closing 4 Date and shall notify CP&L of the actual Subsequent Closing Ratio applicable to each Subsequent Closing at'least seven (7) days prir each such Subsequent Closing Date.

(2) If Power Agency does not close on its Ultimate Ownership Interests in the Mayo Units and the Harris Units within six (6) months following the First Closing Date, the purchase price of the Mayo Units and the Harris Units (set forth in Section 4.2) at any Subsequent Closing occurring after such six month period shall be adjusted to reflect AFUDC computed using a rate based on CP&L's current cost of new capital (calculated in accordance with Exhibit SA-XXI), rather than the rate used to compute CP&L's actual AFUDC, from and after the end of such six month period.

(3) Power Agency shall use its best efforts to close on

( f.) its Ultimate ownership Interests in the Mayo Units and the l Harris Units and (ii) sixty-nine percent (69%) of its Ultimate Ownership Interests in the Brunswick Units and Roxboro Unit No. 4, within twelve (12) months following the First Closing Date. i (4) Notwithstanding the provisions of Section 3.4(G),  !

should Power Agency fail to close on its Ultimate ownership Interests in all Joint Facilities within eighteen (18) months following the First Closing Date, such failure shall constitute an Event of Default under Article 14.

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2.2 Closing r

\;

(A) Any closing held pursunat to Section 2.1 shall com-mence' at 10:00 a.m. on the applicable Closing Date at. New York, New York or at such place as shall be agreed upon by the parties, i provided that, pursuant to Article 3, all conditions precedent i

to such closing have occurred, unless waived by the party benefited thereby. If one or more of such conditions precedent l

have not occurred and have not been waived, the closing shall be postponed from week to week or to a date agreed upon in writing by the parties, except as limited by Section 2.2(B).

I l (D) Because time is of the essence, the First Closing shall L take place not later than ninety (90) days' after the last required governmental or regulatory approval is obtained, but in any event not later than March 31, 1982 unless waived in writing

.by the parties, (C) In the event the First Closing hereunder does not take place, neither party shall claim or recover any loss, damage, penalty or remedy from the other party.

2.3 Dispute Regarding Closing Any dispute arising with respect to Section 2.2 or Article 3 shall be resolved by a court of competent jurisdic-tion in accordance with the- law of North Carolina.

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ARTICLE 3 CONDITIONS PRECEDENT TO OBLIGATIONS HEREUNDER 3.1 Conditions Precedent to CP&L's Obligations Unless CP&L otherwise agrees in writing, all obli-gations of CP&L to Power Agency under this Agreement are subject to the fulfillment, prior to or upon the First Closing Date, of each of the following conditions:

(A) CP&L shall not have discovered any material error or material misstatement in the representations and war ranties made by Power Agency pursuant to this Agreement.

(B) Power Agency's representations and warranties made pur-suant to this Agreement shall be deemed to have been made again l

at and as of the First ?.lcsing Date and shall then be true in all l

i i material re.mpects; and Power Agency shall novo performed and l

con-plied wit'c. all Egreements , covenants and conditions required by this Agreement to be done by Power Agency prior to or upon the First Closing Date as evidenced by the delivery to CP&L, in form

! and substance satisfactory to CP&L, of each of the following : ,

(1) Certificate of the General Manager of Power Agency (a) certifying the existence in full force and

effect, on the First Closing Date, Gf Project Power Sales l

Agreements and Supplemental Power Sales Agreements, in the form prescribed in Exhibits SA-VII and SA-VIII, between Power Agency and the Participr,nts designated in such certificate; and 3-1

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(b) specifying CP&L's right to obtain, upon request, a certified copy of any or all of such agreements.

(2) Certificate of the General Manager. of Power Agency as to (a) recent amendments to its Certificate of Incorporation; (b) good standing of Power Agency in North Caroline; (c) resolution of Power Agency's Board of Commissioners (or any successor entity having equivalent responsibilities) authorizing this Agreement, the Related Agrooments, the Trust Agreement and the covenant not to sue, indemnification and release; (d) absence of conflict with or breach of its Certificate of Incorporation, By-Laws and any other agreement; and (e) timely receipt by Power Agency of CP&L's sub-mission of (i) the allocation methods availabic and an explana-tion of the cases therefor, as provided in Section 4.6; (ii) the statement regarding the Closing Payment pursuant to Section 6.l(C); (iii) the estimate of anticipated payments set forth in Section 6.2( A); (iv) list of matters, if any, described in Section 12.1(Df, current to forty-f' ve (45) days prior to the First Closing Dato; (v) documents regarding insurance described in Section 12.6(E)(1); (vi) the report required by Section 19.2 and the certification required by Section 19.4; and (vii) the contracts described in Section 7.4(B)(1) and set forth in Exhibit SA-IX; and 3-2

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(f) resolution of Power Agency's Board ,of Commissioners (or 'any successor entity having equivalent i responsibilities) approving the contracts described 'in Section 7.4(B)(1) and set forth in Exhibit SA-IX.

(3) ~ Certificate of the General Manager of Power Agency regarding the composition of the Approved Arbitrators Lists pur-f suant to Section 11.2(3)(3)(b) of this Agreement, Section

! 16.2(B)(3)(b) of the Operating Agreement and Section 22.3(B)(3)(b) of the Power Coordination Agreement.

(4) Certificate of the General Manager of Power Agency making all representations, warranties and covenants set forth in Sect. on 9.1 of this Agreement, Sec tions 19.1 and 19.2 of the Operating Agreement, and Sections 26.1 and 26.2 of the i

Power Coordination Agreement current as of the First Closing l Date.

(C) CP&L shall have been furnished witn an opinion or opin-ions of counsel for Power Agency (Spruill, Lane & McCotter of l

Rocky Mount, North Carolina, or other counsel satisfactory to CP&L), dated as of the First Closing Date, addressed to CP&L and j in form and substance satisfactory to CP&L, to the following i

e f f ec t:

j (1) Power Agency is a body corporate and politic organized its accordance with the provisions of Chapter 159B of the General Statutes of North Carolina, duly organized validly exiating and in good standing under the law of the State of North Carolina, having the requisite power and authority to enter into, and to perform all its obligations under, thin Agreement, each of the Related Agreements and the Trust Agreement 3-3

and there have been no amendments to the Certificate of ,

Incorporation or By-Laws of Power Agency, other than as reflected in the true and attested copies of Power Agency's Certificate of Incorporation and By-Laws which have been furnished by Power .

Agency to CP&L.

(2) Each Participant whose name appears on the cer-tificate furnished pursuant to Section 3.l(B)(1)(a) has entered into a lawful gad binding Project Power Sales Agreement and Supplemental Power Sales Agreement in the forms prescribed in Exhibits La-VII and SA-VIII for the supply by Power Agency of capacity and energy to each such Participant.

(3) The execution, delivery and performance of this Agreement, each of the Related Agreements and the Trust Agreement by Power Agency have been duly and effectively authorized by all requisit.e action by Power Agency.

(4) This Agreement, each of the Related Agreements and the Trust Agreement have been duly executed and delivered by Power Agency, are the legal, valid and binding obligations of Power Agency and are enforceable against Power Agency in accordance with their respective terms (subject to judicial discretion, the exercise of the sovereign police powers of the State of North Carolina and of the constitutional powers of the United States of America, and valid bankruptcy, insolvency, reorganization, moratorium and other laws affecting creditors' .

rights).

(5) This Agreement as it relates to the construction work l which CP&L has contracted to have performed complies with the 3-4

Genegal Statutes of North Carolina in effect on the First Closing Date and does not violate any provisions thereof.  !

(6) The covenant not to sue, indemnification and release, substantially in the form prescribed in Exhibit SA-XI, has been duly executed and delivered by Power Agency and each Participant and is the legal, valid and binding obligation of each signatory and is enforceable against each such signatory in accordance with its terms.

(D) Power Agency shrll have executed and delivered each of the Related Agreements and the Trust Agreement.

(E) Power Agency and each of its Participants shall have executed and delivered to CF&L a covenant not to sue, indem-nification and release, substantially in the form prescribed in l Exhibit SA-XI.

(F) All governmental and regulatory approvals required to be l

obtained by this Agreemen'. and the Related Agreements prior to the First Closing by Power Agency and by CP&L shall have been l

l obtained, as evidenced by the delivery to CP&L on or before the First Closing Date in form and substance satisfactory to CP&L, of documents from each of the following :

Nuclear Regulatory Commission Federal Energy Regulatory Commission North Carolina Utilities Commission North Carolina Local Government Commission South Carolina Public Service Comm ission (G) CP&L shall have obtained all necessary releases and other required documents from the trustee under the Company Mortgage such that the conveyances to be ef fe<:ted 'at and through the First 3-5

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{

Closing are of property not subject to the lien of the Company l Such releases ,and other documents shall be

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Mortgage.

substantially in the form attached as Exhibit SA-XIII.

3.2 Conditions Precedent to Power Agency's Obligations Unless Power Agency otherwise agrees .in writing, all ob-ligations of Power Agency to CP&L under this Agreement are sub-j ec t to the fu".fillment, prior to or upon the First Closing Date, of each of the following conditions:

(A) Power Agency shall not have discovered any material error or material misstatement in the representations and warran-ties made by CP&L pursuant to this Agreement.

(B) CP&L's representations and warranties made pursuant to this Agreement shall be deemed to have been made again at and as of the First Closing Date and shall then be true in all material respects; and CP&L shall have performed and complied with all ngreements, covenants and conditions required by this Agreement to be done by CP&L prior to or upon the First Closing

~

Date, as evidenced by the delivery to Power Agency, in form and substLnce satisfactory to Power Agency, of each of the followings (1) Cortificate of a . Senior Vice President of CP&L as to (a) recent amendments to its Certificate of Incorporation; (b) good, standing of CP&L in North Carolina; l

1 (c) resolution of CP&L's Board of Directors >

authorizing this Agreement, the Related Agreements and the cove-

! nant not to. sue, indemnification and release; '

l .

l 3-6 ,

= -- g- + - - - - - - - - - - r n. i~---++iwrw, m- +- ,,re+ -+e-w-

a (d) absence of conflict with or breach of its .

Certificate of Incorporation, By-Laws and any other agreement; and (e) submission by CP&L to Power Agency of (i) the allocation methods available, and an explanation of the bages therefor, as provided in Section 4.6; (ii) the statement regarding the closing Payment pursuant to Section 6.l(C); (iii) the estimate of anticipated payments set forth in Section 6.2(A); (iv) list of matters, if any, described in Caction 12.l(B), current to forty-five (45) days prior to the First closing Date; (v) documents regarding insurance described in Section 12.6(E)(1); (vi) the-report required by Section 19.2 and the certification required by Section 19.4; and (vii) the contracts described in Section 7.4(B)(1) and set forth in Exhibit SA-IX.

(2) Certificate of a Senior Vice President of CP&L l

l regarding the composition of the Approved Arbitrators Lists pur-l l suant to Section 11.2(B)(3)(b) of this Agreement, Section 16.2(B)(3)(b) of the Operating Agreement a'nd Section 22.3(B)(3)(b) of the Power coordination Agreement.

(3) Certificate of a Senior Vice President of CP&L as to matters set forth in Section 3.2(F) relating to the Company i Mortgago.

3-7

I

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(4) Certificate of a Senior Vice President of CP&L making all representations, warranties and covenants set forth in Section 9.2 of this Agreement, Section 19.2 of the Operating Agreement and Section 26.2 of the Power Coordination Agreement current'as of the First Closing Date.

(5) List of matters, if any, described in Section 12.l(B), current to the First Closing Date.

(6) Nuclear fuel plan pursuant to Section 3.1(J) of the . Operating Agreement and fossil fuel information, excluding retail fuel clause requirements, to the extent such information is filed with the North Carolina Utilities Commission.

(C) Power Agency shall have been furnished with an opinion or opinions of the General Counsel for CP&L or other counsel satis-factory to Power Agency, dated as of the First Closing Date, addressed to Power Agency and in form and substance satisfactory to Power Agency to the following effect s (1) CP&L is a corporation daly organized, validly existing and in good standing under the law of the State of North Carolina having the requisite power and authority to enter into, and to perform all its obligations under, this Agreement and each of the Related Agreements and to carry on its business as it is then being conducted.

(2) The execution, delivery and performance of this '

Agreement and the Related Agreements by CP&L have been duly and effectively authcrized by all requisite corporate action.

(3) This Agreement and each of the Related Agreements 3~8

have been duly executed and delivered by CP&L and are the legal, valid and binding obligations of CP&L and are enforceable against it in accordance with their respective terms (subject to judicial

! discretion, the exercise of the sovereign police powers of the I

State of North Carolina and of the constitutional powers of the United States of America, and valid bankruptcy, insolvency, reorganization, moratorium and other laws affecting creditors' rights).

! (4) CP&L has obtained all necessary releases and other l required documents from. the trustee under the Company Mortgage such that the conveyances to be effected at and through the First closing are of property not subject to the lien of the Company Mortgage, that the basis upon which such releases have been obtained is proper under the Company Mortgage and that such releases are legal, valid, binding and irrevocable instruments duly issued in accordance with the terms of the Company Mortgage.

(5) CP&L is seised of the property, real and personal, I

l to be conveyed to Power Agency, free and clear of encumbrances except for its first mortgage indenture, and has good and market-I able title, subject to public roads and other easements of record relative to real property, with minor exceptions, restrictions and reservations in conveyances, and defects, which are of the nature ordinarily found in properties of similar character and magnitude, i

i and which, in the opinion of CP&L's counsel, do not and cannot in j any substantial way . impair the intended une of such property, and CP&L has the'right to convey the same .in f~oe simple.

i 3-9

.. - .1

gD) CP&L shall have executed and delivered each of the Related Agreements.

(E) CP&L shall have executed and delivered to Power Agency and to each of its Participants a covenant not to sue, indemnification and release, substantially in the form prescribed in Exhibit SA-XII.

(F) CP&L shall have obtained all necessary releases and other required documents from the trustee under the Company Mortgage permitting the conveyances to be effected at and through the First Closing, such releases and other documents to be substantially in the form prescribed in Exhibit SA-XIII.

(G) All governmental and regulatory approvals required to be obtained by this Agreement and the Related Agreements prior to the First Closing by Power Agency and by CP&L shall have been obtained, as evidenced by delivery to Power Agency prior to or upon the First Closing Date, in form and substance satisfactory to Power Agency, of documents from each of the following:

Nuclear Regulatory Commission Federal Energy Regulatory Commission North Carolina Utilities Commission North Carolina Local Government Commission South Carolina Public Service Commission

(!!) Power Agency shall have been successful in selling or otherwise placing sufficient bonds, notes or other evidences of indebtedness as will provide Power Agency with funds adequate to make payment for the ownership interests to be purchased by Power Agency at the First Closing; provided, however, that thie 3-10

l crndition precedent shall in no way affect or diminish the obligations imposed upon Power Agency by Sections 2.2(B) and 9.3.

l 3.3 Conditions Precedent to CP&L's Obligation to Proceed to

! Closings Subsequent to the First Closing Unless CP&L otherwise agrees in writing, CP&L's obligation-to proceed to any closing subsequent to the First Closing is sub-ject to the fulfillment, prior to or upon each Subsequent Closing Date, of each of the following conditions:

, (A) CP&L shall not have discovered any material error or material misstatement in the representations and warranties made by Power Agency pursuant to this Agreement.

(D) Power Agency's representations and warranties made pur-suant to this Agreement shall be deemed to have been made again at and as of such Subsequent Closing Date and shall then be true in all material respects; and Power Agency shall have performed and complied with all agreements, covenants and conditions required by this Agreement to he'done by it prior to or upon such

(

l Subsequent Closing Date, as evidenced by the delivery to CP&L, in

' form and substance satisfactory to CP&L, of each of the i

following:

(1) Certificate of the General . Manager of Power Agency (a) certifying the existence in full force and effect, on such Subsequent Closing Date, of Project Power Sales l

Agreements and Supplemental Power Sales Agreements in the form i

l prescribed in Exhibits SA-VII and SA-VIII between Power Agency and ,

i l the Participants designated in such certificate, and i

3-11 l

l .

o

f (b) apecifying CP&L's right to obtain, upon request, a certified copy of any or all of such agreements.

(2) Certificate of the General -Manager of Power Agency as to (a) recent amendments to its Certificate of Incorporation; (b) good standing of Power Agency in North Carolina; (c) absence of conflict with or breach of its Certificate of Incorporation, By-Laws and any other agreement; (d) absence of any material default by Power Agency of any provision of this Agreement or of any provision of the Related Agreements; and (e) timely receipt by Power Agency of CP&L's sub-mission of (i) the allocation methods available, and an explana-tion of the bases therefor, as provided in Section 4.6; (ii) i f

the statement regarding the Closing Payment pursuant to Section 6.1(C); (iii) the estimate of anticipated payments set forth in Section 6.2(A); (iv) documents regarding insurance coverage which

, is in addition to (or a modification of) the insurance coverage evidenced by the documents descr1Ded in Section 12.6(E)(1),

furnished in a form similar to the documents described in Section 12.6(E)(1); (v) the report required by Section 19.2; and (vi) the certification required by Section 19.4.

3-12

(3) Certificate of the General Manager of Power Agency making all representations,' warranties and covenants set forth in Section 9.1 of this Agreement, Sections 19.1 and 19.2 of the Operating Agreement, and Sections-26.1 and 26.2 of the Power Coordination Agreement current as of such Subsequent Closing.Date.

(C) . CP&L shall have been furnished with an opinion or opin-ions of counsel.for Power Agency (Spruill, Lane & McCotter of Rocky Mount, North Carolina,.or other counsel satisfactory to CP&L), dated as of such Subsequent Closing Date, addressed to C,'&L and in form and substance satisfactory to CP&L, to the following effects (1) Power Agency is a body corporate and politic organized in accordance with the provisions of Chapter 159B of l

the General Statutes of North Carolina, duly organized, validly I existing and in good standing under the law of the State of North Ca?olina, having the requisite power and authority to enter into, and to perform all its obligations under, this l

l Agreement, each of the Related Agreements and the Trust Agreement l

l and there have been no amendments to the Certificate of L Incorporation or By-Laws of Power Agency, other than as reflected in the true and attested copies 'of Power Agency's Certificate of.

i Incorporation and By-Laws which have been furnished by Power Agency to CP&L.

(2) Each Participant whose name appears on the cer-

! tificate furnished pursuant to Section 3.l(B)(1)(a)-has entered 3-13 t-

  • s s.

, w .w p-g wv

l into a lawful and binding Project Power Sales Agreement and Supplemental Power Sales Agreement in the forms prescribed in Exhibits SA-VII and SA-VIII for the supply by Power Agency of capacity and energy to each such Participant.

(3) This Agreement as it relates to the construction work which CP&L has contracted to have performed complies with the -

General Statutes of North Carolina in effect on such Subsequent Closing Date and does not violate any provisions thereof. .

(4) The covenant not to sue, indemnification and release, substantially in the form prescribed in Exhibit SA-XI, has been duly executed and delivered by Power Agency and each Participant and is the legal, valid and binding obligation of each signatory and is enforceable against each such signatory in accordance with its terms.

(D) All governmental and regulatory approv&ls required to be ontained by this Agreement and the Related Agreements prior to such Subsequent Closing by Power Agency and by CP&L shall have been obtained, as evidenced by the delivery to CP&L prior to or upon such Subsequent Closing Date, in form and substance satisfactory to CP&L, of documents from each of the following:

Nuclear Regulatory Commission Federal Energy Regulatory Commission North Carolina Utilities Commission North Carolina Local Government Commission South Carolina Public Service Commission (E) CP&L shall have obtained all necessary releases and other required documents from the trustee under the Company Mortgage such that the conveyances to be effected at and through 3-14 L

l l

( such Subsequent Closing are of property not subject to the lien l

of the Company Mortgage. Such releases and other documents shall l

be L.bstantially in the form attached as Exhibit SA-XIII.

3.4 Conditions Precedent to Power Agency's Obligation to Proceed to Closings Subsequent to the First Closing l

Unless Power Agancy otherwise agrees in writing, Pcwer Agency's obligation to proceed to any closing subsequent to the First Closing is subject to the fulfillment, prior to or upon L each Subsequent Closing Date, of each of the following l

conditions:

(A) Power Agency shall not have discovered any material error or material misstatement in the representations and warran-ties made by CP&L pursuant to this Agreement.

1 (B) Except for the representation made in Section 9.2(C),

the representations and warranties of CP&L n de pursuant to this l Agreement shall be deemed to have been made again at and ao of such Subsequent Closing Date, and shall then be true in all i

l material respects; and CP&L shall have performed and complied l

with all agreements, covenants and conditions required by this Agreement to be done by CP&L prior to or upon such Subsequent t

Closing Date, as evidenced by its delivery to Power Agency, in I for:n and substance satisfactory to Power Agency, of each c f the

~

iollowing:

(1) Certificate of a Senior Vice President of CP&L as to (a) recent amendments to its Cortificate of l Incorpora tion; l 3-15 l

(b) good - standing of CP&L in North Carolina; (c) absence of conflict with or breach cf its Certificate of Incorporation, By-Laws and any other agreement; (d) absence of any material default by CP&L of any provision of this Agreement or of any provision of the Related Agreementar and (e) submission by CP&L to Power Agency of (i) the allocation methods available, and an explanation of the bases therefor, as provided in Section 4.6; (ii) the statement regarding the Closing Payment pursuant to Sec tion 6.l(C);

(iii) the estimate of anticipated payments set forth in Section 6.2(A); (iv) documents regarding insurance coverage which is in addition to (or a modification of) the insurance coverage evidenced by the documents described in Section 12.6 G.)(1),

furnished in a form similar to the documents described in Section 12.6(E)(1); (v) the report required by Section 19.2 and (vi) the certification required by section 19.4.

(2) Certificate of a Senior Vice President of CP&L as to matters set forth in Section 3.4(C) relating to the Company Mortgage.

(3) Certificate of a Senior Vice President of CP&L making the representations, warranties and covenants set forth in Sections 9.2( A) and 9.2(B) of this Agreement, Section 19.2 of the Operating Agreement and Section 26.2 of the Power Coordination  ;

Agreement current as of such Subsequent closing Date.

3-16

._? a - - _ - .n.

s F (C) CP&L shall have obtained all necessary releases and other required documents frorc the trustee under the Company Mortgage permitting the conveyancos to be effected at such Subsequent Closing, such releases and other documents to be substantially in the form prescribed in Er.hibit SA-XIII.

(D) Power Agency shalt have been furnished with an opinion er opinions of the General Counsel for CP&L or other counsel satisfactory to Power Agency dated as of such Subsequent Closing Date, addressed to Power Agency and in form and substance satisfactory to Power Agency to the effect that (1) CP&L is a corporation duly organized, validly existing and in good standing under the law of the State of North Carolina having the requisite power and authority to perform all its obligations under this Agreement and each of the Related Agreements and to carry on its business as it is then being conducted, and (2) CP&L has obtained all necessary releases and other required documents from the trustee under the Company Mortgage such that the conveyances to be efJected at such Subsequent Closing are of property not subjecc to the lien of the Company Mortgage, the basis upon Which such releases have been obtained is proper under the Company Mortgage and such releases are legal, valid, binding and irrevocable instruments duly issued in accordance with the terms of the Company Mortgage.

(E) Power Agency sha' l have been furnished with an opinion or opinions of CP&L's Generat Counsel or other counsel satisfactory to Power Agency, dated as of such Subsequent Closing 3-l'

Date, addressad to Power Agency and in form and substance  !

satisfactory to Power AgencyLthat CP&L is seised of the property,

~

real and personaf, to be conveyed to Power Agency, free and clear r

of encudbrances except its first mortgage indenture, has good and marketable title, subject to public roads and other easements of record relative to real property, with minor exceptions, restrictions and reservations in conveyances, and defects, Which are of the nature ordinarily found in properties of similar character and magnitude, and which, in the opinion of CP&L's counsel, do not and cannot in any substantial way impair the intended use of such property, and has the right to convey the samo in fee simple.

(F) bil governmencal and regul atory approvals required to be obtained by this Agreement and the Related Agreements prior to such Subsequeut Closing by Power Agency and by CP&L shall have been obtained, as evidenced by delivery to Power Agency prior to g or upon such Subsequent Closing Date, in form and substance eatisfactory to Power Agency, of documents from each of the following:

Nuclear Regulatory Commission Federal Energy Regulatory Commission North Carolina Utilities Commission North Carolina Local Government Commiscion South Carolina Public Service Commission (G) Power Agency shall have been successful in selling or i

otherwise placing sufficient bonds, notes or other evidences'of l

indebtedness as will provi6e Power Agency with funds adequate to make paymend for the ownership interests to be purchased by Power l

3-18

i Agency at'such Subsequent Closing; provided, however, that this

' condition precedent shall in no way affect or diminish the obligations imposed upon Power Agency by Sections 2.1 B)(2),

2.l(B)(3), 2.l(B)(4) and 9.3.

3.5 Additional' Condition Precedent to CP&L s, Obligations and to Power Agency's Obligations Unless CP&L and Power Agency shall otherwise agree in writing, all obligations of CP&L to Power Agency and all obliga- l tions of Power Agency to CP&L under this Agreement are subject to i

I the further condition that Power Agency shall have entered into Project Power Sales Agreements prior to the First Closing Date with sufficient Participants so that the Commitment Ratio is at least sixty-five percent (65%).

i I

l 3-19 i

. . - . ._=

ARTICLE 4 PURCHASE PRICE 4.1 Purchase Price of the Brunswick Units and Roxboro Unit No. 4 (A) The purchase price of Power Agency's Ultimate Ownership Interest in the Brunswick Units shall be determined as follows:

(1) At the First Closing, the purchase price of the ownership interests to be acquired by Power Agency in the Brunswick Uni".s shall be equal to the sum of (a) the Commitment Ratio times the First Closing Ratio times the Service Ratio, times $199,435,500, for the gross plant investment, including AFUDC, as of December 31, 1979, plus (b) the cost on CP&L's books, as of the First Closing Date, of any additicns to gross plant investment for the l Brunswick Units made subsequcnt to December 31, 1979, including AFUDC associated with the Brunswick Units accrued by CP&L after December 31, 1979, times the ownership interest to be conveyed in the Brunswick Units at the First Closing, us determined in accordance with Section 2.l(B)(1)(a)(i), plus (c) the actual net effect on CP&L's federal and state income taxes (including tax on capital gains) associated with the sale to Power Agency of such additional plant investment as is attributable to 'such AFUDC accrued since December 31, 1979, i

such tax effect to be calculated in accordance with Exhibit SA-V-6, but excluding any taxes, fees and costs payable pursuant to Section 4.7.

, 4-1 b

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(2) At.each Subsequent Closing, the purchase price of 1

the ownership interests to be acquired by Power Agency in the l l

Brunswick Units shall be equal to the sum of: '

i (a) for the gross plant investment, including AFUDC, as of December 31, 1979, the product of $199,435,500 times the difference between (i) the Commitment Ratio times the Cumulative Closing Ratio times the Service Ratio and (ii) the Ownership Interests in the Brunswick Units conveyed prior to such Subsequent Closing, plus (b) the cost on CP&L's books, as of such Subsequent Closing Date, of any additions to gross plant investment for the l

Brunswick Units made subsequent to December 31, 1979, including AFUDC associated with the Brunswick Units accrued by CP&L after December 31, )979, divided by CP&L's ownership interest in the Brunswick Units immediately prior to such Subsequent Closing Date, times the ownership interest to be conveyed in the Brunswick Units at such Subsequent Closing, as determined in accordance with Section 2.l(B)(1)(o)(i), plus (c) the actual net effect on CP&L's federal and state income taxes (including tax on capital gains) associuted with the sale to Power Agency of such additional plant investment as is attributable to such AFUDC accrued since December 31, 1979, such tax effect to be calculated in accordance with Exhibit SA-V-6, but excluding any taxes, fees and costs payable pursuant to Soction 4.7.

4-2

(B) The purchase price of Power Agency's Ultimate Ownership Interest in Roxboro Unit No. 4 shall be determined as follows :

(1) At the First Closing, the purchase price of the o.norship interest to be acquired by Power Agency in Roxboro Unit No. 4 shall be equal to the sum of:

(a) the Commitment Ratio times the First Clocing Ratio times the Service Ratio times $ 36,115,' 200, for the gross plant investment, including AFUDC, as of December 31, 1979, plus (b) the cost on CP&L's books, as of the First Closir.g Date, cd any additions to gross plant investment for Roxboro Unit No. 4 made subsequent to December 31, 1979, including AFUDC associated with Roxboro Unit No.4 accrued by CP&L after pacember 31, 1979, times the ownership interest to be conveyed in Roxboro Unit No. 4 at the First Closing, as determined in accordance with Section 2.l(B)(1)(a)(1), plus (c) the actual net effect on CP&L's federal and state income taxes (including tax on capital gains) associated with the sale to Power Agency of such additional plant investment as is attributable to such AFUDC accrued since December 31, 1979, such tax effect to be calculated in accordance with Exhibit SA-V-6, but excluding any taxes, fees and costs payable pursuant to Section 4.7.

(2) At each Subsequent Closing, the purchase price of the ownership interest to be s iquired by Power Agency in Roxborn Unit No. 4 shall be equal to the sum of:

4-3

(a) for the gross plant investment, including AFUDC, as of December 31, ,1979, the product of $36,115,200 times the difference between (1) the Commitment Ratio times the Cumulative Closing Ratio times the Service Ratio and (ii) the Ownership Interests in Roxboro Unit No. 4 conveyed prior to such Subsequer.t Closing, plus (b) the cost on CP&L's books, as of such mihrequent Closing Date, of any additions to gross plant investment for Roxboro Unit No. 4 made subsequent to December 31, 1979, including AFUDC associated with Roxboro Unit No. 4 accrued by CP&L after December 31, 1979, divided by CP&L's ownership interest in Roxboro Unit No. 4 immediatelv prior to such Subsequent Closing Date, times the ownership interest 40 be conveyed in Roxboro Unit No. 4 at such Subsequent Closing, as determined in accordance with Section 2.l(B)(1)(b)(i), plus (c) the actual net effect on CP&L's federal and state income taxes (including tax on capital gains) associated with the sale to Power Agency of such additional plant investment as is attributable to such AFUDC accrued since December 31, 1979, such tax effect to be calculated in accordance with Exhibit SA-V-6, but excluding any taxes, fees and costs payable pursuant to Section 4.7.

4.2 Purchase Price of Mayo Units and Harris Units l

I (A) The purchase price of Power Agency's Ownership Interests in the Mayo Units and the Harris Units shall be determined as t

follows:

4-4

r-(1) At the'First Closing, the purchase price of the ownership interests. in the Mayo Units and the Harris Units to be acquired by Power Agency at the First Closing shall be Power Agency's Ultimate Ownership Interest in the Mayo Units and in the Harris Units times the First Closing Ratio times the sum of (a) the Costs of Conetruction of such Units as of the First Closing Date and . (b) AFUDC recorded by CP&L as of the First Closing Date in connection with Construction of the Mayo Units and the Harris Units, plus the actual net effect on CF.L's federal and state income taxes (including tax on capital gains)

E associated with the sale to Power Agency of its Ownership Interests in the Mayo Units and the Harris Units which is 2

attributable to such AFUDC, such effect to be calculated in accordance with Exhibit SA-V-6, but excluding 'any taxes, fees and costs payable pursuant to Section 4.7.

