Exhibit 10.1

Execution Version

 

 

 

PIEDMONT NATURAL GAS COMPANY, INC.

$100,000,000 3.47% Series A Senior Notes due July 16, 2027

$200,000,000 3.57% Series B Senior Notes due July 16, 2027

 

 

NOTE PURCHASE AGREEMENT

 

 

Dated March 27, 2012

 

 

 

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TABLE OF CONTENTS

 

               Page   1.   

AUTHORIZATION OF NOTES

     1    2.   

SALE AND PURCHASE OF NOTES

     1    3.   

CLOSINGS

     2      

3.1.

  

Document Execution

     2      

3.2.

  

Series A Closing

     2      

3.3.

  

Series B Closing

     2    4.   

CONDITIONS TO CLOSING

     3      

4.1.

  

Representations and Warranties

     3      

4.2.

  

Performance; No Default

     3       4.3.   

Compliance Certificates

     3       4.4.   

Opinions of Counsel

     4       4.5.   

Purchase Permitted By Applicable Law, Etc.

     4       4.6.   

Sale of Other Notes

     4       4.7.   

Payment of Special Counsel Fees

     4       4.8.   

Private Placement Number

     4       4.9.   

Changes in Corporate Structure

     4       4.10.   

Funding Instructions

     5       4.11.   

Proceedings and Documents

     5       4.12.   

No Amendments and No Waiver

     5    5.   

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     5       5.1.   

Organization; Power and Authority

     5       5.2.   

Authorization, Etc.

     5       5.3.   

Disclosure

     6       5.4.   

Organization and Ownership of Shares of Subsidiaries

     6       5.5.   

Financial Statements; Material Liabilities

     7       5.6.   

Compliance with Laws, Other Instruments, Etc.

     7       5.7.   

Governmental Authorizations, Etc.

     7       5.8.   

Litigation; Observance of Statutes and Orders

     7       5.9.   

Taxes

     8       5.10.   

Title to Property; Leases

     8       5.11.   

Licenses, Permits, Etc.

     8       5.12.   

Compliance with ERISA

     8       5.13.   

Private Offering by the Company

     9       5.14.   

Use of Proceeds; Margin Regulations

     9       5.15.   

Existing Indebtedness

     10       5.16.   

Foreign Assets Control Regulations, Etc.

     10       5.17.   

Status under Certain Statutes

     11   

 

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TABLE OF CONTENTS

(continued)

 

               Page     

5.18.

  

Pari Passu Obligations

     11   

6.

  

REPRESENTATIONS OF THE PURCHASERS

     12      

6.1.

  

Purchase for Investment

     12      

6.2.

  

Source of Funds

     12      

6.3.

  

Accredited Investor

     14   

7.

  

INFORMATION AS TO COMPANY

     14      

7.1.

  

Financial Statements

     14      

7.2.

  

Certificates; Other Information

     15      

7.3.

  

Notices

     16      

7.4.

  

Visitation

     17   

8.

  

PAYMENT AND PREPAYMENT OF THE NOTES

     17      

8.1.

  

Maturity

     17      

8.2.

  

Optional Prepayments with Make-Whole Amount

     17      

8.3.

  

Allocation of Partial Prepayments

     18      

8.4.

  

Maturity; Surrender, Etc.

     18      

8.5.

  

Purchase of Notes

     18      

8.6.

  

Make-Whole Amount

     19      

8.7.

  

Change in Control

     20   

9.

  

AFFIRMATIVE COVENANTS

     22      

9.1.

  

Compliance with Law

     22      

9.2.

  

Insurance

     22      

9.3.

  

Maintenance of Properties

     22      

9.4.

  

Payment of Obligations

     22      

9.5.

  

Corporate Existence, Etc.

     22      

9.6.

  

Books and Records

     23      

9.7.

  

Ranking

     23      

9.8.

  

Guarantors

     23   

10.

  

NEGATIVE COVENANTS

     23      

10.1.

  

Transactions with Affiliates

     24      

10.2.

  

Merger, Consolidation, Etc.

     24      

10.3.

  

Terrorism Sanctions Regulations

     24      

10.4.

  

Liens

     25      

10.5.

  

Leverage Ratio

     26      

10.6.

  

Change in Nature of Business

     26   

 

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TABLE OF CONTENTS

(continued)

 

               Page  

11.

  

EVENTS OF DEFAULT

     26   

12.

  

REMEDIES ON DEFAULT, ETC.

     29      

12.1.

  

Acceleration

     29      

12.2.

  

Other Remedies

     29      

12.3.

  

Rescission

     29      

12.4.

  

No Waivers or Election of Remedies, Expenses, Etc.

     30   

13.

  

REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES

     30      

13.1.

  

Registration of Notes

     30      

13.2.

  

Transfer and Exchange of Notes

     30      

13.3.

  

Replacement of Notes

     31   

14.

  

PAYMENTS ON NOTES

     31      

14.1.

  

Place of Payment

     31      

14.2.

  

Home Office Payment

     31   

15.

  

EXPENSES, ETC.

     32      

15.1.

  

Transaction Expenses

     32      

15.2.

  

Survival

     33   

16.

  

SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT

     33   

17.

  

AMENDMENT AND WAIVER

     33      

17.1.

  

Requirements

     33      

17.2.

  

Solicitation of Holders of Notes

     33      

17.3.

  

Binding Effect, etc.

     34      

17.4.

  

Notes Held by Company, etc.

     34   

18.

  

NOTICES

     35   

19.

  

REPRODUCTION OF DOCUMENTS

     36   

20.

  

CONFIDENTIAL INFORMATION

     37   

21.

  

SUBSTITUTION OF PURCHASER

     38   

22.

  

MISCELLANEOUS

     38   

 

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TABLE OF CONTENTS

(continued)

 

               Page     

22.1.

  

Successors and Assigns

     38      

22.2.

  

Payments Due on Non-Business Days

     38      

22.3.

  

Accounting Terms

     38      

22.4.

  

Severability

     39      

22.5.

  

Construction, etc.

     39      

22.6.

  

Counterparts

     39      

22.7.

  

Governing Law

     39      

22.8.

  

Jurisdiction and Process; Waiver of Jury Trial

     40      

22.9.

  

Paying Agent

     40   

 

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SCHEDULE A   —      Information Relating to Purchasers SCHEDULE B   —     
Defined Terms SCHEDULE 5.3   —      Disclosure Materials SCHEDULE 5.4   —     
Subsidiaries of the Company and Ownership of Subsidiary Stock SCHEDULE 5.5   —
     Financial Statements SCHEDULE 5.15   —      Existing Indebtedness SCHEDULE
10.4   —      Existing Liens EXHIBIT 1(a)   —      Form of 3.47% Series A Senior
Note due July 16, 2027 EXHIBIT 1(b)   —      Form of 3.57% Series B Senior Note
due July 16, 2027 EXHIBIT 4.4(a)(i)   —      Form of Opinion of Special Counsel
for the Company EXHIBIT 4.4(a)(ii)   —      Form of Opinion of In-House Counsel
for the Company EXHIBIT 4.4(b)   —      Form of Opinion of Special Counsel for
the Purchasers

 

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PIEDMONT NATURAL GAS COMPANY, INC.

4720 Piedmont Row Drive

Charlotte, North Carolina 28210

 

 

$100,000,000 3.47% Series A Senior Notes due July 16, 2027

$200,000,000 3.57% Series B Senior Notes due July 16, 2027

March 27, 2012

TO EACH OF THE PURCHASERS LISTED IN SCHEDULE A HERETO:

Ladies and Gentlemen:

PIEDMONT NATURAL GAS COMPANY, INC., a North Carolina corporation (the
“Company”), agrees with each of the purchasers whose names appear at the end
hereof (each, a “Purchaser” and, collectively, the “Purchasers”) as follows:

 

1. AUTHORIZATION OF NOTES.

The Company will authorize the issue and sale of (i) $100,000,000 aggregate
principal amount of its 3.47% Series A Senior Notes due July 16, 2027 (the
“Series A Notes”) and (ii) $200,000,000 aggregate principal amount of its 3.57%
Series B Senior Notes due July 16, 2027 (the “Series B Notes” and, together with
the Series A Notes, the “Notes”, such term to include any such notes issued in
substitution therefor pursuant to Section 13). The Notes shall be substantially
in the forms set out in Exhibit 1(a) and Exhibit 1(b), respectively. Certain
capitalized and other terms used in this Agreement are defined in Schedule B;
and references to a “Schedule” or an “Exhibit” are, unless otherwise specified,
to a Schedule or an Exhibit attached to this Agreement.

 

2. SALE AND PURCHASE OF NOTES.

Subject to the terms and conditions of this Agreement, the Company will issue
and sell to each Purchaser and each Purchaser will purchase from the Company, at
the Closings provided for in Section 3, Notes in the principal amount specified
opposite such Purchaser’s name in Schedule A at the purchase price of 100% of
the principal amount thereof. The Purchasers’ obligations hereunder are several
and not joint obligations and no Purchaser shall have any liability to any
Person for the performance or non-performance of any obligation by any other
Purchaser hereunder.

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3. CLOSINGS.

3.1. Document Execution. The execution and delivery of this Agreement shall
occur at the offices of Bingham McCutchen LLP, 399 Park Avenue, New York, New
York 10022-4689 at 10:00 a.m., New York time, on March 27, 2012.

3.2. Series A Closing. The sale and purchase of the Series A Notes to be
purchased by each Purchaser shall occur at the offices of Bingham McCutchen LLP,
399 Park Avenue, New York, New York 10022-4689, at 11:00 a.m., New York time, at
a closing (the “Series A Closing”) on July 16, 2012 or on such other Business
Day thereafter on or prior to July 20, 2012 as may be agreed upon by the Company
and the Purchasers. At the Series A Closing, the Company will deliver to each
Purchaser the Series A Notes to be purchased by such Purchaser in the form of a
single Series A Note (or such greater number of Series A Notes in denominations
of at least $1,000,000, as such Purchaser may request) dated the date of the
Series A Closing and registered in such Purchaser’s name (or in the name of its
nominee), against delivery by such Purchaser to the Company or its order of
immediately available funds in the amount of the purchase price therefor by wire
transfer of immediately available funds for the account of the Company to
account number XXXXXXX at Bank of America, N.A., ABA number XXXXXXX. If at the
Series A Closing the Company shall fail to tender such Series A Notes to any
Purchaser as provided above in this Section 3.2, or any of the conditions
specified in Section 4 shall not have been fulfilled to such Purchaser’s
satisfaction, such Purchaser shall, at its election, be relieved of all further
obligations under this Agreement, without thereby waiving any rights such
Purchaser may have by reason of such failure or such nonfulfillment.

3.3. Series B Closing. The sale and purchase of the Series B Notes to be
purchased by each Purchaser shall occur at the offices of Bingham McCutchen LLP,
399 Park Avenue, New York, New York 10022-4689, at 11:00 a.m., New York time, at
a closing (the “Series B Closing” and together with the Series A Closing, the
“Closings” and each individually a “Closing”) on October 15, 2012 or on such
other Business Day thereafter on or prior to October 19, 2012 as may be agreed
upon by the Company and the Purchasers. At the Series B Closing, the Company
will deliver to each Purchaser the Series B Notes to be purchased by such
Purchaser in the form of a single Series B Note (or such greater number of
Series B Notes in denominations of at least $1,000,000, as such Purchaser may
request) dated the date of the Series B Closing and registered in such
Purchaser’s name (or in the name of its nominee), against delivery by such
Purchaser to the Company or its order of immediately available funds in the
amount of the purchase price therefor by wire transfer of immediately available
funds for the account of the Company to account number XXXXXXX at Bank of
America, N.A., ABA number XXXXXXX. If at the Series B Closing the Company shall
fail to tender such Series B Notes to any Purchaser as provided above in this
Section 3.3, or any of the conditions specified in Section 4 shall not have been
fulfilled to such Purchaser’s satisfaction, such Purchaser shall, at its
election, be relieved of all further obligations under this Agreement, without
thereby waiving any rights such Purchaser may have by reason of such failure or
such nonfulfillment.

 

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4. CONDITIONS TO CLOSING.

Each Purchaser’s obligation to purchase and pay for the Notes to be sold to such
Purchaser at each Closing is subject to the fulfillment to such Purchaser’s
satisfaction, prior to or at such Closing, of the following conditions:

4.1. Representations and Warranties. The representations and warranties of the
Company in this Agreement shall be correct when made as of the date of this
Agreement and at the time of such Closing, except that with respect to such
Closing:

(a) the Company may supplement Schedule 5.4 with the required information as to
Subsidiaries formed or acquired after the date of this Agreement so long as, as
of such Closing, the ratio set forth in Section 10.5 as of the last day of the
most recent fiscal quarter ended prior to the date of such Closing determined on
a pro forma basis as if any Subsidiaries formed or acquired after such last day
had been formed or acquired on such last day, is equal to or less than 0.60 to
1.00;

(b) the Company may supplement Schedules 5.5 and 5.15 with the required
information for (i) increased funding of the Company’s working capital needs
through draws under the Credit Agreement (or use of the “accordion” feature of
such facility), the issuance of commercial paper or the incurrence of other
short-term Indebtedness and (ii) the incurrence of Indebtedness after the date
of this Agreement (other than Indebtedness permitted pursuant to the foregoing
Section 4.1(b)(i)) so long as Consolidated Funded Indebtedness as of such
Closing is not more than 60% of the sum of Consolidated Funded Indebtedness
determined as of the date of such Closing plus Shareholders’ Equity determined
as of the last day of the most recent fiscal quarter ended before the date of
such Closing; and

(c) the Company may replace the year referred to in the last sentence of
Section 5.9 with a more recent year.

4.2. Performance; No Default. The Company shall have performed and complied with
all agreements and conditions contained in this Agreement required to be
performed or complied with by it prior to or at such Closing and after giving
effect to the issue and sale of the Notes (and the application of the proceeds
thereof as contemplated by Section 5.14) no Change in Control shall have
occurred and no Default or Event of Default shall have occurred and be
continuing.

4.3. Compliance Certificates.

(a) Officer’s Certificate. The Company shall have delivered to such Purchaser an
Officer’s Certificate, dated the date of such Closing, certifying that the
conditions specified in Sections 4.1, 4.2 and 4.9 have been fulfilled.

(b) Secretary’s Certificate. The Company shall have delivered to such Purchaser
a certificate of its Corporate Secretary or Assistant Corporate Secretary, dated
the date of such Closing, certifying as to the resolutions attached thereto and
other

 

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corporate proceedings relating to the authorization, execution and delivery of
the Notes and this Agreement.

4.4. Opinions of Counsel. Such Purchaser shall have received opinions dated the
date of such Closing (a) from (i) Moore & Van Allen PLLC, special counsel for
the Company and (ii) in-house counsel for the Company, substantially in the
forms set forth in Exhibit 4.4(a)(i) and Exhibit 4.4(a)(ii), respectively, (and
the Company hereby instructs its counsel to deliver such opinions to the
Purchasers) and (b) from Bingham McCutchen LLP, the Purchasers’ special counsel
in connection with such transactions, substantially in the form set forth in
Exhibit 4.4(b).

4.5. Purchase Permitted By Applicable Law, Etc. There shall not have occurred
any Change in Law after the date hereof such that, pursuant to such Change in
Law, on the date of such Closing, such Purchaser’s purchase of Notes (a) is not
permitted by the laws and regulations of each jurisdiction to which such
Purchaser is subject, without recourse to provisions (such as section 1405(a)(8)
of the New York Insurance Law) permitting limited investments by insurance
companies without restriction as to the character of the particular investment,
(b) violates any applicable law or regulation (including, without limitation,
Regulation T, U or X of the Board of Governors of the Federal Reserve System) or
(c) subjects such Purchaser to any tax, penalty or liability under or pursuant
to any applicable law or regulation, which law or regulation was not in effect
on the date hereof. If requested by such Purchaser respecting any such Change in
Law, such Purchaser shall have received an Officer’s Certificate certifying as
to such matters of fact as such Purchaser may reasonably specify to enable such
Purchaser to determine whether such purchase is so permitted.

4.6. Sale of Other Notes. Contemporaneously with such Closing the Company shall
offer to sell to each other Purchaser the Notes to be purchased by it at such
Closing as specified in Schedule A.

4.7. Payment of Special Counsel Fees. Without limiting the provisions of
Section 15.1, the Company shall have paid on or before such Closing the fees,
charges and disbursements of the Purchasers’ special counsel referred to in
Section 4.4 to the extent reflected in a statement of such counsel rendered to
the Company at least two Business Days prior to such Closing.

4.8. Private Placement Number. A Private Placement Number issued by Standard &
Poor’s CUSIP Service Bureau (in cooperation with the SVO) shall have been
obtained for the Notes.

4.9. Changes in Corporate Structure. The Company shall not have changed its
jurisdiction of incorporation or organization, as applicable, or been a party to
any merger or consolidation or succeeded to all or any substantial part of the
liabilities of any other entity, at any time following the date of the most
recent financial statements referred to in Schedule 5.5.

 

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4.10. Funding Instructions. At least three Business Days prior to the date of
such Closing, each Purchaser shall have received written instructions signed by
a Responsible Officer on letterhead of the Company confirming the bank and
account information specified in Section 3 including (i) the name and address of
the transferee bank, (ii) such transferee bank’s ABA number and (iii) the
account name and number into which the purchase price for the Notes is to be
deposited.

4.11. Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated by this Agreement and all
documents and instruments incident to such transactions shall be reasonably
satisfactory to such Purchaser and its special counsel, and such Purchaser and
its special counsel shall have received all such counterpart originals or
certified or other copies of such documents as such Purchaser or such special
counsel may reasonably request.

4.12. No Amendments and No Waiver. Except for amendments, supplements or other
modifications of Schedules 5.4, 5.5 and 5.15 and Section 5.9 (to the extent
effected pursuant to Sections 4.1(a) – (c)), no amendments, supplements or other
modifications shall have been made to this Agreement and no provision of this
Agreement shall have been waived before such Closing without the written consent
of each Purchaser purchasing Notes on the date of such Closing. All references
in this Agreement to any of Schedules 5.4, 5.5 and 5.15 and Section 5.9 shall be
deemed to include any and all amendments, supplements and other modifications to
such Schedules and Section 5.9, respectively, to the extent effected pursuant to
Sections 4.1(a) – (c).

 

5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

The Company represents and warrants to each Purchaser that:

5.1. Organization; Power and Authority. The Company is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and is duly qualified as a foreign corporation
and is in good standing in each jurisdiction in which such qualification is
required by law, other than those jurisdictions as to which the failure to be so
qualified or in good standing could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. The Company has the
corporate power and authority to own or hold under lease the properties it
purports to own or hold under lease and to transact the business it transacts
and proposes to transact, except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. The Company has the
corporate power and authority to execute and deliver this Agreement and the
Notes and to perform the provisions hereof and thereof.

5.2. Authorization, Etc. This Agreement and the Notes have been duly authorized
by all necessary corporate action on the part of the Company, and this Agreement
constitutes, and upon execution and delivery thereof each Note will constitute,
a legal, valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, except as such enforceability may be
limited by (i) applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium

 

5

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or other similar laws affecting the enforcement of creditors’ rights generally
and (ii) general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law).

5.3. Disclosure. The Company, through its agent, J.P. Morgan Securities LLC, has
delivered to each Purchaser a copy of a Private Placement Memorandum, dated
February 2012 (the “Memorandum”), relating to the transactions contemplated
hereby. This Agreement, the Memorandum and the documents, certificates or other
writings delivered to the Purchasers by or on behalf of the Company in
connection with the transactions contemplated hereby and identified in Schedule
5.3, and the financial statements listed in Schedule 5.5 (this Agreement, the
Memorandum and such documents, certificates or other writings and such financial
statements delivered to each Purchaser prior to March 12, 2012 being referred
to, collectively, as the “Disclosure Documents”), taken as a whole and including
any information incorporated therein by reference, do not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. Except as disclosed in the Disclosure Documents (including
by incorporation by reference), since October 31, 2011, there has been no change
in the financial condition, operations, business or properties of the Company or
any of its Subsidiaries except changes that individually or in the aggregate
would not reasonably be expected to have a Material Adverse Effect.

5.4. Organization and Ownership of Shares of Subsidiaries.

(a) Schedule 5.4 is (except as noted therein) a complete and correct list of the
Company’s Subsidiaries, showing, as to each Subsidiary, the correct name
thereof, the jurisdiction of its organization, and the percentage of shares of
each class of its capital stock or similar Equity Interests outstanding owned by
the Company and each other Subsidiary.

(b) All of the outstanding shares of capital stock or similar Equity Interests
of each Subsidiary shown in Schedule 5.4 as being owned by the Company and its
Subsidiaries have been validly issued, are fully paid and nonassessable and are
owned by the Company or another Subsidiary free and clear of any Lien (except as
otherwise disclosed in Schedule 5.4).

(c) Each Subsidiary identified in Schedule 5.4 is a corporation or other legal
entity duly organized, validly existing and in good standing under the laws of
its jurisdiction of organization, and is duly qualified as a foreign corporation
or other legal entity and is in good standing in each jurisdiction in which such
qualification is required by law, other than those jurisdictions as to which the
failure to be so qualified or in good standing could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. Each such
Subsidiary has the corporate or other power and authority to own or hold under
lease the properties it purports to own or hold under lease and to transact the
business it transacts and proposes to transact, except as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

 

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(d) No Subsidiary is a party to, or otherwise subject to any legal, regulatory,
contractual or other restriction (other than this Agreement, the agreements
listed on Schedule 5.4 and customary limitations imposed by corporate law or
similar statutes) restricting the ability of such Subsidiary to pay dividends
out of profits or make any other similar distributions of profits to the Company
or any of its Subsidiaries that owns outstanding shares of capital stock or
similar Equity Interests of such Subsidiary.

5.5. Financial Statements; Material Liabilities. The Company has delivered to
each Purchaser copies of the consolidated financial statements of the Company
and its Subsidiaries listed on Schedule 5.5. All of said financial statements
(including in each case the related schedules and notes) fairly present in all
material respects the consolidated financial position of the Company and its
Subsidiaries as of the respective dates specified in such Schedule and the
consolidated results of their operations and cash flows for the respective
periods so specified and have been prepared in accordance with GAAP consistently
applied throughout the periods involved except as set forth in the notes thereto
(subject, in the case of any interim financial statements, to normal year-end
adjustments). The Company and its Subsidiaries do not have any Material
liabilities that are not disclosed on such financial statements or are not
otherwise disclosed in the Disclosure Documents.

5.6. Compliance with Laws, Other Instruments, Etc. The execution, delivery and
performance by the Company of this Agreement and the Notes will not
(i) contravene the Company’s corporate charter or by-laws, (ii) result in any
breach of, or constitute a default under, or result in the creation of any Lien
in respect of any property of the Company, or any Subsidiary, under any
indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease,
or any other agreement or instrument to which the Company or any Subsidiary is
bound or by which the Company or any Subsidiary or any of their respective
properties may be bound or affected, (iii) conflict with or result in a breach
of any of the terms, conditions or provisions of any order, judgment, decree, or
ruling of any court, arbitrator or Governmental Authority applicable to the
Company or any Subsidiary or (iv) violate any provision of any statute or other
rule or regulation of any Governmental Authority applicable to the Company or
any Subsidiary (including, without limitation, PUHCA or the Federal Power Act,
as amended), except in each of the cases referenced in clauses (ii), (iii) or
(iv), as would not reasonably be expected to result in a Material Adverse
Effect.

5.7. Governmental Authorizations, Etc. No consent, approval or authorization of,
or registration, filing or declaration with, any Governmental Authority is
required in connection with the execution, delivery or performance by the
Company of this Agreement and the Notes (including, without limitation, any
thereof under PUHCA, the Natural Gas Act or the Federal Power Act, each as
amended), other than such as have been obtained or made, as applicable.

5.8. Litigation; Observance of Statutes and Orders. (a) There are no actions,
suits, investigations or proceedings pending or, to the knowledge of the
Company, threatened against or affecting the Company or any Subsidiary or any
property of the Company or any Subsidiary in any court or before any arbitrator
of any kind or

 

7

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before or by any Governmental Authority that, individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect.

(b) Neither the Company nor any Subsidiary is in default under any order,
judgment, decree or ruling of any court, arbitrator or Governmental Authority or
is in violation of any applicable law, ordinance, rule or regulation (including
without limitation Environmental Laws or, the USA Patriot Act or any of the
other laws and regulations referred to in Section 5.16) of any Governmental
Authority, which default or violation, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect.

5.9. Taxes. The Company and its Subsidiaries have filed all Material income tax
returns that are required to have been filed in any jurisdiction, and have paid
all taxes shown to be due and payable on such returns and all other taxes and
assessments payable by them, to the extent such taxes and assessments have
become due and payable and before they have become delinquent, except for any
taxes and assessments (i) the amount of which is not individually or in the
aggregate Material or (ii) the amount, applicability or validity of which is
currently being contested in good faith by appropriate proceedings and with
respect to which the Company or a Subsidiary, as the case may be, has
established adequate reserves in accordance with GAAP. The United States federal
income tax liabilities of the Company and its Subsidiaries have been finally
determined (whether by reason of completed audits or the statute of limitations
having run) for all fiscal years up to and including the fiscal year ended
October 31, 2008.

5.10. Title to Property; Leases. The Company and its Subsidiaries have good and
sufficient title to, or valid leasehold interests in, their respective Material
properties, including all such properties reflected in the most recent audited
balance sheet referred to in Section 5.5 or purported to have been acquired by
the Company or any Subsidiary after said date (except as sold or otherwise
disposed of), in each case free and clear of Liens prohibited by this Agreement,
except for those defects in title and Liens that, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect.

5.11. Licenses, Permits, Etc. The Company and its Subsidiaries own or possess
all licenses, permits, franchises, authorizations, patents, copyrights,
proprietary software, service marks, trademarks and trade names, or rights
thereto, that are Material, without known conflict with the rights of others,
except for those conflicts that, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect.

5.12. Compliance with ERISA. (a) The Company and each ERISA Affiliate have
operated and administered each Plan in compliance with all applicable laws
except for such instances of noncompliance as have not resulted in and would not
reasonably be expected to result in a Material Adverse Effect. Neither the
Company nor any ERISA Affiliate has incurred any liability pursuant to Title I
or IV of ERISA or the penalty or excise tax provisions of the Code relating to
employee benefit plans (as defined in section 3 of ERISA), and no event,
transaction or condition has occurred or exists that would reasonably be
expected to result in the incurrence of any such liability by the

 

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Company or any ERISA Affiliate, or in the imposition of any Lien on any of the
rights, properties or assets of the Company or any ERISA Affiliate, in either
case pursuant to Title I or IV of ERISA or to such penalty or excise tax
provisions or to section 401(a)(29) or 412 of the Code or section 4068 of ERISA,
other than such liabilities or Liens as would not be individually or in the
aggregate Material.

(b) The present value of the aggregate benefit liabilities under each Plan
subject to Title IV of ERISA (other than Multiemployer Plans), determined as of
the end of such Plan’s most recently ended plan year on the basis of the
actuarial assumptions specified for funding purposes in such Plan’s most recent
actuarial valuation report, did not exceed the aggregate current value of the
assets of such Plan allocable to such benefit liabilities. The term “benefit
liabilities” has the meaning specified in section 4001 of ERISA and the terms
“current value” and “present value” have the meaning specified in section 3 of
ERISA.

(c) The Company and its ERISA Affiliates have not incurred withdrawal
liabilities (and are not subject to contingent withdrawal liabilities) under
section 4201 or 4204 of ERISA in respect of Multiemployer Plans that
individually or in the aggregate are Material.

(d) The expected postretirement benefit obligation (determined as of the last
day of the Company’s most recently ended fiscal year in accordance with
Financial Accounting Standards Board Codification Topic 715 “Compensation –
Retirement Benefits”, without regard to liabilities attributable to continuation
coverage mandated by section 4980B of the Code) of the Company and its
Subsidiaries is not Material.

(e) The execution and delivery of this Agreement and the issuance and sale of
the Notes hereunder will not involve any transaction that is subject to the
prohibitions of section 406 of ERISA for which a tax could be imposed pursuant
to section 4975(c)(1)(A)-(D) of the Code. The representation by the Company to
each Purchaser in the first sentence of this Section 5.12(e) is made in reliance
upon and subject to the accuracy of such Purchaser’s representation in
Section 6.2 as to the sources of the funds used to pay the purchase price of the
Notes to be purchased by such Purchaser.

5.13. Private Offering by the Company. Neither the Company nor anyone acting on
its behalf has offered the Notes or any similar Securities for sale to, or
solicited any offer to buy any of the same from, or otherwise approached or
negotiated in respect thereof with, any Person other than 70 Institutional
Investors (as defined in clause (c) of the definition of such term) (including
the Purchasers), each of which has been offered the Notes at a private sale for
investment. Neither the Company nor anyone acting on its behalf has taken, or
will take, any action that would subject the issuance or sale of the Notes to
the registration requirements of section 5 of the Securities Act or to the
registration requirements of any securities or blue sky laws of any applicable
jurisdiction.

5.14. Use of Proceeds; Margin Regulations. The Company will apply the proceeds
of the sale of the Notes for general corporate purposes, including, but not
limited to, working capital needs and capital expenditures, and to refinance
outstanding

 

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borrowings. No part of the proceeds from the sale of the Notes hereunder will be
used, directly or indirectly, for the purpose of buying or carrying any margin
stock within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System (12 CFR 221), or for the purpose of buying or carrying or
trading in any Securities under such circumstances as to involve the Company in
a violation of Regulation X of said Board (12 CFR 224) or to involve any broker
or dealer in a violation of Regulation T of said Board (12 CFR 220). Margin
stock does not constitute more than 5% of the value of the consolidated assets
of the Company and its Subsidiaries and the Company does not have any present
intention that margin stock will constitute more than 5% of the value of such
assets. As used in this Section, the terms “margin stock” and “purpose of buying
or carrying” shall have the meanings assigned to them in said Regulation U.

5.15. Existing Indebtedness. (a) Except as described therein, Schedule 5.15 sets
forth a complete and correct list of all outstanding Indebtedness of the Company
and its Subsidiaries as of January 31, 2012 (including a description of the
obligors and obligees, principal amount outstanding and collateral therefor, if
any, and Guarantee thereof, if any), and, except as described in Schedule 5.15,
there has been no Material change in the amounts, interest rates, sinking funds,
installment payments or maturities of the Indebtedness of the Company or its
Subsidiaries. Neither the Company nor any Subsidiary is in default and no waiver
of default is currently in effect, in the payment of any principal or interest
on any Indebtedness of the Company or such Subsidiary and no event or condition
exists with respect to any Indebtedness of the Company or any Subsidiary the
outstanding principal amount of which exceeds $10,000,000 that would permit (or
that with notice or the lapse of time, or both, would permit) one or more
Persons to cause such Indebtedness to become due and payable before its stated
maturity or before its regularly scheduled dates of payment.

(b) Neither the Company nor any Subsidiary is a party to, or otherwise subject
to any provision contained in, any instrument evidencing Indebtedness of the
Company or such Subsidiary, any agreement relating thereto or any other
agreement (including, but not limited to, its charter or other organizational
document) which limits the amount of, or otherwise imposes restrictions on the
incurring of, Indebtedness of the Company, except as specifically indicated in
Schedule 5.15.

5.16. Foreign Assets Control Regulations, Etc.

(a) Neither the Company nor any Affiliated Entity is (i) a Person whose name
appears on the list of Specially Designated Nationals and Blocked Persons
published by the Office of Foreign Assets Control Order or U.S. Department of
Treasury (“OFAC”) (an “OFAC Listed Person”), (ii) a department, agency or
instrumentality of, or is otherwise controlled by or acting on behalf of,
directly or indirectly, (x) any OFAC Listed Person, or (y) the government of a
country subject to comprehensive U.S. economic sanctions administered by OFAC
(the “Country Sanctions”), or (iii) a Person subject to the Country Sanctions
(each OFAC Listed Person and each other Person described in clause (ii) or
(iii), a “Blocked Person”).

 

10

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(b) No part of the proceeds from the sale of the Notes hereunder constitutes or
will constitute funds obtained on behalf of any Blocked Person or will otherwise
be used, directly by the Company or indirectly through any Affiliated Entity, in
connection with any investment in, or knowingly in any transactions or dealings
with, any Blocked Person.