(2) At each Subsequent Closing, the purchase price c#

] the ownership interests in the Mayo Units and the Harris Units to be acquired by Power Agency at such Subsequent Closing shall be Power Agency's Ultimate Ownership Interest in the Mayo Units and in the Harris Units times the applicable Subsequent Closing Ratio times the sum of (a) the Costs of Construction of such units as of the applicable Subsequent Closing Date, and (b) AFUDC, as

described in Section 4.2( A)(1), to a date six months after the First Closing Date and, fram and af ter such da*.e, AFUDC com-puted using a rate based on CP&I,'s current costu of new capital, calculated in accordance with Exhibit SA-XXI, all calculat94 as 4-5 J

N though the Mayo Units and the Harris Units were owned entirely by CPEL. In addition, Power Agency shall pay the actual net effect on CP&L's federal and state income taxes (including tax on capital gains) associated with the sale to Power Agency of its j Ownership Interests in the Mayo Units and the Harris Units Which is attributable to such AFUDC, such tax effect to be calculated as provided in Exhibit SA-V-6, but excluding any taxes, fees

~

' and costs payable pursuant to Section 4.7.

(B) Except for those costs to be borne specifically by Power Agency pursuant to Section 6.2(F) or elseWhere in this Agreement, the owners shall pay in proportion to their respective ownership interests all' Costs of Construction of the Joint Facilities and every portion thereof. Such Costs of Construct!.on shall be determined, accounted for and paid in accordance with Sections ,

6.1 and 6.3. There shall be no duplication of charges.

4.3 ownership Interests in and Purchase Prices of Initial Fuel Cores and Reload Fuel e (A) On the Closing Lates provided for in Article 2, and subject to all the applicable terms and conditions of this l Agreement, CP&L shall sell and convey to Power Agency undivided ownership interests in the Initial Fuel Cores and Reload Fuel.

Such ownership interests shall be determined a_s follows : ,

(1) For fual batches of the Brunswick Plant initial

- Fuel Cores:

(a) the ownership-interests in such batches to be conveyed to. Pcwer Agency at the First Closing shall be determined 4-6 4

O,.v., , , a -e ,, -

by multiplying Power Agency's Ultimate ownership Interest in the Brunswick Units times the First Closing Ratio times the Service Ratio; and (b) the ownership interests in such batches to be conveyed to Power Agency at each Subsequent Closing shalt. be determined by multiplying Power Agency's Ultimate Ownership Interest in the Brunswick Units times the Cumulative Closing Ratio ti nes the Service Ratio and subtracting from such product the Ownership Interests in such batches conveyed prior to such Subsequent Closing.

! (2) For the llarris Plant Initial Fuel Cores, the I ownership interests to be conveyed to Power Agency at the First Closing shall be determined by mul tiplying Power Agency's Ultimate Ownership Interest in the harris Units times the First Closing Ratio. The ownership interests in such Initia.1 Puel Cores to be conveyed to Power Agency at each Subsequent Closing shall be determined by multiplying Power Agency's Ultimate Ownership Interest in the liarrie Units times the Subsequent Closing Ratio.

(3) For any Brunswick Plant Reload Fuel, the ownership interest to be conveyed to Power Agency at the First Closing shall be determined by multiplying Power Agency's Ultimate Ownership Interest in the Brunswick Units times the First Closing Ratio times the Service Ra tio . The ownership interest in such Reload Fuel to be conveyed to Power Agency at each Subsequent Closing shall be determined by multiplying Power Agency's Ultimate Ownership Interest in the Brunswick Units 4-7

[ . __ ________ _ _ _ _ . _ _ _ ___

times the Cumulative Closing ROtio times the Service Ratio and subtracting from such product the ownership Interests in such Reload Fuel conveyed prior'to a.uch Subsequent Closing.

(4) Power Agency's Ownerst.ip Interest. in any spent Initial Fuel Cores or Reload Fuel batches finally discharged from a reactor at the Brunswick Plant shall be the Ownership Interest that exicted when such batch was finally discharged and shall not change as a result of a Subsequent Closing.

(B) (1) The Owners shall pay all costs incurred in connect 10h with the provision of Initia" Fuel Cores and Reload Fuel for the Brunswick Units and the flarris Units, including, but not limited to, the costs of procurement, conversion, enrichment, 1

i fabrication, transportation, storage, insurance, engineering and l quality assurance.

(2) At the First Closing and at each Subscquent Closing, the purchase price of the ownership interests in the Initial Fuel Cares and in Reload Fuel to be acquired by Power Agency shall be determined by multiplying the ownership interest to be conveyed at such closing, as determined in accordance with Section 4.3(A), times the som of (a) the total costs described in Section 4.3(B)(1) incurred (nat of accumulated amortization associated with Brunswick Plant Initial Fuel Cores as adjusted in accordance with orders in FERC proceedings involving CP&b rates) as of the date in such closing and (b) any AFUDC associated with such Initial Fuel Cores and Reload Fuel as of the date of such closing, all calculated as though such Initial Fuel 4-8

v

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+

Cores'and-Reload Fuel were. owned entir'ly e by CP&L. Iri addition, Fower. Agency shall. pay the actual net effect on CP&L's federal ~and state income taxes (including tax on capital _ gains) associated

..with ' the sale to Power - Agency s of such ownership interests in such Initial Fuel Cores and Reload Fuel, such effect to be calculated in accordance wit? Exhibit SA-V-6.

l (3) Power Agency recognizes and acknowledges that pro-

<:eedings pending at FERC on the First Closing Date could result i in refunds to Participants of amounts collected by CP&L which are reflected in the purchase price' of the Brunswick Initial Fuel Cores because of their inclusion in accumulated amortization assocAated with Brunswick Plant Initial Fuel Cores as described in Section 4.3(B)(2). If such refunds to Participants occur, Power '

. Agency shall, upon the date of any such refund, pay to CP&L an l

amount equal to that portion of the refund attributable to

-accumulated amortization associated with Brunswick Initial Fuel Cores which was reflec+ed in the purchase price thereof as l . described in the preceding sentence.

i (C) Payments made by Power Agency for Nuclear Fuel Material l associated with the Harris Plant Initial Fuel Cores shall be at I

the average cost for such Nuclear Fuel Material, as determined in accordance with Section 7.5 of the Operating Agreement.

4.4 Cost of Fuel for Roxboro Unit No. 4 (A) On the Closing Dates provided for in Article 2, and ,

l f-subject to all the applicable terms and conditions of this Agreement, CP&L shall sell and convey to Power Agency undivided i ownership interests in the Associated Fuel then owned by CP&L 4-9 i

l for Roxboro Unit No. 4. Such ownership interests shall '- equal to the ownership interests in Roxboro Unit No. 4 being acquired by Power Agency at each such closing.

-(B) Power Agency shall pay on the First Closing Date- and on each Subsequent Closing Date its prooortionate share of the costs of the Initial Stockpile at Roxboro Unit No. 4, plus any costs actually incurred by CP&L for coal and start-up fuel oil to be used at Roxboro Unit No. 4 as shown in Exhibit SA-V-5. Power Agency's proportionate share of such costs shall be calculated by multiplying the ownership interest (as a percentage) in Roxboro Unit No, 4 being acquired by Power Agency at each such closing times the costs actually incurred by CP&L (a) for such Initial Stockpile at Roxboro Unit No. 4, as reflected on CP&L's books, (b) fer any coal contracted to be delivered for the use of

?

Roxboro Unit No. 4, and (c) for a properly allocable portion of any fuel oil contracted to be delivered to the Roxboro Plant, such costs to be determined by the normal accounting procedures used by CP&L at that time, all divided by CP&L's ownership interect (as a percentage) in Roxboro Unit No. 4 immediately prior to each such closing.

l_ 4.5 _ Cost of Fuel for Mayo Unit Nos. 1 and 2 (A) On the Closing Dates provided for in Article 2, and subject to all the applicable terms and conditicns of this Agreement, CP&L r. hall sell and convey to Power T gency undivided ownership intereste in the Associated Fuel then owned by CP&L for j Mayo Unit Nos. 1 and 2. Such ownership in*.erests shall be equal to the ownership interests in the Mayo Units being e.cquired by Power Agency at each such closing.

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h1 (B) The Owners shall pay all costs incurred in connection with the provision of the lnitial Stockpile for Mayo Unit Nos. 1 and 2, including, but not limited to, the cocts of transportation

< storage, insurance and quality assurance, all as shown in Exhibit SA-V-5. At the First Closing and each Subsequent Closing, Power Agency shall pay its proportionate share of such costs, which share shall be de:drmined by multiplying the ownership interest (as a percentage) in the Mayo Units neing acquired by Power Agency at each such closing times the cocts actually incurred by CP&L for the Initial Stockpile as reflected on CP&L's books and as determined by the normal accounting procedures used by CP&L at that time, all divided by CP&L's ownership interest (as a percentage) in the Mayo Units immediately prior to each such closing.

4.6 Allocation of Certain Costs Any costs properly allocable to the Joint Facilities, including the direct t.nd indirect costs described in Section 1.18(E), shall be allocated by applying the same allocation methods and procedures, if any, being use6 by CP&L at the time in regard to the construction or fueling of its other electric generating facilities. If no such allocation methods and 4

procedures are being used, or if such methode and procedures are inappropriate for use, then CP&L shall apply appropriate allocation methods and ppocedures. CP&L shall submit such allocation methods as are available, and an explanation of the bases for such allocation methods, to Power Agency no later than 4-11

r thirty (30) days prior to each closing Date. Thereafter, CP&L shall submit additional allocation methocs or changes in allocation methods, and an ~ explanation of the bases therefor, 1/ hen necessary prior to making- a charge to the Joint Facilities based on such methods.

Nothing in this Agreement shc11 require CP&L to change, or otherwise affect, the corporate accounting practices and pro-cedures used by it. All accounting practices, procedures and records necessary to obtain a proper allocation of all costs to the Joint Facilities under this Agreement may ' e r maintained independently of CP&L's corporate records and may include alloca-tions not otherwise utilized by CPFL.

4.7 Closing costs 4

Power Agency shall pay, as closing costs, all recording fees, transfer taxes, costs of all documentary stamps or other similar expenses attributable to the transfers and conveyances made pu;suant to Article 2. Power Agency shall pay the amounts '

specified in this paragraph in accordance with Sections 6.1 and 6.3.

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ARTICLE 5 TRANSFER OF. SPARE PARTS, TOOLS AND EQUIPMENT 5.1 Transfer or Exchange of Spare Parts, Tools and Equipment

. Pursuant to Section 1.1, Power Agency shall purchase oat and through each closing a portion vf the spare parts, tools and equipment located at the Brunswick, Mayo and Harris Plants and at Roxboro Unit No. 4 acquired by CP&L for use in the Construction and operation of the Joint Facilities. From time to time, CP&L may, but shall not be required to, transfer or exchange; such spare parts, tools or equipment between Joint Units, among Joint Units, or between Joint Units and other facilities operated by either of the Owners or other utilities, in accordance with CP&L Operating Practice; provided, however, that if such actions would increace or decrease the costs of construction or delay or accelerate the date of Commercial Operatior of a Joint Facility or the date of commercial operation of another generating unit on the CP&L System, the cost of any such Joint Facility or other generating unit on the CP&L System adversely affected shall be adjusted downward to the extent of such increased cost and such amount shall be charged to the Joint

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Facility or other generating unit on the CP&L System benefitirg from such action 5-1 a - *- *

'i 5.2 Replacement of Spare Parte, Tools and Equipment Any item transferred or exchanged pursuant to i

Section 5.1 shall be replaced (if it is necessary to replace  ;

it) at the earliest practicable date. The replacement cost of I the item so transferred shall be borne by the owner of the Joint Unit, Joint Facility er other facility to which such item is l transferred or exchanged, and the price thereof shall be the replacement cost of the item transferred F.O.B. the or'7 1nal location of the item. In the event that it is determined that the item transferred need not be replaced, the applicable account shall be credited at original cost.

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ARTICLE 6 '

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PAYMENTS 6.l' Closing Payment. '

-( A). .Pr ior : to the 'First Closing Date , Power Agency-shall ,

. create a trust for Elie purpose 'of supplying CP&L with various O

forms'of property in., exchange for ownership interests'in the ,

Joint Facilities which are to be acquired in( Power Agency from CP&L on each Closing Date. .Under.the terms of this Agreement and-h the Trust Agreement, Power Agency shall transfer to the Trustee, on each Closing Date, the amount of the Closing Payment associated with the ownership interests being acquired in the Brunswick Units, the Mayo Units, the Harris Units and Roxboro Unit ~No. 4. The remaining amount of;such Closing Payment shall; ,

be delivered to CP&L, or to CP&L's account at a bank designated' by CP&L, on such Closing Date.

(B) Each Closing Payment shall include the items specified in Exhibit series SA-V and the amount thereof shall be determined ,

in accordance with the provisions of Article 2 and Article 4.

(C) CP&L shall submit to Power Agency no later than' thirty (30) da.ys prior to -each Closing Date a written statement of the

estimated. Closing Payment relating to the ownership interests in the Joint Facilities being acquired by Power Agency at and through suun closing and no later than three (3) days prior to-each'such Closing Date, a written statement of the actual
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Closing Payment. In addition, at each such time CP&L will i

provide to Power ?.gency the items set forth below:

(1) With respect to the Dre.,swick Units and Roxboro Unit No. 4:

(a) The purchase price . of the ownership interests in the Brunswick Units _ and Roxboro Unit No. 4 being acquired by Power Agency at and through such closing, as seu forth it. Section 4.1; (b) The purchase price of (i) the ownership interests in the Initial Cores at the Brunswick Units, Reload Fuel for the Brunswick Units and Nuclear Fuel Material previously designated for use at the Brunswick Units, as set forth in Section 4.3(6)(2), which are being acquired by Power Agency at and through such closing, and (ii) c.he ownership interest in the Initial Stockpile for Roxboro Unit No. 4, as set forth in Section 4.4, which is being acquired by Power Agency at such closing; (c) An itemization of the spare parts, tools and equipment described in Section 5.1 of this Agree.aent and in

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Article 10 of the operating Agreement having a book value in excess of $5,000, per CP&L's books, then on hand at the Brunswick Plant and Roxboro Unit No. 4 and the costs thereof; and (d) An itemizativn of s11 payments to be made by Power Agency a: such closing pursuant to provisions of the Operating Agreement.

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(2) With respect _ to the Mayo Units and the Harris Units, the actual costs paid up to si xty (60) days prior to the closing and estimated costs to be paid during the sixty (60) days prior to the closing and on the closing for:

(a) Costs of Construction of each such Unit, categorized Where possible by the FERC Uniform System of Accounts; (b) An itemization of the spare parts, tools and i

equipment described in Section 5.1 having a book value in excess of $5,000, per CP&L's books, on hand at the Mayo Plant and the ilarris Plant acquired for use in the Construction of the Joint Facilities at such plants, and the costs thereof; (c) Costs of Initial Pueling; and (d) An itemization of all payments to be made by Power Agency at such closing pursuant to provisions of the Operating Agreement.

(C) Power Agency may challenge the correctness of any ,

Closing Payment, but all such payments shall be conclusively pre-sumed to be proper hereunder and not subject to challenge unless, prior to April 1 of the second year after the year in which the challenged Closing Payment was made, Power Agentf shall have objected to CP&L, in writing, to the inclusion of any cost for which Power Agency is liable. Notwithstanding_ the existence of

, any challenge or the lack thereof, CP&L shall have the right

) to initiate correction of errors in any closing statenent by

. giving Power Agency notice thereof no later than April 1 of the l second year after the year in which the challenged Closing Payment was made. The par cies shall undertake to resolve challenges 6-3 w -Y -

or corrections within a reasonable time and, if the matter is unresolved for sixty (60) days after the challenge by Power l

Agency or corcection by CP&L is initiated, either party at any l 1

time after such sixty (60) day period may inform the other party in writing that a formal dispute exists. Within sixty (60) days following such notice, the party giving notice shall submit the dispute for arbitration pursuant to Article 11 and, if not submitted to a'rbitration within such sixty (60) day period, the challenge or correction shall be conclusively terminated and without effect. In the event of such a challenge or correction, the review of the challenged ort corrected closing statement shall not be limited to the items challenged by Power Agency or corrected by CP&L, but shall include any other items which CP&L chooses to raise in a challenge or Power Agency chooses to raise in a correction and any such item shall also be subject to adjustment. No challenge, disagreement or dispute relating to the reasonableness or correctness of any such charge or fee shall permit Power Agency to delay or withhold any payment due hereunder.

6.2 Estimates of Anticipated Payments (A) Thirty (30) days prior to the First Closing Date, CP&L shall submit to Power Agency an estimate of its anticipated payments with respect to Costs of Construction of the Joint Fpcilities and each Joint Unit, as follows :

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(1) ' Monthly for ~ each month following the month in which the clos'ing takes place to December 31 of the next following-calendar year;-and (2) Annually thereafter through the end of the Construction Period..

(B) In each calendar year after the First Closing Date, CP&L shall submit to Power Agency an estimate of its anticipated payments with respect to Costs of Construction of the Joint

j. Facilities and each Joint Unit, as follows :

(1) Monthly for each month in the next two (2) calendar years; and (2) Annually thereafter through the end of the Construction Perio6.

(C) In the event that the scheduled date of Commercial Operation of a Mayo Unit or a Harris Unit is to be postponed or advanced, CP&L shall submit to Power Agency within ninety (90) days after the date on which such postponement or advancement is announced by CP&L, or sooner if available, revised estimates of the. costs to complete the Construction, Initial Fueling and placing into Commercial Operation of the affected Unit and revised estimates of Power Agency's anticipated payments with reapect to Construction, Initial Fueling and the placing into Commercial Operation of the affected Unit. CP&L shall submit such revised estimate .of Power Agency's anticipated payments as follows:

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(1) Monthly for each month following the month of the date of announcement of such postponement or advancement to December 31 of the next following calendar year; and 4 (2)- Annually thereafter through the end of the Construction Period.

(D) The estimates to be provided pursuant to Section 6.2(B) shall be subraitted to Power Agency within five (5) busi-ness days following approval' by CP&L's Board of Directors of CP&L'd annual budget, and shall be submitted each year through the end of the Construction Period. By October 1 of each calendar year in the Construction Period, CP&L shall submit to Power Agency a preliminary estimate of such payments.

(E) Notwithstanding the foregoing, in the event that CP&L chould at any time publish revised estimates affecting the esti-mates provided to Power Agency pursuant to Section 6. 2( A) ,

6.2(B) or 6.2(C), CP&L shall promptly furnish Power Agency 1

with revised estimates reflecting such changes. Such revised estimates shall be in the same form as the superseded estimate provided pursuant to Section 6. 2( A) , 6.2(B) or 6.2(C), as appropriate.

(5) The costs of preparing the estimates provided pursuant

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to Sections 6.2(A), 6.2(B), 6.2(C) and 6.2(E) are Costs of Conytruction of the Joint Facilities. The costs of preparing any other cost estimate or payment estimate requested by Power Agency pursuant to any other section of this Agreement or other, wise shall be borne int Power Agency. CP&L shall comply with auch requests pursuant to Article 18.

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I 6.3 Monthly Progress Payments l

(A) Power Agency shall pay a monthly cash advance to CP&L in - accordance with the . schedules and procedures set forth below, '

as moneys to be. applied to the costu and other payments specified.

1 in Article 4 and elsewhere in this Agreement.

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(B) On the first business day of each month after the First Closing Date, CP&L shall submit a statement (" Construction Monthly Statement") to Power Agency which sets forth the amount payable by Power Agency in the month next following in connection with the 7

Cons ruction of the Joint Facilities. Such statement submitted

each month for payment by Power Agency (" Power Agency -

i-Construction Monthly Advance") shall be substantially in the form

} ' prescribed in Exhibit SA-VI.

] (C) Power Agency recognizes- that the amount of anticipated j payments to be included in any Conscraction Monthly Statement '

l submitted pursuant to Section 6,3(B) may not correspond on a

nonthly basis with the estimates of anticipated monthly payments
to be provided pursuant to Section 6.2(A), 6.2(B), 6.2(C) i or 6.2(E). The amounts set forth in each Construction Monthly Statement shall govern for the purpose of determining the monthly advances due-from Power Agency. Notwithstanding the foregoing, if the amount of the advances due from Power Agency in any three i-(3) consecutive months cumulatively exceeds by ten percent (10%)

l the estimates for those three (3) months which are shown on the mostz recent annual estimate of monthly construction advances

! provided pursuaut to Section 6.2(A), 6.2(B), 6.2(C).or

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6.2(E), Powar Agency may, at its option, delay payment of any arount by which such advances due in such three (3) month period s

exceed such estimate by more than ten percent (10%). Power Agency may delay payment of such amount for such perio:I as is convenient for Power Agency to pay such amount, but in no event for a period of more than three (3) months. Power Agency shall.

reimburse CP&L'for Fower Agency's delay of payment of.such amounts by means of payment to CP&L of simple interest calculated at the Compensatory Interest Rate.- In the event of such variance between estinates and amounts actually due from Power Agency: CP&L shall also furnish Power Agency revised estimates in the same manner as provided for in Section 6.2(C) .

(D) At such time as the amount of actual charges incurred and payments made by CP&L for Construction, Initial Fueling, and placing into Commercial Operation of the Joint Facilities in a particular month becomes available, and CP&L has determined that the charges incurred and payments actually made for the Joint Facilities in such month varied from any estimate previously mad'e and paid pursuant to a Closing Payment or a Construction Monthly Statement, whether pursuant to Section 6.1, thic Section 6.3 or otherwise', - the amount of that variance shall be entered as an adjustment to the next Construction Mentbly Statement to be submitted to Power Agency. For the purposes of calculating such variance, CP&L shall ' subtract from such actual charges incurred (1) contract retentions reflected therein and (2) construction related payables , reflected therein which are recorded on ,the construction accounting subsidiary ledger of CP&L 6-8 a -

o to facilitate CP&L's computation of AFUDC. Each such adjustment shall-be supported by a statement, submitted by CP&L'to Power Agency, itemizing all charges incurred and payments made by CP&L

in connection with the Construction, Initial Fueling and placing into Commercial Operation of the Joint Facilities in the month as to which the adjustment relates. Such itemizaticn shall be in a format which is consistent with the Construction Monthly Statement provided by CP&L to Power Agency pursuant to Section 6.3(B). Power Agency shall establish procedures which

.shall assure action on such . submission within thirty (30) days after its receipt-by Power Agency. Approval of any charge or cost on the itemized list so submitted shall constitute Power Agency's determination that the amount thereof is a Cost of Construction or expense payable by Power Agency pursuant to this Agreement. Nothing, however, contained in this Section 6.3(D) shall affect Power Agency's right of challenge as set forth in Section 6.3(F).

If CP&L modifies its method of computing AFUDC and, as a result of such modification, construction related payables are no longer recorded on its construction accounting subsidiary ledger for the purpose - of computing APUDC, then CP&L shall nevertheless #

continue to record such construction-related payables for the purpose of calculating variances pursuant to this Section

_6.3(D).

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In any month in which an adjustment to the Power Agency l C;astruction Monthly Statement is made, simple interest ca?< lated at the Adjustment Interest Rate shall accrue on such adjustment for the period ratween the time when the estimate for the Joint Facilit y was paid and the date on wnich the Construction Monthly Statemon Where the adjustment is reflected is payable pursuant to SecH en 6.3(E), and shall be debited or credited, as the case may be, on the Construction Monthly Statement in which the adjustment is reflected.

(E) The Power Agency Construction Monthly Advance shall be due and payable on the first business day of the month following the date of the statement submitted pursuant to Section 6. 3 (B) .

Payment by Power J.gency shall be delivered on the due date to CP&L's account at a bank designated by CP&L.

1 (F) (1) Power Agency may challenge the correctness of any payment made pursuant to Section 6.3(E), and may challenge the correctness of any adjustment made pursuant to Section 6.3(D)

(including any payments previously made for the item so adjusted), but all such payments and adjusteents shall be

conclusively presumed to be proper hereunder and not subject to i
challenge maless, prior to April 1 of the second year after the year in which the challenged payment was made or the challenged adjustment was rendered, Power Agency shall have objected to CP&L, in writing, to the inclucion of any cost for which it is liable or of any ad;ustment affecting a cost for which it is liable; 6-10 r$

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i' provided, however,. that-. the time limit for a challenge where fraud -is alleged shall be three (3) years from the time the facts L --

l Econstituting such fraud are discovered or reasonably should have I' -

L been discovered by the aggrieved party.

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i Notwithstanding the existance of any challenge or the lack thereof, CP&L shall have *.he right (a) to initiate l correction of errors in any statement by giving Power Agency l notice thereof no later than April 1 of the second year after. the year in which the statement was rendered, and (b) to initiate f

correction of errors in the adjustment set forth in Section 6.3(D) by giving notice thereof not later than April 1 in the

, - second year following the year in which the adjustment is first i

, made.

The parties shall undertake to resolve challenges or corrections within a reasonable time and, if the matter is-unresolved for sixty (60) days after the challenge by Power Agency or correc& ion by CP&L is initiated, either party at any  !

time after such sixty (60) day period may inform the other party 1

in writing that a formal dispute exists. Within sixty (60) days following such notice, the party giving notice shall submit the dispute for arbitration pursuant to Article 11 and, if not submitted to arbitration within such sixty (60) day period, the I

l challenge or correction shall be conclusively terminated and l

i without effect. In the event of such a challenge or correction, l

the review of the challenged or corrected bill'shall not be-

- limited to the items chal{enged by Fower Agency or corrected by -

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CP&L, but shall include any other items which CP&L chooses to raise in a challenge or Power Agency chooses to raise in a correct. ion and any such item shall also be subject to adjustment.

No challenge, disagreement or dispute - relet.ing to the reasonableness or correctness .of any such charge or fee shall pennit Power Aaeney to delay or withhold any payment due

~ hereunder.

(2) In conjunction with its overall annual audit, CP&L chall have an audit made for each year uuring the Construction Period of the construction accounts for Joint Facilities for which Power Agency made payme%7 under this Agreement during such year. Such audit of construction accounts shall be made within ninety (90) days af ter each December 31 by the irdspendent certified public accountant performing CP&L's annual udit who chall be nationally recognized and licensed, registered or Gntitled to practice under the law of North Carolina. A copy of sach such construction account audit showing Costs of.

Construction in reasonable detail and in accordance with the FERC .

Uniform System of Accounts and the amount each Owner has heretofore paid shall be furnished promptly to each Owner . Any cdditional costs of such construction account audits shall be borne by Power Agency.

(G) The costs of preparing the Construction Monthly Statement provided pursuant to this Section 6.3 are Costs of Construction of the Joint Facilities; except that Power Agency 6-12

shall pay all costs of developing new accounting systems or modifying existing accounting systems required to prepare Construction Monthly Statements in accordaace with this i Agreement. It CP&L sells ownership. interests in any of its generating - facilities to an entity other than Power Agency, and if such development of new accounting systems or such modifications to existing accounting systems are used in preparing construction billing statements for such other entity, CP&L shall pay .to Power Agency a portion of the- development or modification costs pr eviously paid by Power Agency for such development or modification. Such portion shall be equal to the proportion of such other owner's ownership interest in generating facilities jointly owned with CP&L (in megawatts) to the total

( ownership interests in generating facilities jointly owned with CP&L (in megawatts) of all such other owners (.nc1,uding Power Agency). Such payment shall be made upon the clostr.g date for the acquisition of such ownership interest by such other owner.

Power Agency shall also pay all costs incurred by CP&L arising out of special requests by Power Agency associated with the l ..

Construction Monthly Statement.

L l (H) Simple 7.nterest calculated at the Late Payment Interest Rate shall accrue on any Power Agency Construction Monthly i Advance due, but not received by CP&L on time, huginning on the first day such payment should have been made pursuant to Section l

6.3(E).

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N (I) . Notwithstanding the forogoing proiisions of- this Article 6, an after-the-fact restatement shall be made by CP&L of I each Construction Monthly Statement to reficct payments made by

CP&L on all contracts which involve materials, equipment, services, supplios or the transfer of assets where such payment e
tceeded $250,000 in that month and where such individual payments are directly assignable to any one or more of the Mayo Units and Harris Units in the month shown on each statement.

Pcwer Agency shall be deemed to have made separate payment to CP&L of such amounts on the firot business day of the mcnth in i which each such payment was due. Fcr,all such separate payments deemed to-have been made by Power Agency, simple interest calculated at the Ad justment Interest Rate shall accrue from the first business day of the month to the date When the vendor payment was actually made by CP&L. The total amount of such interest shall be reflected as an adjustment to the Power Agency Construction Monthly Advance for such month, and Power Agency shall receive a credit in the amount of such adjustment to be

,, shown on the Construction Monthly Statement in the second month sucaeeding such month.

6.4 No Offseto

-No payment required from Power Agency under this Agreement shall be eubject to any offset of any nature, arising outside this Ag reement, which may be claimed by Power Agency against CP&L.

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k ARTICLE 7 CONSTRUCTION AND CONTROL 7.1 Designation of CP&L as Project Manager CP&!. shall serve as project manager with respect to the Joint Facilities and shall fulfill each of the functions and

,s obligations of the project manager set forth in this Article 7 and ir. any other provision of this Agreement or the Related Agreements.

7.2 General Obligations of CP&L as Project Manageg (A) Power Agency engages and employs CP&L as project manager, and CP&L hereay agrees so to act. As project manager.

CP&L chall take such actions as are necessary or appropriate l (including design, procurement of materials and equipment, employment and supervision of all contractors, fueling and start-up): (1) for the Construction, Initial Fueling and placing into Commercial Operation of the ' Joint Facilities, including the Joint Units at the Harris Plant and the Mayo Plant according to ti e following schedule, subject ta Article 25 of this F.greement and Articic 10 of,the Power Coordination Agreement and with no warranty or representation whatsoever that these

~ dates will be met: ,

Mayo Uni? No. 1: April 1, 1983 Mayo Uni. No. 2: April 1, 1990 Harris Unit No. 1: October 1, 1985 Harris Unit No. 2: April 1, 1988 Harris Unit No. 3: April 1, 1994

, Harris Unit No. 4: April 1, 1992 7-1 i

(2) for the Construction of any addition to or modification of any Joint Unit or other Joint Facility which is commenced or authorized prior to (a) the date of Commercial Operation of the Mayo or Harris Unit as to which such addition or modification relates and (b) the First Closing Date with respect to the Brunswick Units and Roxboro Unit No. 4; and (3) for the carrying out of decommissioning or cancellation of any Joint Facility pursuant to Article 25, if retained so to act pursuant to Article 25.