(c) To the Company’s actual knowledge after making due inquiry, neither the
Company nor any Affiliated Entity (i) is under investigation by any Governmental
Authority for, or has been charged with, or convicted of, money laundering, drug
trafficking, terrorist-related activities or other money laundering predicate
crimes under any applicable law (collectively, “Anti-Money Laundering Laws”),
(ii) has been assessed civil penalties under any Anti-Money Laundering Laws or
(iii) has had any of its funds seized or forfeited in an action under any
Anti-Money Laundering Laws. The Company has taken reasonable measures
appropriate to the circumstances (in any event as required by applicable law),
to ensure that the Company and each Affiliated Entity is and will continue to be
in compliance with all applicable Anti-Money Laundering Laws, except to the
extent failure to do so would not reasonably be expected to result in a Material
Adverse Effect.

(d) No part of the proceeds from the sale of the Notes hereunder will be used,
directly or indirectly, for any improper payments to any governmental official
or employee, political party, official of a political party, candidate for
political office, official of any public international organization or anyone
else acting in an official capacity, in order to obtain, retain or direct
business or obtain any improper advantage. The Company has taken reasonable
measures appropriate to the circumstances (in any event as required by
applicable law), to ensure that the Company and each Affiliated Entity is and
will continue to be in compliance with all applicable anti-corruption laws and
regulations, except to the extent failure to do so would not reasonably be
expected to result in a Material Adverse Effect.

5.17. Status under Certain Statutes. Neither the Company nor any Subsidiary is
subject to regulation under the Investment Company Act of 1940, as amended, or
is subject to regulation under PUHCA, the ICC Termination Act of 1995, as
amended, or the Federal Power Act, as amended.

5.18. Pari Passu Obligations. The obligations of the Company under this
Agreement and the Notes and the obligations of each Guarantor under the
Subsidiary Guaranty rank pari passu in right of payment with all other senior
unsecured Indebtedness of the Company and of each Guarantor, as applicable;
provided, the foregoing does not constitute any representation or warranty
regarding or otherwise limiting (a) the maturity date of any Indebtedness of the
Company or of any Guarantor, (b) any terms relating to the timing of
prepayments, redemptions or similar provisions (including without limitation on
a voluntary or involuntary basis) regarding any Indebtedness of the Company or
of any Guarantor or (c) any Liens with respect to secured Indebtedness upon or
with respect to any property of the Company or of any Guarantor permitted
pursuant to this Agreement (including without limitation pursuant to
Section 10.4).

 

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6. REPRESENTATIONS OF THE PURCHASERS.

6.1. Purchase for Investment. Each Purchaser severally represents that it is
purchasing the Notes for its own account or for one or more separate accounts
maintained by such Purchaser or for the account of one or more pension or trust
funds and not with a view to the distribution thereof, provided that the
disposition of such Purchaser’s or their property shall at all times be within
such Purchaser’s or their control. Each Purchaser understands that the Notes
have not been registered under the Securities Act and may be resold only if
registered pursuant to the provisions of the Securities Act or if an exemption
from registration is available, except under circumstances where neither such
registration nor such an exemption is required by law, and that the Company is
not required to register the Notes.

Each Purchaser severally represents that it has received and reviewed the
Disclosure Documents and has been furnished an opportunity to obtain any
additional information or documents concerning the Company and its Subsidiaries,
and their financial condition, operations, business or properties, necessary or
desirable to make an informed decision to purchase the Notes.

6.2. Source of Funds. Each Purchaser severally represents that at least one of
the following statements is an accurate representation as to each source of
funds (a “Source”) to be used by such Purchaser to pay the purchase price of the
Notes to be purchased by such Purchaser hereunder:

(a) the Source is an “insurance company general account” (as the term is defined
in the United States Department of Labor’s Prohibited Transaction Exemption
(“PTE”) 95-60 (issued July 12, 1995)) in respect of which the reserves and
liabilities (as defined by the annual statement for life insurance companies
approved by the NAIC (the “NAIC Annual Statement”)) for the general account
contract(s) held by or on behalf of any employee benefit plan together with the
amount of the reserves and liabilities for the general account contract(s) held
by or on behalf of any other employee benefit plans maintained by the same
employer (or affiliate thereof as defined in PTE 95-60) or by the same employee
organization in the general account do not exceed 10% of the total reserves and
liabilities of the general account (exclusive of separate account liabilities)
plus surplus as set forth in the NAIC Annual Statement filed with such
Purchaser’s state of domicile; or

(b) the Source is a separate account that is maintained solely in connection
with such Purchaser’s fixed contractual obligations under which the amounts
payable, or credited, to any employee benefit plan (or its related trust) that
has any interest in such separate account (or to any participant or beneficiary
of such plan (including any annuitant)) are not affected in any manner by the
investment performance of the separate account; or

(c) the Source is either (i) an insurance company pooled separate account,
within the meaning of PTE 90-1 or (ii) a bank collective investment fund, within
the meaning of the PTE 91-38 and, except as disclosed by such Purchaser to the
Company in

 

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writing pursuant to this clause (c), no employee benefit plan or group of plans
maintained by the same employer or employee organization beneficially owns more
than 10% of all assets allocated to such pooled separate account or collective
investment fund; or

(d) the Source constitutes assets of an “investment fund” (within the meaning of
Part VI of PTE 84-14 (the “QPAM Exemption”)) managed by a “qualified
professional asset manager” or “QPAM” (within the meaning of Part VI of the QPAM
Exemption), no employee benefit plan’s assets that are managed by the QPAM in
such investment fund, when combined with the assets of all other employee
benefit plans established or maintained by the same employer or by an affiliate
(within the meaning of section VI(c)(1) of the QPAM Exemption) of such employer
or by the same employee organization and managed by such QPAM, exceed 20% of the
total client assets managed by such QPAM, the conditions of Part I(c) and (g) of
the QPAM Exemption are satisfied, as of the last day of its most recent calendar
quarter, the QPAM does not own a 10% or more interest in the Company and no
Person controlling or controlled by the QPAM maintains an ownership interest in
the Company that would cause the QPAM and the Company to be “related” within the
meaning of Part VI(h) of the QPAM Exemption and (i) the identity of such QPAM
and (ii) the names of any employee benefit plans whose assets in the investment
fund, when combined with the assets of all other employee benefit plans
established or maintained by the same employer or by an affiliate (within the
meaning of Part VI(c)(1) of the QPAM Exemption) of such employer or by the same
employee organization, represent 10% or more of the assets of such investment
fund, have been disclosed to the Company in writing pursuant to this clause (d);
or

(e) the Source constitutes assets of a “plan(s)” (within the meaning of
Part IV(h) of PTE 96-23 (the “INHAM Exemption”)) managed by an “in-house asset
manager” or “INHAM” (within the meaning of Part IV(a) of the INHAM Exemption),
the conditions of Part I(a), (g) and (h) of the INHAM Exemption are satisfied,
neither the INHAM nor a Person controlling or controlled by the INHAM (applying
the definition of “control” in Part IV(d) of the INHAM Exemption) owns a 10% or
more interest in the Company and (i) the identity of such INHAM and (ii) the
name(s) of the employee benefit plan(s) whose assets constitute the Source have
been disclosed to the Company in writing pursuant to this clause (e); or

(f) the Source is a governmental plan; or

(g) the Source is one or more employee benefit plans, or a separate account or
trust fund comprised of one or more employee benefit plans, each of which has
been identified to the Company in writing pursuant to this clause (g); or

(h) the Source does not include assets of any employee benefit plan, other than
a plan exempt from the coverage of ERISA.

As used in this Section 6.2, the terms “employee benefit plan”, “governmental
plan”, “party in interest” and “separate account” shall have the respective
meanings assigned to such terms in section 3 of ERISA.

 

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6.3. Accredited Investor. Each Purchaser represents that it is an “accredited
investor” (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under
the Securities Act acting for its own account (and not for the account of
others) or as a fiduciary or agent for others (which others are also “accredited
investors”). Each Purchaser further represents that such Purchaser has had the
opportunity to ask questions of the Company and received answers concerning the
terms and conditions of the sale of the Notes.

 

7. INFORMATION AS TO COMPANY.

7.1. Financial Statements. The Company shall deliver to each holder of Notes
that is an Institutional Investor:

(a) as soon as available, but in any event by the date on which consolidated
financial statements for such period are required to be delivered to the SEC
under the Securities Laws (without regard to any extensions of such date
permitted by the Securities Laws for which any special application is required)
(and if the Company does not have to deliver such consolidated financial
statements to the SEC under the Securities Laws, then as soon as available, but
in any event within 90 days after the end of the fiscal year of the Company), a
consolidated balance sheet of the Company and its Subsidiaries as at the end of
each fiscal year, and the related consolidated statements of income from
operations, shareholders’ equity and cash flows for such fiscal year, setting
forth in each case in comparative form the figures for the previous fiscal year,
all in reasonable detail and prepared in accordance with GAAP, such consolidated
statements to be audited and accompanied by (i) a report and opinion of a
Registered Public Accounting Firm of nationally recognized standing reasonably
acceptable to the Required Holders (which shall include but not be limited to
Deloitte & Touche, LLP), which report and opinion shall be prepared in
accordance with generally accepted auditing standards and applicable Securities
Laws and shall not be subject to any “going concern” or like qualification or
exception or any qualification or exception as to the scope of such audit or
with respect to the absence of any material misstatement; and

(b) as soon as available, but in any event by the date on which consolidated
financial statements for such period are required to be delivered to the SEC
under the Securities Laws (without regard to any extensions of such date
permitted by the Securities Laws for which any special application is required)
(and if the Company does not have to deliver such consolidated financial
statements to the SEC under the Securities Laws, then as soon as available, but
in any event within 45 days after the end of the first three fiscal quarters of
each fiscal year of the Company), a consolidated balance sheet of the Company
and its Subsidiaries as at the end of the fiscal quarter and as at the end of
the most recently completed fiscal year, the related consolidated statements of
income from operations for such fiscal quarter and for the portion of the
Company’s fiscal year then ended, setting forth in comparative form the figures
for the corresponding fiscal quarter of the previous fiscal year and the
corresponding portion of the previous fiscal year, and the related consolidated
statements of cash flows for the portion of the Company’s fiscal year then ended
setting forth in comparative form the figures for the corresponding portion of
the previous fiscal year, all in reasonable detail, such

 

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consolidated statements to be certified by the chief executive officer, chief
financial officer, treasurer or controller of the Company as fairly presenting
the financial condition, results of operations, shareholders’ equity and cash
flows of the Company and its Subsidiaries in accordance with GAAP, subject only
to normal year-end audit adjustments and the absence of footnotes.

As to any information contained in materials furnished pursuant to
Section 7.2(c), the Company shall not be separately required to furnish such
information under subsections (a) or (b) above, and, subject to the last
paragraph of Section 7.2, to the extent that the Company has filed a Form 10-K
or Form 10-Q for the respective financial period with the SEC, it shall be
deemed to have satisfied subsections (a) and (b) above.

7.2. Certificates; Other Information. The Company shall deliver to each holder
of Notes that is an Institutional Investor the following:

(a) concurrently with the delivery of the financial statements referred to in
Sections 7.1(a) and (b) (commencing with the delivery of the financial
statements for the fiscal quarter ended April 30, 2012), a duly completed
compliance certificate signed by the chief executive officer, chief financial
officer, treasurer or controller of the Company, which certificate (i) shall
contain a statement that such officer has reviewed the relevant terms hereof and
has made, or caused to be made, under his or her supervision, a review of the
transactions and conditions of the Company from the beginning of the quarterly
or annual period covered by the statements then being furnished to the date of
the certificate and that such review shall not have disclosed the existence
during such period of any condition or event that constitutes a Default or an
Event of Default or, if any such condition or event existed or exists,
specifying the nature and period of existence thereof and what action the
Company shall have taken or proposes to take with respect thereto and (ii) shall
contain information (including detailed calculations) required in order to
establish whether the Company was in compliance with the requirements of
Section 10.5, inclusive during the quarterly or annual period covered by the
statements then being furnished (including with respect to such Section, where
applicable, the calculations of the maximum or minimum amount, ratio or
percentage, as the case may be, permissible under the terms of such Section, and
the calculation of the amount, ratio or percentage then in existence);

(b) promptly after the same are requested by any holder of Notes that is an
Institutional Investor, copies of any detailed audit reports, management letters
or recommendations submitted to the board of directors (or the audit committee
of the board of directors) of the Company by independent accountants in
connection with the accounts or books of the Company or any Subsidiary, or any
audit of any of them;

(c) promptly after the same are available, copies of each annual report, proxy
or financial statement or other report or communication sent to the stockholders
of the Company, and copies of all annual, regular, periodic and special reports
and registration statements which the Company may file or be required to file
with the SEC under sections 13 or 15(d) of the Securities Exchange Act of 1934,
and not otherwise required to be delivered pursuant hereto;

 

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(d) promptly after the furnishing thereof, copies of any statement or report
furnished to any holder of debt Securities of the Company or any Subsidiary
thereof pursuant to the terms of any indenture, loan or credit or similar
agreement and not otherwise required to be furnished pursuant to Section 7.1 or
any other subsection of this Section 7.2;

(e) promptly, and in any event within five Business Days after receipt thereof
by the Company or any Subsidiary thereof, copies of each notice or other
correspondence received from the SEC (or comparable agency in any applicable
non-U.S. jurisdiction) concerning any investigation or possible investigation or
other inquiry (excluding SEC comment letters) by such agency regarding financial
or other operational results of the Company or any Subsidiary thereof; and

(f) promptly, such additional information regarding the business, financial or
corporate affairs of the Company or any Subsidiary, or compliance with the terms
of this Agreement or the Notes, as any holder of Notes that is an Institutional
Investor may from time to time reasonably request.

Documents required to be delivered pursuant to Sections 7.1(a) or (b) or
Sections 7.2(c) or (d) (to the extent any such documents are included in
materials otherwise filed with the SEC) may be delivered electronically and if
so delivered, shall be deemed to have been delivered on the date (i) on which
the Company posts such documents, or provides a link thereto on the Company’s
website on the Internet at the website address www.piedmontng.com (or such other
website address as the Company may from time to time specify to each holder of
Notes that is an Institutional Investor); or (ii) on which such documents are
posted on the Company’s behalf on an Internet or intranet website, if any, to
which each holder of Notes that is an Institutional Investor has access;
provided that: upon the request of any holder of Notes that is an Institutional
Investor, (i) the Company shall deliver paper copies of such documents to such
holder that requests the Company to deliver such paper copies until a written
request to cease delivering paper copies is given by such holder and (ii) the
Company shall notify such holder (by telecopier or electronic mail) of the
posting of any such documents and provide to such holder by electronic mail
electronic versions (i.e., soft copies) of such documents. Each holder of Notes
that is an Institutional Investor shall be solely responsible for requesting
delivery to it or maintaining its copies of such documents.

7.3. Notices. Promptly, but in any event, within five (5) days of a Responsible
Officer of the Company becoming aware thereof, the Company shall notify each
holder of Notes that is an Institutional Investor:

(a) of the occurrence of any Default;

(b) of any matter that has resulted or would reasonably be expected to result in
a Material Adverse Effect, including (i) any dispute, litigation, investigation,
proceeding or suspension between the Company or any Subsidiary and any
Governmental Authority; or (ii) the commencement of, or any material development
in,

 

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any litigation or proceeding affecting the Company or any Subsidiary, including
pursuant to any applicable Environmental Laws;

(c) of the occurrence of any ERISA Event;

(d) of any material change in accounting policies or financial reporting
practices by the Company or any Subsidiary; and

(e) of any public announcement by Moody’s or S&P of any change in a debt rating
of the Company.

Each notice pursuant to this Section 7.3 shall be accompanied by a statement of
a Responsible Officer of the Company setting forth details of the occurrence
referred to therein and stating what action the Company has taken and proposes
to take with respect thereto. Each notice pursuant to Section 7.3(a) shall
describe with particularity any and all provisions of this Agreement that has
been breached.

7.4. Visitation. The Company shall permit the representatives and independent
contractors of each holder of Notes that is an Institutional Investor to visit
and inspect any of its properties, to examine its corporate, financial and
operating records, and make copies thereof or abstracts therefrom, and to
discuss its affairs, finances and accounts with its directors, officers, and
independent public accountants, all at the expense of such holder, and at such
reasonable times during normal business hours and upon reasonable advance notice
to the Company, but not more frequently than once per every twelve (12) month
period; provided, however, that when an Event of Default exists each holder of
Notes that is an Institutional Investor (or any of their respective
representatives or independent contractors) may do any of the foregoing at the
expense of the Company at any time during normal business hours and without
advance notice as often as may be reasonably requested.

 

8. PAYMENT AND PREPAYMENT OF THE NOTES.

8.1. Maturity.

(a) As provided therein, the entire unpaid principal balance of the Series A
Notes shall be due and payable on the stated maturity date thereof.

(b) As provided therein, the entire unpaid principal balance of the Series B
Notes shall be due and payable on the stated maturity date thereof.

8.2. Optional Prepayments with Make-Whole Amount. The Company may, at its
option, upon notice as provided below, prepay at any time all, or from time to
time any part of, the Notes, in an amount not less than 5% of the aggregate
principal amount of the Notes then outstanding in the case of a partial
prepayment at 100% of the principal amount so prepaid, plus the Make-Whole
Amount, if any, determined for the prepayment date with respect to such
principal amount. The Company will give each holder of Notes written notice of
each optional prepayment under this Section 8.2 not less than 30 days and not
more than 60 days prior to the date fixed for such prepayment. Each such notice

 

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shall specify such date (which shall be a Business Day), the aggregate principal
amount of the Notes to be prepaid on such date, the principal amount of each
Note held by such holder to be prepaid (determined in accordance with
Section 8.3), and the interest to be paid on the prepayment date with respect to
such principal amount being prepaid, and shall be accompanied by a certificate
of a Senior Financial Officer as to the estimated Make-Whole Amount, if any, due
in connection with such prepayment (calculated as if the date of such notice
were the date of the prepayment), setting forth the details of such computation.
Two Business Days prior to such prepayment, the Company shall deliver to each
holder of Notes a certificate of a Senior Financial Officer specifying the
calculation of such Make-Whole Amount, if any, as of the specified prepayment
date.

8.3. Allocation of Partial Prepayments. In the case of each partial prepayment
of the Notes, the principal amount of the Notes to be prepaid shall be allocated
among all of the Notes at the time outstanding in proportion, as nearly as
practicable, to the respective unpaid principal amounts thereof not theretofore
called for prepayment.

8.4. Maturity; Surrender, Etc. In the case of each prepayment of Notes pursuant
to this Section 8, the principal amount of each Note to be prepaid shall mature
and become due and payable on the date fixed for such prepayment (which shall be
a Business Day), together with interest on such principal amount accrued to such
date and the applicable Make-Whole Amount, if any. From and after such date,
unless the Company shall fail to pay such principal amount when so due and
payable, together with the interest and Make-Whole Amount, if any, as aforesaid,
interest on such principal amount shall cease to accrue. Any Note paid or
prepaid in full shall be surrendered to the Company and cancelled and shall not
be reissued, and no Note shall be issued in lieu of any prepaid principal amount
of any Note.

8.5. Purchase of Notes. The Company will not and will not permit any Affiliate
to purchase, redeem, prepay or otherwise acquire, directly or indirectly, any of
the outstanding Notes except (a) upon the payment or prepayment of the Notes in
accordance with the terms of this Agreement and the Notes or (b) pursuant to an
offer to purchase made by the Company or an Affiliate pro rata to the holders of
all Notes at the time outstanding upon the same terms and conditions. Any such
offer shall provide each holder with sufficient information to enable it to make
an informed decision with respect to such offer, and shall remain open for at
least 15 Business Days. If the holders of more than 50% of the principal amount
of the Notes then outstanding accept such offer, the Company shall promptly
notify the remaining holders of such fact and the expiration date for the
acceptance by holders of Notes of such offer shall be extended by the number of
days necessary to give each such remaining holder at least 5 Business Days from
its receipt of such notice to accept such offer. The Company will promptly
cancel all Notes acquired by it or any Affiliate pursuant to any payment,
prepayment or purchase of Notes pursuant to any provision of this Agreement and
no Notes may be issued in substitution or exchange for any such Notes.

 

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8.6. Make-Whole Amount.

“Make-Whole Amount” means, with respect to any Note of any Series, an amount
equal to the excess, if any, of the Discounted Value of the Remaining Scheduled
Payments with respect to the Called Principal of such Note over the amount of
such Called Principal, provided that the Make-Whole Amount may in no event be
less than zero. For the purposes of determining the Make-Whole Amount, the
following terms have the following meanings:

“Called Principal” means, with respect to any Note of any Series, the principal
of such Note that is to be prepaid pursuant to Section 8.2 or has become or is
declared to be immediately due and payable pursuant to Section 12.1, as the
context requires.

“Discounted Value” means, with respect to the Called Principal of any Note of
any Series, the amount obtained by discounting all Remaining Scheduled Payments
with respect to such Called Principal from their respective scheduled due dates
to the Settlement Date with respect to such Called Principal, in accordance with
accepted financial practice and at a discount factor (applied on the same
periodic basis as that on which interest on such Note is payable) equal to the
Reinvestment Yield with respect to such Called Principal.

“Reinvestment Yield” means, with respect to the Called Principal of any Note of
any Series, 0.50% plus the yield to maturity calculated by using (i) the yields
reported, as of 10:00 A.M. (New York City time) on the second Business Day
preceding the Settlement Date with respect to Called Principal on screen “PX-1”
on the Bloomberg Financial Market Service (or such other display as may replace
Page PX-1) on Bloomberg for the most recently issued actively traded on the run
U.S. Treasury Securities having a maturity equal to the Remaining Average Life
of such Called Principal as of such Settlement Date, or (ii) if such yields are
not reported as of such time or the yields reported as of such time are not
ascertainable (including by way of interpolation), the Treasury Constant
Maturity Series Yields reported, for the latest day for which such yields have
been so reported as of the second Business Day preceding the Settlement Date,
with respect to such Called Principal, in Federal Reserve Statistical Release
H.15 (519) (or any comparable successor publication) for actively traded U.S.
Treasury Securities having a constant maturity equal to the Remaining Average
Life of such Called Principal as of such Settlement Date.

In the case of each determination under clause (i) or clause (ii), as the case
may be, of the preceding paragraph, such implied yield will be determined, if
necessary, by (a) converting U.S. Treasury bill quotations to bond equivalent
yields in accordance with accepted financial practice and (b) interpolating
linearly between (1) the applicable actively traded U.S. Treasury Security with
the maturity closest to and greater than such Remaining Average Life and (2) the
applicable actively traded U.S. Treasury Security with the maturity closest to
and less than such Remaining Average Life. The Reinvestment Yield shall be
rounded to the number of decimal places as appears in the interest rate of the
applicable Note.

“Remaining Average Life” means, with respect to any Called Principal, the number
of years (calculated to the nearest one-twelfth year) obtained by dividing
(i) such Called Principal into (ii) the sum of the products obtained by
multiplying (a) the principal component of each Remaining Scheduled Payment with
respect to such Called Principal by (b) the number of years

 

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(calculated to the nearest one-twelfth year) that will elapse between the
Settlement Date with respect to such Called Principal and the scheduled due date
of such Remaining Scheduled Payment.

“Remaining Scheduled Payments” means, with respect to the Called Principal of
any Note of any Series, all payments of such Called Principal and interest
thereon that would be due after the Settlement Date with respect to such Called
Principal if no payment of such Called Principal were made prior to its
scheduled due date, provided that if such Settlement Date is not a date on which
interest payments are due to be made under the terms of the Notes, then the
amount of the next succeeding scheduled interest payment will be reduced by the
amount of interest accrued to such Settlement Date and required to be paid on
such Settlement Date pursuant to Section 8.2 or Section 12.1.

“Settlement Date” means, with respect to the Called Principal of any Note of any
Series, the date on which such Called Principal is to be prepaid pursuant to
Section 8.2 or has become or is declared to be immediately due and payable
pursuant to Section 12.1, as the context requires.

8.7. Change in Control.

(a) Notice of Change in Control. The Company will, within 15 Business Days after
any Responsible Officer has knowledge of the occurrence of any Change in
Control, give written notice of such Change in Control to each holder of Notes.
Such notice shall contain and constitute an offer to prepay Notes as described
in subparagraph (b) of this Section 8.7 and shall be accompanied by the
certificate described in subparagraph (f) of this Section 8.7.

(b) Offer to Prepay Notes. The offer to prepay Notes contemplated by
subparagraph (a) of this Section 8.7 shall be an offer to prepay, in accordance
with and subject to this Section 8.7, all, but not less than all, the Notes held
by each holder (in the case of this Section 8.7(b) only, “holder” in respect of
any Note registered in the name of a nominee for a disclosed beneficial owner
shall mean such beneficial owner) on a date specified in such offer (the
“Proposed Prepayment Date”) and such date shall be not less than 20 days and not
more than 30 days after the date of such offer (if the Proposed Prepayment Date
shall not be specified in such offer, the Proposed Prepayment Date shall be the
20th day (or if such day is not a Business Day, the first Business Day following
such 20th day) after the date of such offer).

(c) Acceptance; Rejection. A holder of Notes may accept or reject the offer to
prepay made pursuant to this Section 8.7 by causing a notice of such acceptance
or rejection to be delivered to the Company at least 5 Business Days prior to
the Proposed Prepayment Date. A failure by a holder of Notes to respond to an
offer to prepay made pursuant to this Section 8.7 shall be deemed to constitute
a rejection of such offer by such holder.

(d) Prepayment. Prepayment of the Notes to be prepaid pursuant to this
Section 8.7 shall be at 100% of the principal amount of such Notes, but without
the

 

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payment of the Make-Whole Amount, together with interest on such Notes accrued
to the date of prepayment. The prepayment shall be made on the Proposed
Prepayment Date.

(e) [Reserved].

(f) Officer’s Certificate. Each offer to prepay the Notes pursuant to this
Section 8.7 shall be accompanied by a certificate, executed by a Senior
Financial Officer of the Company and dated the date of such offer, specifying:
(i) the Proposed Prepayment Date; (ii) that such offer is made pursuant to this
Section 8.7; (iii) the principal amount of each Note offered to be prepaid;
(iv) the interest that would be due on each Note offered to be prepaid, accrued
to the Proposed Prepayment Date; (v) that the conditions of this Section 8.7
have been fulfilled; and (vi) in reasonable detail, the nature and date or
proposed date of the Change in Control.

(g) “Change in Control” Defined. “Change in Control” means an event or series of
events by which:

(i) any “person” or “group” (as such terms are used in sections 13(d) and 14(d)
of the Securities Exchange Act of 1934, but excluding any employee benefit plan
of such person or its subsidiaries, and any person or entity acting in its
capacity as trustee, agent or other fiduciary or administrator of any such plan)
becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the
Securities Exchange Act of 1934, except that a person or group shall be deemed
to have “beneficial ownership” of all Securities that such person or group has
the right to acquire whether such right is exercisable immediately or only after
the passage of time (such right, an “option right”)), directly or indirectly, of
35% or more of the equity Securities of the Company entitled to vote for members
of the board of directors or equivalent governing body of the Company on a
fully-diluted basis (and taking into account all such securities that such
person or group has the right to acquire pursuant to any option right); or

(ii) during any period of 24 consecutive months, a majority of the members of
the board of directors or other equivalent governing body of the Company cease
to be composed of individuals (i) who were members of that board or equivalent
governing body on the first day of such period, (ii) whose election or
nomination to that board or equivalent governing body was approved by
individuals referred to in clause (i) above constituting at the time of such
election or nomination at least a majority of that board or equivalent governing
body or (iii) whose election or nomination to that board or other equivalent
governing body was approved by individuals referred to in clauses (i) and
(ii) above constituting at the time of such election or nomination at least a
majority of that board or equivalent governing body (excluding, in the case of
both clause (ii) and clause (iii), any individual whose initial nomination for,
or assumption of office as, a member of that board or equivalent governing body
occurs as a result of an actual or threatened solicitation of proxies or
consents for the election or removal of one or more directors by any person or
group other than a solicitation for the election of one or more directors by or
on behalf of the board of directors).

 

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9. AFFIRMATIVE COVENANTS.

The Company shall and shall cause each Guarantor to, so long as any of the Notes
are outstanding:

9.1. Compliance with Law. Without limiting Section 10.3, comply in all material
respects with the requirements of all Laws, including without limitation all
Laws described in Section 5.16, and all orders, writs, injunctions and decrees
applicable to it or to its business or property, except in such instances in
which (a) such requirement of Law or order, writ, injunction or decree is being
contested in good faith by appropriate proceedings diligently conducted; or
(b) the failure to comply therewith would not reasonably be expected to have a
Material Adverse Effect.

9.2. Insurance. The Company shall maintain insurance (including self-insurance)
with respect to its properties and business as necessary and appropriate in the
customary business practice in the industry of the Company.

9.3. Maintenance of Properties. The Company shall (a) maintain, preserve and
protect all of its material properties and equipment necessary in the operation
of its business in good working order and reasonably good condition, ordinary
wear and tear excepted; and (b) make all necessary repairs thereto and renewals
and replacements thereof, except in the case of both (a) and (b) above, where
the failure to do so would not reasonably be expected to have a Material Adverse
Effect.

9.4. Payment of Obligations. The Company shall pay and discharge as the same
shall become due and payable, all its obligations and liabilities, including all
federal, state and other material tax liabilities, assessments and governmental
charges or levies upon it or its properties or assets, unless the same are being
contested in good faith by appropriate proceedings diligently conducted and
adequate reserves in accordance with GAAP are being maintained by the Company.

9.5. Corporate Existence, Etc. The Company shall (a) preserve, renew and
maintain in full force and effect its legal existence under the Laws of the
jurisdiction of its organization except in a transaction permitted by
Section 10.2 of this Agreement or except to the extent the Company, after any
such change in its legal existence, does not engage in any material line of
business substantially different from those lines of business conducted by the
Company and its Subsidiaries on the date hereof or any business substantially
related or incidental thereto; (b) preserve, renew and maintain in full force
and effect its good standing under the Laws of the jurisdiction of its
origination, except where the failure to do so would not reasonably be expected
to result in a Material Adverse Effect; (c) take all reasonable action to
maintain all rights, privileges, permits, licenses and franchises necessary or
desirable in the normal conduct of its business, except to the extent that
failure to do so would not reasonably be expected to have a Material Adverse
Effect; and (d) preserve or renew all of its registered patents, trademarks,
trade names and service marks, the non-preservation of which would reasonably be
expected to have a Material Adverse Effect.

 

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9.6. Books and Records. The Company shall maintain proper books of record and
account, in which full, true and correct entries in conformity with GAAP
consistently applied shall be made of all financial transactions and matters
involving the assets and business of the Company or such Subsidiary, as the case
may be.

9.7. Ranking. Except as otherwise required by applicable Law, the Company will
ensure that, at all times, all liabilities of the Company under the Notes will
rank in right of payment either pari passu with or senior to the obligations
under the Credit Agreement and under all other unsecured Indebtedness of the
Company provided, the foregoing does not constitute a covenant regarding or
otherwise limiting (a) the maturity date of any Indebtedness of the Company or
of any Guarantor, (b) any terms relating to the timing of prepayments,
redemptions or similar provisions (including without limitation on a voluntary
or involuntary basis) regarding any Indebtedness of the Company or of any
Guarantor or (c) any Liens with respect to secured Indebtedness upon or with
respect to any Property of the Company or of any Guarantor permitted pursuant to
this Agreement (including without limitation pursuant to Section 10.4).

9.8. Guarantors. The Company will cause any Subsidiary which is required to
become or becomes a party to the Credit Agreement (or otherwise becomes a
borrower thereunder), or guarantees Indebtedness under the Credit Agreement, to
enter into a subsidiary guaranty agreement which shall be in a form
substantially comparable to and not more restrictive than such guarantee and
otherwise reasonably acceptable to the Company and the Required Holders
providing for a guarantee of the obligations of the Company under the Notes and
this Agreement (a “Subsidiary Guaranty”) and to deliver to each of the holders
of the Notes (substantially concurrently with the incurrence of any such
guarantee obligation pursuant to the Credit Agreement) the following items:

(i) a certificate signed by an authorized Responsible Officer of the Company
making representations and warranties substantially to the effect of those
contained in Sections 5.4(c), 5.6 and 5.7, with respect to such Subsidiary and
the Subsidiary Guaranty, as applicable; and

(ii) an opinion of counsel (who may be in-house counsel for the Company)
addressed to each of the holders of the Notes reasonably satisfactory to the
Required Holders, substantially to the effect that the Subsidiary Guaranty by
such Person has been duly authorized, executed and delivered and that the
Subsidiary Guaranty constitutes the legal, valid and binding obligation of such
Person enforceable in accordance with its terms, except as such enforceability
may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws affecting the enforcement of creditors’ rights
generally and by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).