(B) As project manager, CP&L shall have the exclusive right to select, hire and dismiss all necessary architect-en;ineers and other contractors. In performing this work, CP&L will act as an independent contractor as to Power Agency.

(C) CP&L shall take any and all reasonable steps to enforce compliance with each '.onstruction ant pply contract related eto the Construction, Initial Fueling and placing into Commercial Operation of the Joint Facilities, and CP&L shall actively pursue any and all contractual or other remedies which might be availsble in the event of noncompliance with any such construction or supply contract. CP&L's actions in enforcing coa.pliance with such construction and supply contracts, and CP&L's pursuit of remedies in the event of noncompliance with any such construction or supply contract, shall be in accordance with CP&L Operating Practice.

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d-o (D)' 'CP&L shall provide a Liaison Representative whoGe

, -. . defined duties 'shall include (1) the'respansibility to cooperate with Power Agency in . meeting. its needs for all information i

r- reasonably requested with respect t6 Construction, Initial l.

t Fueling and the pl' acing into Commercial Operation of the Joint ,

l Facilities and the costs thereof and (2) the responsibility for

, obtaining and coordinating adequate restsase by CP&L to'such l 'needs. The Liaison Representative's duties shall also include responsibility for obtaining and coordinating monthly progress payment estimates, information concerning costs of the Joint Facilitie s , and information or other assistance relating to Power

! Agency financings. The Liaison Representative shall be an l employee of CP&L with the responsibilities and obligations l attendant thereto. - Power Agency shall pay all direct and l

Indirect costs of the Liaison Representative in meeting his responsibilities to Power Agency, including, but not limited to, s

the direct costs associated with employment of the Liaison-l Representative. In addition, Power Agency shall pay all direct l

l and indirect costs not specified as a Coat of Construction that L

CP&L incurs, including hourly costs of other CP&L personnel, in providing Power Agency with information, reports and assistance when the Liaison Representative is responsible for obtaining and -

( ' coordinating such information, reports or assistance... Any costs of the Liaison Representative for work performed other than for l 7-3 e

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Power Agency, including a properly allocated portion of the overhead costs, sh3 (1 be excluded from the costs of Power Agency determined pursuant to this Section 7.2(D) .

(E) (1) Power Agency may have a representative (" Site Representative") at each Joint Facility for observing, in the interests of Power Agency, materials furnished, the work

. perfoi .2d and the costs thereof related to the Ccnstruction, Initial Fueling and the placing into Commercial Operation of such Joint Facility. Except as otherwise limited by the provisions of this Section 7.2(E)(1), each such Site Representative shall have completc access to such Joint Facility. The Site Representative may have additional support personnel located on each job site but such support personnel shall not be authorized to represent Power Agency or to have access to the Joint Facilities except as authorized by CP&L, which authcrization shall not be unreasonably denied. Each Site Representative and rupport personnel shall (a ) cooperate with CP&L and the contrac-tors engaged by CP&L in order to minimize interference with the Const ruc tion, Initial Fueling and placing into Conmercial Operation of the Joint Facilities, or any part thereof, and (b) comply with all regulations of any governmental agencies and those which CP&I. and its contractors shall reasonably impose f..

their construc tion program. Communications, including meetings, between the Site Representatives (or their support personnel) and the contractors engaged by CP&L ahall be conducted only through CPEL.

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L (2) CP&L shall provide such reasonable racilities and assistance . at the Joint Facilities for the Site 3epresentatives ,

and their support personnel as may be required for them to; carry-l out their work, and the cost of such facilities and assistance .

shall be borne by Power Agency.

(3) ELch Site Representative and support personnel shall be an employee or agent of and be paid for by Power Agency.

No Site Representative and no support personnel shall have the l

right- to su'pervise or issue orders to personnel of CP&L or ( f the l contractors operating under the supervision of CP&L.

7.3 Mutual Obligations of CP&L and Power agency Relating to Construction and Co'ntrol l

Recognizing that the design, constructioa, fueling and start-up of electric generating plants constitute a complex l undertaking which is exposed to a variety of problems, unforeseen l

or otherwise, each party shall cooperate and assist the other.

[ party in fulfilling and discharging the responsibilities assumed under this Agreement. This general undertaking of mutual cooperation and asaistance shall not be deemed to replace or l modify in any respect the specific responsibilities and l-obligations of each Owner or +f CPat, as project manager as ,

! described in this Agreement.

Recognizing that the design, procurement, construction, fueling and start-rplof electric generating plants are subject to applicable laws and regulations and, in the case of nuclear-fueled electric generating plants, to licensing by the 7-5.

United States Nuclear Regulatory Commission ("NRC"-), and that CP&L has been or will be authorized by the NRC to direct and l

control such activities in regard to the Brunswick and Harris Plants on a day-to-day basis, the parties agree that in no event shall CP&L be required to act or refrain from acting or to suf fer any act or omission inconsistent with applicable laws, regulations or NRC license requirements.

7.4 Construction and Initial Fueling ,

(A) CP&L, in its capacity as project manager, shall furnish all supervision necessary for the Construction, Initial Fueling and placing into Commercial Operation of the Joint Facilities.

The role of project manager shall include making provision fo r ,

or the hiring of, adequate qualified personnel and/or contractors to furnish the labor, equipment, tools, materials, supplies and incidentals necessary to ,the Construction, Initial Fueling and placing into Commercial Operation of the Joint Facilities.

(B) With respect to Construction,- Initial Fueling and the placing into Commercial Operation of the Joint Facilities, CP&L's responsibilitiec and authority as project manager, without limttation but subject to the provisions as indicateE , shall include the following :

il) Submission of Contracts for Power Agency Approval At least sirty (60) days prior Lo the First Closing Date, CP&L shall furnish to Power Agency a liet of contracts entered into by CP&L with third partian as of suel. date which relate to the Construction, Initial Fueling and placing 7-6

4 into Commercial Operation of the Harris and Mayo Units and which relate to the Construction of any additions or modifications to the ' Brunswick Units and Roxboro Unit No. 4 commenced or authorized prior to the First Closing Date, the aggregate contract prices of Which consititute at least eighty percent (80%) of the total prices of all such contracts. CP&L shall simultaneously furnish Power Agency with a copy of each contract referred to-on such list for Power Agency's approval.

Within fifteen (15) days of its receipt of such

list, Power Agency may request' CP&L to add to the list any other .

such contract Which Power Agency believes to be appropriate for' Power Agency approval. CP&L promptly shall add such contracts to the list and furnish to Power Agency a copy of each such additional contract.

, At least seven (7) days prior to the First Closing i

Date, Power Agency's Board of Commissioners (or any successor entity having equivalent responsibilities) shall approve each contract on such list and shall notify CP&L of such approval.

(2) Negotiation of Additional Contracts As to construction, equipment and supply contracts relating to the Construction, Initial Fueling and the placing into Commercial Operation of the Joint Facilities which are unexecuted as of the First Closing Date, CP&L shall negotiate such contracts and change orders thereto, or amendments thereto, and shall submit all such contracts and change orders thereto, or

amendments thereto, to Power Agency for review as soon as A

! 7-7 l

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l practical but. not later than thirty (30) days after CP&L

')

. receives the original or a ' copy 'of such executed contracts, change orders or amendments.

i (3). Staffing and Labor Relations CP&L, as project manager, shall determine the organizational structure, manpower requirements and contractual arrangements with third parties for the Constructio'n, Initial-

. Fueling and placing into Commercial Operation of the Joint l Facilities. CP&L shall set wages, benefits and compensation for all CP&L personnel, and shall employ, bargain with, transfer,

. discipline, terminate and otherwise manage all such personnel.

Except where a contractual arrangement with third parties is

! applicable, settlement of strikes, lockouts and other industrial disturbances shall be solely in the discretion of CP&L. CP&L shall not be required to make settlement of strikes, lockouts or other industrial disturbances by acceding to the demands of the opposing party or parties when such course is, in the sole judgment of CP&L, unfavorable to CP&L, either with respect to the Joint Facilities ~ or any other interest of CF&L, including the ef fect on the CP&L System as a whole or on the Combined System.

Where a contractual arrangement with third parties is applicable, nothing contained in this Agreement shall require the settlement l 7-8 l

l l-

of strikes, lockouts and industrial disturbances and the contractor shall not be required by this Agreement to make settlement of sM.1kes, lockouts and other industrial disturbances by acceding to the demands of the opposing party or parties. In carrying out the functions described in this Section 7.4(B)(3), CP&L shall act in accordance with its standard practice and procedures.

(4) Rggirts and Information (a) CP&L, on behalf of the Owners, shall prepare, execute and . file all applications, amendments, reports and other documents and filings relating to the Construction, Initial Fueling and placing into Commercial Operation of the Joint Facilities required to be submitted to the NRC or to any other governmental agency. The costs involved shall be Costs of Construction. CP&L shall have the right to submit, in any form, any report or information relating to the Construction, Initial Fueling and placing into Commercial Operation of the Joint Facilities to any other entity.

(b) Power Agency promptly shall provide to CP&L any information or assistance requested by CP&L (i) for the purpose of preparing or submitting any report or information described in Section 7.4(B)(4)(a), or (ii) in order to I

facilitate the Construction, Initial Fueling and placing 'into Commercial Operation of the Joint Facilities. The costs involved shall be Costs of Construction. Power Agency's assistance to CP&L will include, without limitation, joining with CP&L in the 7-9 4

filing of any documents to be filed, executing all such documents and doing all such other acts and things as are necessary, appropriate or helpful.

(c) At the written request of Power Agency, CP&L shall provide to Power Agency a construction completion certificate and report as may be required by Power Agency. The cost of preparing such construction completion certificate and report or of developing underlying data or information that are not otherwise available, or that are not otherwise available in a.

form required by Power Agency, shall be borne by Power Agency.

(d) (i) CP&L shall deliver all plans, specifications and other documents reasonably necessary for the operation and maintenance of the Joint Facilities to the Joint Facility to which the documents relate, and such plans and

- specifications chall thereafter be located at that Joi:Tt Facility for as long as such Jetnt Facility is used as a generating facility.

(ii) CP&L shall store and maintain all plans, specifications and other documents relating to the construction, Initial Fueling and placing into Commercial Operation of the Joint Facilities which are not located pursuant tv Section 7.4(B)(4)(d)(i) at the Joint Facility to which the documents relate for as long as such Joint Facility is used as a generating facility.

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(iii) The Owners shall own the plans, specifications and other documents referred to in Sections 7'4(B)(4)(d)(1) and 7.4(B)(4)(d)(ii) and each Owner shall have access to such material in accordance with the provisions of Article 18.

7.5 Relief from obligations Under this Article CP&L's obligations as project manager with respect to .

the Joint Facilities, as described in this Article 7, shall not be diminished by CP&L's transfer of its ownership interest in a Joint Facility or any portion thereof, and under no circumstance shall CP&L be relieved of any eL2.gation under this Article 7 unless Power Agency's written consent to such relief has first been obtained.

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a o 7-11

ARTICLE 8 RIGHT OF USE OF THE ROXBORO COMMON SUPPORT FFCILITIES In consideration of Power Agency's payment of the purchase price of Roxboro Unit No. 4 and in order to facilitate Power Agency's use of its Ownership Interest in Roxboro Unit No. 4, CP&L grants to Power Agency as of the First Closing Date the right to use the Roxboro Common Support Facilities. The terms and conditions of Power Agency's right of use of the Roxboro Common Support Facilities are as described in Article 6 of the Operating Agreement.

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JARTICLE 9-REPRESENTATIONS, WARRANTIES AND COVENANTS 9.1 Power Agency's Representations, Warranties and Covenants l

Power- Agency hereby represents, warrants and covenants i to CPEL-as follows:

(A)' Power Agency is a body corporate and politic and an instrumentality of the State of North Carolina, duly organized, validly existing and in good standing under the law of the State of North Carolina having corporate power and authority to per-form all its obligations under this Agreement, the Related Agreements and the Trust Agreem nt. and the requisite power and authority to conduct its operations as they are now conducted, including, without limitation, the implementation of this Agreement, tha Related Agre'ements and the Trust Agreement. Power Agency shall take no action, including, without;1 imitation, amendment to its charter or By-Laws, the effect of which would

( change-its status as a body corporate and politic and an

! instrumentality of the State of North Carolina, or Which would i

adversely affect its corporate power and authority-to perform all l

its' obligations under this Agreement, the Related Agreements and the Trust Agreement, or its corporate power and authority to l conduct its operations, including, without limitation, the implementation of this Agreement, the Related Agreements and the

~

Trust Agreement. Power Agency has furnished- true and attested 9-1 -

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copies of its Certificate of Incorporation and By-Laws to CP&L with all amendments to date.

(B) Exhibits SA-VII and SA-VIII prescribe the form of Project Power Sales Agreement and Supplemental Power Sales Agreement, respectively, Which Power. Agency will enter into with each of its Participants for the supply by Power Agency of ' capacity and energy I

to such Participant, which agreements, in the aggregate, shall be designed to . provide Power Agency with funds sufficient to meet. its obligations Un.ler this Agreement and the Related Agreenents, and under the bonds or other securities or evidences of indebtedness referred to in Section 9.3. In the event Power Agency shall l

enter intol similar Project Power Sales Agreements and Supplemental Power Sales Agreements with any other Municipal System, Whether l before or after the First Closing Date, Power Agency shall, forth-with upon execution of said agreement by both parties, notify CP&L thereof and furnish CP&L with a copy of such agreement, together with a covenant not to sue, indemnification and r.elease, as prescribed in Exhibit SA-XI, executed by such Municipal System.

Power Agency covenants and agrees that it shall fix, charge and take all steps necessary to collect rents, rates, fees and charges for the sale of electric power and energy and other.

facilities and commodities sold, furnished or. supplied to its Participants at a level sufficient to provide Power Agency with revenues adequate to meet its obligations under this Agreement and the Related Agreements, and under the bonds or other securities or evidences of indebtedness referred to in 9-2 l

l

Section 9.3, and to pay any and all other amounts payable from or constituting a charge or lien upon such revenues.

Each Project Power Sales Agreement and Supplemental Power Sales 4

Agreement shall provide that (1) the signatory Participant shall fix, charge and collect rents, rates, fees and charges for the sale of electric power and energy and other services, facilities and commodities sold, furnished or supplied thrcugh its electric j system at a level sufficient to provide revenues adequate to meet its obligations under such agree.aent and to pay any and all other i

amounts payable from or constituting a charge and lien upon such q revenues; (2) the signatory Participant shalt take no action the j, effect of which would be to prevent, hinder or delay Power Agency i from the timely fulfillment of its obligations under such agreement, this Agreement, the Related Agreements , and the bonds, other securities or evidences of indebtedness referred to in Section 9.3; (3) Power Agency shall have the right to terminate such agreement as to the defaulting Participant in accordance with Section 21.2(B) of the Power Coordination Agreement (with respect to Supplemental Power Sales Agreements) or Section 20.2(B) of the Operating Agreement (with respect to Project Power Sales Agreements); and (4) upon failure -of the Participant to make any payment in full when due under the Project Power Sales Agreement or the Supplemental Power Sales i Agreement or to perform any other obligation in such agreements, Power Agency shall make demand upon the Participant for payment or performance and if said failure is not cured within fifteen 9-3

(15) days from the date of such demand, it shall constitute a default at the expiration of such period and notice of such

" event of default" shall be given to the Participant. Each such agreement shall further provide that it shall not be amended or rescinded with respect to the provisions specified in clauses (1) through (4) of the preceding sentence without the prior written consent of CP&L.

In addition to the provisions specified in the foregoing paragraph, each Supplemental Power Sales Agreement shall provide that no Participant may operate its electric system in such a manner that electrical interconnection is made within such Participant's system of electric service from two or more Delivery Points, except that in cases where interruptions of electric serv.co of a circuit that can be energized from more than one Delivery Point would cause unusual hardship (such as extensive clean-up operations prior to restart of a continuous production process or critical computer operations) for a customer of a Participant and where the Participant has installed all equipment necessary to accomplish it, CP&L may permit, by express approval in each instance, the Delivery Points to be interconnected through such circuit momentarily for switching purposes. Each such Supplemental Power Sales Agreement shall i

further provide that it shall not be amended or rescinded with respect to the provision set forth in the foregoing sentence without the prior written consent of CP&L.

9-4

(C) Except as provided in the Project Power Sales Agreements, the Supplemental Power Sales Agreements, Section 21.2(B) of the Power Coordination Agreement or Section 20.2(B) of the Operating Agreement, Powar Agency shall continue each of such agreements in full force and effect and shall enforce all such agreements, as amended from time to time, in accordance with their terms. The parties agree and acknowledge that the violation of the obligations of Power Agency under this Section 9.l(C) would cause irreparable injury to CP&L and that the remedy at law for any violations or threatened violations thereof would be inadequate, and agree that if an " Event of Default" by Power Agency as defined in this Agreement or the Related Agreements shall have occurred and shall not have been fully cured, CP&L need not prove the inadequacy of legal remedies in order to become entitled to a temporary or permanent

injunction or other equitable relief specifically to enforce such obligation.

(D) The execution and delivery of this Agreement, the Related Agreements and the Trust Agreement by Power Agency have been duly and effectively authorized by all requisite action by Power Agency and the provisions thereof comply with the General Statutes of North Carolina and do not violate any provision thereof.

(E) The execution ar. delivery of the covenant not to sue, indemnification and release, substantially in the form prescribed in Exhibit SA-XI, by Power Agency and each Participant have been duly and effectively authorized by all requisite action.

9-5 1

1

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9.2 CP&L's Representations and Warranties CP&L hereby represents and warrants to Power Agency as follows:

(A)~ CP&L is a corporation duly organized, validly existing and in good standing under the law of the State of North Carolina having the requisite power and authority to perform all its obligations under this Agreement and the Related Agreements and to carry on its business as it is now beir,3 conducted.

(B) The execution, delivery and performance of this Agreement and the Related Agreements by CP&L have been duly and effectively authorized by all requisite corporate actions.

'(C) As to the Mayo Plant and the Harris Plant, CP&L repre-sents and warrants at the First Closing that CP&L intends to construct, comolete and place into Commercial operation each Mayo and Harris Unit, and all of them; provided, however, if, prior to the First Closing Date, CP&L officially announces the cancellation of Harris Unit No. 3 or Harris Unit No. 4, or both such Units, then such representation and warranty shall not apply to auch Unit or Units.

9.3 Covenants Concerning Financings Power Agency covenants and agrees to use reasonable'best efforts to take steps within its power to issue bonds or other securities or evidences of indebtedness, or otherwise to obtain sufficient funds in a timely manner, in order to provide the amounts due from and payable by Power Agency on the First Closing Date, on each Subsequent Closing Date and thereafter under the terms of this Agreement and, as appl icable, the Related Agreements.

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. Power Agency further agrees . that it shall take no action Which would prevent, hinder or delay the issuance of any bonds, notes i

or other securities or evidences of indebtedness, and that it shall make all payments and perform all obligations required of it under indentures or other instruments relating to such securities or evidences of indebtedness. Power Agency also-l covenants and agrees to use every effort and to take all steps within its power to provide that any bonds or other securities or evidences of indebtedness issued with a maturity exceeding five (5) years include a provision permitting such debt to be paid off in accordance with Section 14.1(E).

9.4 Other Covunants (A) Each party covenants and agrees that if any event shall occur or condition shall exist which constitutes, or which after notice, lapse of time, or both, would constitute, an Event of

. Default hereunder pursuant to Section 14.1, it shall imme-diately (and thereaf ter on a prompt continuing baeis) notify the i

2

! other party thereof, specifying the nature thereof and any action taken or proposed to bu taken with respect there to .

(B) Power Agency covenants and agrees that it shall pr'omptly furnish CP&L a copy of any notification to a Participant of an

" event of default" by such Participant under the provisions of a Project Power Sales Agreement or a Supplemental Power Sales Agreement.

9-7

(C)- Power Agency agrees that at the First Closing it shall notify CP&L in writing of the name and address of each trustee under its bond resolution or similar-instrument of indebtedness i and further covenants and agrees .that at all times While this i

Agreement remains in effect, it shall promptly notify CP&L in writing of the name and ;.ddress of any substitute or additional trustee.

(D) CP&L covenants and agrees that at the First Closing it shall notify Power Agency in writing of the name and address of the trustee under the indenture covering CP&L's First Mortgage Bonds and further covenants and agrees that at all times While this Agreement remains in effect, it shall promptly notify Power Agency in writing of the name and address of any substitute or additional trustee.

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ARTICLE 10 GOVERNMENTAL AND REGULATORY APPROVALS 10.1 . Approvals Obtained by CP&L

! CP&L shall use all reasonable efforts to dbtain and maintain, or amend, as necessary, all required governmental and regulatory approvals for the sale to Power Agency of ownership interests in the Joint Facilities and for the Construction, Initial Fueling and placing into Commercial Operation of the Joint Facilities. Such governmental and regulatory approvals j shall include, without limitation, those approvals listed in Sections 3.2(G) and 3.4(F). Ptwer Agency-shall cooperate fully with CP&L in taking all actions required in order to obtain, retain or amend all such approvals. CP&L shall have the right to negotiate with any governmental or regulatory agency and may agree on behalf of the Owners with respect to such approvals

, provided such agreement is not inconsistent with this Agreement l

l, or the Related Agreements. At the First Closing, Power Agency l

l shall reimburse CP&L for all costs incurred by CP&L prior to the l

l First Closing Date which are incurred in, or arise in connection l

with, obtaining governmental or regulatory approvals which are

( necessary for or connected with the sale to Power Agency of l ownership interests in the Joint Facilities. All other costs l

incurred pursuant to this Section 10.1 shall be deemed Costs of

( Construction.

e 10-1

10.2 Approvals Obtained by Power Agency Power Agency shall use all reasonable efforts to obtain and maintain, or amend, as necessary, all required governmental and regulatory approvals for the purchase by Power Agency of ownership interests in the Joint Facilities, and for the Construction, Initial Fueling and placing into Commercial

' Operation of the Joint Facilities. Such governmental and regula-tory approvals shall include, without limitation, those anprovals listed in Sections 3.l(F) and 3.3(D). CP&L shall cooperate fully with Power Agency in taking all actions required in order to obtain, retain or amend all such approvals. Power Agency shall have the right to negotiate with any governmental or regu-latory agency and may agree on behalf of the Owners with respect to such approvals provided that such agreement is not incon-sistent with this Agreement or the Related Agreements. Power Agency shall bear all costs incurred by Power Agency or its Participants prior to the First Closing Date which are incurred in, or arise in connection with, obtaining governmental or regulatory approvals which are necessary for or :onnected with the purchase by Power Agency of ownership interests in the Joint Facilities.

All other costs incurred pursuant to this Section 10.2 shall be deemed Costs of Construction.

10.3 Failure to Obtain Approvals (A) In the event either Owner fails after the First Closing i

i 10-2

l Date for any . reason to obtain or retain any governmental or regu-l_ latory approval, or takes or fails to take an action which pre-vents the other Owner from obtaining, retaining, transferring or amending any governmental or regulatory approval, without which approval Power Agency's purchase of ownership interests in the Joint Facilities or the Construction, Initial Fueling and placing j into Commercial Operation of any Joint Facility cannot proceed, the owners shall first use their reasonable best efforts to take such actions as are required in order to effect the necessary approval without affecting their status as Owners and without a*fecting CP&L's functions and obligations as project manager or as operator of such Joint Facility.

(B) If the Owners are unable after a reasonable period of time to effect the necessary approvals in accordance with Section lO.3(A), the Owners agree as follows : -

(1) If an order, no longer subject to appeal, is entered which (a) revokes or suspends for a period of at least ninety (90) days construction permits or other essential regulatory approvals for any Joint Facility, heretofore issued or to be issued to CP&L by any state or federal regulatory agency or commission, (b) denies to the Owners the retention, transfer or amendment of such permits or approvals, or l 10-3 l .

i . . _

(c) curpends for a period of at least i ninety (90) days the Construction, Initial Fueling or placing into Commercial Operation of any Joint i

l Facility, I on the basis, in any case, in whole or in part, of CP&L's l 1

participation as the project manager of the Joint Facility affected, as such participation is described in Article 7, the Ownera shall seek to continue with the Construction, Initial Fueling and placing into Commercial Operation of the Joint Facility affected by employing Power Agency's own forces or those of a substitute entity of the owners' choosing to discharge the functions and obligations of the proj0ct manager with respect to the Construction, Initial Fueling and placing into Commercial Operation of the Joint Facility affected.

(2) If an order, no longer subject to appeal, is entered which denies the issuance of the operating licenses or other essential regulatory approvals for any Joint Facility to the owners by any state or federal regulatory agency or commission, on the basis, in whole or in part, of CP&L's participation as operator, then the Owners of the Joint Facility affected shall' seek to obtain such licenses or essential regulstory approvals with a substitute entity as the operator.

(3) If an order, no longer subject to appeal, is entered denying the issuance, transfer or amendment of, or revoking, any governmental or regulatory approval described in Section lO.3(A) on the basis , in whole or in part, of CP&L's 10-4

-. . ~ ..

j~ participation as an Owner, Power Agency shall' have the right to

- proceed on the following basis: .;

j- (a) Power Agency 'shall have the - right to purchase

~

CP&L's ownership interest in such Joint Facility affected and f

will succeed to the rights and obligations of CP&L under this t

j Agreement with respect-to such Joint Facility.- If the parties.

cannot agree-upon a price within sixty (60) days . af ter such final-

[ order,'the determination cf the fair market value of such Joint-Fac'ility may'be submitted.to arbitration. In such event, Power

!' Agency may obtain title at any time after'giving Notice of intent f to proceed with arbitration pursuant to Section 11.2(B)(1) by j paying to CP&L, in such manner ae CP&L may reasonably require, an I

j~ amount equal to (i) CP&L's net plant investment in such Joint J

!' Facility, plus (ii) the actual net effect on CP&L's federal and 1

] state income taxes (including tax on capital gains) associated i with the sale to Power Agency of such investment as is i

j attributable to AFUDC not previously amortized calculated in a j manner similar to that set forth in Exhibit SA-V-6.

t j .(b) Should the final determination of fair market

] -value as determined through arbitration be higher than the amount j

paid pursuant to Section 10.3(B)(3)(a), Power Agency shall nake i such additional payment, in such manner as CP&L may reasonably i

require, as will make the total purchase price equal to the fair 4 market value. In addition, Power Agency shall pay to CP&L simple

interest, calculated at the Compensatory Interest Rate, on the
amount of such additional payment for the period beginning with 10-5 e

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1

-.-yn,.. ,, , ~ , , .,.. - - - , - - , - - - - , - . - e-- - - . - - = - - , - - - , -

the date of acquisition by Power Agency of title to CP&L's ownership interest in such Joint Facility and ending with the date of such additional payment. Such additional payment, p including interest thereon, shall be paid as soon after the Arbitrator's decision as Power Agency can effect the necessary financing using reasonable best efforts.

14) If an order, no longer subject to appeal, is entered denying the issuance, transfez or amendment of, or re-voking, any governmental or regulatory approval described in Section 10.3(A) on the basis, in whole or in part, of Power Agency's participation as an Owner, CP&L shall have the right to proceed on the following basis:

(a) CP&L shall have the right to purchase Power Agency's Ownership Interest in the Joint Facility affected and will succeed to the rights and obligations of Power Agency under this Agreement with respect to such Joint Facility. If the parties cannot agree upon a price within sixty (60) days after' such final order, the detenaination of the fair market value of such Joint Facility may be submitted to arbitration. In such i

event, CP&L may obtain title at any time after giving Notice of intent to proceed with arbitration pursuant to Section 11.2(B)(1) by paying to Power Agency an amount which, together with amounts then on deposit under Power Agency's bond resolution or similar instrument and pledged for the security of holders of debt issued 1

by Power Agency, will be sufficient to pay the interest on and i

principal of each such issue of debt outstanding on the date of l

CP&L's election, the proceeds of which have 1 en or are 10-6

t 1

L . designated to be used for such Joint Facility, .to each such issue's maturity or to the first date on Which such issue may be called, whichever shall first occur, together with any premium -

payable upon redemption.

(b) Should the final determination of fair market value as determined through arbitration be higher than the amount

. paid pursuant to Section 10.3(B)(4)(a), CP&L shall make such l

I additional payment as will make the total purchase price equal to the fair market value. In addition, CP&L shall pay to Power Agency simple interest, calculated at the Compensatory Interest Rate, on the amount of such additional payment for the period beginning with the date of acquisition by CP&L of title to Power Agency's Ownership Interest in such Joint Facility and ending with the date of such additional payment. Such additional payment, including interest thereon, shall be paid as soon after the Arbitrator's decision as CP&L can effect the necessary i 1

l financing usi!.g reasonable best efforts. In lieu of cash, CP&L l

l may pay the purchase price, or any 'part thereof, by delivering to l the trustee named pursuant to Section 9.4(C) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America maturing as to principal and interest in such amount which, together with investment securities of the same kind then held by such trustee and pledged for the security of debt issued by Power Agency and such cash as CP&L may. tender, will assure the availability.of sufficient moneys to make the payment referred to in this paragraph. In the event that there is more than one bond  ;

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resolution or similar instrument, payment or delivery'of I securities.shall be made to the respective trustees thereunder provided that CP&L has been notified in writing - of the identity of each such trustee pursuant to Section 9.4(C). -If CP&L has not received written notice of the identity of a particular urustee, it shall make payment or delivery to those trustees as to wh'ich CP&L has received notice.

(5) In the event none of the options set forth in Sections lO.3(B)(1) through 10.3(B)(4) is exercised, or in

. the event neither Owner can obtain or retain the construction I

permits, operating licenses or any other essential regulatory approval for any Joint Facility, the Owners shall in good faith 4

make all reasonable efforts to agree on the action to be taken toward completion of Construction, Initial Fueling and the placing into Commercial Operation of the Joint Facilities and the continued operation of the Brunswick Plant and Roxboro Unit i No. 4. Such action, however, shall include the possible sale, ,

i i

cancellation, retirement or decommissioning of the Joint Facility affected. If such agreement is not reached .within ninety (90)

. days after the order so affecting the construction permits, operating licenses or other essential regulatory approval is no

> longer subject to appeal, the question of what action should be 1-taken shall be submitted to arbitration in accordance with Article 11. If any Joint Facility is sold pursuant to this Section 10.3(B)(5), the proceeds of such sale shall be apportioned between the Owners in accor dance with their 10-8

. ,+-. e. . - ,

1 l

respective ownership interests in the Joint Facility affected; or, if cancelled or decommissioned prior to the date of Commercial Operation'of the Joint Facility affected, such cancellation or decommissioning shall be pursuant to Article 25.

(6) Upon the exercise of the right set forth in Section 10.3(B)(4), CP&L thereafter shall be entitled to all of Power Agency's rights and shall, except for the Delivery Facilities Sales Agreements provided for in the Power Coordination Agreement, be responsible for performance of all of Power Agency's obligations under this Agreement and the Related Agreements . If the right l

described in Section 10.3(B)(4) is exercised, however, the transaction shall be subject to any applicable governmental or

regulatory approvals. Power Agency shall take all necessary actions and shall execute, and file where appropriate, all legal documents which shall be reasonably requested by the purchaser to complete any transaction described in Section 10.3(B)(4).

l (7) Upon the exercise of the right set forth in Section lO.3(B)(3), Power Agency thereafter shall be entitled to all of CP&L's rights and shall be responcible for performance of all of CP&L's obligations under this Agreement; provided, however, that if Po'wer Agency so elects in writing, CP&L shall continue to discharge the functions and obligations of project manager and operator, as such functions and obligations are described in Article 7 and i< the Related Agreements or, pursuant to the l

terms hereof, , orate the Joint Facility affected pursuant to the terms of the Operating Agreement, or do both. If the right 10-9

E described in Section lO.3(B)(3) is exercised, however, the transaction shall be subj'ect to any applicable governmental or regulatory approvals. CP&L shall take all necessary actions and execute, and file where appropriate, all legal documents which shall be reasonably requested by the purchaser to complete the transaction described in Section 10.3(B)(3).

-(C) Any cost incurred pursuant to this Section 10.3 shall be deemed a Cost of Construction.

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ARTICLE 11 l

RESOT UTION OF DISPUTES i

11.1 Arbitration-(A) Except as otherwise specifically excluded in' this Agreement, all matters under this Agreement and costs related thereto are subject to challenge by either party. Except as provided in Section 11.1(B), any unresolved dispute arising out of or relating to the matters set forth in this Agreement and l costs related thereto shall be settled by arbitration in i

i accordance with the procedures set forth in this Ar+ 4cle 11, and judgment upon the award rendered by the Arbitrator ma.y be entered i

in the Superior Court for Wake County of the State of North l

l Carolina or in any other state or federal court having jurisdiction thereof. In addition, disputes relating to the arbitration provisions of this Agreement including, witNout limitation, disputes as to the applicability of such provisions to a particular dispute, shall be submitted for arbitration.

(B) Any dispute arising out of or relating to the following shall not be submitted to or determined by arbitration unless the parties agree to do so in writing: Sec tion 2.2, Article 3, Section 4.7, all of Article 12 except Section 12.6, and Article 16.

11-1

(+ 11.2 Arbitration Pr'ocedure (A) Applicability of Provisions -- Arbitration of dis- i putes subject to arbitration hereunder shL11 be conducted in accor-dance with the procedures set forth in this Section 11.2.

(B) Initiation of Arbitration and Selection of Arbitrator --

Arbitration bereunder shall be initiated and the Arbitrator selected in thn following manners (1) The initiating party (the " Initiating Party")

shall give written notice (the " Notice") to the other party ( the "Other Party") of its intention to arbitrate, which Notice shall set forth the nature of the dispute, the Initiating Party's esti-mate of the amount involved, if any, and the remedy sought. With the Notice, the Initiating Party shall submit to the Other Party in writing ,the names of three persons acceptable to the Initiating Party as arbitrators, the fee arangements required by each such person and a statement that such persons have agreed to serve if-requested.

(2) Within ten (10) days of its receipt of the Notice and related information, the Other Party may, if it so desires, serve on the Initiating Party an answering statement (the " Answering Statement") with respect to the matters set forth in the Notice and shall notify the Initiating Party in writing either of its - acceptance of one of the proposed arbitrators or of its rejection of all such arbitrators. In the event the Other Party notifies the Initiating Party of its acceptance of one of the proposed arbitrators, such proposed arbitrator shall thereupon become the Arbitrator.

, 11-2 1

i-(3) In the event the Other Party does not accept one of the proposed arbitrators submitted by the Initiating Party as provided above and the parties are otherwise unable to agree on an Arbitrator within twenty ( 20) days of the receipt of the Notice by the Other Party, the Arbitrator shall be selected from among the persons on the relevant Approved Arbitrators List, as hereinafter defined, in the following manner s (a) The Initiating Party shall give five (5) days written notice of its demand that an Arbitrator be selected from the 2:elevant Approved Arbitrators List, which notice shall set a day, within fourteen (14) days of the date of such notice, time and place for a meeting of representatives of the parties to make such selection. At such meeting, which shall be held at -;

location in Raleigh, North Carolina (or at such other place as the parties may designate), the parties shall strike names from the relevant Approved Arbitrators List alternately, with the Other Party striking first, until a single person's name remains on such list, which person shall become Arbitrator. In the event such person is unable to serve as Arbitrator, the process shall be repeated one additional time with the remaining names on the relevant Approved Arbitrators List.

(b) There shall be thr ee (3) separate Approved Arbitrators Lists, the first of which shall consist of the names of not less than three (3) nor more than eleven (11) persons qualified the field of nuclear-fueted electric generating plant engineering and construction, the second of which shall consist of the ".ames of not less than three nor more than eleven persons qualified in 11-3

the~ field of , fossil-fired electric generating plant engineering and construction, and the third of which shall consist of the names of not less than three (3) nor more than eleven (11) per-sons qualified in the field of electric utility construction financial matters. On the First Closing Date, the parties shall 4

1 mutually agree as to the names on each Approved Arbitrators List - l l

and each name on each such list shall require mutual confirmation '

of approval by the parties during the month of January each year thereafter. No person approved or confirmed for inclusion on any such list shall be removed except (i) at such person's demise or incapacitation, (ii) at such person's request, (iii) upon suc person's failure to receive such annual mutual confirmation of r.pproval , (iv) upon such person's being employed or compensated by a party other than for services as an arbitrator, or (v) upon the mutual consent of the parties. Upon any such removal, a person mutually acceptable to the parties shall be named as a replacement. It is the intention of the parties that each Approved Arbitrators List shall consist of as many persons, up to eleven, as are qualified. Accordingly, at any time any of such lists contains less than eleven persons, each party shall continue to seek additional qualified persons acceptable to the other party for inclusion on such list.

(c) Only the Approved Arbitrator s List con-sisting of persons qualified in the field of nuclear-fueled electric generating plant engineering and construction shall be used for selection of an Arbitrator of any dispute relating to f

11-4

!4  ;

l the Construction, Initial Fueling or' placing into Commercial i

Operation of the Brunswick Plant or the liarris Plant, or any part thereof. Only'the Approved Arbitr6 tors List consisting of f

l persons qualified in the field of fossil-fired electric

! generating plant engineering and construction shall be used for selection of an Arbitrator of any dispute relating to the

Construction, Initial Fueling or placing into Commercial i Operation of Roxboro Unit No. 4 or the Mayo Plant, or any part thereof. Only the Approved Arbitrators List consisting of persons qualified in the field of electric utility construction L

t financial matters shall be m for selection of an Arbitrator with respect to any dispute relating to financial matters under this Agreement. In any case where either party indicates that the dispute relates both to the Construction, Initial Fueling and placing into Commercial Operation of the Brunswick or liarris

~

Plant and to financial matters, each party shall aelect an  :

Arbitrator from either the Approved Arbitrators List consisting of persons qualified in the field of nuclear-fueled electric generating plant enaineering and construction or the Approved Arbitrators List consisting of persons qualified in t. e field of electric utility construction financial matters, and the two Arbitrators so selected shall select a third Arbitrator from either of these two Approved Arbitrators Lists. In any case 5

where either party indicates that the dispute relates both' to the l

L Construction, Initial Fueling and placing into Commercial Operation of Roxboro Unit No. 4 or the Mayo Plant and to I financial matters, each party shall select an Arbitrator from 11-5

either the Approved Arbitrators List consisting of persons qualified in the field of fossil-fired electric generating plant engineering and construction or the Approved Arbitrators List consisting of persons qualified in the field of electric utility construction financial matters, and the two Arbitrators so selected shall select a third Arbitrator from either of these two Approved Arbitrators Lists.

(4) In the event the selection procedure provided for herein does not result in the selection of an Arbitrator within the time periods allotted, or in the event a designated Arbitrator fails to serve or fails to complete his service, then either party may petition the Senior Resident Judge of the Superior Coart of Wake County of the State of North Carolina for the appointment of an Arbitrator, or a substitute Arbitrator, and such Arbitrator may be, but need not be, selected from the current Approved Arbitratora Lists.

(5) Upon the selection of an Arbitrator, the Initiating Party shall immediately notify the proposed Arbitrator of his selection by the parties to become Arbitrator of the dispute and immediately provide such Arbitrator with a copy of the Notice, the Answering Statement, if any, and copies of this Agreement and the Related Agreements. Copies of this selection notice and all correspondence and other documents relating to the arbitration between either party and the Arbitrator shall be sent to the other oarty.

11-6

(C) Initiation and Completion of Hearings The Arbitrator shall initiate the hearings as promptly and expeditiously as possible after his selection (and both parties shall cooperate to this end), and shall conclude the l

hearings within thirty (30) days of their commencement unless the

! Arbitrator expressly finds that additional time is necessary for l

completion of the hearings for reasons in the best interests of l the parties and directed toward the development of an adequate record. The Arbitrator shall expressly designate the number of l'

days by which the hearings shall be extended. Such extension l

l shall be limited to the minimum amount of time which, in the

Arbitrator's judgment, is necessary to conclude the hearings.

l l (D) Time and Finality of Award l

l The award of the Arbitrator shall be made no later '

l l than thirty (30) days from the date of the closing of hearings, and such award and any judgment thereon, entered pursuant to Section 11.1, shall be conclusive, final and binding except as specifically provided in Sections ll.2(G) and ll.2(H).

j (E) Location Unless the Initiating Party and the Other Party otherw!

l t agree in writing, arbitration under this Agreement shall be con-l l ducted in Raleigh, North Carolina.

i (F) Applicable Rules Arbitration under this Agreement shall be governed by the provisions of the Uniform Arbitration Act, Chapter 1, #

Article 45A of the General Statutes of North Carolina (as amended 11-7

i from time to time) or any successor statute in effect at the time the notice is given by the Initiating Party, provided that any 1

specific provision hereof that conflicts therewith shall govern.

(G) Vacation of Arbitration Award Upon application of either party to the Arbitration, sn Arbitrator's award shall be vacated by a court where:

l (1) The award was procured by corruption, fraud or other unaue means; l

(2) There was' evident partiality by an l

l Arbitrator or corruption of an Arbitrator or misconduct prejudicing the rights of either party; (3) An Arbitrator exceeded his powers; or i

(4) An Arbitrator refused to postpone the

, hearing upon sufficient cause being shown therefor or refused to hear evidence material to the controversy or otherwise so conducted the hearing, contrary to the provisions of Chapter 1, l Article 45A of the General Statutes of North Carolina, as to prejudice substantially the rights of either party.

(11) Trial De Novo When the prevailing party to an at:bitration applies to the court for enforcement of the arbitration award and the court determ2.tes that one or more of the following elements is present in such award, the non-prevailing party shall have the right to a trial de novo in a court of competent jurisdiction (1) such iward for any one proceeding exceeds 75.00C,000 against such l non-prevailing party; ^ or (2) where such award requires the i

1.

11-8

1 l

l l

i j performance by the non-prevailing party of any act whi,ch (a) is not lawful, (b) is contrary to the provisions of the non-provailing party's security instruments, ( c) violates the conditions of any governmental or regulatory approval _ required herein or jeopardizes the obtaining, retaining, transferring or amending of any governmental or regulatory approval ~, (d) has the effect of interrupting, suspending or terminating the Construction, Initial Fueling or placing into Commerical Operation of any Joint Facility, or any major portion thereof, for a period of at least ninety (90) days contrary to the provisions of this Agreement, or (e) has the effect of creating an Event of Default for the non-prevailing party under the terms of this Agreement.

11.3 Cottrt Proceedings Any dispute arising under Section 2.2, Article 3, Section 4.7, all of Article 12 except Section 12.6, or Article 16 shall (unless the party affected agrees otherwise) be resolved by a court of competent jurisdiction in accordance with the law of North Carolina.

11.4 Payment of Fees and Costs (A) Where no money damages are claimed by the party ini-tiating the arbitration or court proceedings, the payment of the Arbitrator's fee and the cost of the arbitration or court proceedings, not including attorneys' fees, shall be borne by the party the Arbitrator or the court rules against unless the

. Arbitrator or the court directs otherwise, in which event the 11-9 l

Arbitrator's or the court's allocation of said fee and costs

-shall be binding.

(B) Where money damages are claimed by the party ini-tiating the arbitration or court proceedings or where either

~

party seeks to vacate si arbitration award t such party shall pay to the defending party a portion of the defense costs, including investigations, engineering fees, attorneys' fees, cxpert witnesses' fees, and any other expenses of defense actually incurred in regard to the particular arbitration or court proceeding in question. Such portion of the defense costs payable shall bear the same relation to the total defense costs as the dollar amount of the claims of the party initiating the i proceeding which were not sustained by the Arbitrator or the court bears to the total dollar amount of such party's claims.

Such determination shall be made only after the entry of a decision or order no longer subject to appeal. Payment of any defenue costs to the defending party shall be mad 0 by the party init iating the arbitration or court proceeding within thirty (30) days af ter the defending party to be paid furnishea such .

initiating party with an itemized and verified listing of the i

defenso costs actually incurred.

(

4

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11-10 1

_,,v-

ARTICLE 12 LIABILITY AND ALf;O, CATION OF RISK J2.1 "As Is" Sale

(A) THE BRUNSWICK PLANT, THE HARRIS PLANT, THE MAYO PLANT AND ROXBORO UNIT NO. 4 ARE SOLD, CONSTRUCTED AND FUELED ON AN "AS IS" BASIS. CP&I
MAKES NO WARRANTY OR REPRESENTATION WilATSOEVER, EXPRESS, IMPLIED OR STATUTORY, AND DISCLAIMS ANY AND ALL WARRANTIES, INCLUDING WITHOUT LIMITATION, ANY REPRESENTATION l OR WARRANTY AS TO TIIE VALUE, QUANTITY, QUALITY, CONDITION, SALEABILITY, OBSOLESCENCE, MERCilANTABILITY, FITNESS OR SUITABILITY l

FOR USE OR WORKING ORDER OF ALL OR ANY PART OF THE BRUNSWICK PLANT, Tile llARRIS PLANT, THE t1AYO PLANT AND ROXBORO UNIT NO. 4, i

POWER AGENCY IS PURCHASING ITS INTERESTS IN THE BRUNSWICK PLANT, THE HARRIS PLANT, TIIE MAYO PLANT AND ROXBORO UNIT NO. 4 "AS IS" AND IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THIS AGREEMENT.

POWSR AGENCY AGREES TilAT THIS DISCLAIMER OF WARRANTIES IIAS BEEN l

SET OUT " CONSPICUOUSLY" AS REQUIRED BY THE UNIFORit COMMERCIAL l CODE, AND TliAT POWER AGENCY UNDERSTANDS THE LIMITED NATURE OF i

! CP&L'S OBLIGATZONS flEREUNDER.

(B) (1) Forty-five (45) days prior to the First Closing Date, CP&L shall provide to Power Agency a list of actual or potential litigation, defects in construction, major licensing or other problems and controversies then known to CP&L's management Which in their judgment could affect the purchase, 12-1

l i

l l

l

[ : Construction, fueling or operation of the Brunswick Plant or  !

l l Roxboro Unit No. 4 or the purchase, Construction, Initial Fueling l

l : or placing into Commercial Operation of the Harris Plant or the l

L Mayo Plant, or any portion thereof, or the rights or obligations i of Power Agency arising under this Agreement.

(2) At the First Closing, CP&L shall make current l an of the First Closing Date the list provided by CP&L to Power l Agency pursuant to Section 12.l(B)(1) by providing either (a) j the certificate of a Senior Vice President of CP&L to the effect that the list provided pursuant to Section 12.1(B)(1) is l accurate and complete as of such date, or (b) a revised list of actual or potential litigation, defects in construction, major

' licensing or other problems and controversies then known to CP&L's management which could affect the purchase, Construction, fueling ' or operation of the Brunswick Plant or Roxboro Unit No. 4 l or the purchase,' Construction, Initial Fueling or placing into l Commercial Operation of the Harris Plant or the Mayo Plant, or any portion thereof, or the rights or obligations of Power Agency arising under this Agreemant.

(3) 'For purposes of this Section 12.l(B), CP&L's management shall include and be limited to the following of ficers and employees of CP&L (or officers and employees of CP&L with equivalent responsibilities at the time the list described in this'Section 12.l(B) is furnished):

12-2

(a) all corporate-officers of CP&L; (b) Manager - Nuclear Plant Engineering;

-(c) Manager - Fossil Plant Engineering; (d).-Manager - Brunswick Plant; (e) Manager - Roxboro Steam Electric Plant;

( f) Manager - Mayo Plant Construction; and (g) Manager - Harris Plant Construction.

12.2 Recognition of Allocation of Risk of Loss to Owners The parties acknowledge and agree that the amounts

)

payable to CP&L for its performance as project manager under this.

Agreement have been determined on the basis of the assumption by t the Owners of all risk of claims by, or uninsured loss or damage to, CP&L, Power Agency or to third parties arising out of, connected with, occasioned by, or resulting from this Agreement or any activities hereunder, except as otherwise specificalty provided in this Section 12.2 and in Section 12.3, and the liability provided for in Article 19, to the contrary. Such claims, loss or damage may be substantial. In this connection, CP&L agrees to bear its share of the risk of claims, uninsured loss or damage arising out of, connected with, occasioned by, or resulting from this Agreement in its role as Owner. It is the intention of the parties that, except with respect to the limited liability of CP&L as specifically provided for in this Section 12.2 and in Section 12.3, and the liability provided for in Article 19, the expense of such claims, including the 12-3

1 cost of defense, ' the cost of insurance against such claims and any and all such uninsured loss or damage be borne by the owners as a Cost'of Construction. Such expense shall be allocated between and borne by the Owners of the Joint Facility giving rise to the expense in the same manner that the Cost of Construction of such Joint Facility is shared by the Owners.

12.3 Liability of CP&L for Certain Loss or Damage Except as otherwise provided in this Agreement, CP&L's sole liability to the Owners with respect to all claims of any kind, whether based upon contract, tort (including negligence) or otherwise, for any loss or damage connected with, arising out of, occasioned by or resulting from CP&L's role as project manager of the Joint Facilities shall be to pay the uninsured l

costs (excluding damages and costs arising from items identified in accordance with Section 12.l(B)) of restoring, repairing or replacing any property of the Owners damaged or made inoperable l

as the result of the failure of CP&L to use reasonable efforts, in accordance with CP&L Operating Practice, to carry out its express undertakings under this Agreement, but only to the extent j that such uninsured cost in any single occurrence exceeds

$50,000; provided, however, that in no event shall CP&L be required to expend for the restoration, repair or replacement of all-property so damaged or made inoperable within one (1) calendar year, an aggregate amount in excess of thirty percent (30%) of the costs described in Section 1.18(F) paid for that calendar year by Power Agency; and provided further , however , that in no event 12-4

l shall CP'& L be liable for the payment of the cost of any such restoration,. repair or replacement unless demand for such payment is made by Power Agency in criting and is received by CP&L within one (1) year from the date that occurrence of such damage - becomes known. to Power Agency, but in no ev(nt beyond two (2) years after all Costs of Construction have been paid for the Joint Facility

( with regard to which the loss or damage occurred.

I Notwithstanding the foregoing paragraph, _ne Owners agree that, except as otherwise specifically provided in Article 19, they shall bear as owners and in propor lon '^ sir ownership intercots any and all losses, damages c musts arising out of errors, omissions and failures by CP&L non-supervisory personnel.

12.4 Indirect or Consequential Damages In no event shall either Owner be liable to the other Owner for any indirect, sp ec ial, incidental or consequential damages with respect to any claim, whether based upon contract, tort (including negligence), patent, trademark or servicemark, or otherwise, including, but not limited to, any claims for loss of profits or revenues, loss of u< of all or any portion of the l

Joint Facilities or the Roxboro Common Support Facilities, cost of capital, cost of purchased or replacement power or claims of customers of the Owners for service interruptions; or claims of

-customers of the Participants for service interruptions.

12-5 I

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l l

12.5 Indemnification Except for the liability of the Owners as provided in Section 12.2, and except with respect to the limited liability of CP&L as project manager as provided in Section 12.3, and except as otherwise expressly provided in Article 19, (a) the owners hereby assume all liability with respect to the ownership, Construction, Initial Fueling and placing into Commercial operation of the Joint Facilitics in proportion to the'ir 7

ownership interests in the Joint Facilities, and (b) the Owners agree to indemnify and sav,e harmless each other and their respective agents, servants and employees from and against all i

liability, losses, claims, damages, expenses (including attorneys' fees) in excess of their proportionate shares, as I

defined in this paragraph. Such indemnification shall apply

)

whether the claims involved be based upon contract, tort i

1 (including the owner's alleged acti'ta or passive negligence or participation in the wrong), or upon any alleged breach of any duty or obligation under this Agreement on the part of the owners, their. respective agents, servants or employees or otherwise. The provisions of this Section 12.5 shall inc1 tde

) any claims based on alleged damage to the business of any claimant.

Such indemnification shall hold harmless the Owners and 3

3 their respective agents, servants and employees, in the manner indicated above, in performing their obligations under this Agreement from and against any and all liability and any and all 12-6

1

~

losses, damages, injuries, costs and' expenses, inclu' ding expenses incurred by an Owner who is sued, its agents, servants and l

l.

employees, in connection with~ investigating any claim or defending any action, and including reasonable attorneys' fees incurred or suffared by the owner sued, its agents, servants or employees, by reason of the assertion of any such claim against

! the Owner r,ued, its agents, servant.s or employees. The Owners may l

l assume e.t-behalf of the Owner sued, its agents, servants and employees, at their option after written notification to the owner sued, the defense of any action at law or in equity which may be brought against the Owner sued, its agents, servants or employees, upon any such claim. The Owners, regardless of whether they assume the defense of any action or the Owner sued defends such action, shall pay on behalf of the Owner sued, its agents, servants and employees, thu smount of any judgment that may be entered against the Owner sued, its agents, servants, or employees, in any such action. The indemnification provided for in this Section 12. 5, however, does not extend to conduct of either Owner or their respective agents, servants or employees adjudged to have caused the damage or injury by reason af willful or wanton misconduct or reckless action. The Owners agree that the obligations assumed by them in this Section 12.5 shall be paid by them' ac a Cost of Construction or as a cost of operation and nointenance depending upon whether the expense is connected with, arises out of, is occasioned by or reeults from a l

l Joint Facility whi'h is unler Construction or which is in l 12-7 l

Coimnercial Operation. Such expense shall be. allocated between and '

r l borne by the Owners of the Joint Facility giving rise to the

^

expense in the same manner as the Cost of Construction or the cost of operation and maintenance of such facility is shared by the owners.

i 12.6 Insurance

! (A) Harris Plant -

(1) All Risk Property Insurance -

CP&L shall obtain and maintain in force (i.e.,

carry) , 'in the name of CP&L with the loss payable to the Owners I

as their interests may appear, all risk property insurance covering Owners' properties at the Harris Plant in the form available from, or equivalent to that available from, Nuclear 'l Hutual Limited. The limit of such insurance coverage shall be the maximum amount available from Nuclear Mutual Limited for a i

nuclear generating plant not to exceed the values at risk at the Harris Plant; provided, however, the limit of such insurance coverage prior to first delivery of nuclear fuel to the Harris Plant shall be $100,000,000. Except as otherwise provided in this Article 12, any lot not reimbursed by insurance proceeds shall be borne by the Owners of the affected property in proportion to their respective interests in such property. The cost of the builder's risk portion of the ull risk insurance coverage _ shall be considered a Cost of Construction and shall be allocated _between and borne by the Owners in the same manner as other Costs of - Construction associated with the Parris Plant.

The cost of the operating plant portion of the all risk property 12-8

  • 4

, - --, , , - ~ r . - -

--n,e , , - - - - - - - - - - .

insurance coverage shall he considered an operating expense of the Harris Plant and shall be allocated between and borne by the Owners in the same manner as other operating expenses associated with the Harris Plant. As long as Nuclear Mutual Limited's

insuring agreements permit the insurance company to make I

retrospective premium adjustments for a given policy year, CP&L shall bear the additional premium cost resulting from any j retrospective premium adjustment made by Nuclear butual Limited and shall be entitled to any good experience credit and/or any increment to its share account resulting from premiums paid for all risk property insurance coverage at the Harris Plant.

l (2) Nuclear Liability Insurance and Governmental Indemnity-

,(a) CP&L shall obtain and maintain in force (i.e., carry), in the names of the Owners as their interests may appear, nuclear liability insurance in such form, in such amount and for such term as will meet the financial responsibility requirements established from time to time by the NRC, or any j successor governmental agency, pursuant to Section 170 of the Atomic Energy Act of 1954, as amended. The allocation of premiums at any time among each of the Harris Units shall be in proportion to the ratable exposure of each such Unit to the total ratable exposure of the Harris Plant. As to each Harris Unit which is not yet in Commercial operation, such allocated porti<;n of I

premiums for nuclear liability insuran:e shall be considered a Cost of Construction of the Harris Plant and shall De allocated

! s 12-9 l

f

l between and borne by the owners in the same manner as other Costs I 1

of Construction associated with the Harris Plant. As to each Harris Unit which is in Commercial Operation, such allocated portion of premiums for nuclear liability insurance shall be l considered an operating expense of the Harris Plant and s'nall be allocated between and borne by the Owners in the same manner as

other operating expenses associated with the Harris Plant.

(b) The Owners shall enter into the governmental indemnity agreements required by Section 170 of the Atomic Energy Act of 1954, as amended. The cost of such indemnity, including any retrospective premium liability (deferred premiums), shall be l

borne by the Owners in proportion to their interests in the Joint Facilities covered by the governmental indemnity. Each Owner l shall be responsible for guaranteeing its portion of any l

l retrospective premium liability which may be required by the ,

l NRC, or any successor governmental agency. Any reimbursement required to be made to an insurance carrier, surety or

governmentr' agency because of the default of either Owner in i

payment of a retrospective premium shall be for the account of the defaulting Owner.

(c) In the event that the nuclear liability protection system contemplated by Section 170 of the Atomic Energy Act of 1954, as amended, is repealed, the owners shall maintain in effect during the period of operation and until the completion oc aecommissioning of each Joint Unit at the Harris 12-10

9 Plant and with respect thereto, to the extent available and l consistent with generally accepted electric utility industry l

l. practice in the United States, a liability protection system t

l consisting of governmental indemnity, limitation of liability and/or nuclear liability insurance.

(3) Extra Expense Insurance -

CP&L shall obtain and maintain in force (i.e.,

l carry), in the names of the owners as their interests may appear, insurance coverage against the extra expense incurred in obtaining replacement power during prolonged accidental outages of the Joint Units at the Harris Plant in the form available fromi or equivalent to that available from, Nuclear Electric Insurance Limited. The limit of insurance coverage shall be the maximum amount available from Nuclear Electric 7nsurance Limited for the Harris Plant. The cost of the extra expense insurance shall be considered an operating expense of the Harris Plant and shall be allocated between and borne by the Owners in the same manner as other operating expenses associated with the Harris l

l Plant. As long as the Nuclear Electric Insurance Limited insuring agreements permit the insurance company to make retrospective premium adjustments for a given policy year, CP&L shall bear the additional premium cost resulting from . any retrospective premium adjustment made by Nuclear Electric.

Insurance Limited and shall be entitled to any good experience credit and/or increment to its share account resulting from premiu.ns paid for extra expense insurance coverage of the Joint Units at the Harris Plant.

12-11 l

(4) Non-Nuclear Liability Insurance (a) During construction of the Harris Plant, and with respect to claims arising out of construction activities at the Harris Plant, Daniel Construction Company is insuring the interests of the owners and constructor against exposures covered by the following types of insurance to a maximum limit of

$25,000,000: Worker's Compensation / Employer Liability Insurance r Comprehensive General Liability Insurance; and Motor Vehicle Liability Insurance.

(b) Prior to the date of Commercial Operation of the first Joint Unit to achieve Commercial Operation at the Harris Plant, CP&L shall obtain and shall thereafter maintain in force (i.e., carry), at its sole cost and expense, public liability insurance coverage insuring CP&L against liability to third persons and their property in limits of not less than

$25,000,000 in excess of a deductible (i.e., retention) of

$1,000,000. CP&L shall make reasonable efforts to have Power Agency included as an ai5itionel insured on its public liability insurance policy. Any additional cost actually incurred by CP&L solely as a result of the inclusion of Power Agency on CP&L's public liability insurance coverage shall be borne by Power Agency.

(5) Workers compensation -

All uninsured costs incurred by the Owners, or either one of them, associated with claims arising prior to the 12-12

T i date of Commercial Operation of any llarris Unit for payments to or for the benefit of covered CP&L employees at the liarris Plant shall be considered a ' Cost of Construction of the Harris Unit as l

! to which such claims relate and shall be allocated between and l borne by the Owners in the same manner as other Costs of i

l Construction associated with the liarris Plant. All uninsured l costs incurred by the Owners, or either one of them, associated l

with claims tising after the date of Commercial Operation of any 11arris Unit for payments to or for the benefit of covered CP&L employees at the IIarris Plant shall be considered an operating ,

expense of the liarris Unit as to which such claims relate and shall be allocated between and borne by the Owners in the same manner as other operating expenses associated with- the liarris 1

Plant.

(6) Other Insurance -

l CP&L may obtain and maintain in force (i.e., carry) transit, contractor's equipment and such other insurance coverages as utilities of similar size vtay from time to time purchase to protect against risks of loss at nuclear-fueled generating plants. The costs of such insurance coverages for the l

l liarris Plant, and_any other insurance related expenses chargeable to the Ilarris Plant in accordance with generally accepted electric utility accounting practices, which are incurred by CP&L 1

l prior to the .date of Commercial Operation of a llarris Unit shall be considered a Cost of Construction of the Ilarris Unit as to l

l 12-13 t

y

which such costs esiato and shall be allocated between and borne by the Owners in the same manner as other Costs of Construction associated with the Harris Plant. The costs of such insurance l

l coverages for the Harris Plant, and any other insurance related expenses chargeable to the Harris Plant in accordance with generally accepted electric utility accounting practices, which are incurred by CPFL after the date of Commercial Operation of a Harris Unit shall be considered an operating expense of the Harris Unit as to which such costs relate and shall be allocated between and borne by the Owners in the same manner as other operating expenses associated with the Harris Plant.

(B) Brunswick Plant -

(1) All Risk Property Insurance -

CP&L shall maintain in force (i.e., carry) in the name of CP&L with the loss payable to the Owners as their interests may appear, all risk property insurance covering owners' properties at the Brunswick Plant in the form available from, or equivalent to that available from, Nuclear Mutual Limited. The limit of such insurance coverage shall be the maxi-mum amount available from Nuclear Mutual Limited for a nuclear generating plant not to exceed the value's at risk at the Brunswick Plant. Except as otherwise provided in this Article 12 any >ss not reimbursed by insurance proceeds shall be borne by the Owners of the affected property in proportion to 12-14

their respective interests in sucn n . , arty. The cost of the all risk property insurance coverage shall be considered an operating expense of the Brunswick Plant and shall be allocated between and borne by the Owners in the same manner as other operating expenses associated with the Brunswick Plant. As long as Nuclear Mutual Limited's insuring agreements permit the insurance company to make retrospective premium adjustments for a given policy year, CP&L shall bear the additional premium cost resulting from any retrospective premium adjustment made by Nuclear Mutual Limited and shall be entitled to any good experience credit snd/or any increment to its share account resulting from premiums paid for all risk property insurance coverage at the Brunswick 4

Plant.