 

10. NEGATIVE COVENANTS.

The Company shall not, and shall not permit any Guarantor to (directly or
indirectly), so long as any of the Notes are outstanding:

 

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10.1. Transactions with Affiliates. Enter into any transaction of any kind
(other than this Agreement and any other Finance Agreement or in accordance with
the terms thereof (including without limitation any guaranty provided by a
Subsidiary as required by the terms of the Credit Agreement, as referenced in
Section 9.8)) with any Affiliate of the Company, whether or not in the ordinary
course of business, other than on fair and reasonable terms substantially as
favorable to the Company or such Guarantor as would be obtainable by the Company
or such Guarantor at the time in a comparable arm’s length transaction with a
Person other than an Affiliate; provided, that the foregoing restriction shall
not apply to transactions between or among the Company and any Guarantor or
between and among any Guarantors.

10.2. Merger, Consolidation, Etc. Merge, dissolve, liquidate, consolidate with
or into another Person, or Dispose of (whether in one transaction or in a series
of transactions) all or substantially all of its assets (whether now owned or
hereafter acquired) to or in favor of any Person, or discontinue or eliminate, a
line of business; provided, that the foregoing limitation on the sale, lease or
other transfer of assets and on the discontinuance or elimination of a line of
business shall not prohibit, at any time, a transfer of assets or the
discontinuance or elimination of a line of business (in a single transaction or
a series of related transactions) to the extent that any such Disposition would
not cause the aggregate value of all assets Disposed of (excluding the sale,
lease or other transfer of assets permitted under subsection (c) of this
Section), after the date referred to in Section 3.1 to exceed $75,000,000, and
provided, further, that so long as no Default or Event of Default exists or
would result therefrom:

(a) the Company may merge with another Person if (i) such Person is organized
under the laws of the United States of America or one of its states, and
(ii) the Company is the surviving corporation or if the Company is not the
surviving corporation, such surviving corporation or business entity (the
“Successor Corporation”) shall have executed and delivered to each holder of
Notes its assumption of the due and punctual performance and observance of each
covenant and condition of this Agreement and the Notes (pursuant to such
agreements and instruments as shall be reasonably satisfactory to the Required
Holders), and the Successor Corporation shall have caused to be delivered to
each holder of Notes (A) an opinion of nationally recognized independent
counsel, to the effect that all agreements or instruments effecting such
assumption are enforceable in accordance with their terms and (B) to the extent
a Subsidiary Guaranty exists pursuant to Section 9.8, an acknowledgment from
each Subsidiary Guarantor that the Subsidiary Guaranty continues in full force
and effect;

(b) any Guarantor may merge with (i) the Company, provided that the Company
shall be the continuing or surviving Person, or (ii) any one or more other
Guarantors; and

(c) the Company or any Guarantor may Dispose of all or substantially all of its
assets (upon voluntary liquidation or otherwise) to the Company or to any
Guarantor.

10.3. Terrorism Sanctions Regulations. The Company will not and will not permit
any Affiliated Entity to (a) become an OFAC Listed Person or (b) have any

 

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investments in, or knowingly engage in any dealings or transactions with any
Blocked Person.

10.4. Liens. Create, assume, incur or suffer to exist any Lien upon or with
respect to any property of the Company or any Guarantor except:

(a) Liens existing on the date hereof and listed on Schedule 10.4 and any
renewals or extensions thereof, provided that (i) the property covered thereby
is not changed (except for proceeds of such property), and (ii) the direct or
any contingent obligor with respect thereto is not changed;

(b) Liens for taxes not yet due or which are being contested in good faith and
by appropriate proceedings diligently conducted, if adequate reserves with
respect thereto are maintained on the books of the applicable Person in
accordance with GAAP;

(c) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other
like Liens arising in the ordinary course of business which are not overdue for
a period of more than 30 days or which are being contested in good faith and by
appropriate proceedings diligently conducted, if adequate reserves with respect
thereto are maintained on the books of the applicable Person;

(d) pledges or deposits in the ordinary course of business in connection with
workers’ compensation, unemployment insurance and other social security
legislation, other than any Lien imposed by ERISA;

(e) deposits to secure the performance of bids, trade contracts and leases
(other than Indebtedness), statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature incurred in the
ordinary course of business;

(f) easements, rights-of-way, restrictions and other similar encumbrances
affecting real property which, in the aggregate, are not substantial in amount,
and which do not in any case materially detract from the value of the property
subject thereto or materially interfere with the ordinary conduct of the
business of the applicable Person;

(g) Liens securing judgments for the payment of money not constituting an Event
of Default under Section 11(i);

(h) leases or subleases granted to others in the ordinary course of business not
interfering in any material respect with the business of the applicable Person;

(i) any interest of title of a lessor under, and Liens arising from UCC
financing statements (or equivalent filings, registrations or agreements in
foreign jurisdictions) relating to, leases permitted by this Agreement;

(j) Liens deemed to exist in connection with repurchase agreements;

(k) normal and customary rights of setoff upon deposits of cash in favor of
banks or other depository institutions;

 

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(l) Liens of a collection bank arising under section 4-210 of the Uniform
Commercial Code on items in the course of collection;

(m) Liens existing on any asset or property prior to the acquisition thereof by
the Company or any Guarantor or existing on any asset or property of any Person
that becomes a Guarantor prior to the time such Person becomes a Guarantor;

(n) Liens on property securing purchase money indebtedness (including capital
lease obligations, provided that (i) such Liens attach to such property within
90 days after the acquisition of such property, (ii) such Liens secure only the
payment of the purchase money Indebtedness (and refinancings, renewals or
extensions thereof) and (iii) such Liens attach only to the property subject to
the purchase money Indebtedness and do not encumber any other property of the
Company or any Guarantor;

(o) Liens created or deemed to exist as a result of (i) a substantially
non-recourse assignment, sale or other transfer of receivables in connection
with one or more third-party financings (or Guarantee of such financing) of
energy projects developed by the Company or any Guarantor (or any subcontractor
of the Company or any Guarantor) and (ii) Liens on such energy projects in favor
of one or more providers of such third-party financing (including, without
limitation, with respect to each of the foregoing clauses (i) and (ii), projects
developed for agencies, departments and instrumentalities of the United States
government, any state, county, municipal government or other political
subdivision, any university or any college through utility energy services
contracts); and

(p) Liens securing any other Indebtedness of the Company so long as the Notes
are equally and ratably secured with such other Indebtedness, pursuant to an
agreement reasonably satisfactory to the Required Holders; and

(q) Liens not permitted by subsections (a) through (p) above, if at the time of,
and after giving effect to, the creation or assumption of any such Lien, the
aggregate amount of all Indebtedness of the Company or any Guarantor secured by
all such Liens not so permitted by subsections (a) through (p) above does not
exceed 10% of Consolidated Total Assets; provided further that, no such Liens
permitted under this Section 10.4(q) may secure any obligations under the Credit
Agreement.

10.5. Leverage Ratio. The Company will not permit the ratio of Consolidated
Funded Indebtedness to Total Capitalization, in each case determined as of the
close of business on the last day of each fiscal quarter of the Company, to
exceed 0.70 to 1.00.

10.6. Change in Nature of Business. The Company will not, and will not permit
any Guarantor to, engage in any material line of business substantially
different from those lines of business conducted by the Company and its
Subsidiaries on the date hereof or any business substantially related or
incidental thereto.

 

11. EVENTS OF DEFAULT.

An “Event of Default” shall exist if any of the following conditions or events
shall occur and be continuing:

 

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(a) the Company defaults in the payment of any principal or Make-Whole Amount,
if any, on any Note when the same becomes due and payable, whether at maturity
or at a date fixed for prepayment or by declaration or otherwise; or

(b) the Company defaults in the payment of any interest on any Note for more
than five Business Days after the same becomes due and payable; or

(c) the Company defaults in the performance of or compliance with any term
contained in Sections 10.2, 10.4 or 10.5; or

(d) the Company defaults in the performance of or compliance with any term
contained in any Finance Agreement (other than those referred to in
Sections 11(a), (b) and (c)) and such default is not remedied within 30 days
after the earlier of (i) a Responsible Officer obtaining actual knowledge of
such default and (ii) the Company receiving written notice of such default from
any holder of a Note (any such written notice to be identified as a “notice of
default” and to refer specifically to this Section 11(d)); or

(e) any representation or warranty made in writing by or on behalf of the
Company or by any officer of the Company in any Finance Agreement or in any
writing furnished pursuant to any Finance Agreement proves to have been false or
incorrect in any material respect on the date as of which made; or

(f) (i) the Company or any Guarantor is in default (as principal or as guarantor
or other surety) in the payment of any principal of or premium or make-whole
amount or interest on any Indebtedness that is outstanding in an aggregate
principal amount of at least $75,000,000 beyond any period of grace provided
with respect thereto, or (ii) the Company or any Guarantor is in default in the
performance of or compliance with any term of any evidence of any Indebtedness
in an aggregate outstanding principal amount of at least $75,000,000 or of any
mortgage, indenture or other agreement relating thereto or any other condition
exists, and as a consequence of such default or condition such Indebtedness has
become, or has been declared due and payable before its stated maturity or
before its regularly scheduled dates of payment; or

(g) the Company or any Guarantor (i) is generally not paying, or admits in
writing its inability to pay, its debts as they become due, (ii) files, or
consents by answer or otherwise to the filing against it of, a petition for
relief or reorganization or arrangement or any other petition in bankruptcy, for
liquidation or to take advantage of any bankruptcy, insolvency, reorganization,
moratorium or other similar law of any jurisdiction, (iii) makes an assignment
for the benefit of its creditors, (iv) consents to the appointment of a
custodian, receiver, trustee or other officer with similar powers with respect
to it or with respect to any substantial part of its property, (v) is
adjudicated as insolvent or to be liquidated, or (vi) takes corporate action for
the purpose of any of the foregoing; or

(h) a court or other Governmental Authority of competent jurisdiction enters an
order appointing, without consent by the Company or any Guarantor, a custodian,

 

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receiver, trustee or other officer with similar powers with respect to it or
with respect to any substantial part of its Property, or constituting an order
for relief or approving a petition for relief or reorganization or any other
petition in bankruptcy or for liquidation or to take advantage of any bankruptcy
or insolvency law of any jurisdiction, or ordering the dissolution, winding-up
or liquidation of the Company or any Guarantors, or any such petition shall be
filed against the Company or any Guarantors and such petition shall not be
dismissed within 60 days; or

(i) a final judgment or judgments for the payment of money aggregating in excess
of $75,000,000 (to the extent not covered by independent third party insurance
as to which the insurer does not dispute coverage) are rendered against one or
more of the Company or any Guarantor and which judgments are not, within 60 days
after entry thereof, bonded, discharged or stayed pending appeal, or are not
discharged within 60 days after the expiration of such stay; or

(j) if (i) any Plan shall fail to satisfy the minimum funding standards of ERISA
or the Code for any plan year or part thereof or a waiver of such standards or
extension of any amortization period is sought or granted under section 412 of
the Code, (ii) a notice of intent to terminate any Plan shall have been or is
reasonably expected to be filed with the PBGC or the PBGC shall have instituted
proceedings under ERISA section 4042 to terminate or appoint a trustee to
administer any Plan or the PBGC shall have notified the Company or any ERISA
Affiliate that a Plan may become a subject of any such proceedings, (iii) the
aggregate “amount of unfunded benefit liabilities” (within the meaning of
section 4001(a)(18) of ERISA) under all Plans, determined in accordance with
Title IV of ERISA, shall exceed $75,000,000, (iv) the Company or any ERISA
Affiliate shall have incurred or is reasonably expected to incur any liability
pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of
the Code relating to employee benefit plans, (v) the Company or any ERISA
Affiliate withdraws from any Multiemployer Plan, or (vi) the Company or any
Subsidiary establishes or amends any employee welfare benefit plan that provides
post-employment welfare benefits in a manner that would increase the liability
of the Company or any Subsidiary thereunder; and any such event or events
described in clauses (i) through (vi) above, either individually or together
with any other such event or events, would reasonably be expected to have a
Material Adverse Effect; or

(k) any Finance Agreement, at any time after its execution and delivery and for
any reason other than as expressly permitted hereunder or thereunder or upon
satisfaction in full of all the obligations under the Finance Agreements, ceases
to be in full force and effect; or the Company or any Guarantor contests in any
manner the validity or enforceability of any Finance Agreement; or the Company
or any Guarantor denies that it has any or further liability or obligation under
any Finance Agreement, or purports to revoke, terminate or rescind any Finance
Agreement.

As used in Section 11(j), the terms “employee benefit plan” and “employee
welfare benefit plan” shall have the respective meanings assigned to such terms
in section 3 of ERISA.

 

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12. REMEDIES ON DEFAULT, ETC.

12.1. Acceleration. (a) If an Event of Default with respect to the Company
described in Section 11(g) or (h) (other than an Event of Default described in
clause (i) of Section 11(g) by virtue of the fact that such clause encompasses
clause (i) of Section 11(g)) has occurred, all the Notes then outstanding shall
automatically become immediately due and payable.

(b) If any Event of Default (other than pursuant to Sections 11(g) or (h)) has
occurred and is continuing, the Required Holders may at any time at its or their
option, by notice or notices to the Company, declare all the Notes then
outstanding to be immediately due and payable.

(c) If any Event of Default described in Section 11(a) or (b) has occurred and
is continuing, any holder or holders of Notes at the time outstanding affected
by such Event of Default may at any time, at its or their option, by notice or
notices to the Company, declare all the Notes held by it or them to be
immediately due and payable.

Upon any Notes becoming due and payable under this Section 12.1, whether
automatically or by declaration, such Notes will forthwith mature and the entire
unpaid principal amount of such Notes, plus (x) all accrued and unpaid interest
thereon (including, but not limited to, interest accrued thereon at the Default
Rate) and (y) the Make-Whole Amount determined in respect of such principal
amount (to the full extent permitted by applicable law), shall all be
immediately due and payable, in each and every case without presentment, demand,
protest or further notice, all of which are hereby waived. The Company
acknowledges, and the parties hereto agree, that each holder of a Note has the
right to maintain its investment in the Notes free from repayment by the Company
(except as herein specifically provided for) and that the provision for payment
of a Make-Whole Amount by the Company in the event that the Notes are prepaid or
are accelerated as a result of an Event of Default, is intended to provide
compensation for the deprivation of such right under such circumstances.

12.2. Other Remedies. If any Event of Default has occurred and is continuing,
and irrespective of whether any Notes have become or have been declared
immediately due and payable under Section 12.1, the holder of any Note at the
time outstanding may proceed to protect and enforce the rights of such holder by
an action at law, suit in equity or other appropriate proceeding, whether for
the specific performance of any agreement contained herein or in any Note, or
for an injunction against a violation of any of the terms hereof or thereof, or
in aid of the exercise of any power granted hereby or by law or otherwise. Upon
the occurrence of any Default, the holders may take any action permitted by law
to protect their rights under the Finance Agreements.

12.3. Rescission. At any time after any Notes have been declared due and payable
pursuant to Section 12.1(b) or (c), the Required Holders (in the case of
Section 12.1(b)) and the applicable holder or holders of Notes (in the case of
Section 12.1(c)), by written notice to the Company, may rescind and annul any
such declaration and its consequences if (a) the Company has paid all overdue
interest on the

 

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Notes, all principal of and Make-Whole Amount, if any, on any Notes that are due
and payable and are unpaid other than by reason of such declaration, and all
interest on such overdue principal and Make-Whole Amount, if any, and (to the
extent permitted by applicable law) any overdue interest on the Notes, at the
Default Rate, (b) neither the Company nor any other Person shall have paid any
amounts which have become due solely by reason of such declaration, (c) all
Events of Default, other than non-payment of amounts that have become due solely
by reason of such declaration, have been cured or have been waived pursuant to
Section 17, and (d) no judgment or decree has been entered for the payment of
any monies due pursuant hereto or to the Notes. No rescission and annulment
under this Section 12.3 will extend to or affect any subsequent Event of Default
or impair any right consequent thereon.

12.4. No Waivers or Election of Remedies, Expenses, Etc. No course of dealing
and no delay on the part of any holder of any Note in exercising any right,
power or remedy shall operate as a waiver thereof or otherwise prejudice such
holder’s rights, powers or remedies. No right, power or remedy conferred by this
Agreement or by a Note upon any holder thereof shall be exclusive of any other
right, power or remedy referred to herein or therein or now or thereafter
available at law, in equity, by statute or otherwise. Without limiting the
obligations of the Company under Section 15, the Company will pay to the holder
of each Note on demand such further amount as shall be sufficient to cover all
costs and expenses of such holder incurred in any enforcement or collection
under this Section 12, including, without limitation, reasonable attorneys’
fees, expenses and disbursements.

 

13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.

13.1. Registration of Notes. The Company shall keep at its principal executive
office a register for the registration and registration of transfers of Notes.
The name and address of each holder of one or more Notes, each transfer thereof
and the name and address of each transferee of one or more Notes shall be
registered in such register. Prior to due presentment for registration of
transfer, the Person in whose name any Note shall be registered shall be deemed
and treated as the owner and holder thereof for all purposes hereof, and the
Company shall not be affected by any notice or knowledge to the contrary. The
Company shall give to any holder of a Note that is an Institutional Investor
promptly upon request therefor, a complete and correct copy of the names and
addresses of all registered holders of Notes.

13.2. Transfer and Exchange of Notes. Upon surrender of any Note to the Company
at the address and to the attention of the designated officer (all as specified
in Section 18(a)(iii)), for registration of transfer or exchange (and in the
case of a surrender for registration of transfer accompanied by a written
instrument of transfer duly executed by the registered holder of such Note or
such holder’s attorney duly authorized in writing and accompanied by the
relevant name, address and other information for notices of each transferee of
such Note or part thereof), within ten Business Days thereafter, the Company
shall execute and deliver, at the Company’s expense (except as provided below),
one or more new Notes (as requested by the holder thereof) in exchange therefor,
in an aggregate principal amount equal to the unpaid principal amount of the
surrendered

 

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Note. Each such new Note shall be payable to such Person as such holder may
request and shall be substantially in the forms of Exhibit 1(a) or 1(b), as
applicable. Each such new Note shall be dated and bear interest from the date to
which interest shall have been paid on the surrendered Note or dated the date of
the surrendered Note if no interest shall have been paid thereon. The Company
may require payment of a sum sufficient to cover any stamp tax or governmental
charge imposed in respect of any such transfer of Notes. Notes shall not be
transferred in denominations of less than $1,000,000, provided that if necessary
to enable the registration of transfer by a holder of its entire holding of
Notes, one Note may be in a denomination of less than $1,000,000. Any
transferee, by its acceptance of a Note registered in its name (or the name of
its nominee), shall be deemed to have made the representation set forth in
Section 6.2.

13.3. Replacement of Notes. Upon receipt by the Company at the address and to
the attention of the designated officer (all as specified in Section 18(iii)) of
evidence reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of any Note (which evidence shall be, in the case of
an Institutional Investor, notice from such Institutional Investor of such
ownership and such loss, theft, destruction or mutilation), and

(a) in the case of loss, theft or destruction, of indemnity in favor of the
Company reasonably satisfactory to the Company (provided that if the holder of
such Note is, or is a nominee for, an original Purchaser or another holder of a
Note with a minimum net worth of at least $50,000,000 or a Qualified
Institutional Buyer, such Person’s own unsecured agreement of indemnity shall be
deemed to be satisfactory), or

(b) in the case of mutilation, upon surrender and cancellation thereof,

within ten Business Days thereafter, the Company at its own expense shall
execute and deliver, in lieu thereof, a new Note, dated and bearing interest
from the date to which interest shall have been paid on such lost, stolen,
destroyed or mutilated Note or dated the date of such lost, stolen, destroyed or
mutilated Note if no interest shall have been paid thereon.

 

14. PAYMENTS ON NOTES.

14.1. Place of Payment. Subject to Section 14.2, payments of principal,
Make-Whole Amount, if any, and interest becoming due and payable on the Notes
shall be made in New York, New York at the principal office of Bank of America,
N.A. in such jurisdiction. The Company may at any time, by notice to each holder
of a Note, change the place of payment of the Notes so long as such place of
payment shall be either the principal office of the Company in such jurisdiction
or the principal office of a bank or trust company in such jurisdiction.

14.2. Home Office Payment. So long as any Purchaser or its nominee shall be the
holder of any Note, and notwithstanding anything contained in Section 14.1 or in
such Note to the contrary, the Company will pay all sums becoming due on such
Note for principal, Make-Whole Amount, if any, and interest by the method and at
the address

 

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specified for such purpose below such Purchaser’s name in Schedule A, or by such
other reasonable method or at such other address as such Purchaser shall have
from time to time specified to the Company in writing for such purpose, without
the presentation or surrender of such Note or the making of any notation
thereon, except that upon written request of the Company made concurrently with
or reasonably promptly after payment or prepayment in full of any Note, such
Purchaser shall surrender such Note for cancellation, reasonably promptly after
any such request, to the Company at its principal executive office or at the
place of payment most recently designated by the Company pursuant to
Section 14.1. Prior to any sale or other disposition of any Note held by a
Purchaser or its nominee, such Purchaser will, at its election, either endorse
thereon the amount of principal paid thereon and the last date to which interest
has been paid thereon or surrender such Note to the Company in exchange for a
new Note or Notes pursuant to Section 13.2. The Company will afford the benefits
of this Section 14.2 to any Institutional Investor that is the direct or
indirect transferee of any Note purchased by a Purchaser under this Agreement
and that has made the same agreement relating to such Note as the Purchasers
have made in this Section 14.2.

 

15. EXPENSES, ETC.

15.1. Transaction Expenses. Whether or not the transactions contemplated hereby
are consummated, the Company will pay all costs and expenses incurred by the
Purchasers and each other holder of a Note in connection with the preparation,
execution and delivery of this Agreement and the Notes and enforcement actions
in connection therewith, and in connection with any amendments, waivers or
consents under or in respect of this Agreement or the Notes (whether or not such
amendment, waiver or consent becomes effective), including, without limitation:
(a) the costs and expenses incurred in enforcing or defending (or determining
whether or how to enforce or defend) any rights under this Agreement or the
Notes or in responding to any subpoena or other legal process or informal
investigative demand issued in connection with this Agreement or the Notes, or
by reason of being a holder of any Note, (b) the costs and expenses, including
financial advisors’ fees, incurred in connection with the insolvency or
bankruptcy of the Company or any Guarantor or in connection with any work-out or
restructuring of the transactions contemplated hereby and by the Notes and
(c) the costs and expenses incurred in connection with the initial filing of
this Agreement and all related documents and financial information with the SVO;
provided, that such costs and expenses under this clause (c) shall not exceed
$5,000. Such costs and expenses shall include reasonable attorney’s fees and
expenses of a special counsel (but not local counsel) in connection with the
preparation, execution and delivery of this Agreement and attorneys’ fees and
expenses of a special counsel and, if reasonably required by the Required
Holders, local or other counsel in connection with (1) the Series A Closing,
(2) the Series B Closing and (3) the matters referred to in the preceding
sentence (other than the preparation, execution and delivery of this Agreement).
The Company will pay, and will save each Purchaser and each other holder of a
Note harmless from, all claims in respect of any fees, costs or expenses, if
any, of brokers and finders (other than those, if any, retained by a Purchaser
or other holder in connection with its purchase of the Notes).

 

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15.2. Survival. The obligations of the Company under this Section 15 will
survive the payment or transfer of any Note, the enforcement, amendment or
waiver of any provision of this Agreement or the Notes, and the termination of
this Agreement.

 

16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.

All representations and warranties contained herein shall survive the execution
and delivery of this Agreement and the Notes, the purchase or transfer by any
Purchaser of any Note or portion thereof or interest therein and the payment of
any Note, and may be relied upon by any subsequent holder of a Note, regardless
of any investigation made at any time by or on behalf of such Purchaser or any
other holder of a Note. All statements contained in any certificate or other
instrument delivered by or on behalf of the Company pursuant to this Agreement
shall be deemed representations and warranties of the Company under this
Agreement. Subject to the preceding sentence, this Agreement and the Notes
embody the entire agreement and understanding between each Purchaser and the
Company and supersede all prior agreements and understandings relating to the
subject matter hereof.

 

17. AMENDMENT AND WAIVER.

17.1. Requirements. Subject to the provisions of Section 4.12, this Agreement
and the Notes may be amended, and the observance of any term hereof or of the
Notes may be waived (either retroactively or prospectively), with (and only
with) the written consent of the Company and the Required Holders, except that
(a) no amendment or waiver of any of the provisions of Section 1, 2, 3, 4, 5, 6
or 20 hereof, or any defined term (as it is used therein), will be effective as
to any Purchaser unless consented to by the Company and such Purchaser in
writing, and (b) no such amendment or waiver may, without the written consent of
the Company and the holder of each Note at the time outstanding affected
thereby, (i) subject to the provisions of Section 12 relating to acceleration or
rescission, change the amount or time of any prepayment or payment of principal
of, or reduce the rate or change the time of payment or method of computation of
interest or of the Make-Whole Amount on, the Notes, (ii) change the percentage
of the principal amount of the Notes the holders of which are required to
consent to any such amendment or waiver, or (iii) amend any of Sections 8,
11(a), 11(b), 12, 17 or 20.

17.2. Solicitation of Holders of Notes.

(a) Solicitation. The Company will provide each Purchaser (at any time prior to
the date of the Series B Closing) and each holder of the Notes (irrespective of
the amount of Notes then owned by it) with sufficient information, sufficiently
far in advance of the date a decision is required, to enable such Purchaser or
such holder to make an informed and considered decision with respect to any
proposed amendment, waiver or consent in respect of any of the provisions hereof
or of the Notes. The Company will deliver executed or true and correct copies of
each amendment, waiver or consent effected pursuant to the provisions of this
Section 17 to each Purchaser (with respect to any amendment, waiver or consent
effected at any time prior to the date of the Series B Closing) and each holder
of outstanding Notes promptly following the date on which it is

 

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executed and delivered by, or receives the consent or approval of, the requisite
Purchasers (with respect to any amendment, waiver or consent effected at any
time prior to the date of the Series B Closing) and/or holders of Notes.

(b) Payment. The Company will not directly or indirectly pay or cause to be paid
any remuneration, whether by way of supplemental or additional interest, fee or
otherwise, or grant any security or provide other credit support, to any
Purchaser (with respect to any amendment, waiver or consent effected at any time
prior to the date of the Series B Closing) or holder of Notes as consideration
for or as an inducement to the entering into by any such Purchaser or such
holder of Notes of any waiver or amendment of any of the terms and provisions
hereof unless such remuneration is concurrently paid, or security is
concurrently granted or other credit support concurrently provided, on the same
terms, ratably to each such Purchaser and each such holder of Notes then
outstanding even if such Purchaser or such holder did not consent to such waiver
or amendment.

(c) Consent in Contemplation of Transfer. Any consent made pursuant to this
Section 17 by the holder of any Note that has transferred or has agreed to
transfer such Note to the Company, any Subsidiary or any Affiliate of the
Company and has provided or has agreed to provide such written consent as a
condition to such transfer shall be void and of no force or effect except solely
as to such holder, and any amendments effected or waivers granted or to be
effected or granted that would not have been or would not be so effected or
granted but for such consent (and the consents of all other holders of Notes
that were acquired under the same or similar conditions) shall be void and of no
force or effect except solely as to such transferring holder.

17.3. Binding Effect, etc. Any amendment or waiver consented to as provided in
this Section 17 applies equally to all holders of Notes and is binding upon them
and upon each future holder of any Note and upon the Company without regard to
whether such Note has been marked to indicate such amendment or waiver. No such
amendment or waiver will extend to or affect any obligation, covenant,
agreement, Default or Event of Default not expressly amended or waived or impair
any right consequent thereon. No course of dealing between the Company and the
holder of any Note nor any delay in exercising any rights hereunder or under any
Note shall operate as a waiver of any rights of any holder of such Note. As used
herein, the term “this Agreement” and references thereto shall mean this
Agreement (including without limitation the Schedules and Exhibits hereto) as it
may from time to time be amended or supplemented.

17.4. Notes Held by Company, etc. Solely for the purpose of determining whether
the holders of the requisite percentage of the aggregate principal amount of
Notes then outstanding approved or consented to any amendment, waiver or consent
to be given under this Agreement or the Notes, or have directed the taking of
any action provided herein or in the Notes to be taken upon the direction of the
holders of a specified percentage of the aggregate principal amount of Notes
then outstanding, Notes directly or indirectly owned by the Company or any of
its Affiliates shall be deemed not to be outstanding.

 

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18. NOTICES.

(a) Notices Generally. All notices and communications provided for hereunder
shall be in writing and sent (a) by telecopy if the sender on the same day sends
a confirming copy of such notice by email (if recipient has specified an email
address in its notice address) and by a recognized overnight delivery service
(charges prepaid), or (b) by registered or certified mail with return receipt
requested (postage prepaid), or (c) by a recognized overnight delivery service
(with charges prepaid) or (d) as provided Section 18(b) below. Any such notice
must be sent:

(i) if to any Purchaser or its nominee, to such Purchaser or nominee at the
address specified for such communications in Schedule A, or at such other
address as such Purchaser or nominee shall have specified to the Company in
writing,

(ii) if to any other holder of any Note, to such holder at such address as such
other holder shall have specified to the Company in writing, or

(iii) if to the Company, to the Company at its address set forth below or at
such other address as the Company shall have specified to the holder of each
Note in writing:

Piedmont Natural Gas Company, Inc.

Office of the Treasurer

4720 Piedmont Row Drive

Charlotte, North Carolina 28210

Attention: Robert Pritchard

Telephone: 704-731-4332

Telecopier: 704-731-4097

Email: rob.pritchard@piedmontng.com

with a copy to:

Piedmont Natural Gas Company, Inc.

Office of General Counsel

4720 Piedmont Row Drive

Charlotte, North Carolina 28210

Attention: Jane R. Lewis-Raymond

Telephone: 704-731-4261

Telecopier: 704-365-8515

Email: jane.lewis-raymond@piedmontng.com

U.S. Bank National Association

190 South LaSalle Street, 7th Floor

Chicago, IL 60603

Attention: Patricia M. Child, Vice President

 

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Telephone: 312-332-7494

Telecopier: 312-332-7996

Email: patricia.child@usbank.com

Notices sent by hand or overnight courier service, or mailed by certified or
registered mail, shall be deemed to have been given when received; notices sent
by telecopier shall be deemed to have been given when sent (except that, if not
given during normal business hours for the recipient, shall be deemed to have
been given at the opening of business on the next Business Day for the
recipient). Notices hereunder shall be conclusively presumed received as
evidenced by a delivery receipt furnished by the United States Postal Service or
any reputable commercial delivery service. Notices delivered through electronic
communications, to the extent provided in Section 18(b) below, shall be
effective as provided in such Section 18(b).

(b) Electronic Communications. Notices and other communications to the holders
of Notes hereunder may be delivered or furnished by electronic communication
(including e-mail and Internet or intranet websites) pursuant to procedures
approved by the applicable holders and the Company, provided that the foregoing
shall not apply to notices regarding Sections 2, 3 and 8 to any holder if such
holder has notified the Company that it is incapable of receiving notices under
such Sections by electronic communication. Each holder of Notes or the Company
may, in its discretion, agree to accept notices and other communications to it
hereunder by electronic communications pursuant to procedures approved by it,
provided that approval of such procedures may be limited to particular notices
or communications.

 

19. REPRODUCTION OF DOCUMENTS.

This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by any Purchaser at the Closings (except the
Notes themselves), and (c) financial statements, certificates and other
information previously or hereafter furnished to any Purchaser, may be
reproduced by such Purchaser by any photographic, photostatic, electronic,
digital, or other similar process and such Purchaser may destroy any original
document so reproduced. The Company agrees and stipulates that, to the extent
permitted by applicable law, any such reproduction shall be admissible in
evidence as the original itself in any judicial or administrative proceeding
(whether or not the original is in existence and whether or not such
reproduction was made by such Purchaser in the regular course of business) and
any enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence. This Section 19 shall not prohibit the
Company or any other holder of Notes from contesting any such reproduction to
the same extent that it could contest the original, or from introducing evidence
to demonstrate the inaccuracy of any such reproduction.

 

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20. CONFIDENTIAL INFORMATION.