4 (2) Nuclear Liability Insurance and Governmental Indemnity -

(a) CP&L shall maintain in force (i.e., carry), in he names of the Owners as their interests may appear, nuclear liability insurance in such form, in such amount and for such term as will meet the financial responsibility requirements established from time to time by the NRC, or any successor governinental agency, pursuant to Section 170 of the Atomic Energy Act of 1954, as mnended. The costs of such insurance shall be considered an operating expense of the Brunswick Plhnt and shall be allocated between and borne by the Owners in the same manner as other operating expenses associated with the Brunswick Plant.

12-15

(b) The Owners shall enter into the governmental indemnity agreements required by Section 170 of the Atomic Energy Act of 1954, as amended. The cost of such indemnity, incl uding any retrospective premium liability (deferred premiums), shall be borne by the Owners in proportion to their interests in the Joint Facilities covered by the governmental indemnity. Each Owner l shall be responsible for guaranteeing its portion of any retrospective premium liability which may be required by the l NRC, or any successor governmental agency. Any reimbursement required to be made to any insurance carrier, surety or governmental agency because of the default of an owner in payment of a retrospective premium shall be for the account of the defaulting owner.

(c) In the event th:6 the nuclear liability pro-tection system comtemplated by Section 170 of the Atomic Energy Act of 1954, as amended, is repealed, the owners shall maintain in effect during the period of operation and until the completion of decommissioning of each Joint Unit at the Brunswick Plant and with respect thereto, to the extent available and consistent with generally accepted electric utility industry practice in the United States, a liability protection system consisting of governmental indemnity, limitation of liability and/or nuclear liability insurance.

12-16

(3) Extra Expense Insurance -

CP&L shall obtain and maintain in force (i.e.,

carry), in the names of the Owners au their interests may appear, insurance coverage against the extra expense incurred in obtaining replacement power during prolonged accidental outages of the Joint Units at the Brunswick Plant in the form available from, or equivalent to that available from, Nuclear Electric Instrance Limited. The limit of insurance coverage shall be the maximum amount available from Nuclear Electric Insurance Limited for the Brunswick Plant. The cost of the extra expense insurance shall be considered an operating expense of the Brunswick Plant and shall be allocated between and borne by the Owners in the same manner as other operating expenses associated with the Brunswick Plant. As long as the Nuclear Electric Insurance Limited insuring agreement permits the insurance company to make retrospectiva premium adjustments for a given policy year, CP&L shall bear the additional premium cost resulting from any retrospective premium adjustment mada by Nuclear Electric Insurance Limited and shall be entitled to any good experience credit and/or increment to its share account reep.lting from pre-miums paid for extra expense insurance coverage of the Joint Units at the Brunswick Plant.

12-17

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!~ (4) Non Nuclear Liability Insurance - '

CPF.L shall'obtain and mainta',n in force (i.e.,

arry), at~its sole cost and expense, public liability insurance coverage insuring CP&L against liability to third persons and their property in limits of not less than $25,000,000 in excess af a deductible (i.e., retention) of $1,000,000. CP&L shall make reasonable efforts to bave Power Agency included as an ' additional insured on its public liability insurance policy. Any additional cost actually incurred by CP&L solely as a result of the inclu-sion of Power Agency on CP&L's public liability insurance coverage shall be borne by Power Agancy.

(5) Workers Compen24 tion -

All uninsured costs incurred by the Owners, or either one of them, for payments to or for the benefit of covered i CP&L employees at the Brunswick Plant shall be considered an aperating expense of the Brunswick Plant and shall be allocated between and borne by the Owners in the same manner as other operating expenses associated with the Brunswick Plant.

(6) Other Insurance -

CP&L may obtain and maintain in force (i.e., carry) transit, contractor's equipment and such other insuranca coverages as utilities of similar size may from time to time l

purchase to protect against risks. of loss at nuclear-fueled generating plants. The costs of such insurance coverages for the 12-19 i

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l1 l

Brunswick Plant and any other insurance related expenses chargeable to the Brunswick Plant in accordance with generally accepted electric utility accounting practices shall be l

l considered an operating expense of the Brunswick Plant and shall I

l be allocated between and borne by the Owners in the same manner as other operating expenses associated with the Brunswick Plant.

l

! (C) Mayo Plant -

(1) Property Insurance (a) CP&L shall obtain and maintain in force (i.e.,

carry), in the name of CP&L with the loss payable to the Owners r as their interests may appear, during the construction of the Mayo Plant, all risk builder's risk property insurance in the form available to CP&L as an Ebasco, Incorporated client company underwritten (i.e., insured by) by Insurance Company of North America and other participating insurance companies. The limit of such insurance coverage shall be $50,000,000 in excess of a deductible (i.e., retention) not to exceed $50,000 per f occurrence. The cost of such insurance coverage shall be l

! considered a Cost of Construction of the Mayo Plant and shall be I allocated between and borne by the Owners in the same manner as other Costs of Construction associated with the Mayo Plant.

1 (b) CP&L shall obtain and maintain in force (i.e.,

l P 'arry), in the name of CP&L with the loss payable to the Owners I

as their interests may appear, during the operation of each Mayo Unit wnich is in Commercial Operation, property insurance l 12-19 l

l

t coverage under a broad form named perils policy covering all generating properties of CP&L (except the nuclear-fueled generating plants and li.B. Robinson Unit No. 1). The perils covered shall ,

include: Fire and Lightning; Windstorm; Hail; Riot; Riot Attending a Striker Civil Commotion; Explosion; Implosion; Aircraft; Vehicles: Smoke Damage; ' Vandalism and Malicious Misch'ief;' Electrical Injury; Collapse; Falling Objects; Weight of Snow; Ice or Sleet; and Water Damage. The minimum limit of such blanket. insurance coverage shall be $100,000,000 in excess of a deductible-(i.e., retention) not to exceed S250,000 per occurrence. The cost of such insurance coverage for the Mayo Plant shall be considered.an operating expense of the Mayo Plant and shall be allocated between and borne by the Owners in the same manner as other operating expenses associated with the Mayo ,

Plant.

(c) CP&L shall obtain and maintain in force (i.e.,

carry), in the name of CP&L with the loss ' payable to the 04ners as their interests may appear , during the operation of each Mayo Unit which is in Commercial Operation, Primacy Boiler Insurance Coverage and Excess Boiler & Turbine Insurance Coverage. The

$rimary. Boiler Insurance Coverdge shall be in 'the form available from, or equivalent to that available from, American Motorist Insurance Company, with a limi', af $500,000 per occurrence and

? .

subject to.a deductible (i.e., retention) of $100,000. The Excess 12-20

, N v. s.N< w- .pr

Boiler :& Turbine Insurance shall' be in the form available from, or equivalent to that available from, Utility Services Insurance company, Ltd., with a minimum limit of $25,000,000 for boiler coverage and $22,000,000- for turbine coverage subject to such reasonable deductibles (i.e., retentions) as CP&L shall select.

l The cost of such insurance coverages for the Mayo Plant shall be l

l considered an operating expense of the Mayo Plant and shall be

( allocated between and borne by the Owners in the same manner as other operating expenses associated with the Mayo Plant.

(d) Except as otherwise provided in this Article 12, any loss not reimbursed by insurance proceeds shall l

be borne by the Owners of the af fected property in proportion to their respective interests in such property.

(2) Liability Insurance -

(a) During the construction of the Mayo Plant, and with respect to claims arising out of construction activities at l the Mayo Plant, CP&L is insuring, under an owner controlled insurance program, the interests of the Owners and participating contractors against exposures covered by the following types of

! insurance to a maximum limit of $11,000,000: Worker's Compensation / Employer Liability Insurance and Comprehens ve i

General Liability Insurance.

12-21 i

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4

(b) CP&L shall obtain and maintain in force (i.e.,

carry), _at its sole cost and expense, puolic liability insurance coverage insuring CP&L against liability to third persons and their property in limits of not less than S25,000,000 in excess of a deductible (i.e., retention) of $1,000,000. CP&L shall make reasonable efforts to have Power Agency included as an additional insured oa its public liability insurance policy. Any additional cost actually incurred by CP&L solely as a result of the inclusion or Power Agency on CP&i's public liability insurance coverage shall be borne by Power Agency.

(3) Workers Compensation -

All uninsured costs incurred by the Owners, or either one of them, associated with claims arising prior to the date of Commercial Operation of any Mayo Unit for payments to or for the benefit of covered CPLL employees at the Mayo Plant shall be considered a Cost of Construction of the Mayo Unit as to which such claims relate and shall be allocated between and borne by the Owners in the same manner as other Costs of Construction associated with the Mayo Plant. All uninsured costs incurred by the Owners, or either.one of them, associated with claims arising after the date of Commercial Operation of any Mayo Unit for payments to or for the benefit of covered CP&L employees at th-Mayo Plant shall be considered an operating expense of the Mayo Unit as to which such claims relate and shall be allocated 12-22

a

.between and borne by the Owners in the same manner as other operating expenses associated with the Mayo Plant.

(4) -other Insurance -

CP&L may obtain and maintain in force (i.e., carry),

i transit, contractor's equipment and such other insurance coverages as utilities of similar size may from time to time purchase to protect against risks of loss at fossil-fueled generating plants. The costs of such insurance coverages for the Mayo Plant, and any other insurance related expenses chargeable to the Mayo Plant in accordance with generally accepted electric utility accounting practices, which are incurr d e by CP&L prior to the date of Commercial Operation of a Mayo Unit shall be considered a Cost of Construction of the Mayo Unit as to which such costs relate and shall be allocated between and borne by the i

Ownera in the same manner as other Costs of Construction l

associated with the Mayo Plant. The costs of such insurance coverages for the Mayo Plant, and any other insurance related expenses chargeable to the Mayo Plant in accordance with generally accepted electric utility accounting practices, which are incurred by CP&L after the date of Commercial Operation of a Mayo Unit shall be considered an operating expense of the Mayo Unit as to which such costs relate and shall be allocated between and borne by the Owners in the same manner ae other operating expenses associated with the Mayo Plant.

F 12-23

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(D) Roxboro Unit No. 4 (1) Property Insura,ce (c) CP&L shall obtain and maintain in force (i.e.,

carry), in the name of CP&L with the loss payable t3 the owners as their inturests may appear, during the operation of Roxboro Unit No. 4, property ' insurance coverage under a broad form named perils policy covering all generating properties of CP&L (except the nuclear-fueled generating plants and li.B. Robinson Unit No. 1) . The perils covered shall include: Fire and Lightning; Windstorm; liail; Riot; Riot Attending a Strike; Civil Commotion; Explosion; Implosion: Aircraft; Vehicles; Smoke Damage; Vandalism and Maliciout Mischief; Electrical Injury; C:411 apse; Falling

~

Objects; Weight of Snow; Ice or Sleet; and Water Damage. The minimum limit of such blanket insurance coverage shall be

$100,000,000 in excess of a deductible (i.e., retention) not to exceed $250,000 per occurrence. The cost of such insurance coveraga for Roxboro Unit No. 4 shall b( considered an operating expense of P.oxboro Unit No. 4 and shall be allocated between and borne by the Owners in the same manner as c*.her operating expenses associated with Roxboro Unit No. 4.

(b) CP&L shall obtain and maintain in force (i.e.,

carry), in the name of CP&L'with the loss payable to the Owners 12-24 I

l-as their interests may appear, during the operation of Roxboro Unit No. 4, Primary Boiler Insurance Coverage and Excess ' Boiler l

L &iTurbine Inaucance Coverage. The Primary Boiler Insurance Coverage shall be in the form available from, or equivalent to

[

that available from, American Mot nist Insurance ^ Company, with a i limit of $500,000 per occurrence and subject to a deductible (i.e., retention) of $100,000. The Excess Boiler & Turbine

Insurance shall be in the form available from, or equivalent to that available from, Utility Services Insurance Company, Ltd.,

with a minimum limit of $25,000,000 for boiler coverage and ,

$22,000,000 for turbine coverage subject to such reasonable i deductibies (i.e., retentions) as CP&L shall select. The cost of l

such insurance coverage for Roxboro Unit No. 4 shall be con-sidered an operating expense of Roxboro Unit No. 4 and shall be allocated between and borne by the Owners in the same manner as otner operating expenses associated with Roxboro Unit - No . 4.

I l (c) Except as otherwise provided in this

)

' Article 12; any loss not reimbursed by insurance proceeds shall be borne by the Owners of the affected property in proportion to their respective interests in.such property.

(2) Liability Insurance -

CP&L shall obtain and maintain- in force (i.e.,

carry), at its sole cost and expense, public liability insurance 12-25

&)

0 -

h 1 1

coverage insuring CP&L against liability to third persons and f their property in limits of not less than $25,000,000 in excess

-of a deductible (i.e., retention) of $1,,000,000. CP&L shall make e reasonable efforts to have Power Agency included as an additional l

insured on its public liability insurance policy. Any additional

[

l- cost 'actually incurred by CP&L solely as a "esult of the inclu-sion of Power Agency on CP&L's public liability insurance

! coverage shall be borne by Power Agency.

l l (3) Workers Compensation -

All uninsured costs incurred by the Owners, or either one of them, _ for payments to or for the; benefit of covered CP&L employees at Roxboro Unit No. 4 shall be considered an operating expense of Roxboro Unit No. 4 and shall be allocated between and borne by the Owners in the same manner as other operating expenses associated with Roxboro Unit No. 4.

(4) Other Insurance -

CP&L n. y obtain and maintain in force (i.e., carry) l transit, contractor's equipment and such other insurance l

! coverages as utilities of similar size may from time to time purchase to protect against riske of loss at fossil-fueled generating plants. The costs of such insurance coverages for Roxboro Unit No. 4, and any other insurance related expenses

12-26 l

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L

chargeable to Roxboro Unit No. 4 in accordance with generally I accepted electric utility accounting practices, shall be con-sidered an operating expense of Roxboro Unit No. 4 and shall be allocated between and borne by the Owners in the same manner as-

other operating expenses associated with Roxboro Unit No. 4.

l (E) General Provisions l

(1) Copiet of Insurance Policies l Not less than thirty ( 30) days prior to the First Closing Date, CP&L shall provide Power Agency with certified copies of all insurance policiea required to be obtained by CP&L l

pursuant to this ' Article 12, or other evidence of coverage satisfactory to Power Agency pending availability of the certified copies of the insurance policies.

(2) Additional or Substitute Insurance of Power Agency As a substitute for or in addition to the ir uurance coverage on the Owners' exposures to be obtained by CP&L (including any self-insurance by CP&L) which is provided for in this Section 12.6, Power Agency may self-insure or may obtain and maintain, at its sole cost and expense, such insurance coverage as it deems necessary or advisable in substitution for or in addition to the insurance coverage obtained by CP&L pursuant to this Section 12.6; provided, however, that self-insurance by Power Agency, or such additional 3r substitute l insurance on Power Agency's exposures, shall not reduce or i

diminish in any way the insurance coverage maintained by CP&L 12-27'

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I on 'its own exposures as contemplated by this Article 12, and l shall- not increase the costs to CP&L for such insurance coverage.

In the event that Power Agency self-insures or obtains any insurance coverage on its exposures as a substitute for insurance I coverage obtained by CP&L, then Power Agency shall not be r

- assigned any portion of the premium or other costs incurred by i

l CP&L in obtaining or maintaining in force the substituted insurance coverage, nor shall Power Agency be entitled to share j in the proceeds of such substituted insurance coverage.

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l 12-28 i

ARTICLE 13 FORCE MAJEURE' ,

13.1 Excuse of Performance l

'Notwithstanding anything in this Agreement to the-

-contrary, neither_ party shall be liable .or responsible for failure to carry out any of ~its obligations under this Agreement caused by Force Majeure; provided, however, that this Art:.cle 13 t

shall not apply to the parties' obligations te make payments or t

l give credits.as specified in Article 6.

l

[ 13.2 Definition The term " Force Majeure" as used herein shall mean any

j. cause beyond the control of the party affected, and which by l

l reasonable efforts the party affected .is unable to overcome including, without limitation, the following : Acts of God; fire, flood, landslide, lightning, earthquake, hurricane, tornado, storm,. freeze, volcanic eruption or drought; blight, famine, epidemic or quarantine; strike, lockout or other labor difficulty; act or failure to act of the other party (and such party so acting or failing to act shall not use its act or l

failure to act to excuse any other abligation which it has under this Agreement); act or failure to act of any regulatory agency

! or.other governmental authority; changes in the work or delays l caused by public bidding requirements; theft; casualty; accident; l equipment breakdown; failure or shortage of, or inability to obtain from usual sources, goods, labor, equipment, information or drawings, machinery, supplies, energy, fuel or materials; 13-1 w

'etbargo;_ injunction; litigation or' arbitration with suppliers or vendors;-sh'ttage o of~ rolling stock; arrest;Ewar; invasion; civil disturbance; explosion; act.n of.public enemies; satutage; or breach of contract by any supplier, contractor, subcontractor,

-laborer or'materialman. A party rendered unable to fulfill any obligation under this Agreement by reason of Force Majeure shall make reasonable efforts to remove such inability within a reasonable time.

G.S. 25-2-615 of the General Statutes 'of North Carolina shall be inapplicable to this Agree nent, and neither party shall be excused from its obligations unde r this Agreement on the ground that performance as agreed has become commercially '

impracticable. '

13.3 Continuation after Force Majeure Event (A) If, due to an event of Force Majeure Which causes Construction, Initial Fueling and the placing into Commercial Operation of any Joint Facility to be interrupted or suspended for a period of at least six (6) nonths, CP&L as project manager i recommends in writing to the other Owner that Construction, Initial Fueling and the placing into Commercial Operation of such 1 -

Joint Facility be discontinued on the ground that completion of l Construction,-Initial Fueling and the placing into Commercial l'

l Operation of the Joint Facility would be impracticable under CP&L f Operating Practice, the owners.shall attempt t: agree as to s

13-2

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whether Construction, Initial Fueling and the placing into j . Commercial Operation of - the affected Joint Facility will continue.

I If agreement is not reached within six (6) months after receipt

. of such recommendation by the othe r Owner (or such later time as l f.he Owners shall agree), the Owner desiring to proceed with Construction, Initial Fueling and the placing into Commercial l

Operation of the affected Joi.it Facility shall have the right to proceed on the same basis as provided for in Section 10.3(B)(3) e or Section 10.3(B)(4), as applicable.

(B) During any period in which any such discontinuation of Construction, Initial Fueling and the placing into Commercial i Operation of a Joint Facility takes place pursuant to this I

Section 13.3, any' cost of maintaining that part of the Joint l Facility at which Construction, Initial Fueling and the placing l^

into Commercial Operation is so discentinued shall be a Cost of Construction.

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ARTICLE 14 DEFAULT 14.1. Events of Default i

The following shall be " Events of Default" under thia Agreempnt:

(A) Failure by either Owner to make any payment to the

~

other Owner or to CPhL as project manager required under this l Agreement within sixty (60) days after the date on Which such payment becomes due; failure by CP&L to give any credit to Power l Agency required under this Agreement for a period of sixty (60)

[ days after the date on which such credit becomes due; or failure L by CP&L to make any payment to a third party required under this Agreement for a period of one hundred and twenty (120) days after the date on which such payment is due, in which event CP&L shall notify Power Agency in writing of its failure to make such payment, provided, however, that CP&L's failure to make such payment to a third party shall not be an Event of Default so long as CP&L is contesting its obligation to make such payment in good i

faith for sufficient cause.

(B) Willful failure by CP&L to convey to Power Agency i any ownership interest in the Joint Facilities to which' it is entitled under this Agreement.

14-1 l

i

(C) Willful' failure by CP&L to proceed with or prose-cute for ' a consecutive period of ninety (90) days the Construction, Initial Fueling and the placing into Commercial Operation of any Joint Facility in accordance with the provisions of this Agreement; provided, however, that nothing contained in this Section 14.1 and in Section 14.4 shall be deemed to dimi-nish in any respect CP&L's right to cancel or to delay the Construction, Initial Fueling and the placing into Commercial Operation of any Joint Facility in accordance with Article 25 of this Agreement or Article 10 ' of the Power Coordination Agreement.

(D) (1) The insolvency, bankruptcy, or equivalent thereof, of Power Agency or CP&L or either party's inability or admission in writing of its inability to pay its debts as they mature, or the making of a general assignment for the benefit of, or entry into any composition or crrangement with, its creditors; (2) Either party's application for , or consent (by admission of material allegations of a petition or otherwise) to, the appointment of a receiver, trustee or liquidator for such psrty, or for all or substantially all of such party's assets, or either party's authorization of or consent to such application or the commencement of any proceedings seeking such appointment egainst it without such authorization, consent or application which proceedings continue undismissed or unstayed for a period i

of one hundred and eighty (180) days; ,

14-2

P (3) The authorization or filing by Power Agency or CP&L of a voluntary petition in bankruptcy or application for , or consent (by admission of material allegationc of a petition or otherwise) to, the application of any bankruptcy, reorganization, readjustment of debt, insolvency, dicsolution, liquidation or other similar law of any jurisdiction, or the institution of such proceedings against Power Agency or against CP&L without such authorization, application or consent, whis proceedings remain undiumissed or unstayed for ninety (90) days, or which result in an adjudication or bankruptcy or insolvency within such time.

(E) Failure by Power Agency to complete within eighteen (18) mont hs fol lowing the First Closing Date tha purchase of its Ultimate Ownership Interests in the Mayo Units, the Harris Units, the Brunswick Units and Roxboro Un!t No. 4.

14.2 Notice and Opportunity to Cure as Conditions Precedent to Invoking Remedies A party wishing to invoke the remedies provided for in Sections 14.3, 14.4 or 14.5 must give written notice to the other party that an Event of Default has occurred, specifying the Event of Default involved. The party thus notified shall then have thirty (30) days to cure such Event of Default before the aforesaid remedies may be invoked. If CP&L gives notice to Power Agency that CP&L has failed to pay a third party on the j 1

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14-3 l

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f date such payment was due, Power Agency may not invoke such failure to pay a third party as an Event of Default under Section

~

14.1(A) unless, prior to giving the aforesaid pr;tice and oppor-tunity to cure, Power Agency gives notice of its intent to do so within one hundred and eighty (180) days following the receipt by Power Agency of such notice from CP&L that it has failed to pay a third party on the date such payment 'Ts due.

14.3 Remedies on Default by Power Agency (A) Whenever any Event of Default of Power Agency referred to in Sections 14.l(A) and 14.l(E) has occurred and has not been fully cured, or whenever any Dvent of Defnuit of Power Agency referred to in Section 14.l(D) has occurred and

  • has not been fully cured and if following such Event of Default referred to in Gection 14.l(D) Power Agency (or its trustee, receiver or liquidator) is unable to provide its proportionate share of funds for continued Construction, Initial Fuel.ing and placing into Comx.ercial Operation of any Mayo Unit or llarris-

+ Unit, and, in any case, subject to the provisions of Section 14.2, CP&L may take one or more of the following remedial steps:

(1) CP&L shall have the right to continue the Construction, Initial Fueling and placing into Commerical ,

Operation of the liarris Units and the Mayo Units or any of them; or, at any time after an Event of Default has occurred (whether or not CP&L had continued Construction, Initial Fueling and 14-4

v -

placing into ' Commercial Operation of any such Unit for some time after the default), to discontinue Construction, Initial Fueling and placing into Commercial Operation of the Harris Units and the Mayo Units or any of them. In the event CP&L elects not to continue the Construction, Initial Fueling and placing into Commercial Operation of any Harris Unit or Mayo Unit, CP&L shall have the right, subject to any regulatory or government ~t restrictions, to abandon such Unit or any poltions of such Unit.

CP&L shall have the right to elect either of the alternative courses of action specified herein with respect to any Harris Unit or Hayo Unit as to which Construction, Initial Fueling and piacing into Commercial Operation are not complete. If CP&L elects to abandon any Unit or any portion of a Unit pursuant to this Section 14.3(A)(1), the amount which would otherwise be owed by CP&L to Power Agency pursuant to Section 25.1 shall be reduced by the amount. of Power Agency's defaulted obligations as of the date CP&L makes such payment to Power Agency.

(2) CP&L may borrow, or provide itself, sufficient funds, up to an amount equal to the payments owed by and to be due under this Agreement from Power Agency in order to continue Construction, Initial Fueling and placing into Commerical Operation of the Harris Units and the Mayo Units or to pay any costs which may be related to the abandonment of such Units or any part thereof as to which an Event of Default has occurred.

At any time prior to the date of Commercial Operation of a Harris Unit or a Mayo Unit, CP&L shall be entitled to recover from Power 14-5

I L Agency the amount of the funds so borrowed or provided for Construction,. Initial Fueling and placing'into Commercial Operation of such Unit with simple interest thereon calculated at

! the Compensatory Interest Rate. A default or an Event of Default shall be deemed to continue until the total amount due CP&L, including the full amount borrowed or provided by CP&L and interest as specified in this section 14.3(h)( 2), is paid to CP&L. Subject to any provisions of applicable law and prior rights and security interests of a secured financing entity, Power Agency shall take any reasonable measures requested by CP&L to assist CP&L in arranging such financing, including (a) the provision of Power Agency property as security therefor, and (b) l those measures necessary to alleviate concerns raised by any gcVernmental agencies having jurisdiction over Power Agency.

(3) If the Event of Default is caused by a failure or refusal of a financing enticy to proviCa funds required, CP&L shall have the right to obtain substitute financing on behalf of Power Agency and, subject to any provisions of applicable law and prior rights and security interests of a secured financing entity, may require Power Agency to provide adequate security therefor. To that end, Power Agency shall execute all documents which may be reasonably requested by CP&L or by the substitute financing entity in order to secure the interest of the substitute financing entity.

14-6

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B Whenever any Event of Default of Power Agency referred to in Sections 14.l(A) and 14.l(E) has occurred, or whenever an Event of Default by Power Agency referred to 'in Section 14.l(D) has. occurred and if following such Event of befault referred to in Section 14.l(D) Power Agency (or its trustee, receiver or liquidator) is unable to provide its pro-l portionate share of funds for continued Construction, Initial Fueling and placing into Commercial Operation of any Mayo Unit ~or Harris Unit, and, in any case, subject to the provisions of Section 14.2:

(1) Power Agency's Ownership Interest in each of the Brunswick Units and Roxboro Unit No. 4 and in the Associated Fuel for each such Unit shall be reduced in accordance with the following formula :

A=Bx +D C+E where, A= reduced Ownership Interest of Power Agency in such Brur cuick Unit or Roxboro Unit No. 4 and in the d

Associated Fuel for each such Unit B= Power Agency's ownership Interest in such Brunswick Unit or Roxboro Unit No. 4 and in the Associated Fuel for ,

1

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each such Unit C= total of all amounts actually paid by Power Agency pur-suant to Sections 6.1 and 6.3 D= amounts due and owing by Power Agency pursuant to Section 6.3 associated with any Mayo and Harris Units 14-7

- , . ~ - . ,

i s

which hava betn piccid.into Commercial Operation'cinca the date of. the occurrence of the default which oecomes~ l an Event of Default E=~ total.of all amounts-due and owing by Power Agency pur-suant to Sections 6.l'and 6.3 which have not been paid but not less than the total estimated amount of such Power Agency payments for forty-eight (48) months from the date Power. Agency first fails to make such a payment as determined in accordance with the estimate of auticipated payments submitted by CP&L to Power Agency pursuant to Section 6.2 which was in effect when Power.

Agency first failed to make such a payment.

f (2) Foi. ng the earlier of (a) the payment by l

Power Agency to CP&L of all sums then due and owing by Power Agency under this Agreement taking account of Section l

l 14.3(C)(2)(a) or (b) the placing into Commercial Operation of I

the last Joint Unit, the following formula shall be substituted for the formula contained in Section 14.3(B)(1) for the purpose of determining Power Agency's reduced Ownership Interest in each cf the Brunswick Units and Roxboro Unit No. 4 and in the L - Associated Fuel for each such Unit s A=Bx G x [1 - (.03 x 1)]

G+H where, A= reduced Ownership Interest of Power Agency in such Brunswick Unit or Roxboro Unit No. 4 and in the j s Associated Fuel for each such Unit j, B= Power Agency's Ownership Interest in such . Brunswick Unit l'!- ,

or Roxboro Unit No. 4 and in. the Associated Fuel for

e l

each such Unit-8

G= amounts actually paid by: Power Agency pursuant to Sections 6.1 and 6.3 for such Brunswick Unit or Rcxboro Unit No. 4 11 = amounts due and owing by Power Agency pursuant to Section 6.3 associated with such Brunswick Unit or Roxboro Unit No. 4 which have not been paid I= the number of tiayo and Harris Units which were pluced into Commercial Operation between the date of the occurrence of the default which beccmes an Event of Default and the date upon which the formula set forth in this Section 14.3(B)(2) becomes effective.

(3) Power Agency's reduced Ownership Interest in the l Brunswick Units and Roxboro Unit No. 4, as determined in accor-j dance with Sections 14.3(B)(1) and 14.3(B)(2), shall be l

!- adjusted on the first day of each month to reflect changes in '.he

, formula variables occurring prior to that date.

l (4) In the event that the last Joint Unit has not yet been placed into Commercial Operation and Power Agency has made '

partial payments to CP&L of amounts due and owing to CP&L under i

this Agreement but has not fully paid all such amounts, Power Agency's Ownership Interest in each of the Brunswick Units arl Roxboro Unit No. 4 shall be equal to the lesser of the amounts determined pursuant to Sectiona 14.3(B)(1) und-14.3(B)(2).

(5) In the event that Power Agency undertakes to cure an Event of Default by means of partial payments of the total 14-9 e

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f, amount then due and owing by ~ Power Agency, CP&L shall. apply each ,

such pr.rtial payment first to obligations of Pcwer Agency .under Section 6.3, to be apportioned among the Joint Facilities on the basis of the amounts in default on each such Joint Facility under Section 6.3, until such obligations have been fully met on a current basis, and only then to obligations of Power Agency under Section 6.1, t.o be apportioned among the Joint Facilities on the basis of the amounts in default on each such Joint Facility under Section 6.1. If a cure is effected by a partial payment which is available for Powar Agency's obligations under Section 6.1 or by a full payment of all obligations in default, a Subsequent Closing shall take place on the date of such payment in which the amount available for defaulted obligations under Section 6.1 shall be treated as a Closing Payment.