For the purposes of this Section 20, “Confidential Information” means
information delivered to any Purchaser by or on behalf of the Company or any
Subsidiary in connection with the transactions contemplated by or otherwise
pursuant to this Agreement that is proprietary in nature and that was clearly
marked or labeled or otherwise adequately identified when received by such
Purchaser as being confidential information of the Company or such Subsidiary,
provided that such term does not include information that (a) (i) was publicly
known through no act or omission by such Purchaser or any Person acting on such
Purchaser’s behalf or (ii) was otherwise known to such Purchaser prior to the
time of such disclosure and not known to have been obtained or derived in
contravention of any confidentiality obligation in favor of the Company known to
such Purchaser after due inquiry; (b) subsequently becomes publicly known
through no act or omission by such Purchaser or any Person acting on such
Purchaser’s behalf; (c) otherwise becomes known to such Purchaser (and not known
to have been obtained or derived in contravention of any confidentiality
obligation in favor of the Company known to such Purchaser after due inquiry)
other than through disclosure by the Company or any Subsidiary; or
(d) constitutes financial statements delivered to such Purchaser under
Section 7.1 that are otherwise publicly available. Each Purchaser will maintain
the confidentiality of such Confidential Information in accordance with
procedures adopted by such Purchaser in good faith to protect confidential
information of third parties delivered to such Purchaser, provided that such
Purchaser may deliver or disclose Confidential Information to (i) its directors,
officers, employees, agents, attorneys, trustees and Affiliates (to the extent
such disclosure reasonably relates to the administration of the investment
represented by its Notes and to the extent each such recipient of Confidential
Information is bound by the terms of this Section 20 or otherwise agrees in
writing prior to receipt of any Confidential Information to hold confidential
the Confidential Information substantially in accordance with the terms of this
Section 20), (ii) its financial advisors and other professional advisors who
agree in writing prior to receipt of any Confidential Information to hold
confidential such Confidential Information substantially in accordance with the
terms of this Section 20, (iii) any other holder of any Note, (iv) any
Institutional Investor to which it sells or offers to sell such Note or any part
thereof or any participation therein (if such Person has agreed in writing prior
to its receipt of such Confidential Information to be bound by the provisions of
this Section 20), (v) any Person from which it offers to purchase any Security
of the Company (if such Person has agreed in writing prior to its receipt of
such Confidential Information to be bound by the provisions of this Section 20),
(vi) any federal or state regulatory authority having jurisdiction over such
Purchaser, (vii) the NAIC or the SVO or, in each case, any similar organization,
or any nationally recognized rating agency that requires access to information
about such Purchaser’s investment portfolio, or (viii) any other Person to which
such delivery or disclosure is necessary (w) to effect compliance with any law,
rule, regulation or order applicable to such Purchaser, (x) in response to any
subpoena or other legal process, (y) in connection with any litigation to which
such Purchaser is a party or (z) if an Event of Default has occurred and is
continuing, to the extent such Purchaser may reasonably determine such delivery
and disclosure to be necessary in the enforcement or for the protection of the
rights and remedies under such Purchaser’s Notes and this Agreement. Each holder
of a Note, by its acceptance of a Note, will be deemed to have agreed to be
bound by and to be entitled to the benefits of this Section 20 as though it were
a party to this Agreement. On reasonable request by the Company in connection
with the delivery to any holder of a Note of

 

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information required to be delivered to such holder under this Agreement or
requested by such holder (other than a holder that is a party to this Agreement
or its nominee), such holder will enter into an agreement with the Company
embodying the provisions of this Section 20.

 

21. SUBSTITUTION OF PURCHASER.

Each Purchaser shall have the right to substitute any one of its Affiliates as
the purchaser of the Notes that it has agreed to purchase hereunder, by written
notice to the Company, which notice shall be signed by both such Purchaser and
such Affiliate, shall contain such Affiliate’s agreement to be bound by this
Agreement and shall contain a confirmation by such Affiliate of the accuracy
with respect to it of the representations set forth in Section 6. Upon receipt
of such notice, any reference to such Purchaser in this Agreement (other than in
this Section 21), shall be deemed to refer to such Affiliate in lieu of such
original Purchaser. In the event that such Affiliate is so substituted as a
Purchaser hereunder and such Affiliate thereafter transfers to such original
Purchaser all of the Notes then held by such Affiliate, upon receipt by the
Company of notice of such transfer, any reference to such Affiliate as a
“Purchaser” in this Agreement (other than in this Section 21), shall no longer
be deemed to refer to such Affiliate, but shall refer to such original
Purchaser, and such original Purchaser shall again have all the rights of an
original holder of the Notes under this Agreement.

 

22. MISCELLANEOUS.

22.1. Successors and Assigns. All covenants and other agreements contained in
this Agreement by or on behalf of any of the parties hereto bind and inure to
the benefit of their respective successors and assigns (including, without
limitation, any subsequent holder of a Note) whether so expressed or not.

22.2. Payments Due on Non-Business Days. Anything in this Agreement or the Notes
to the contrary notwithstanding (but without limiting the requirement in
Section 8.4 that the notice of any optional prepayment specify a Business Day as
the date fixed for such prepayment), any payment of principal of or Make-Whole
Amount or interest on any Note that is due on a date other than a Business Day
shall be made on the next succeeding Business Day without including the
additional days elapsed in the computation of the interest payable on such next
succeeding Business Day; provided that if the maturity date of any Note is a
date other than a Business Day, the payment otherwise due on such maturity date
shall be made on the next succeeding Business Day and shall include the
additional days elapsed in the computation of interest payable on such next
succeeding Business Day.

22.3. Accounting Terms.

(a) Generally. All accounting terms not specifically or completely defined
herein shall be construed in conformity with, and all financial data (including
financial ratios and other financial calculations) required to be submitted
pursuant to this Agreement shall be prepared in conformity with, GAAP applied on
a consistent basis, as in effect from time to time. Notwithstanding the
foregoing, for purposes of determining compliance with any covenant (including
the computation of any financial covenant)

 

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contained herein, Indebtedness of the Company and its Subsidiaries shall be
deemed to be carried at 100% of the outstanding principal amount thereof, and
the effects of FASB ASC 825 on financial liabilities shall be disregarded.

(b) Changes in GAAP. If at any time any change in GAAP would affect the
computation of any financial ratio or requirement set forth in this Agreement,
and either the Company or the Required Holders shall so request, representatives
of the holders of the Notes designated by the Required Holders at such time and
the Company shall negotiate in good faith to amend such ratio or requirement to
preserve the original intent thereof in light of such change in GAAP (subject to
the approval of the Required Holders); provided that, until so amended, (i) such
ratio or requirement shall continue to be computed in accordance with GAAP prior
to such change therein and (ii) the Company shall provide to the holders of the
Notes that are Institutional Investors financial statements and other documents
required under this Agreement or as reasonably requested hereunder setting forth
a reconciliation between calculations of such ratio or requirement made before
and after giving effect to such change in GAAP. Any amendment of this Agreement,
at any time, with regard to any such change in GAAP shall be effected without,
in connection therewith, (i) the Company being obligated to pay any fee,
(ii) any increase in the interest rate with respect to the Notes or (iii) any
other increase in the consideration then payable by the Company pursuant to this
Agreement or the Notes.

22.4. Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by applicable law) not
invalidate or render unenforceable such provision in any other jurisdiction.

22.5. Construction, etc. Each covenant contained herein shall be construed
(absent express provision to the contrary) as being independent of each other
covenant contained herein, so that compliance with any one covenant shall not
(absent such an express contrary provision) be deemed to excuse compliance with
any other covenant. Where any provision herein refers to action to be taken by
any Person, or which such Person is prohibited from taking, such provision shall
be applicable whether such action is taken directly or indirectly by such
Person.

For the avoidance of doubt, all Schedules and Exhibits attached to this
Agreement shall be deemed to be a part hereof.

22.6. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one instrument. Each counterpart may consist of a number of copies
hereof, each signed by less than all, but together signed by all, of the parties
hereto.

22.7. Governing Law. This Agreement shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the law of
the State of

 

39

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New York excluding choice-of-law principles of the law of such State that would
permit the application of the laws of a jurisdiction other than such State.

22.8. Jurisdiction and Process; Waiver of Jury Trial. (a) Each party to this
Agreement hereby irrevocably submits to the non-exclusive jurisdiction of any
New York State or federal court sitting in the Borough of Manhattan, The City of
New York, over any suit, action or proceeding arising out of or relating to this
Agreement or the Notes. To the fullest extent permitted by applicable law, each
party to this Agreement hereby irrevocably waives and agrees not to assert, by
way of motion, as a defense or otherwise, any claim that it is not subject to
the jurisdiction of any such court, any objection that it may now or hereafter
have to the laying of the venue of any such suit, action or proceeding brought
in any such court and any claim that any such suit, action or proceeding brought
in any such court has been brought in an inconvenient forum.

(b) Each party to this Agreement hereby consents to process being served by or
on behalf of any other party hereto in any suit, action or proceeding of the
nature referred to in Section 22.8(a) by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage prepaid,
return receipt requested, to it at its address specified in or pursuant to
Section 18 or at such other address of which such party shall then have been
notified pursuant to said Section. Each party to this Agreement hereby agrees
that such service upon receipt (i) shall be deemed in every respect effective
service of process upon it in any such suit, action or proceeding and
(ii) shall, to the fullest extent permitted by applicable law, be taken and held
to be valid personal service upon and personal delivery to it. Notices hereunder
shall be conclusively presumed received as evidenced by a delivery receipt
furnished by the United States Postal Service or any reputable commercial
delivery service.

(c) Nothing in this Section 22.8 shall affect the right of any party to this
Agreement to serve process in any manner permitted by applicable law, or limit
any rights that any party hereto may have to bring proceedings against any other
party hereto in the courts of any appropriate jurisdiction or to enforce in any
lawful manner a judgment obtained in one jurisdiction in any other jurisdiction.

(d) The parties hereto hereby waive trial by jury in any action brought on or
with respect to this Agreement, the Notes or any other document executed in
connection herewith or therewith.

22.9. Paying Agent. The Purchasers hereby acknowledge that the Company may use a
paying agent, among other things, to make payments due hereunder and under the
Notes and to make delivery of documents required to be delivered hereunder
(whether under Section 7 or otherwise). The Company hereby acknowledges that its
use of a paying agent for such purposes does not relieve it of any its
obligations under this Agreement or the Notes and any failure of any such paying
agent to perform any obligations of the Company hereunder or under the Notes
shall be treated, as between the Company and the holders of the Notes, as the
failure of the Company to perform such obligations.

 

40

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If you are in agreement with the foregoing, please sign the form of agreement on
a counterpart of this Agreement and return it to the Company, whereupon this
Agreement shall become a binding agreement between you and the Company.

 

Very truly yours, PIEDMONT NATURAL GAS COMPANY, INC. By:   /s/ Robert O.
Pritchard Name:   Robert O. Pritchard Title:   Vice President–Treasurer and
Chief Risk Officer

This Agreement is hereby accepted and agreed to as of the date thereof.

 

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA By:   /s/ Brian E. Lemons Name:  
Brian E. Lemons Title:   Vice President UNITED INSURANCE COMPANY OF AMERICA By:
  Prudential Private Placement Investors, L.P. (as Investment Advisor) By:  
Prudential Private Placement Investors, Inc. (as its General Partner)   By:  
/s/ Brian E. Lemons   Name:   Brian E. Lemons   Title:   Vice President PRUCO
LIFE INSURANCE COMPANY OF NEW JERSEY By:   /s/ Brian E. Lemons Name:   Brian E.
Lemons Title:   Assistant Vice President HARTFORD LIFE AND ACCIDENT INSURANCE
COMPANY HARTFORD LIFE AND ANNUITY INSURANCE COMPANY By:   Hartford Investment
Management Company   Their Agent and Attorney-in-Fact By:   /s/ Robert M. Mills
Name:   Robert M. Mills

--------------------------------------------------------------------------------

Title:   Vice President METROPOLITAN LIFE INSURANCE COMPANY By:   /s/ John A.
Tanyeri Name:   John A. Tanyeri Title:   Director UNION FIDELITY LIFE INSURANCE
COMPANY By:   MetLife Investment Advisors Company, LLC, its investment adviser  
By:   /s/ John A. Tanyeri   Name:   John A. Tanyeri   Title:   Director NEW YORK
LIFE INSURANCE COMPANY By:   /s/ Ruthard C. Murphy, II Name:   Ruthard C.
Murphy, II Title:   Corporate Vice President NEW YORK LIFE INSURANCE AND ANNUITY
CORPORATION By:   New York Life Investment Management LLC, Its Investment
Manager   By:   /s/ Ruthard C. Murphy, II   Name:   Ruthard C. Murphy, II  
Title:   Director THRIVENT FINANCIAL FOR LUTHERANS By:   /s/ Patricia H.
Eitrheim Name:   Patricia H. Eitrheim Title:   Director JACKSON NATIONAL LIFE
INSURANCE COMPANY By:   PPM America, Inc., as attorney in fact, on behalf of
Jackson National Life Insurance Company   By:   /s/ Brian Manczak   Name:  
Brian Manczak   Title:   Vice President GREAT-WEST LIFE & ANNUITY INSURANCE
COMPANY By:   /s/ James Lowery Name:   James Lowery

--------------------------------------------------------------------------------

Title:   Assistant Vice President, Investments By:   /s/ Paul Runnalls Name:  
Paul Runnalls Title:   Manager, Investments THE CANADA LIFE ASSURANCE COMPANY
By:   /s/ James Lowery Name:   James Lowery Title:   Assistant Vice President,
Investments, GWL&A By:   /s/ Paul Runnalls Name:   Paul Runnalls Title:  
Manager, Investments, GWL&A AMERICAN UNITED LIFE INSURANCE COMPANY By:   /s/
John C. Mason Name:   John C. Mason Title:   VP, Investments THE STATE LIFE
INSURANCE COMPANY By:   American United Life Insurance Company Its:   Agent  
By:   /s/ John C. Mason   Name:   John C. Mason   Title:   VP, Investments
PIONEER MUTUAL LIFE INSURANCE COMPANY By:   American United Life Insurance
Company Its:   Agent   By:   /s/ John C. Mason   Name:   John C. Mason   Title:
  VP, Investments MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY By:   Babson
Capital Management LLC as Investment Adviser   By:   /s/ Thomas P. Shea   Name:
  Thomas P. Shea   Title:   Managing Director

C.M. LIFE INSURANCE COMPANY

--------------------------------------------------------------------------------

By:   Babson Capital Management LLC as Investment Adviser   By:   /s/ Thomas P.
Shea   Name:   Thomas P. Shea   Title:   Managing Director MASSMUTUAL ASIA
LIMITED By:   Babson Capital Management LLC as Investment Adviser   By:   /s/
Thomas P. Shea   Name:   Thomas P. Shea   Title:   Managing Director GENWORTH
LIFE AND ANNUITY INSURANCE COMPANY By:   /s/ John R. Endres Name:   John R.
Endres Title:   Investment Officer KNIGHTS OF COLUMBUS By:   /s/ Charles E.
Maurer, Jr. Name:   Charles E. Maurer, Jr. Title:   Supreme Secretary

--------------------------------------------------------------------------------

SCHEDULE B

DEFINED TERMS

As used herein, the following terms have the respective meanings set forth below
or set forth in the Section hereof following such term:

“Affiliate” means, with respect to any Person, another Person that directly, or
indirectly through one or more intermediaries, Controls or is Controlled by or
is under common Control with the Person specified.

“Affiliated Entity” means the Subsidiaries of the Company and any of their or
the Company’s respective Controlled Affiliates.

“Agreement” is defined in Section 17.3.

“Anti-Money Laundering Laws” is defined in Section 5.16(c).

“Anti-Terrorism Order” means Executive Order No. 13,224 of September 24, 2001,
Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten
to Commit or Support Terrorism, 66 U.S. Fed. Reg. 49, 079 (2001), as amended.

“Attributable Indebtedness” means, on any date, (a) in respect of any capital
lease of any Person, the capitalized amount thereof that would appear on a
balance sheet of such Person prepared as of such date in accordance with GAAP,
and (b) in respect of any Synthetic Lease Obligation of any Person, the
capitalized amount of the remaining lease payments under the relevant lease that
would appear on a balance sheet of such Person prepared as of such date in
accordance with GAAP if such lease were accounted for as a capital lease.

“Audited Financial Statements” means the audited consolidated balance sheet of
the Company and its Subsidiaries for the fiscal year ended October 31, 2010, and
the related consolidated statements of income from operations, shareholders’
equity and cash flows of the Company and its Subsidiaries for such fiscal year,
including the notes thereto.

“Blocked Person” is defined in Section 5.16(a).