(6) Power Agency's obligation to make all payments associated with the Brunswick Units and Roxboro Unit No. 4 and the Associated Fuel for such Units, and its entitlement to the output of such Units, shall be based upon the reduced Ownership Interest 1:a cach such Unit (expressed as a percentage) as determined in accordance with Section 14.3(B)(1) or Section 14.3(B)(2), whichever is applicable, all in accordance with tue provisions of this Agreement and the Related Agreements.

(C) If an Event of Default has occurred with respect to Power Agency's obligations involving a Mayo Unit or liarris Unit and is continuing as of the date of Commercial Operation of any such Unit or, subject to the provisions of Section 14.2, if a default prior to such date of Commercial Operation thereafter becomes an Event of Default:

14-10

L (1). Power Agency's Ownership Interest in such Mayo Unit or Harris Unit and in the' Associated Fuel for such Unit shall be reduced to a percentage equal to ninety (90) percent times the L ratio of the Costs of Construction of such Unit paid to such date by Power Agency ' divided by the tota; Costs of Construction of such Mayo Unit or Harris Unit as of such date.

-(2) (a) Power Agency's obligation to make payments in accordance with the provisions of this Agreement and the Related '

Agreements for such Mayo Unit or Harris Unit and the Associated l Fuel for such Unit shall be based upon such reduced Ownership

! Interest expressed as a percentage and (b) Power Agency's l entitlement to Output from such Mayo Unit or Harris Unit in i accordance with this Agreement and the Related Agreements shall i

l be based upon such reduced Ownership Interest expressed as a l percentage; provided, however, that Power Agency shall be l

obligated to take Retained Capacity from such Mayo Unit or Harris Unit in the same percentage of such Unit's MNDC in each year from l and after the date of Commercial Oper.ition of such Unit that it l

l would have taken pursuant to the Power Coordination Agreement had Power Rgency's Ownership Interest in such Unit not been reduced l purauant to Section 14.3(C)(1). To the extent such Retained Capacity in any year is less than the reduced Ownership Interest j times the MNDC of such Unit, CP&L shall purchase such difference l as Purchased Capacity _and Purchased Energy pursuant to the provisions of the Power Coordination Agreement. To the extent such Retained Capacity in any year is greater than the reduced 14-11

1 Ownership Interest- times 'the MNDC of such Unit, Power Agency shall purchase such difference from CP&L as a Unit Purchase at CP&L's costs, r,uch costs to be calculated in accordance with ..

Exhibit r.A-XIV.

(D) Subject to the provisions-of Section 14.2, if an Event of Default shall have continued for eighteen (18) months, CP&L

~

may elect to terminato Power Agency's rig'it w cure such Event of Default' by giving written notice to Power Agency of such elec-tion.

(E) Subject to the provisions of Section 14.2, if an Event of Default pursuant to Section 14.l(E) shall have continued for a period' of at least eighteen (18) months, CP&L, either alone or in conjunction with others, shall have the right ir purchase Power Agency's Ownership Interests in the Joint Facilities.

(1) If CP&L elects to exercise this right, it shall give notice in writing of such election to Power Agency and to those trustees of Power Agency's revenue bonds (the proceeds of which are designated to be used for financing the Joint Facilities) whose identities have been made known to CP&L in writing. Once CP&L shall have given notice of such election, .

- this right shall not'be defeated by any offer or tender made in an attempt to cure the Event of Default. From and af ter the date of such notice, Power Agency's obligations to make the payments

!. required by Sections 6.1 and 6.3 shall be limited to the t

14-12 F

J

, .- _ . - - , --r.

amounts due .CP&L on the date of such notice; provided, however, that any amounts which otherwise would h&ve been-due and owing under Sections 6.1 and 6.3 as of the date of such notice shall. continue to be included in the formulas set forth in Section 14.3(B). If CP&L, whether alone or'with others, I- elocts to exercise this right, it must purchase Power Agency's entire Ownership Interests in all of the Joint Facilities.

CP&L shall give notice of its election to exercise this l right and shall complete the purchase of Power Agency's Ownership Intereste in the Joint Facilities within eighteen (18) months after CP&L's right to make such purchase has accrued. The r closing with respect to such purchase shall be at a time and l place to be agreed upon by the parties.

l (2) If CP&L elects to exercise thip right, the i

purchase price of Power Agency's ownership Interests shall be an amount which, together with amounts then on deposit under Power Agency's bond resolution or similar instrument and pledged for the security-of holders of debt issued by Power Agency, will be sufficient to pay the interest on (including any interest in

. arrears) and principal of each issue of debt outstanding on the date of CP&L's election, the proceeds of which have been or are designated to be used for making the payments under this Agreement to each such issue's maturity or to the first date on which such issue may be called, whichever shall first occur, together with any premium payable upon such redemption.

14-13

l (3) CP&L may pay the purchase price, or any part thereof, in cash or, in lieu of cash, by delivering to the trustee direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by the United States of America maturing as to principal and interest in such amount which, together with investment securities of the same kind then held by such trustee and pledged for the security of debt issued by Power Agency and such cash as CP&L may tender, will assure the availability of sufficient moneys to make the payment referred to in Section 14.3(E)(2).

(4) In the event that there is more than one bond reso-lution or similar instrument, payment or delivery of such securi- ,

ties shall be made to the respective trustees thereunder provided that CP&L has been notli. led in writing of the identity of each such trustee. If CP&L has not received written notice of the identity of a particular trustee, it shall make payment or deli-very to those trustees as to Jhich CP&L has received notice.

l (5) Upon the exercise of the right set forth in this Section 14.3(E) and upon complete payment as specified herein, CP&L (and, where applicable, any other purchasers) thereafter shall be deemed to have purchased Power Agency's Ownership Interests in the Joint Facilities and shall be entitled to all of l

Power Agency's rights arising from Power Agency's Ownership Interests and shall, except for the Delivery Facilities Sales Agreements (as described in Section 13.5 of the Power Coordination Agreement), be responsible for performance of all

'14-14

4 l- of Power Agency's _ obligatione under this Agreement and the Related Agreements to t.he extent of cuch Ownership Interests.

From and after the date of CP&L's pure,hase of Power Agency's i Ownership Interests in the Joint Facilities, CPkL shall supply Power Agency with Supplemental Capacity and Energy in the amounts necessary to mest its Participants' Hourly Resource Demands in accordance with the provisions of th~e Power Coordination Agreement. Any transaction described in this Section 14.3(E),

l however, shall be subject to any applicable governmental or regu-l l latory approvals. Power Agency shall take all necessary actions and shall execute, and file where appropriate, all legal docu-ments which shall be reasonably requested by CP&L to complete any transaction described in this Section 14.3(E), including, without limiting the generality of the foregoing, using its best efforts to facilitate the repayment specified in Section 14.3(E)(2), and to obtain any governmental or regulatory appro-l vals which are necessary to the transaction.

(F) In addition to all other righte under this Article 14, CP&L shall have the right to make any payraent, in its own name or

! in the name of Power Agency, of any amounts required to be paid to the revenue bond trustees by Power Agency in respect to debt service on bonds for financing Power Agency's obligations hereunder which Power Agency fails to make when due, and in such case-to be reimbursed promptly in full therefor by Power Agency

! 14-15

,~ _ ..

y together with simple interest calculated at the Compensatory

' Interest. Rate. CP&L shall have the right to make such payment pursuant to this Section 14.3(F) at any titr.e after an Event of Default'has occurred and has not been fully cured. 22y payments made under this Section 14.3(F) shall, to their extent,

!. discharge CP&. from atty obligation to Power Agency in connection with the purchase of Power Agency's Ownershio Interests, or otherwise.

$ (G) If as a result of an Event of Default there exists a situation on the CP&L System where CP&L's generating resources 4

! are not sufficient to supply CP&L's total load, Power Agency 1

i shall take any steps reasonably necessary to ensure that Power Agency and its Participants cooperate with CP&L to reduce load to ensure the integrity of the CP&L System.

14.4 Remedies on Default by CP&L Regarding Construction, Initial Fueling and Placing into Commerical Operation of the liarris Units and the Mayo Units (A) Whenever any Event of Default of CP&L referred to in Section 14.l(D) has occurred and has not been fully cured and if, following such Event of Defhult, CP&L (or its trustee, receiver j or liquidator) is unable to provide its proportionate share l funds for continued Construction, Initial Fueling and placing j into Commercial Operation of any liarris Unit or Mayo Unit I

not yet in Commercial Operation, and subject to the provisions of Section 14.2, Power Agency may take either of the following steps with respect to any such Unit:

14-16

} (1) Power Agency shall have the right to continue the Construction, Initial Fueling and placing into Comrsercial Operation of any such Unit under its own supervision. In such case, CP&L shall not object to Power Agency's succeeding to the rights of CP&L under all contracts with suppliers, contractors and subcontractors.

Alternatively, at any time after such an " vent of Default has occurred (whsther or not Construction, Initial Fueling and placing into Commercial Operation of any such Unit has continued for some time after the default), Power Agency may discontinue Construction, Initial Fueling and placing into Contmercial Operation of any such Unit. In the event Power Agency elects not to continue the Construction, Initial Fueling and ,

placing into Commercial Operation of any such Unit, Power Agency shall have the right, subject to any regulatory or governmental restrictions, to abandon that Unit.

1 (2) Power Agency may borrow, or provide itself, suf-ficient funds in order to continue Construction, Initial Fueling and placing into Commerical Operation of any such Unit or to pay any costs which may be related to the abandonment of that Unit or any parts of such Unit. At any time prior to the date of l

. i Commercial' Operation of a Harris Unit or a Mayo Unit, Power 14-17 1

i  ; -

i Agency Eshall be entitled ' to - recover the amount of the funds so

. borrowed orEprovided for Construction, Initial Fueling 7 and i

placing _;into Commercial Operation of such Unit from CP&L with

! simple interest thereon calculated at the Compensatory Interest-

! Rate. A default or an Event of Default shall be deemed to

. continue until the total amount due Power Agency, including the

- full amount borrowed or provided by Power Agency with interest as specified in this Section 14.4( A)(2), is' paid to Power Agency.

l.

-(3) If Power' Agency elects pursuant to Section 14.4(A)(1) to continue the Construction, Initial Fueling and placing into Commercial Operation of any Harris Unit or Mayo Unit l not yet in Commercial Operation, its monthly Se"olemental Capacity l Billing KW (as described in Exhibit PCA-I-28 of the Power Coordination Agreement) shall be reduced by the lesser of the following amounts :

(a) Ax B B~ + C =

where A= the total MNDC associated with Power Agency's Ultimate Ownership Interest in the Joint Facilities in Commercial Operation as of the date this formula is applied for a given month 14-18

B.= any Costs of Cor itruction paid by. Power' Agency, in excess of those associated with its Ultimate Ownership Interests, for liarris Units and Mayo Units which (i) are u yo* a Commercial Operation as of the date this fo r-mula is applied for a given month and (ii) on which Power Agency is continuir.g the Construction, Initial Fueling and placing into Commercial Operation pursuant to Section 14.4(A)(1) l J= total of' all amounts actually paid by Power Agency pur-suant to Sections 6.1 and 6. 3 associated with its Ultimate Ownership Interest in the Joint Facilities, or (b) ten thousand (10,000) kilowatts for each Mayo Unit and Harris Unic which (i) is not yet in Commercial Operation as of the date this formula is applied for - a given month j and (ii) on which Power hgency is continuing the Construction, Initial Fueling and placing into I

l Commercial Operation pursuant to Section 14.4(A)(1).

l ' (4) Following the earlier of (a) the payment by CP&L to Power Agency of an amount equal to any Costs of Construction paid by Power Agency in excess of those which Power Agency would have

. paid in order to acquire its Ultimate Ownership Interest in any Ilarris Units or Mayo Units not yet in Commercial Operation as of the .

date of the occurrence of a default which becomes an Event of 14-19

Default defined in Sectfan 14.l(D) or (b) the placing into Commercial Operation of the . last of the Harris Units or Mayo l

l Units which were not yet in Commercial Operation as of the date

- of the occurrence of a default which becomes an Event of Default defined in Section 14.1(D) and as to which Power Agency has continued-Construction, Initial. Fueling and placing into Commercial Operation pursuant to Section 14.4(A)(1), (a) Power Agency's monthly Supplemental Capacity Billing KW (as described in Exhibit PCA-I-28 of the Power Coordination Agreement) shall be reduced by three thousand (3,000) kilowatts for each Mayo Unit and Harris Unit placed into Commercial Operation between the date of the occurrence of the default which becomes an Event of Default and the date upon v/hich the formula set forth in this Section 14.4(A)(4) becomes ef fective, and (b) Power Agency shall no longer be entitled to the remedy described in Section 14.4(A)(3).

(B) Whenever an Event of Default of CP&L referred to in Section 14.l(D) has occurred and is continuing as of the date of Commercial Operation of any liarris Unit or Mayo Unit, or if a default prior to such date of Commercial Operation thereaftet becomes an Event of Default, and subject to the provisions of Section 14.2:

r l

14-20 l

l w <

E v e , - --

(1) Power Agency's Ownership Interest in such Mayo Unit or Harris Unit and in the Associated Fuel for such Unit shall be increased to a percentage equal to one hundred and ten percent (110%) times the ratio of the Costs of Construction of such Unit paid to such date by Power Agency divided by the total Costs of Construction of such Mayo Unit or Harris Unit as of such date.

(2) Prwer Agency's obligation to make all payments associated with such Mayo Unit or Harris Unit and che Associated Fuel for such Unit, and its entitlement to the Output of such l Unit, shall be based upon such increased Ownership Interest in each such Unit (cxpressed as a percentage) in accordance with the provisions of thiv Agreement and the Related Agreements.

! (C) Whenever any Event of Default by CP&L referred to in Section 14.l( A) has occurred and has not been fully cured, and sub jec t to the provisions of Section 14.2, Power Agency shall be entitled to the following remedies:

l (1) In the case of a failure by CP&L to make a payment to Power Agency or to give a credit to Power Agency as described in Sec t ion 14.1( A) , Power Agency shall be entitled to receive i

from CP&L the amount of such payment or credit plus simple intereet, in which case the rate of interest to be paid by CP&L shall not he determined puriurnt to Article 6 but shall be calculated at the Incentive It.cerest Rate.

14-2]

l (2) In the case of a failure by CP&L to make a payment l

to a third party as described in Section 14.l(A), CP&L shall be obligated upon demand by Power Agency to make said payment to the third party.

(D) In the case of an Event of Default described in Section 14.l(C), i.e., a willful failure by CP&L to proceed with or l prosecute for a consecutive period of ninety (90) days the j Construction, Initial Fueling and the placing into Commercial

! Operation of any Joint Facility in accordance with the provisions of this Agreement, Power Agency shall be. entitled to payment by CP&L of an amount equal to Power Agency's proportionate share of l any increase in the costs of Construction of, costs of Initial Fueling of, or costs of placing into Commercial Operation the Joint Facilities, which increase is incurred as a result of such r failure by CP&L. In addition, CP&L shall puy to Power Agency l

i simple interest calculated at the Incentive Interest Rate.

14.5 Remedies on Default by CP&L Regarding Conveyance of L Ownership Interests in the Brunswick Units and Roxboro l Unit No. 4 Whenever any Event of Default of CPeL referred to in Section 14.l(B) shall have occurred in relation to the con-voyance by CP&L to Power Agency of ownership interests in the Brunswick Units or Roxboro Unit No. 4 or in the Associated Fuel for such Units, and subject to the provisions of Section 14.2,

! Power Agency may obtain specific performance of CP&L's obligation to convey such ownership interests and CP&L covenants not-to oppose any action at law or in equity by Poser Agency seeking i such specific performance.

I l-i 14-22

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f.

4 14.6 Excuse of Party's Failure to Perform Following Event of Default by Other Party Following an Event of Default as defined in Section 14.1 by either party which has not been fully cured, and subject to the provisions of Section 14.2, any failure by the other party to perform an obligation which would otherwise constitute an Event of Default as defined in Section 14.1 shall not be treated as such, and such a failure to perform the .

i.

obligation thus described shall be fully excused.

14.7 Disputes Concerning Default In the event that either Owner or CP&L as project manager'shall dispute an asserted default by it which is a  !

failure to make payment, such party shall pay the disputed payment but may do so under protest, except that CP&L shall not, by this provision, be required to make payments to third parties.

The protest shall be in. writing, shall precede or accompany the disputed payment and shall specify the reasons upon which the protest is based. In the event it is determined in an arbitration proceeding conducted pursuant to Article 11 that the protesting party is entitled to a refund of all or any portion of a disputed payment or payments, the protesting party shall be reimbursed such amount with simple interest calculated i at- the Compensatory Interest Rate.

14-23

14.8 Additional Obligations Either party responsible for an Event of Default shall use all reasonable efforts to take any and all such further actions and shall execute, and file where appropriate, any and i

all such further legal documents and papers as may be reasonable i

l under the circumstances in order to facilitate the carrying out of this Agreement or otherwise effectuate its purposes including, but not limited to, action to seek any required governmental or regulatory approval and to obtain any other require'd consent, l

release, amendment or other similar legal documents.

14.9 Equitable Legal Relief l

The parties agree and acknowledge that the violation of any of their obligations to take action and execute legal docu-l

! ments which may be reasonably requested as set forth - in this Article 14 would cause irreparable injury to theuother party and that the remedy at law for any violations or threatened violations thereof would be inadequate, and the parties agree that neither party need prove the inadequacy of legal remedies in l

order to becomo entitled to a temporary or permanent injunction

or other equitable relief specifically to enforce such l

l obligation.

L No remedy conferred upon or reserved to the parties in this Article 14 is intended to be exclusive of any other remedy or remedies available hereunder or now or hereafter existing at i law, in equity, by statute or otherwise, but each and every such L

t ,

[ remedy shall be cumulative and shall be in addition to every l

i 14-24

other remedy under this Agreement or now or hereaf ter existing at law or in equity or otherwise provided by statute. The pursuit by either party of any specific remedy shall not be deemed to be an election of that remedy to the exclusion of any other or others, whether provided hereunder or at law, in equity, by ,

statute or otherwise.

14.10 Waivers l No waiver of any default or Event of Default hereunder shall extend to or affect any subsequent default or Event of Default or shall impair any rights or remedies consequent thereon. No delay or omission to exercise any remedy available upon any Event of Default shall impair either party's right to l

exercise such remedy or shall be construed to be a waiver thereof, but any such remedy may be exercised from time to time

. and as often as may be deemed expedient. In order to entitle i

either party to exercise any remedy conferred upon or reserved l

to it in this Article 14, it shall not be necessary to give any i

l notice, other than such notice as may be herein expressly required.

j 14.11 Agreement to Pay All Costs to Cure Default If any Event of Default should occur and a party not in default should employ attorni . or incur other expenses for the collection of any payment or the enforcement or performance or 14-25

m - -

I L

l observance of any condition or obligation on the part of a defaulting party, or for the exercise of any other remedy hereunder, the defaulting party agrees that it will on demand therefor reimburse the other party for its reasonable expenses of such attorneys and such other expenses so incurred. No default shall be deemed cured until all costs payable under this Article 14, including any attorneys' fees incurred by the party not in default, and payments pursuant to this Agreement shall have been paid or reimbursed.

14-26 E $

r ARTICLE 15 GENERATION OF ENERGY PRIOR TO COMMERCIAL 3PERATION Certain tests must be' performed on each Mayo Unit and liarris Unit prior to placing sucP Unit into Commercial Operation.

In performing such tests, certain amounts of energy will be generated. Each Owner shall be entitled to its share of such energy in proportion to its ownership interest in such Mayo or Ilarris Unit. CP&L agrees to receive the net energy generated into the CP&L System on a metered basis and will pay Power Agency for its ownership share of such energy at the Unit's fuel cost i

l per kilowatt hour generated. The amount of such payment shall be computed monthly for each mont.. In which acch energy is generated

- and shall either be paid directly to Power Agency by CP&L or credited to n.ymoucs due from Power Agency under this Agreement.

i i

O 15-1

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.J ARTICLE 16 ALIENATION AND ASSIGNMENT 16.1 Right to Convey Ownership Interests Except to the extent such right is conditioned by Section 16.2, each owner shall have the right to sell, lease, convey, transfer, assign or alienate to any other party (hereinafter referred to as " Third Party") in any manner whatsoever its ownership interest, or any portion or portions thereof, in a Joint Facility.

l 16.2 Conditions of Transfer (A) Notwith Landing the foregoing, the right of each Owner to convey interests in the Joint Facilities is "onditioned as follows:

(1) Each Owner shall have the right to convey a security interest in its ownership interest in a Joint Facility to secure loans, bonds or other evidences of indebted-l ness issued or to be issued by it without the consent of the other Owner if the proceeds from such loans, bonds or other I

evidences of indebtedness are tu be used to meet the Owner 's l obligations under this Agreement or the Related Agreeraents . Each Owner shall notify the other Owner in writing as soon as possible after learning that any lien or security interest has been or will be imposed upon its ownership interest in a Joint Facility or has reason to believe that such lien or security interest is under discussion with a possible lender or other entity; 16-1 1

w, provided, however, that no notice is required' under this Section 16.2(A)(1) concerning liens or security interests created by the. Company Mortgage.

(2) Each Owner shall have the right to convey for financing purposes its ownership interest in a Joint Facility, or any portion thereof, pursuant to an arrangement whereby such Owner shall lease back the . interest so conveyed from the transferee.

l (3) Each Owner shall have the right to convey its ownership interest in a Joint Facility, or any portion thereof, pursuant to any other arrangement undertaken for financing purposes.

(B) No sale, lease, conveyance, transfer, assignment or j alienation of an ownership interest in a Joint Facility or of i

l rights or obligations under this Agreement, whether to the other I

l Owner or to a Third Party, shall relieve the transferor, lessor l

l or assignor from full liability and financial responsibility for t

l performance after any such transfer, lease or assignment of:

(1) any obligation or duty incurred by the trans-feror, lessor or assignor prior to such transfer, lease or assignment under the terms and conditions of this Agreement or any Related Agreement; or (2) any obligation or duty provided and imposed after such transfer, lease or assignment upon such transferor, lessor or assignor under the terms and conditions of this Agreement or any Related Agreement, 16-2

{

unless and until the transferee, lessee or assignee shall agree in- writing to assume such obligations and duties and the other Owner has consented in writing to such assumption, which consent shall not be unreasonably withheld.

(C) In no event shall the sale, lease, conveyance, transfer, assignment or alienation by CP&L of its ownership interest in.a

!^

Joint Facility, or any portion thereof, whether to Power Agency

}

or to a Third Party, diminish Power Agency's rights or CP&L's obligations under this 7.greement; and in connection with any such' saic, lease, conveyance, transfer, assignment or alienation, CP&L shall not assign any of its rights and obligations under this j Agreement without the prior written consent of Power Agency, j which consent shall not be unreasonably withheld.

(D) In the event that any Third Party purchases an ownership interest in a Joint Facility, the provisions of this Agreement

shall be amended appropriately to reflect such Third Party's i ownership interest.

(E) In the event of any sale, conveyance, transfer, assignment, or alienation (other than solely as security for an i

indebtedness) by either Owner of its ownership interest, or any portion or portions thereof, in a Joint Facility, such Owner shall cause the transferee to assume, in proportion to the interest so sold, conveyed, transferred, assigned, or alienated, obligations no less than those placed upon the transferor pursuant to this Agreement and the Related Agreements.

4

_ 16-3

_-_ _ _ __ _=__ _ _ _ - _ - _ _ _ _ _ _ - _ _ ___ _ _ _ _ _ _ _ _ _ _ _ _ - _ _ _ _ _ _ _ _ _ _ _ __ . _ _ _ _ - _ - _ - _ _ - _ _ _ _ _ _ _ _ - _ _ - _ _ _ _ _ _ _ _ _ _ _ _ _

(F) The Owners agree that any entity which succeeds to an ownership interest pursuant to this Article 16 shall.be required to agree in writing at the time of such transfer or assignment that it will not transfer or assign all or any portion of the ownership interest so acquired without complying with the terms and conditions of this Article 16.

(G) Any sale, lease, conveyance, transfer, assignment or

. alienation pursuant to this Article 16 shall be subject to the prior approval of all governmental and regulatory agencies having jurisdiction over such transaction.

16.3 . Involuntary Alienation In the event of an involuntary transfer of any in-terest of either Owner in a Joint Facility pursuant to order of a court of competent jurisdiction or otherwise, the recipient of such interest shrill be required to offer the same to the other Owner at the fair riarket value of such interest.

4 r -

! 16-4 4

m 7 , - , , - , - _ .w --* -

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u 4

3 ARTICLE 17 ADDITIONAL USES OF BRUNSWICK, MAYO OR liARRIS l

17.1 Land Use Charges Applicable to Power Agency's Undivided Ownership Interest in Land at the Joint Facilities '

(A) In consideration of the Base Incidental Land Use Charge set forth in this Section 17.1(A) and in order to facilitate i CP&L's operation of the Joint Facilities pursuant to the Operating Agreement, CP&L shall have the right to utilize any land located at the Brunswick Plant, the fiayo Plant and the

! liarris Plant for incidental purposes, except as such utilization is limited by 3ection 17. l(B) . CP&L shall pay Power Agency an

} Lincidental 1;jad use charge for this right as applicable to Power Agency's Owj/.ership Interest in land at each such plant, such

) charge fori each such plant to be one dollar ($1.00) per year (the " Bag #a Incidental Land Use Charge").

.=

( B)l# CP&L shall also have the right to make any additional

! use of/the land located at the E answick Plant, the Mayo Plant and the !!arris Plant including, but not limited to, the construction of additional generating units or. other facilities upon payment to Power Agency of an increased additional land use charge (" Additional Land Use ' Charge") ; provided, however, that any such additional use does not interrupt or otherwise adversely

. i

~

affect the Construction, Initial Fueling or the placing into 17-1

-y,.

1 i

Commercial 9peration, or the operation, maintenance, fueling or

. construction, of any Joint Facility unless . Power Agency consents in writing to such additional use, Which consent shall not be ,

unreasonably withheld. -When CP&L begins to consider any additional use of the land at any Joint Facility, it shall advise Power Agency of such consideration and the nature and' scope of the proposed use at the earliest stage which is reasonably feasible and, in any event, CP&L shall advise Power Agency as soon as a decision is made by CP&L's Senior Management Committee (or any successor to such committee having equivalent responsibilities) to approve the expenditure of funds for study of (nr construction associated with such additional use. CP&L and Power Agency shall then undertake negotiations to determine an increased annual Additional Land Use Charge Which is reflective of the fair narket use value of Power Agency's undi.zded ownership interest in the land affected by the additional use, and such annual Additional Land Use Charge shall thereaf ter be applied to CP&L's use of such land affected by the additional USe (C) The land use charges-provided 26r in Sections 17.l(A) and 17.1(B) shall be paid each year directly to Power Agency or, at Power Agency's option, reflected as a credit to the payments due from Power Agency under the first Construction-

! Monthly Statement submitted in each year pursuant to Section l 6.3(B) as to any Joint Facility at Which no Joint-Unit is in l

!. Commercial Operation, or as a credit to the payments due from L

17-2

b~

Power Agency under the first O&M Monthly. Statement submitted in each year pursuant to Section 9.l(C) of the Operating Agreemea.c as to any Joint Facility at which a Joint Unit is in Commercial Operation, as applicable.

(D) Notwithstanding the foregoing, in the event that CP&L's additional use pursuant to Section 17.l(B) of the land at the Brunswick Plant, the Mayo Plant or the Harris Plant results in any increase in costs or reduction in benefits to Power Agency associated with such plant including, but not limited to, t

l any increased costs of operation or maintenance, reduction in the MNDC or the Output of any Joint Unit, increased cost of backstand i

l power and energy or an increase in any other charges allocable to i

l Power Agency under this Agreement or the Related Agreements, CP&L shall reimburse Power Agency in full for such increased costs or charges by such method as the parties shall agree to in writing upon the basis of good faith negotiations.

17.2 Spent Fuel Storage Capability In consideration in part of the Power Coordination Agreement, CP&L shall have the exclusive right to use the spent j fuel storage capability at the Brunswick Plant and the spent fuel storage capability at the Harris Plant for other than Brunswick or Harris fuel, respectively, in accordance with the provisions of Article 4 of the Operating Agreement.

17-3 l L

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i: ARTICLE 18 l

RIGIITS OF. ACCESS TO PROJECT RELATED INFORMATION AND MATERIALS; MEETINGS; PLANT VISITS l-18.1 Power Agency's Right of Access (A)' During the Construction, Initial Fueling and ,

placing into Commercial Operation of any Joint Facility, Power

l. . .

Agency shall be granted reasonable access, in accordance with the provisions of this Article 18, to records and other materials

[ described in this Article 18 pertaining to such activities and l-which are in the possession of CP&L or which can be made available by CP&L~. Upon request . by Power Agency for such materials and subject to reasonable conditions consistent with' the conduct of CP&L's regular business affairs and responsibilites, CP&L shall grant Power Agency access to the materials. described in this Article during normal business hours.

Power Agency shall maintain the confidentiality of any non-

[ public information obtained through such access and shall not l

disclose any such information except as required by law.

! (B) Power Agency shall bear the costs incurred by CP&L t

1 as a result of providing the access to information, documentary s

materials, reports or presentations to which Power Agency is entitled under this Article 18; provided, however, that where the information or documentary materials involved are already available in the form provided to Power Agency, the costs associated with the accuraulation and preparation of such information or. materials, including the cost of one copy of such documentary materials, .shall be a Cost of Construction.

18-1 l

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, , , .---,p3. ---,-m., - , - - --

7_

18.2 Types of Materials to be Made Available to Power Agency Upon Request (A) Subject to the conditions set forth -in this Article 18, CP&b shall provide access for Power Agency to all ,

records.available to CP&L relating ~ to the Construction, Initial Fueling and placing into Commercial Operation of the Joint Facilities with respect to (1) Project construction cost estimates and cash-flow schedules, revisions to project construction cost estimates and cash flow schedules and supporting and substantiating back-up and detail of such project construction cost estimates, cash flow schedules and revisions thereof; (2) Construction progress schedules of all available levels of detail, revisions to conatruction progress schedules, and back-up, detail, and other substantiating and sup-porting data to the construction progress schedules and revisions thereof; ,

..(3) Matters, including booku, records, invoices and other documents, which set forth costs and methods of .:ost allocation applicable to the transactions described in this Agreement to the extent necessary to enable Power Agency to verify the c^:ts for which Power Agency is billed pursuant to the provisions 'of this Agreement; ,

(4) Contracts, purchase orders and changes or amendments to contracts and purchase orders; (d) Materials relating to' contractor performance ,

18-2

assessments, including project progress reports, status repcrts, inspection reports, cost control or financial reports, reports concerning construction progress, official notes of meetings, productivity analyses and work sampling studies, and other simi-lar materials; (6) Books, records, and other documents which set forth matters affecting the Joint Facilities in dealings between CP&L and any regulatory body or governmental agency including, but not limited to, the obtaining by CP&L of construction permits, operating licenses and all other essential regulatory approvals for any Joint Facility; and (7) Matters relating to the transactions and duties of CP&L described in this Agreement.

(B) CP&L need not make available to Power Agency any reports or information relating to personnel : natters, staffing or labor relations at or connected with the Construction, Initial Feeling or j tl wing into Commercial Operation of the Joint Facilities or any books, records or other documents that are sub-ject to a valid clai.n of privilege by CP&L. Any payroll information raade available to Power Agency shall be provided in a form which protects the identity of individuals. l 18.3 Additional Materials to be Provided to Power Agency (A) CP&L shall:

(1) Within a reasonable time after receipt of a written request by Power Agency, provide Power Agency with copies of any plans, specifications or other documents referred to in Sections 7.4(B)(4)(d)(i) and 7.4(B)(4)(d)(ii);

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(2) Make Power Agency ~ aware of any actual litiga-tion relating to the Construction, Initial Fueling or placing into Commercial-Operation of any Joint Facility known to CP&L if in CP&L's opinion such litigation is likely to result in liability of, or cost to, Power Agency; and (3)- Make Power Agency aware of any claim reported to any insurer of the Joint Facilities and known to CP&L's Manager of Insurance (or any-successor entity with equivalent responsibilities) or any uninsured claim in excess of $100,000 known to CP&L's General Counsel (or any successor office with equivalent responsibilities), when such insured or uninsured claim relates to the Construction, Initial Fueling or placing into Commercial Operation of any Joint Facility.

(B) Except as provided in this Section 18.3(B), Power Agency shall act have a right of access, under Section 18.2(A) or any other provision of this Agreement or the Related Agreements, to CP&L's internal audit reports or any documents prepared by CP&L's internal audit staff underlying those reports.

Power Agency shall have the right to an annual review by a nationally recognized accounting firm of its choosing of CP&L's internal audit reports and supporting documents relating to third

! party contractors involved in' the Construction, Initial Fueling or placing into Commercial Operation of any Joint Facility for the purpose of determining whether such audits were performed in accordance with sound accounting and auditing principles. The accounting- firm performing such review shall not make copies or t

verbatim dotes of any materials reviewed.

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i 18.4 Additional Rights of Power Agency (A) In addition to the rights of access and review l l described in this Article 18 and in other provisions of this Agreement and the Related Agreements, Power Agency shall have the following rights:

(1) The'right to review sad audit primary books of account maintained by CP&L; i

(2) The right to have a representative in atten-dance as an observer at meetings or conferences between or among CP&L and its contractors, consultants or architect-engineer which relate to the Construction, Initial Fueling or placing into ,

Commercial Operation of any Joint Facility. Such representative of Power Agency shall not participate in such meetings or con-forences except by means of submission of written comments or t

questions to the participants through CP&L. CP&L shall institute reasonable procedures for informing Power Agency concerning the scheduling of meetings as to w'aich Power Agency may wish to exer-l-

cise such right. Power Agency and CP&L recognize and agree that I

such procedures for informing Power Agency concerning the j scheduling of meetings need not apply to all such meetings or l

conferences but should only apply to meetings or conferences of a formal nature involving personnel with significant managerial responsibilities. In no event shall CP&L be required to delay-or reschedule such meetings or conferences because of the existence of Power Agency's right to attend; and 18-5 l

l

, - , - . . .- y . . . -. ._,_y -. , , , - y -,.

yr.,...

i (3) The right to have a representative in r

atteadance as an observer at any meeting or conference between or among CP&L and any regulatory bodies or governmental agencies

. concerning any aspect of the Construction, Initial Fueling or placing into Commercial Operation of any Joint Facility. CP&L shall institute reasonable procedures for informing Power Agency concerning the scheduling of meetings as to which Power Agency may wish to exercise such right. Power Agency and CP&L recognize and agree - that such procedures for informing Power Agency concerning the scheduling of meetings need not apply to all such meetings or conferences but should only apply to meetings or conferences of a formal nature involving personnel with significant managerial responsibilities. In no event shall CP&L I

be required to delay or reschedule such meetings or conferences because of the existence of Power Agency's right to attend.

18.S CP&L' u Right of Access l

l (A) During the Construction, Initial Fueling and placing into Commercial Operation of any Joint Facility, CP&L shall be granted reasonable access, in accordance with the provi-sions of this Article 18, to records and other materials pertaining to .the obligations of Power Agency under this i

l Agreement which are in the possession of Power Agency or which l

can be made available by Power Agency. Upon request by CP&L for such materials and subject'to reasonable conditions consistent with . the conduct of Power Agency's regular business affairs and responsibilitics, Power Agency shall grant CP&L such access 18-6

i during normal business hours. CP&L shall maintain the confidentiality of any non-public information obtained through such access and shall not disclose any such information except as required by law.

l (B) CP&L shall bear the costs incurred by Power l Agency as a result of providing the access to information, docu-mentary materials or presentations to which CP&L is entitled under this Article 18; provided, however, that where the infor-l mation or documentary materials involved are already available in l

l the form provided to CP&L, the costs associated with the accumu-1 lation and preparation of such information or materials, l including the cost of one copy of such documentary materials, shall be a Cost of Construction.

l (C) Power Agency need not make available to CP&L any reports or information relating to personnel matters, staffing or labor relations, relating to Power Agency, its own staf f or any other organization performing a staff function for l Power Agency on a continuing basis or make available any books, l

l records or other documents that are subject to a valid inaim of I

l privilege. CP&L shall not have a right of access to any internal audit reports or documents prepared by the staff of Power Agency l

! or by any other organization performing a staff function for Power Agency on a continuing basis.

l 18.6 Meetings Between CP&L and Power Agency (A) Power Agency shall have the right, upon its request, to meet at a mutually agreeable time and place with appropriate personnel of CP&L, (1) to review, discuss, clarify or 18-7

L supplement information supplied to Power Agency ' by CP&Lr or (2).to present and discuss recommendations made by Power Agency concerning the Construction, Initial Fueling, and placing into L Commercial Operation of any Joint Facility. The timing and fre-2 quency of such meetings shall be subject to reasonable conditions i consistent with the conduct of the regular business affairs and responsibilities of CP&L. .

(B) Once each quarter, CP&L as project manager and as ,

I l Owner shall meet with representatives of Power Agency for the pur-l pose of discussing matters relating to the Construction, Initial p Pueling and placing into com;. u s1 Operation of the Joint l Facilities. Such meetings (" Project Meetings") shall be held at a mutually agreeuble time in Raleigh, North Carolina oc some other mutually agreeable place. The following procedures shall apply to Project' Meetings:

(1) Power Agency shall select not more than three representatives to participate on its behalf in the Project Meetings. Power Agency shall appoint such representatives as of the First Closing Date and such representatives shall serve until Power Agency gives CP&L written notice of its intention to replace any or all of such representatives. Power Agency may, by written

! notice to CP&L, designate an alternate or substitute to act as a representative in the absence of any of its regular representatives, or to participate in lieu of a regular representative on specified occasions or with respect to i

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l specified matters. Any member of the governing body of Power l Agency or any representatives of a Participant may attend but not participate in the Project Meetings.

l (2) CP&L shall propose a written agenda for each 1

Project Meeting Which shall be forwarded to Power Agency approxi-mately one month prior to the Project Meeting. Power Agency i shall have the right to add items to the agenda proposed by CP&L and shall nocify CP&L of any additions to the agenda at least fifteen (15) days prior to the Project Meeting. The parties l shall attempt to arrive at a mutually agreed upon agenda, but either party shall have the right to place items on' the proposed agenda without the agreement of the other party. The agenda and l the minutes for each Project Meeting shall contain an item entitled " Challenges and Disputes."

(3) The minutes of the proceedings of each Project l

Meeting shall be prepared by CP&I. und forwarded to Power Agency l for concurrence. Each party shall sign the minutes to signify that such minutes accurately reflect the proceedings of the Project Meeting. In the event of a disagreement as to Whether any part of the minutes of a Project Meeting accurately reflects the proceedings thereof, the contentions of both parties shall be included in the minutes and identified as such.

(4) Each Project Meeting shall be conducted in acc'brdance with the following format:

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L (a) CP&L shall report'on activities relating to the Construction, Initial Fueling and placing into Commercial Operation of the Joint Facilities during the previous quarter; (b) CP&L shall report on proposed activities relating to the Construction, Initial Fueling and placing into Commercial Operation of the Joint Facilities during the current quarter; and (c) CP&L and Power Agency shall discuss agenda items, including any disputed matters included in the agenda for that Project Meeting and any items remaining unresolved after the previous Project Meeting which are not yet appropriate for submission to arbitration.

(C) CP&L and Power Agency shall attempt to resolve any dispute raised during a Project Meeting under any agenda item.

Any matter not so resolved may be submitted to arbitration in accordance with Article 11 of this Agreement, but only if such matter is so submitted within thirty (30) days after the Project Meeting next following the Project Meeting at which the matter involved was first noted and referred to as an item in dispute specifically raised by either Party under the agenda item entitled " Challenges and Disputes" in the minutes of such Project Meeting; provided, however, the representatives of CP&L and Power Ags icy at such next following Project Meeting may agree in writing that the disputed matter is to be carried over to the next subsequent Project Meeting, in which event the time for sabaitting the matter to arbitration shall be tolled for the period between such Project Meetings.

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I (D) The provisions of this Section 18.6 shall in no l

way affect Power Agency's right to challenge the correctness of l'

any payment or adjustment or CP&L's right to correct any billing or adjustment pursuant to Section 6.3(F).

18.7 Plant Visits f

i (A) Upon reaoonable prior notice, authorized l

representatives of Power Agency, other than Site Representatives, l

shall have the right to visit the Joint Facilities. Visitors l shall be required to comply with all requirements which may be, imposed by any governmental agency, CP&L or its contractors for safety or security reasons, including, but not limited to, per-sonal search.

(B) The Owners recognize that it may be beneficial for members of the public to visit tha Joint Facilities. CP&L shall cooperate with Power Agency in arranging such visits, but CP&L shall have the right to exclude such visitors or reschedule such I visits in order to minimize any interference with Construction, Initial Fueling or placing into Commerical Operation of the Joint Facilities, i

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ARTICLE 19 AF,SISTANCE Bf CP&L IN AGENCY FINANCINGS 19.1 Assistance CP&L shall provide such assistance as set forth in this Article 19 as Power Agency may reasonably require in connection with the issuance or sale by Power Agency of any bonds, notes or other evidences of indebtedness, whether public i

or private (including, without limitation, revolving or other credit facilities).

19.2 Reports CP&L agrees that in connection with such issuance or sale, it will make available to Power Agency, to the managing i

underwriters of any such issuance or sale and to any other financing entity involved in such issuance or sale information relating to the Joint Facilities including, but not limited to, a current architectural and construction engineering report with respect to the Joint Facilities, prepared by CP&L, s3Lting forth the design of the Joint Facilities, a description of the Joint Facilities, the status of engineering, design and construction of l

the Mayo and 11arris Plants, the status of any ' required ?.icenses l and permits, the estimated costs of nuclear fuel, coal and start-up fuel oil, an estimate of construction costs and the construction schedule and an updated suntmary of the information to be supplied by CP&L pursuant to Section 12.l(B). When appropriate, the 19-1

report shall also include a description of CP&L's utility business and a factual outline of its experience in the operation of nuclear-fueled and coal-fired generating facilities.

Such report may be used as en exhibit to, or otherwise in support of, any official statement prepared by Power Agency in connection with the issuance or sale by Power Agency of the obligations described in Section 19.1. Such report shall be in such detail as is customary in similar financings by municipal power agencies or comparable entities.

19.3 Senior Personnel CPAL, at the request of the managing underwriters or any other financing entity involved in the issuance or sale by Power Agency of any bonds, notes or other evidences of indebtedness, shall make available in connection with any such issuance or sale at least one of its senior personnel who is knowledgeable about the construction, operation and fueling of the Joint Facilities i to assist Power Agency and its underwriters or any other

! financing entity involved in such issuance or sale (a) in the preparation of any official statement or report; provided, how-1 over, that such assistance and preparation shall be limited to matters relating to the information in the report furnished pur-

! suant to Section 19.2; (b) at the due diligence meetings with the underwriters or their representatives; and (c) at information meetings with potential investors or lenders. Such assistance shall be provided at such times and from time to time, and at such l places, as shall be reasonably requested by Power Agency, the i

managing underwriters or any other financing entity involved in such issuance or sale.

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19.4 Certification of Information by CP&L-(A) CP&L shall cartify and represent as true, subject to any qualification contained in such certification, any in-formation contained in the report referred to in Section 19.2

supplied by CP&1 to Power Agency, to the managing underwriters I

or to any other financing entity involved in the issuance or sale by Power Agenc-y of any bonds, notes or other evidences of indebt-odness in connection with such issuance or sale by Power Agency, and CP&L shall state that the statements in such report which pur-port to be statements of fact are true and correct in all material l

respects and such report does not omit to state any material fact l necessary to make such report not misleading in the light of the i

j circumstances under which it was furnished. Such certification i

l and representation shall, upon request of the managing underwrit-ers or any other financing entity involved in such issuance or-l sale, be embodied in a letter of representation-addressed to such l

managers on behalf of the underwriting syndicate or to such other l

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financing entity.

(B) CP&L shall also, upon request, furnish an opinion of counsel for CP&L, addressed to the managing underwriters or to any other financing entity involved in the issuance or sale by Power Agency of any bonds, notes or other evidences of indebted-ness, to the same effect as the opinions required by Section 3.2(C)'or Cections 3.4(D) and 3.4(E), as appropriate, nd in each case to the further effect that the execut ion and deli-very of the letter of representation referred to in Section 19.4(A).

19-3

have been. duly and effectively authorized by all requisite corporate action. -

19.5. Liability and costs Any liability which CP&L may have to Power Agency, to.

members of the underwriting syndicate of any securities or to any other financing entity involved in the-issuance or sale by Jower Agency of any bonds, notes or other ' evidences of indeb'tedness, by. reason of any misstatement of material fact or omission of material- facts by CP&L in the intormation furnished pursuant to Section 19.2, shall be-borne.by CP&L, subject

to any rights of contribution . to which ic may be entitled by law, and shall not be a cost reimbursable by Power Agency. undet th..s Agreement. For purposes of the preceding sentence, CP&L's liability shall include the costs of its defense of any lawsuit involving the subject matter of such sentence, whether or not CP&L prevails in such defenue, but CP&L shall be held harmless against any and all claims against CP&L including reasonable attorneys' fees resulting from any misleading , improper.or erroneous use of such information by Power Agency, the underwriters or any other financing entity. Power Agency shall i also bear all other costs of CP&L's performance under this Article 19, excepting, however, any liability resulting from

, any intentional misstatement by CP&L of a material fact or the.

intentional anission by CP&L of a material fact necessary in order to make such information provided under this Article 19, in the light of the circumstances unuer which it was furnished, not taisleading.

l19-4

ARTICLE 20 WAIVER OF PARTITION Notwithstanding any other provision of this Agreement, CP&L and Power Agency hereby waive any right to partition the Joint Facilities, or any part thereof, so long as any Joint Facility shall not have been decommissioned or retired and agree not to commence during such period any action of any kind seeking any form of partition with respect thereto.

i 20-1

ARTICLE 21 INCORPORATION OF EXIIIBITS Exhibits SA-I through SA-XXIII attached to this Agreement are incorporated in and are a part of this Agreement.

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21-1

r ARTICLE 22

SEV2RABILITY OF PROVISIONS 22.1 Generally In the event a court or other tribunal of competent jurisdiction at any time holds that any provision of this Agreement is invalid, the remainder of this Agreement shall not be af fected thereby and shall continue in full force and eff ect.

22.2 Specifically as to Article 12 In the event a court or other tribunal of competent jurisdiction at any time holds that any provision of Article 12 is . alid, (a) the remainder of Article 12 shall not be affected thereby and shall continue in full force and effect; and (b) to the extent that the subject matter of such invalidated provision is not governed by the remainder of Article 12, said subject matter is to be construed in light of the Agreement of the parties that the amounts payable to CP&L for its performance under this Agreement have been determined on the basis of the intention of the parties that, except with respect to the limited liability of CP&L as specifically provided for in Section 12.3, and CP&L's liability under Section 19.5, _the expense of any and all claims against, or uninaured loss or damage to, CP&L or Power Agency as Owners arising out of, con-nected with, occasioned by or resulting from this Agreement or

-any activities hereunder, including, but not limited to, - ac tivi-ties by CP&L in its role as project manager, shall be borne by the Owners as a Cost of Construction, as Fet forth in Section 12.2.

3 22-1 i

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22.3 Renegotiation In the event any provision of this Agreemert is so held invalid, the parties shall promptly renegotiate i , good faith new l

1 provisions to restore this Agreement as nearly as possible to its original intent and effect.

In - this connec tion, the parties recognize that they I

have bargained at arm's length in good faith and on equal terms for economic benefits to each party which are closely interre-lated and which produce an overall result which is considered by the parties to be just and reasonable. In recognition thereof, if any provision of this Agreement'is held invalid, and such holding alters the economic benefits flowing to either party, the parties' renegotiation shall attempt to restore the overall eco-nomic benefits to each party to the levels provided for in the Agreement as originally executed. If either party concludes that such renegotiations have failed, or will fail, to produ'ce the objective of restoring economic benefits to the levels originally provided for, such party may institute arbitration proceedings in accordance with Article 11, the issues at such 'rbitration being limited to the means by which such restoration of original econo-mic benefits should be accomplished and shall'not involve any issues as to whether such restoration should take place.

22-2

i ARTICLE 23 APPLICABLE LAW This Agreement is made under and shall be governed by the law of the State of North Carolina.

a M.

23-1

ARTICLE 24 TERM OF AGREEMENT This Agreement shall terminate, unless otherwise agreed by the Owners, at the earlier of -(1) - fifty ( 50) years -from the date of Commercial operation of the last of the Joint Units to

achieve Commercial operation or (2) the date of decommissioning l or retirement (as appropriate) of the last of the Joint Units to be decommissioned or retired. '

If the duration of any provision of this Agreement

'shall be subject to the rule- against restrictions on alienation or to a similar cr related rule, then the effectiveness of such provision shall not extend beyond (1) the maximum period of time permitted under suchirule, or (2) the specific applicable

~ period of time expressed in this Agreement, whichever is shorter.

l For purposes of applying the rule against restrictions on alienation, or a similar or related rule, the measuring lives in being shall be those of the officera and members of the Board of Commissioners of Power Agency (or ely successor entity having equivalent responsibilities), togf>.aer with all such persons' childre. who are living on the date of execution of this i

Agreement, all as shown in Exhibit SA-XXII. As used in this l

Artic'le 24, the word " children" shall have its generally accepted meaning of descendancs of the first degree.

l 24-1

ARTICLE 25 DECOMMISSIONING OR CANCELLATION PRIOR TO COMMERCIAL OPERATION 25.1 General CP&L shall have the right to cancel or decommission any

-Mayo Unit or Harris Unit for any reason af ter the date of this Agreement but prior to the date of Commercial Operation of such Unit. If either Harris Unit No. 3 or Harris Unit No. 4, or both such Units, is cancelled prior to the First Closing Date, the provisions of Section 2.l(A) shall apply. In the event any Mayo Unit or any Harris Unit is cancelled or decommissioned af ter the First Closing Date but prior to the date of Commercial Operation of uuch Unit, Power Agency's obligations under this Agreement to make any and all payments with respect to such Unit and with respect to the Associated Fuci for such Unit, associated in either case solely with such Unit, shall be adjusted as though

! Power Agency's Ultimate Ownership Interest in such Unit were thirteen and two-tenths percent (13.20%) times the Commitment Ratio effective retroactiveli to and including the First Closing l

l Date. For payments made prior to the effective date of such cancellation or decommissioning t'te adjustment shall be made by l

l multiplying the total of all such payments by eighty percent (80%)

i (the ratio of 13.20 percent /16.53 percent). On the effective 1

date of such cancellation or decommissioning, CP&L shall pay to Power Agency or credit against any obligations of Power Agency under this Agreement twenty percent (20%) of all such amounts paid by Power Agency to such date. For all payments to be made by Power Agency after the effective date of cancellation or 25-1 I

I

decommissioning, the amount of such payments shall be computed on the basis of Power Agency's Ultimate Ownership Interest as of the

~

ef fective date of cancellation or decommissioning which shall be thirteen and two-tenths percent (13.20%) times the Commitment Ratio.

25.2 Costs of Decommissioning or Cancellation Subject to the provisions of Section 25.1, the Owners shall bear all costs incurred prior to the date of Commercial Operation of any Joint. Unit for the decommissioning or cancellation of such Unit, for whatever period of time is necessary, whether pursuant to regulatory requirements or otherwise, to complete the decommissioning or cancellation process so that no further expenditure of funds is required.

Decommissioning or cancellation costs shall include, but not be limited to, any costs which must be provided for in advance of decommissioning or cancellation, and any costs which are incurred during or after decommissioning or cancellation whether such costs result from regulatory requirements or ot'.nerwise.

25.3 Decommissioning or Cancellation Agreement Subject to the provisions of Section 25.1, after the decision to decommission or cancel has been made, the-Owners shall' arrange, pursuant to an agreement (the " Decommissioning or Cancellation Agreement") separate from this Agreement, to carry out the decommissioning or cancellation of the Joint Unit affected, by CP&L or by qualified engineers and/or contractors.

Such. agreement shall contain the provisions set forth in 25-2 ,

4 Section 25.2. If CP&L is to cr.rry out the decommissioning or

- cancellation, the Decommissioning or ' Cancellation Agreement shall contain the provisions of Article 12 and Section 22.3, and all other provisions of this Agreement with respect to CP&L

~

acting as project manager and shall contain no provision which is inconsistent with any term of this Agreement with respect to CP&L's acting as project manager.

25.4 Repurchase Subject to the provisions of Section 25.1, in the i

event any of the Joint Units is decommissioned or cancelled l

pursuant to this Agreement, CP&L shall have the right of first i refusal to purchase any materials, parts, supplies or other facilities therefrom. The proceeds of such sale to CP&L, or of any sale to any other entity, shall be credited to Power Agency in accordance with its Ownership Interest in such Joint Unit.

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25-3 r

h ARTICLE 26 .

i

, ENTIRE AGREEMENT l-This Agreement and, as applicable, the Related Agreements, . shall constitute the entire understanding between the l

l- parties superseding any and all previous understandinga, oral or written, pertaining to the subject matter contained herein.

The parties have entered into this Agreement in reliance upon the l

representations and mutual undertakings contained herein and not i

in. reliance upon any oral or written representation or information provided to one party by any representative of the other party.

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26 . ,. .- . . _ . _ . _

ARTICLE 27 MISCELLANEOUS 27.1 CP&L's Disenarge of Obligations (A) In performing its functions and obligations under this Agreement, CP&L shall act in accordance with CP&L Operating Practice in a timely manner.

(B) In the perf.ormance of its obligations under this Ag ree.nent , CP&L shall not engage in a pattern of adverse distinc-tion against, or a pattern of undue discrimination against, the Joint Facilit ies.

27.2 No Delt <

l (A) No disagreement or dispute of any kind between the parties, or between any party and any other entity, concerning any matter, including, without limitation, the amount of any payment due from said party or the correctness of any charge made to the party, shall permit said party, or either of them, to delay or withhold any payment or the performance by either party l

of any other obligation pursuant to this Agreement. Each party shall promptly and diligently undertake to cesolve such disagreement or dispute without undue delay.

(B) Except as permitted in Articles 10, 13 and 14, no dispute between the parties to this Agreement shall permit CP&L to cease or to refrain from taking any action related to the Construction, Initial Fueling and placing into Commercial Operation of a Joint Facility, or to depart from any schedule for I

27-1

'the-Construction, Initial Fueling and placing into Commercial operation of a Joint Facility, or to fail to perform any

'other obligation pursuant to . this Agreement while any such dispute is pending.

27.3 Further Documentation From time to time after the First Closing Date, the parties shall within their legal authority execute such instru-ments of assignment or conveyance or other documents as may oe necessary, helpful or appropriate, to carry out the terms of this Agreement.

27.4 Notic_e, Any notice, consent or other communication pezmitted or required by this Ag reement shall be in writing and shall be denmed given when delivered by hand or (unless otherwise required by the terms of this Agreement) when deposited in the United States mail, first class postage prepaid, and if to CP&L, addressed to:

Vice President - Power Supply Carolina Power & Light Company P.O. Box 1551 Raleigh, North Carolina 27602 and if to Power Agency, addressed to:

General Manager I

North Carolina Municipal Power Agency Number 3 P.O. Box 95162 Raleigh, tiorth Carolina 27625 -

unless a different officer or address shall have been designated by the respective party by notice in writing.

27-2

27.5 Headings Not to Affect Meaning The descriptive headings of the various articles and sections of this Agreement have been inserted for convenience of reference only and shall in no way modify or restrict any of the terms and provisions hereof.

27.6 No Partnership; Tax Matters Notwithstanding any provision of this Agreement, the parties do not intend to create hereby any joint venture, partnership, association taxable as a corporation, or other entity for the conduct of any business for profit, and if it should appear that one or more changes to this Agreement would be required in order not to create such an entity, the parties agree to negotiate promptly in good faith with respect to such changes. Upon the request of a party, the other party agrees to take, in a timely manner, all voluntary action as may be-necessary to be excluded from treatment as a partnership under the Internal Revenue Code of 1954, as amended.

Upon request of a party, the other party agrees to take, in a timely manner, all voluntary action as may be necessary to obtain a ruling from the Internal Revenue Service: (a) that no association taxable as a corporation has been created by this Agreement or the Related Agreements; (b) that neither this Agreement nor the Related Agreements would cause the loss of the tax exempt status of the bonds of Power Agency; and (c) that is satisfactory to CP&L relating to the income tax treatment of i l

Power Agency's advances for Nuclear or Fossil Fuel Material, l

Nuclear or Fossil Fuel Services and Reload Fuel.  !

27-3

l 27.7 Amendments This Agreement or any Erhibit hereof may be amended or supplemented by and only by a written instrument duly executed by each of the parties.

27.8 Successors and Assigns This Agreement shall inure to the benefit of a id be binding upon the parties and their respective succesr . 's and assigns. Nothing in this Agreement, express or implied, is intended to confer upon any other person any rights or remedies hereunder.

27.9 Counterparts This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instru-ment.

27.10 No Waiver The failure of either party to enforce at any time any of the provisions of this Agreement, or to require at any time performance by the other party of any of the provisions hereof, shall in no way be construed to be a waiver of such provisions, nor in any way to affect the validity of this Agreement or any part nereof, or the right of such party thereaf ter to enforce s

each and every such provision.

27-4

27.11 Singular to Include Plural and Plural to includa Singular Thr'oughout this Agreement, whenever any word in the singular number is.used, it shall include the plural unless the context otherwise requires; and whenever the plural number is used, it shall include the singular unless the context- otherwise requires.

27.12 1 References to Articles, Sections and Exhibits Unless otherwise expressly indicated, all re ferenc es to Articles, Sections and Exhibits are re ferences to articles and l

sections of, and exhibits to, this Agreement.

27.13 Security of Information l

l The Owners agree that any information provided under this Agreement will not be used in a manner which (a) would i compromise any part of the security system of any Joint Facility, (b) would be in contravention of any applicable governmental regulation, or (c) would cause an Owner to violate any arrangement regarding confidentiality or proprietary rights which such Owner has with any third party.

27.14 Computation of Time In computing any period of time prescribed or allowed under this Agreement, the day' of the act, event or default from which the designated period of time begins to run shall be inc lud ed . If the last day of the period so computed is a Saturday, a Sunday.or a legal holiday in North Carolina, then the i

period shall run until the end of the next day which is not a Saturday, a Sunday or a legal holiday in North Carolina.

27-5 v .., , , "e -

r --

ARTICLE 28 SURVIVORSHIP OF OBLIGATIONS 28.1 Survivorship of Obligations The termination of this Agreement shall not discharge either party from any obligation it owes to the other party under this Agreement by reason of any transaction, loss, cost, damage, expense or liability (a) which shall occur or arise (or the circumstances, events or bases of which shall occur or arise) prior to such termination or (b) which shall occur or arise (or the circumstances, events or bases of which shall occur or arise) as a result of this Agreement after such termination. It is the intent of the parties that any such obligation owed pursuant to the proceding sentence (whether the same shall be known or unknown at the termination of this Agreement or whether the circumstances, events or bases of the same shall be known or unknown at the termination of this Agreement) shall survive the termination of this Agreement.

28.2 Survivorship of Provisions The provisions of Article 12, incit' ding specifically, but without limitation, the indemnification provisions thereof, shall remain operative and in full force and effect, regardless of any termination or cancellation of this Agreement, except vith respect to actions of the Owners occurring after such termination or cancellation.

28-1

IN WITNESS WHEREOF, the parties have caused this Purcha8e, Construct 1on and Ownership Agreement to be signed and sealed as of the day and year first above written, by their duly authorized representatives.

CAROLINA POWER & LIGHT COMPANY w

~

ATTEST:

Chairman / President ,, ,

E9 hetary w A MUNICIPAL POWER AG E I

ATTEST:

B W

ra k COMMissiqhfyg 4.

gecretary/

t 4

i PURCHASE, CONSTRUCTION AND

OWNERSHIP AGREEMENT i  !

! EXHIBITS l

l i

J

^

f' g

t PURCHASE,-CONSTRUCTION AND OWNERSHIP AGREEMENT INDEX OF EXHIBITS 1

l

' Exhibit Title' Exhibit Reference

- List of. Power Agency's . Members Purchasing CP&L-Capacity SA-I-l North Carolina Municipal Electric Systems Eligible for Membership in Power Agency Number 3 SA-II-l l

Form of General Warranty Deed SA-III-l*

Form of-Bill of Sale SA-IV-l*

Form of Closing Statement SA-V-l*

Closing. Statement - Brunswick'and

[ Roxboro SA-V-2*

l Closing' Statement - Harris and Mayo SA-V-3*

Closing Statement - Nuclear Fuel SA-V-4*

l C -Closing Statement - Fossil Fuel SA-V-5* .

Calculation of Tax Ef fect of AFUDC SA-V-6*

Form of Construction Monthly Statement SA-VI-l*

Determination of Monthly Construction Management Fee SA-VI-2*

Form of Project Power Sales Agreement SA-VII-l*

Form of Supple .tal Power Sales

Agreement .SA-VIII-1*

List .of Contracts for Power Agency Approval Prior to First Closi'ng SA-IX-l*

Resolution of Power Agency's Board SA-X-l*

Form of Covenant Not to Sue, Indemnification-and Release by Power Agency / Participant SA-XI-l

! Form of Covenant Not to Sue, Indemnification and Release by CP&L SA-XII-l

Exhibit Title Exhibit Reference Form of' Release From Trustee Under the Company Mortgage SA-XIII-l*

Unit Purchase SA-XIV-l*

Boundaries of the Brunswick Plant SA-XV-l*

Boundaries of the Harris Plant SA-XVI-l*'

Boundaries of the Mayo Plant SA-XVII-l*

Boundaries of Roxboro Unit No. 4 SA-XVIII-l*

Roxboro Common Support Facilities SA-XIX-l*

Projected Demands of Power Agency Participants SA-XX-l*

Current Cost of New Capital SA-XXI-l*

Measuring Lives SA-XXII-l*

Trust Agreement SA-XXIII-l*

  • To be provided o

l-

(;

SA-I LIST OF POWER AGENCY'S MEMBERS PURCHASING CP&L CAPACITY Town of Apex Town of Ayden Town of Belhaven*

Bown of Benson Town of Clayton

. Town of'Edenton*

f City of Elizabeth City

  • Town of Enfield*

Town of Farmville Town of Fremont -

City of Greenville*

l Town of !!amilton*

Town of flertford*

Town of Ilobgood*

Tbwn of Hookerton -

City of Kinston Tbwn of LaGrange City of Laurinburg l Town of Louisburg.

[ City of Lumberton L City of New Bern Town.of Pikeville Town of Red Springs Town of Robersonville*

, City of Rocky Mount

! Town of Scotland Neck

  • l Town of Selma

( Town of Smithfield j City of Southport Town of Tarboro*

Tbwn of Wake Forest City of Washington

  • Town of Waynesville City of Wilson l

Tbwn of Windsor

  • I Town of Winterville*

l

  • Members not served by CP&L as of the date of this Agreement.

SA-II-1 North Carolina Municipal Electric Systems Eligible for Membership in Power Agency Number 3 Town of Apex

  • Town of Macclesfield Town of Ayden* City of New Bern*

Town of Belhaven* Town of Oak City Town of Bent;on* Town of Pikeville*

Town of Black Creek Town of Pinetops Town of Clayton* Town of Princeville Town of Edenton* Town of Red Springs

  • City of Elizabeth City
  • Town of Robersonville*

Town of Enfield* City of Rocky Mount

  • Town of Farmville* Town of Scotland Neck
  • City of Fayetteville Town of Selma*

Town of Fountain Town of Sharpsburg l Town of Fremont* Town of Smithfield*

City of Greenville* City of Southport*

Town of Hamilton

  • Town of Stantonsburg l Town of Hertford* Town of Tarboro*

Town of Hobgood* Town of Wake Forest

  • Town of Hookerton* Town of Walstonburg City of Kinston* City of Washington
  • Town of LaGrange* Town of Waynesville*

City of Laurinburg* City of Wilson

  • Town of Louisburg* Town of Windsor
  • Town of Lucama Town of Winterville*

l City of Lumberton*

l

  • Member of Power Agency No. 3 1

SA-III-1 Form of General Warranty Deed (Format to be developed at least 30 days prior to the First Closing Date. The format agreed upon shall then be deemed Exhibit SA-III-l and shall be substituted for this page.)

.t SA-IV-1 i Form of Bill of Sale l.

-(Format to b'e developed at least 30 days prior to the First Closing Date. The format agreed upon shall then be deemed i Exhibit SA-IV-1 and shall be substituted for this'page.)

i i

j j

i.

i a

i l

}

l i

7 i

I J- l t.a. - _ _ , _. - . _ .

Ji-:

4 SA-V-1 Form _of Closing Statement' (Format to be developed at least.30 days prior to the First Closing Date.. The format agreed upon shall then be deemed Exhibit SA-V-1 and shall be substituted for this page.)-

- g ,, . y y m, , e .e -+w1+

i h.

r

l. SA-V-2

' Closing Statement.- Brunswick and Roxboro i

n s

J l

l l

( Format to be developed at least 30 days prior to the First Closing Date. The format agreed upon shall then be deemed Exhibit SA-V-2 and shall be substituted for this page.)

I l

l l

L v _. _- , ..-- - , - , . - _ , , - . , - , - _ - , .

SA-V-3 Closing Statement - Harris and Mayo l

(Format to be developed at least 30 days prior to the First Closing Date. The format agreed upon shall then be deemed Exhibit SA-V-3 and shall be substituted for this page. )

i I

l l

e ,

SA-V-4 Closing Scatement'- Nuclear Fuel (Format to be developed at least 30 days prior to the First Closing Date. The format agreed upon shall then be deemed Exhibit 5A-V-4 and shall be substituted for this page.)

l 4

i M

+. - , - . - . . . . ., ,,

SA-V-5 Closing Statement - Fossil Fuel

( Format to be developed at least 30 days prior to the First l

Closing Date. The format agreed upon shall then be deemed Exhibit SA-V-5 and shall be substituted for this page.)

i l

l l

SA-V-6 Calculation of Tax Effect of AFUDC 1

l (Format to be developed at least 30 days prior to the First Closing Date. The format agreed upon shall then be deemed Exhibit SA-V-6 and shall be substituted for this page.)

l l

l l

l

SA-VI-1 Form of Construction Monthly Statement f ( Fo rma t to be developed at least 30 days prior to the First

, Closing Date. The format agreed upon shall then be deemed l Exhibit SA-VI-1 and shall be substituted for this page.)

1 l

l I

I i

l 1

i l

SA-VI-2 Determination of Monthly Construction Management Fee e

r

( Forma t to be developed at least 30 days prior to the First Closing Date. The format agreed upon shall then be deemed Exhibit SA-VI-2 and shall be substituted for this page.)

l l

l

t.

  • s.

, i L. SA-VII-l a

  • . Form of Project Power Sales Agreement' l

( Format to be developed -at least 30 days prior to the First Closing Date. The format agreed upon shall then be deemed Exhibit SA-VII-1 and shall be substituted for this page.)

I I

e i

k-

< ~ ,,,. - , - - . .

.=_ . . . . .. . _ - -

r

[

SA-VIII-l For: of. Supplemental Power Sales Agreement i

i l

l i

l. (Format to be developed. at least 30 days prior .to the First l Closing Date. The format agreed upon shall then be' deemed 1 Exhibit SA-VIII-l and shall be substituted for this page.)

l

. , , , . . . - - - - - -- , -- --,- -~= --- -- -

SA-IX-1 Lir of Contracts for Power Agency Approval

Prior to First Closing (Format to be developed at least 30 days prior to the First Closing Date. The format agreed upon shall then be deemed Exhibit- SA-IX-1 and shall be substituted for this page.)

l l

l

SA-X-1 Resolution of Power Agency's Board l

i (Format to be developed at least.30 days prior to the First l Closing Date. The format agreed upon shall then be deemed Exhibit SA-X-1 and shall be substituted for this page.)

I i

l 1

l l

l l

JSA-XI-l

' COVENANT NOT 9N) SUE, l . INDEMNIFICATION AND RELEASE l This' Covenant Not to Sue, Indemnification and l

l~

Release-made the day of , 198_, by

. [ Power Agency / Participant]

l (hereinafter referred to as the "Releasor").

RECITALS:

A. Carolina Power & Light Company ("CP&I") and North Carolina Municipal Power Agency Number Three (" Power Agency")

have entered into a Purchase, Construction and Ownership Ag reement ("the Sales Agreement") for the sale by CP&L to Power l

Agency of certain undivided ownership interests in certain of CP&L's generating facilities ("the Joint Facilities")'as set l

forth in Section 2.l(A) of the Sales Agreement..

B. CP&L and Power Agency have also entered into a Power Coordination Agreement establishing the terms and conditions for provision by CP&L to Power Agency of certain power

. services and other matters.

l C. CP&L and Power Agency have also entered into an Operating and Fuel Agreement (the Operating Agreement")-

l establishing the terms and conditions for the operation and fueling of the Joint Facilities.

r

,e.v - g - ,, - - - , , .- -

ne.

SA-XI-2 l

D. With respect to the foregoing Agreements, CP&L for itself, and Power Agency for itse3f and for each Municipal System (as defined in Section 1.40 o'c the Sales Agreement) with which it has contracted to supply power from the Joint Facilities (a

" Participant" as defined in Section 1.50 of the Sales Agreement),

have bargained at arms length and in good f aith and on equal terms for economic benefits to each of them and to each Participant which are closely interrelated and which produce an overall result considered to be just and reasonable.

E. As part of the aforementioned ecor.. C: benefits, the Releasor desires and has agreed to deliver this Covenant Not To Sue, Indemnification and Release.

NOW THEREFORE, in consideration of the mutual covenants, agreements, representations and warranties herein set forth or noted, the Releasor agrees as follows:

1. For purposes of this Covenant Not To Sue, Indemnification and Release, each and every reference to the tetms "CP&L," "Special Claims" and " antitrust laws of the United 1

States" shall have the following meaning respectively:

(a) "CP&L" shall mean, severally and collectively, Carolina Power.& Light Company, its affiliated companies, subsidiaries, predecessors, successors and assigns, and all and each of its or their past and present officers, directors,

l SA-XI-3 i

agents, and employees, and the respective successors, assigns, l heirs, executors and administrators thereof, and each of them.

(b) "Special Claims" shall mean, severally and l collectively, all claims, liabilities, causes of action and

damages, arising out of, connected with, occasioned by, or resulting from the negotiation or the execution of the Sales l Agreement, the Power Coordination Agreement, or the Operating l

Agreement.

(c) " Antitrust laws of the United States" shall mean the following acts, and all amendmente thereto: "An Act to protect trade and commerce against unlawful restraints and monopolies," approved July 2, 1890 (the Sherman Act); sections 73 to 76, inclusive, of an Act entitled "An Act to reduce taxation, 1

l to provide revenue for the Government, and for other purposes,"

l approved August 27, 1894 (the Wilson Tariff Act); "An Act to supplement existing laws against unlawful restraints and monopolies, and for other purposes," approved October 15, 1914 (the Clayton Act); and "An Act to create a Federal Trade Commission, to define its powers and duties, and for other i

purposes," approved September 26, 1917 (the Federal Tra'de Commission Act).

- ~

1 l

SA-XI-4

-(d) " Antitrust laws of North Carolina and South Carolina" shall mean the following Acts and all amendments thereto:

North Carolina Constitution, Article 1, Section 34; North Carolina General Statutes, Chapter 75 (including, but not limited to, 75-1, 75-1.1, 75-2, 75-4, 75-5, 75-6, 75-7, 75-8, 75-9, 75-10,

75-11, 75-12, 75-13, 75-14, 75-15, 75-15.1, j 75-15.2, 75-16, 75-16.1, 75-17, 75-18, 75-19, 75-27, and 75-28).

p South Carolina Constitution, Article IX, Sections 1 and 2 and Code of Laws of South Carolina, Title i

39 (including, but not limited to, Sections

! 39-3-10, 39-3-20, 39-3-30, 39-3-40, 39-3-110, i

j 39-3-120, 39-3-130, 39-3-140, 39-3-150, 39-3-160, 39-3-170, 39-3-180, 39-3-190, 39-3-200, 39-3-310,

39-3-320, 39-3-330, 39-3-340, 39-3-350, 39-3-360, 39-5-10, 39-5-20, and 39-5-40).

j 2. The Releasor does, for itself [For Power Agency: L its departments, managers, officers,] [For

Participants:

i ts icpartments, agencies,) predecessors, successors and assigns and i

any person or entity claiming through, by or under it or them, remise, release and forever discharge CP&L' from:

f

, r w - -,-c , .c- a.

m SA-XI-5 I

l (a) All claims, liabilities, causes of action and damages of -every type and description arising at any time prior to the date of this Covenant Not To Sue, Indemnification and Release'under or based upon (1) the antitrust laws of the United States, the antitrust laws of North Carolina or South Carolina, or the antitrust. laws of any other state; :2) the Federal Power Act, the Atomic Energy Act, and the Ptolic Utility Laws of North Carolina and South Carolina and any amendment to any of said laws and acts insofar as such acts or laws may give rise to liability for anticompetitive or unfair competitive conduct or activity, including all claims for damages or other forms or relief, or for attorneys' fees, costs and expenses; and (3) claims arising under the statutes of common law of any state relating to tortious interference with contracr a.1 relationships which is l

l anticompetitive or unfairly competitive in intent or effect; and (b) All Special Claims (as defined in paragraph 1(b) above) arising at any time prior to the date of this Covenant Not Tb Suc, Indemnification and Release, under or based upon the statutes or common law mentioned in paragraph 2(a) above. <

-Action (s) taken by CP&L in accordance with the terms of the Sales

( Agreement, Power Coordination Agcesinent or the Operating l

l Agreement shall, as between CP&L and Power Agency and as between i

m v- ,-- - ,<.-n 7

SA-XI-6 CP&L and each Participant, be deemed to be in compliance with the statutes or common law mentioned in paragraph 2(a) above as such statutes and law are in effect as of the date of this Covenant Not To Sue, Indemnification and Release.

(c) This Covenant Not To Sue, Indemnification and Release shall not constitute a release as to any of the matters described in paragraphs 2(a) or 2(b) above upon which the Releasor may have a claim against a person, fi rm , corporation, association or other entity which may have been a joint tortfeasor or a co-conspirator with CP&L. With respect to such situations, Releasor hereby covenants and agrees with CP&L that it will never institute any suit or action at law or otherwise against CP&L based upon or arising out of any claim covered by these paragraphs.

3. With respect to any matter arising out of, connected with, occasioned by, or resulting from the Sales Agreement, the Power Coordination Agreement, or the Operating Agreement, or from any claim described in paragraph 2(a) heieof, Releasor will not, alone or in concert with others, initiate, intervene in or file any counterclaim in, any action or proceeding in any forum on the basis of, er in which it raises, any allegation that prior to the effective date of this Covenant t

SA-XI-7 Not To Sue, Indemnification and Release CP&L has engaged in any anticompetitive or unfairly competitive acts or conduct, or any i

acts intended to have, or which did have, an anticompetitive or I

unfair effect, nor will it alone or in concert with or through the agency of others take any action to persuade any municipal, state or federal agency or department or any cooperative or private person or entity to institute, intervene in, or counterclaim in, any action or proceeding in any forum on the basis of any of the aforedescribed conduct or acts of CP&L.

j 4. The Releasor acknowledges that this Covenant Not To Sue, Indemnification and Release is not based upon any factual, legal or other representations or promises made by CP&L not contained in this document, the Sales Agreement., the Power Coordination Agreement or the Operating Agreement; and it fully t

i understands that if the facts or law with respect to which this Covenant Not To Sue, Indemnification and Release is execu:ed are or may be found hereafter to be other than, or different from, the facts or law in that connection now believed by the Releasor to le true, the Releasor expressly accepts and assumes the risk of such possible difference and agrees that the covenant not to sue, indemnification and release herein given shall be and remain effective notwithstanding any such difference.

1 1

SA-XI-8

5. The Releasor ackowledges that the Sales Agreement, the Power Coordination Agreement and the Operating Agreement may be amended from time to time. The Releasor also acknowledges that CP&L may sell interests in the Joint Facilities to other entitian on terms and conditions more or less favorable to CP&L than those contained in the Sales Agreement, and in connection therewith CPGL may assign to such entities certain of CP&L's rights and obligations under the Power Coordination Agreement and the Operating Agreement on terms or conditions more or less favorable than those contained in such agreements for Power Agency. The Releasor expressly acknowledges that in the event of such amendment, sale or assignment, the covenant not to sue, indemnification and release herein given shall be and remain in full force and effect as to CP&L
6. The Releasor represents and warrants to CP&L that it has not made or suf fered to be made any assignment or transfer -

of any claims or Special Claims herein purported to be released, or for which it has covenanted not to sue.

7. If, because of the warranties or agreements contained in this Covenant Not To Sue, Indemnification and Release are breached by Releasor, or because any of the representations by Releasor herein are inaccurate, claims are

SA-XI-9 asserted against CP&L by any person, the Releasor-agrees to indemnify and hold CP&L harmless from any such claims.

8. The Releasor agrees that this' Covenant Not To Sue, Indemnification and Release shall be binding on it, [For Power Agency: its departments, managers, of ficers,]. [For

Participants:

its departments, agencias, councils, managers] and its 3

predecessors, successors, and assigns, and any person claiming through, by or under it, and each of them and shall inure to the benefit of CP&L.

! 9. In the event a court or other tribunal of competent jurisdiction at any time holds that any provision of this Covenant Not To Sue, Indemnification and Release is invalid, the remainder hereof shall not be affected by such holding and shall continue in full force and effect.

10. This Covenant Not To Sue, Indemnification and
' Release shall be effective as of , 198__, upon

, delivery to CP&L. In the event there is no closing pursuant to l_ the Sales Agreement, the provisions of this Covenant Not To See, 1

Indemnification and Release shall apply only to the Special

$ Claims defined in paragraph 1(b) hereof.

IN WITNESS WHEREOF, the Releasor has caused these presents to be signed and sealed, the day and year first above mentioned, by its representative thereunto duly authorized.

4 RELEASOR:

By Name and Title p

SA-XII-l i

i

COVENANT NOT TO SUE I INDEMNIFICATION AND RELEASE f

This Covenant Not To Sue, Indemnification and Release

! made the day of , 198_, by Carolina Power & Light-Company, on behalf of itself, its affiliated companies, subsidiaries, predecessors, successors and assigns (hereinafter referred to as "CP&L") .

RECITALS:

A. CP&L and North Carolina Municipal Power Agency Number Three (" Power Agency") have entered into a Purchase, Construction and Ownership Agreement ("the Sales Agreement") for the sale by CP&L to Power Agency of certain undivided ownership interests in certain of CP&L's generating facilities ("the Joint'

Facilities") as set forth in Section 2.l(A) of the Sales i

Agreement.

B. CP&L and Power Agency have also entered into a Power Coordination Agreement establishing the. terms and conditions for provision by CP&L to Power Agency of certain power l-services and other matters.

C. CP&L and Power Agency have also entered into an Operating and Fuel Agreement (the " Operating Agreement")

SA-XII-2 establishing the terms and conditions for the operation and fueling of the Joint Facilities.

D. With respect to the foregoing Agreements, CP&L for itself, and Power Agency for itself and for each Municipal System (as defined La Section 1.40 of the Sales Agreement) with which it has contracted to supply power from the Joint Facilities (a

" Participant" as defined in Section 1.50 of the Sales Agreement),

-have bargained at arms length and in good faith and on equal terms for economic benefits to each of them and to each Participant which are closely interrelated and which produce an overall result considered to be just and reasonable. ,

E. As part of the aforementioned economic benefits, CP&L desires and has agreed to deliver this Covenant Not To Sue, Indemnification and Release.

NOW THEREFORE, in consideration of the mutual covenants, agreements, representations and warranties herein set forth or noted, CP&L agrees as follows:

1. For purposes of this Covenant Not To Sue, Indemniff;ation and Release, each and every reference to the terms " Participant," "Special Claims" and " antitrust laws of the United States" shall have the following meaning respectively:

i (a) " Participant" shall mean, severally and collectively, a municipality in North Carolina which (1) has

SA-XII-3 become, or shall hereafter become,-a member of Power Agency, and (2) which has entered into a Project Power Sales Agreement and a Supplemental Power Sales Agreement with Power Agency to receive power from the Joint Facilities, and (3) has entered into a Covenant Not To Sue, Indemnification and Release, substantially in the form of this document, for the benefit of CP&L. Any such municipality shall.become a Participant when it carries out all of the foregoing actions, but not before. The term " Participant" shall include all departments, agencies, councils, managers, officers, employees, predecessors, successors and assigns of a Participant.

(b) "Special Claims" shall mean, severally and collectively, all claims, liabilities, causes of action and damages, arising out of, connected with, occasioned by, or l

resulting from the negotiation or the execution of the Sales Agreements, the Power Cooriination Agreement, or the Operating Agreement.

(c) " Antitrust laws of the United States" shall mean the following acts, and all amendments thereto: "An Act to protect trade and commerce against unlawful restraints and

~

monopolies," approved July 2, 1890 (the Sherman Act); sections 73 to 76, inclusive, of an Act entitled " An Act to reduce taxation, to provide revenue for Government, and for other purposes,"

F_ -

SA-XII-4 approved August 27, 1894 (the Wilson Tariff Act); "An Act to supplement existing laws against unlawful restraints and monopolies, and for other purposes," approved ' October 15, 1914 (the Clayton Act); and "An Act to create a Federal Trade Commission, to define its powers and duties, a. for other purposes," approved September 26, 1917 (the Federal Trade Commission Act).

(d) " Antitrust laws of North Carolina and South Carolina" shall mean the following Acts and all amendments thereto:

North Carolina Constitution, Article 1, Section 34; North Carolina General Statutes, Chapter 75 l

(including, but not limited to, 75-1, 75-1.1, 75-2, 75-4, 75-5, 75-6, 75-7, 75-8, 75-9, 75-10, 75-11, 75-12, 75-13, 75-14, 75-15, 75-15.1,

! 75-15.2, 75-16, 75-16.1, 75-17, 75-18, 75-19, 75-27, and 75-28).

South Carolina Constitution, Article IX, Sections

( 1 and 2 and Code of Laws of South Carolina, Title 1

j 39 (including, but not limited to, Sectior-39-3-10, 39-3-20, 39-3-30, 39-3-40, 39-3-110, 39-3-120, 39-3-130, 39-3-140, 39-3-150, 39-3-160, 39-3-170, 39-3-180, 39-3-190, 39-3-200, 39-3-310, 39-3-320, 39-3-330, 39-3-340, 39-3-350, 39-3-360, 39-5-10, 39-5-20 and 39-5-40).

i SA-XII-5

2. CPEL does, for itself, its departments, divisions, predecessors, successors, assigns, subsidiaries, affiliated companies, and any person or entity claiming through, by or l under it, or them, remise, release and forever discharge Power Agency and each Participant from:

(a) All claims, liabilities, causes of action and damages of every type and description arising at any time prior to the date of this Covenant-Not To Sue, Indemnification and i

i Release, under or based upon (1) the antitrust laws of the United i

i States, the antitrust laws of North Carolina or South Carolina, or the antitrust laws of any other state; (2) the Federal Power Act, the A' comic Energy Act, and the Public Utility Laws of North l

l Carolina and South Carolina and any amendment to any of said laws i

and acts insofar as such acts or laws may give rise to liability for anticompetitive or unfair competitive conduct or activity, l 1 'uding all claims for damages or other forms of relief, or for 1

atto, 'ys' fees, costs and expenses; (3) any alleged tying of municip, services or alleged anticompetitive or unfairly competiti practices associated with the subject of annexation; and (4) cla ns arising under the statutes or common law of any

, state relating to tortious interference t'ith contractual l

l i

SA-XII-6 relationships which is anticompetitive or unfairly competitive in intent or effect; and (b) All Special Claims (as defined in paragraph 1(b) above) arising at any time prior to the date of this Covenant Not To Sue, Indemnification and Release, under or based upon the statutes or common law mentioned in paragraph 2(a) above.

Action (s) taken by Power Agency or a Participant in accordance with the terms of the Sales Agreement, Power Coordination Agreement or the Operating Agreement shall, as between CP&L and the Power Agency and as between CP&L and each Participant, be deemed to be in compliance with the statutes or common law mentioned in paragraph 2(a) above as such statutes and

! law are in effect as of the date of this Covenant Not Tb Sue, Indemnification an'd Release.

(c) This Covenant Not To Sue, Indemnification and Release shall not constitute a release as to any of the matters described in paragraphs 2(a) or 2(b) above upon which CP&L may have a claim against a person, firm, corporation, association or other entity which may have been a joint tortfeasor or a co-conspirator with Powcr Agency or with a Participant. With respect to such situations, CP&L hereby covenants and agrees with Power Agency and each of its Participants that it will never institute any suit or action at law or otherwise against Power' 9

<m 1 -

4 SA-XII-7 Agency or a Participant based upon or arising out of any claic covered.by these paragraphs.

3. With respect to any matter arising out of, connected with, occasioned by, or resulting f rom the Sales Agreement, the Power Coordination Agreement, or the Operating Agreement, or from any claim described in paragraph 2(a) hereof, CP&L will not, alone or in concert with others, initiate, int'ervene in or file any cointerclaim in, any action or proceeding in any forum on the basis of, or in which it raises, any allegation that prior to the effect've date of this covenant Not To Sue, Indemnification and Release Power Agency or a Participant has engaged in any anticompetitive or unfairly i

j competitive acts or conduct, or any acts intended to have, or l which did have, an anticompetitive or unfair effect, nor will it l

alone or in concert with or through the agency of others take any l action to persuade any municipal, state or federal agency or l

department or any cooperative or private person or. entity to institute, intervene in, or counterclaim in, any action or proceeding in any forum on the basis of any of the.

l aforedescribed conduct or acts of Power Agency or a Participant.

4. CP&L acknowledges that this Covenant Not To Sue, Indemnification and Release is not based upon any factual, legal or other representations or promises made by Power Agency or a

SA-XII-8 Participant not contained in this document, the Sales Agreement, the Power Coordination Agreement or the Operating Agreement; and it fully understands that if the facts or law with respect to which this covenant Not To Sue, Indemnification and Release is executed are or may be found hereaf ter to be other than, or different from the facts or law in that connection now believed by CP& L to be true, CP&L expressly accepts and assumes the risk of such possible difference and agrees that the covenant not to sue, indemnification and release herein given shall be and remain effective notwithstanding any such difference.

5. CP&L acknowledges that the Sales Agreement, the Power Coordination Agreement, and the Operating Agreement may be l

amended from time to time. CP&L also acknowledges that CP&L may sell interests in the Joint Facilities to other entities on terms and conditions more or less f avorable to CP&L than those contained in the Sales Agreement, and in connection therewith CP&L may assign to such entities certain of its rights and obligations under the Power Coordination Agreement and the Operating Agreement on terms or conditions more or less favorable than those contained .in such agreements for CP&L; and (b) that, under circumstances set forth in the Sales Agreement, Power Agency may under certain circumstances sell interests in the i

SA-XII-9 Joint _ Facilities to, and assign rights and obligations under such agreements to, other entities. CP&L expressly acknowledges that in the event of any such amendment, sale or assignment, the covenant not to sue, indemnification and release herein given shall be and remain in full force and effect as to Power Agency and each Participant.

6. CP&L represents and warrarts that it has not made or suffered to be made any assignment or transfer of any claims herein purported to be released, or for which it has covenanted not to sue.

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7. If, because any of the warranties or agreements contained in this Covenant Not To Sue, Indemnification and Release are breached by CP&L, or because any of the f.

l representations by CP&L herein are inaccurate, claims are asserted against Power Agency or any Participant by any person,

! CP&L agrees to indemnify and hold Power Agency or such l Participant harmless from any such claims.

l 8. CP&L agrees that this Covenant Not To Sue, l

Indemnification and Release shall be binding on it, its departments, divisions, predecessors, successors, assigns, affiliated companies and subsidiaries, and any person claiming through, by or under it or them, and each of them, and shall inure to the benefit of Power Agency and each Participant.

SA-XII-10

9. In the event a court or other tribunal of competent jurisdiction at any time holds that any provision of this Covenant Not To Sue, Indemnification and Release is invalid, the remainder hereof shall not be af fected by such holding and shall continue in full force and effect.
10. This Covenant Not To Sue, Indemnification and Release shall be effective as of , 198_, upon delivery to Power Agency or a Participant, as the case may be. In the event there is no closing pursuant to the Sales Agreement, the provisions of this Covenant Not To Sue, Indemnification and Release shall apply only to the Special Claims defined in paragraph 1(b) hereof.

L IN WITNESS WHEREOF, CP&L has caused these presents to be signed and sealed, the P(. arat year first above mentioned,1 by its representative ther< acr. .uly authorized.

l Carolina Power & Light Company l

By ATTEST:

Title:

Secretary

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L- SA-XIII-1~

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i j' ' Form of Release - Prom Trustee Under the Company' Mortgage I

(Format to be developed at least 30 days prior to the First Closing Date. The format agreed upon shall then be deemed Exhibit SA-XIII-l and shall be substituted for this page. )

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SA-XIV-1 Unit Purchase (Format to be developed at least 30 days prior to the First Closing Date. The format agreed upon shall then be deemed Exhibit SA-;'IV-1 and shall be substituted for this page. )

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SA-XV-1 Boundaries of the Brunswick Plant

( Forma t to be developed at least 30 days prior to the First Closing Date. The format agreed upon shall then be deemed Exhibit SA-XV-1 and shall be substituted for this page.)

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J SA-XVI-l Boundaries of the Harris Plant f

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I (Format to be developed at least 30 days prior to the First Closing Date. The format agreed upon shall then be deemed Exhibit SA-XVI-1 and shall be substituted for this page. )

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SA-XVII-l Boundaries of the Mayo Plant

( Format to be developed at least 30 days prior to the First Closing Date. The format agreed upon shall then be deemed Exhibit SA-XVII-1 and shall be substituted for this page.)

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ist . :SA-XVIII Boundaries of"Roxboro Unit'No. 4 l

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( Format to ' be dev > ped at least 30 days prior to the First

. Closing Date. TL format agreed upon shall then be deemed Exhibit SA-XVIII-l and shall'be substituted for this page.)

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SA-XIX-1 Roxboro Common Support Facilities

( Fo rma t to be developed at least 30 days prior to the First Closing Date. The format agreed upon shall then be deemed I

Exhibit SA-XIX-1 and shall be substituted for this page. )

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SA-XX-1 Projected Demands of Power Agency Participants

( Format to be developed at least 30 days prior to the First Closing Da t e . The format agreed upon sha.'.1 then be deemed Exhibit SA-XX-1 and shall be substituted for this page. )

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SA-XXI-l CURRENT COST OF NEW CAPITAL L

CP&L's Capital Related Costs CP&L's capital related cost (current cost of new capital)-shall consist of return and income taxes as' calculated in accordance with the methodology set forth in Exhibits PCA-II-18 through PCA-II-21 of the Power Coordination Agreement, except that the capitalization ratios shall be calculated using weighted daily average capitalization amounts for the most recent j twelve-month period at the time the calculation is made and the cost of long-term debt and preferred (and preference) stock shall
be calculated using the cost of the most recent issue of l

long-term debt and preferred (or preference) stock, l respectively.

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Power Agency's Capital Related Costs i

f Power Agency's capital related costs (expressed as a percent) for the purposes of Sections 1.15 and 1.29 of this l Acreement shall be calculated as follows:

Formula is: Percent = (A x B) -D (B - C)

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SA-XXI-2 Where: A = Weighted average coupon interest rate (%) on all outstanding debt issued by Power Agency; B = Aggregate principal amount of bonds (S) issued and outstanding by Power Agen'y to the date of f

calculation; and C = Total amount paid by Power Agency for:

(1) Bond discount including original issue discount, if any, paid from bond proceeds; plus (2) Required deposit from bond proceeds into a reserve account in the bond fund ; plus (3) Required deposit into a renewa] and replacement fund f rom bond proceeds.

D = Any interest earn.s'ags that may accrue in the reserve accounts described in C(2) and (3) above.

SA-XXII-l Measuring Lives

( Format to be developed at least 30 days prior to the First Closing Date. The format agreed upon shall then be deemed Exhibit SA-XXII-1 and shall be substituted for this page.)

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l i-I SA-XXIII-1

[ Trust Agreement t

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(Format to be developed at least 30 days prior to the First Closing Date. _ The format agreed upon shall then be deemed Exhibit SA-XXIII-1 and shall be substituted for this page. )

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