“Business Day” means (a) for the purposes of Section 8.6 only, any day other
than a Saturday, a Sunday or a day on which commercial banks in New York City
are required or authorized to be closed, and (b) for the purposes of any other
provision of this Agreement, any day other than a Saturday, a Sunday or a day on
which commercial banks in New York, New York or Charlotte, North Carolina are
required or authorized to be closed.

“Change in Control” is defined in Section 8.7(f).

“Change in Law” means the occurrence, after the date of this Agreement, of any
of the following: (a) the adoption or taking effect of any law, rule, regulation
or treaty, (b) any change

 

Schedule B-1

--------------------------------------------------------------------------------

in any law, rule, regulation or treaty or in the administration, interpretation
or application thereof by any Governmental Authority or (c) the making or
issuance of any request, guideline or directive (whether or not having the force
of law) by any Governmental Authority.

“Closing” is defined in Section 3.3.

“Code” means the Internal Revenue Code of 1986, as amended from time to time,
and the rules and regulations promulgated thereunder from time to time.

“Company” means Piedmont Natural Gas Company, Inc., a North Carolina corporation
or any successor that becomes such in the manner prescribed in Section 10.2.

“Confidential Information” is defined in Section 20.

“Consolidated Funded Indebtedness” means, as of any date of determination, for
the Company and its Subsidiaries on a consolidated basis, the sum of (a) the
outstanding principal amount of all obligations, whether current or long-term,
for borrowed money (including the Notes hereunder) and all obligations evidenced
by bonds, debentures, notes, loan agreements or other similar instruments,
(b) all purchase money Indebtedness, (c) all direct obligations arising under
standby letters of credit, bankers’ acceptances, bank guaranties, surety bonds
and similar instruments, (d) all obligations in respect of the deferred purchase
price of property or services (other than trade accounts payable in the ordinary
course of business), (e) Attributable Indebtedness in respect of capital leases
and Synthetic Lease Obligations, (f) without duplication, all Guarantees with
respect to outstanding Indebtedness of the types specified in clauses
(a) through (e) above of Persons other than the Company or any Subsidiary, and
(g) all Indebtedness of the types referred to in clauses (a) through (f) above
of any partnership or joint venture (other than a joint venture that is itself a
corporation or limited liability company) in which the Company or a Subsidiary
is a general partner or joint venturer, except to the extent such Indebtedness
is expressly made non-recourse to the Company or such Subsidiary.

“Consolidated Total Assets” means, as of any date of determination, for the
Company and its Subsidiaries on a consolidated basis, the total assets of the
Company and its Subsidiaries as set forth or reflected on the most recent
consolidated balance sheet of the Company and its Subsidiaries, prepared in
accordance with GAAP.

“Control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise.
“Controlling” and “Controlled” have meanings correlative thereto.

“Country Sanctions” is defined in Section 5.16(a).

“Credit Agreement” means the Credit Agreement among the Company, the lenders
signatory thereto and Bank of America, N.A. as administrative agent among others
dated as of January 25, 2011, as amended by that certain Amendment No. 1 to
Credit Agreement dated as of March 21, 2011, as such agreement may be hereafter
amended, modified, restated, supplemented, refinanced, increased or reduced from
time to time, and any successor credit agreement or similar facilities.

 

Schedule B-2

--------------------------------------------------------------------------------

“Default” means an event or condition the occurrence or existence of which
would, with the lapse of time or the giving of notice or both, become an Event
of Default.

“Default Rate” means that rate of interest that is the greater of (i) 2% per
annum above the rate of interest stated in clause (a) of the first paragraph of
the Notes or (ii) 2% over the rate of interest publicly announced by Bank of
America, N.A. in New York, New York (and its successors) as its “base” or
“prime” rate.

“Disclosure Documents” is defined in Section 5.3.

“Disposition” or “Dispose” means the sale, transfer, license, lease or other
disposition (including any sale and leaseback transaction) of any property by
any Person, including any sale, assignment, transfer or other disposal, with or
without recourse, of any notes or accounts receivable or any rights and claims
associated therewith.

“Environmental Laws” means any and all United States federal, state, local, and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
governmental restrictions relating to pollution and the protection of the
environment or the release of any materials into the environment, including
those related to hazardous substances or wastes, air emissions and discharges to
waste or public systems.

“Equity Interests” means, with respect to any Person, all of the shares of
capital stock of (or other ownership or profit interests in) such Person, all of
the warrants, options or other rights for the purchase or acquisition from such
Person of shares of capital stock of (or other ownership or profit interests in)
such Person, all of the Securities convertible into or exchangeable for shares
of capital stock of (or other ownership or profit interests in) such Person or
warrants, rights or options for the purchase or acquisition from such Person of
such shares (or such other interests), and all of the other ownership or profit
interests in such Person (including partnership, member or trust interests
therein), whether voting or nonvoting, and whether or not such shares, warrants,
options, rights or other interests are outstanding on any date of determination.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time, and the rules and regulations promulgated thereunder from
time to time in effect.

“ERISA Affiliate” means any trade or business (whether or not incorporated) that
is treated as a single employer together with the Company under section 414 of
the Code.

“ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) a
withdrawal by the Company or any ERISA Affiliate from a Pension Plan subject to
section 4063 of ERISA during a plan year in which it was a substantial employer
(as defined in section 4001(a)(2) of ERISA) or a cessation of operations that is
treated as such a withdrawal under section 4062(e) of ERISA; (c) a complete or
partial withdrawal by the Company or any ERISA Affiliate from a Multiemployer
Plan or notification that a Multiemployer Plan is in reorganization; (d) the
filing of a notice of intent to terminate, the treatment of a Plan amendment as
a termination under sections 4041 or 4041A of ERISA, or the commencement of
proceedings

 

Schedule B-3

--------------------------------------------------------------------------------

by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or
condition which constitutes grounds under section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Pension Plan
or Multiemployer Plan; or (f) the imposition of any liability under Title IV of
ERISA, other than for PBGC premiums due but not delinquent under section 4007 of
ERISA, upon the Company or any ERISA Affiliate.

“Event of Default” is defined in Section 11.

“Federal Power Act” means 16 U.S.C. § 791-828(c).

“Finance Agreement” means this Agreement, the Notes and any Subsidiary Guaranty.

“Form 10-K” means Form 10-K of the Company filed with the SEC for the applicable
fiscal period.

“Form 10-Q” means Form 10-Q of the Company filed with the SEC for the applicable
fiscal period.

“GAAP” means generally accepted accounting principles in the United States set
forth in the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or such other
principles as may be approved by a significant segment of the accounting
profession in the United States, that are applicable to the circumstances as of
the date of determination, consistently applied.

“Governmental Authority” means the government of the United States or any other
nation, or of any political subdivision thereof, whether state or local, and any
agency, authority, instrumentality, regulatory body, court, central bank or
other entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government (including any
supra-national bodies such as the European Union or the European Central Bank)

“Guarantee” means, as to any Person, (a) any obligation, contingent or
otherwise, of such Person guaranteeing or having the economic effect of
guaranteeing any Indebtedness or other obligation payable or performable by
another Person (the “primary obligor”) in any manner, whether directly or
indirectly, and including any obligation of such Person, direct or indirect,
(i) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or other obligation, (ii) to purchase or lease property,
Securities or services for the purpose of assuring the obligee in respect of
such Indebtedness or other obligation of the payment or performance of such
Indebtedness or other obligation, (iii) to maintain working capital, equity
capital or any other financial statement condition or liquidity or level of
income or cash flow of the primary obligor so as to enable the primary obligor
to pay such Indebtedness or other obligation, or (iv) entered into for the
purpose of assuring in any other manner the obligee in respect of such
Indebtedness or other obligation of the payment or performance thereof or to
protect such obligee against loss in respect thereof (in whole or in part), or
(b) any Lien on any assets of such Person securing any Indebtedness or other
obligation of any other Person, whether or not such Indebtedness or other
obligation is assumed by such Person (or any right, contingent

 

Schedule B-4

--------------------------------------------------------------------------------

or otherwise, of any holder of such Indebtedness to obtain any such Lien);
provided that, the term “Guarantee” shall not include endorsements for
collection or deposit in the ordinary course of business. The amount of any
Guarantee shall be deemed to be an amount equal to the stated or determinable
amount of the related primary obligation, or portion thereof, in respect of
which such Guarantee is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof as determined by the
guaranteeing Person in good faith. The term “Guarantee” as a verb has a
corresponding meaning.

“Guarantors” means each Person who is a signatory to the Subsidiary Guaranty and
any other Person who, pursuant to Section 9.8, executes a joinder agreement and
becomes a party to the Subsidiary Guaranty.

“holder” means, with respect to any Note the Person in whose name such Note is
registered in the register maintained by the Company pursuant to Section 13.1.

“Indebtedness” means, as to any Person at a particular time, without
duplication, all of the following, whether or not included as indebtedness or
liabilities in accordance with GAAP:

(a) all obligations of such Person for borrowed money and all obligations of
such Person evidenced by bonds, debentures, notes, loan agreements or other
similar instruments;

(b) all direct or contingent obligations of such Person arising under letters of
credit (including standby and commercial), bankers’ acceptances, bank
guaranties, surety bonds and similar instruments;

(c) net obligations of such Person under any Swap Contract;

(d) all obligations of such Person to pay the deferred purchase price of
property or services (other than trade accounts payable in the ordinary course
of business);

(e) indebtedness (excluding prepaid interest thereon) secured by a Lien on
property owned or being purchased by such Person (including indebtedness arising
under conditional sales or other title retention agreements), whether or not
such indebtedness shall have been assumed by such Person or is limited in
recourse;

(f) capital leases and Synthetic Lease Obligations;

(g) all obligations of such Person to purchase, redeem, retire, defease or
otherwise make any payment in respect of any Equity Interest in such Person or
any other Person, valued, in the case of a redeemable preferred interest, at the
greater of its voluntary or involuntary liquidation preference plus accrued and
unpaid dividends; and

(h) all Guarantees of such Person in respect of any of the foregoing.

For all purposes hereof, the Indebtedness of any Person shall include the
Indebtedness of any partnership or joint venture (other than a joint venture
that is itself a corporation or limited

 

Schedule B-5

--------------------------------------------------------------------------------

liability company) in which such Person is a general partner or a joint
venturer, except to the extent such Indebtedness is expressly made non-recourse
to such Person. The amount of any net obligation under any Swap Contract on any
date shall be deemed to be the Swap Termination Value thereof as of such date.
The amount of any capital lease or Synthetic Lease Obligation as of any date
shall be deemed to be the amount of Attributable Indebtedness in respect thereof
as of such date.

“INHAM Exemption” is defined in Section 6.2(e).

“Institutional Investor” means (a) any Purchaser of a Note, (b) any holder of a
Note holding (together with one or more of its Affiliates) more than 3% of the
aggregate principal amount of the Notes then outstanding, (c) any bank, trust
company, savings and loan association or other financial institution, any
pension plan, any investment company, any insurance company, any broker or
dealer, or any other similar financial institution or entity, regardless of
legal form, and (d) any Related Fund of any holder of any Note.

“Laws” means, collectively, all international, foreign, Federal, state and local
statutes, treaties, rules, guidelines, regulations, ordinances, codes and
administrative or judicial precedents or authorities, including the
interpretation or administration thereof by any Governmental Authority charged
with the enforcement, interpretation or administration thereof, and all
applicable administrative orders, directed duties, requests, licenses,
authorizations and permits of, and agreements with, any Governmental Authority,
in each case having the force of law.

“Lien” means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge, or preference,
priority or other security interest or preferential arrangement in the nature of
a security interest of any kind or nature whatsoever (including any conditional
sale or other title retention agreement, any easement, right of way or other
encumbrance on title to real property, and any financing lease having
substantially the same economic effect as any of the foregoing).

“Make-Whole Amount” is defined in Section 8.6.

“Material” means material in relation to the operations, business, properties,
condition (financial or otherwise) of the Company and its Subsidiaries taken as
a whole.

“Material Adverse Effect” means (a) a material adverse change in, or a material
adverse effect upon, the operations, business, properties, condition (financial
or otherwise) of the Company and its Subsidiaries taken as a whole; (b) a
material impairment of the ability of the Company or any Guarantor to perform
its obligations under any Finance Agreement to which it is a party; or (c) a
material adverse effect upon the legality, validity, binding effect or
enforceability against the Company or any Guarantor of any Finance Agreement to
which it is a party.

“Memorandum” is defined in Section 5.3.

“Moody’s” means Moody’s Investors Service, Inc.

 

Schedule B-6

--------------------------------------------------------------------------------

“Multiemployer Plan” means any employee benefit plan of the type described in
section 4001(a)(3) of ERISA, to which the Company or any ERISA Affiliate makes
or is obligated to make contributions, or during the preceding five plan years,
has made or been obligated to make contributions.

“NAIC” means the National Association of Insurance Commissioners or any
successor thereto.

“NAIC Annual Statement” is defined in Section 6.2(a).

“Natural Gas Act” means U.S.C. Title 15, Chapter 15B.

“Notes” is defined in Section 1.

“OFAC” is defined in Section 5.16(a).

“OFAC Listed Person” is defined in Section 5.16(a).

“Officer’s Certificate” means a certificate of a Senior Financial Officer or of
any other officer of the Company whose responsibilities extend to the subject
matter of such certificate.

“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in
ERISA or any successor thereto.

“PCAOB” means the Public Company Accounting Oversight Board.

“Pension Plan” means any “employee pension benefit plan” (as such term is
defined in section 3(2) of ERISA), other than a Multiemployer Plan, that is
subject to Title IV of ERISA and is sponsored or maintained by the Company or
any ERISA Affiliate or to which the Company or any ERISA Affiliate contributes
or has an obligation to contribute, or in the case of a multiple employer or
other plan described in section 4064(a) of ERISA, has made contributions at any
time during the immediately preceding five plan years.

“Person” means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, Governmental Authority
or other entity.

“Plan” means an “employee benefit plan” (as defined in section 3(3) of ERISA)
subject to Title I of ERISA that is or, within the preceding five years, has
been established or maintained, or to which contributions are or, within the
preceding five years, have been made or required to be made, by the Company or
any ERISA Affiliate or with respect to which the Company or any ERISA Affiliate
may have any liability.

“property” of a Person means any and all property, whether real, personal,
tangible, intangible, or mixed, of such Person, or other assets owned, leased or
operated by such Person.

“Proposed Prepayment Date” is defined in Section 8.7(b).

“PTE” is defined in Section 6.2(a).

 

Schedule B-7

--------------------------------------------------------------------------------

“PUHCA” means the Public Utility Holding Company Act of 2005, as amended.

“Purchaser” is defined in the first paragraph of this Agreement.

“QPAM Exemption” is defined in Section 6.2(d).

“Qualified Institutional Buyer” means any Person who is a “qualified
institutional buyer” within the meaning of such term as set forth in Rule
144A(a)(1) under the Securities Act.

“Registered Public Accounting Firm” has the meaning specified in the Securities
Laws and shall be independent of the Company as prescribed in the Securities
Laws.

“Related Fund” means, with respect to any holder of any Note, any fund or entity
that (i) invests in Securities or bank loans, and (ii) is advised or managed by
such holder, the same investment advisor as such holder or by an Affiliate of
such holder or such investment advisor.

“Reportable Event” means any of the events set forth in section 4043(c) of
ERISA, other than events for which the 30 day notice period has been waived.

“Required Holders” means, at any time, the holders of at least 51% in principal
amount of the Notes at the time outstanding (exclusive of Notes then owned by
the Company or any of its Affiliates); provided that, before the issuance and
sale of any Notes by the Company under this Agreement, “Required Holders” shall
mean the Purchasers holding commitments to purchase 51% of the aggregate
principal amount of the Notes.

“Responsible Officer” means the president, senior vice president, chief
financial officer, treasurer, or vice president-chief risk officer of the
Company and, solely for purposes of notices given pursuant to Section 18, any
other officer or employee of the Company so designated by any of the foregoing
officers in a notice to the holders of the Notes. Any document delivered
hereunder that is signed by a Responsible Officer of the Company shall be
conclusively presumed to have been authorized by all necessary corporate,
partnership and/or other action on the part of the Company and such Responsible
Officer shall be conclusively presumed to have acted on behalf of the Company.

“S&P” means Standard & Poor’s Ratings Group, a division of The McGraw-Hill
Companies, Inc.

“SEC” shall mean the Securities and Exchange Commission of the United States, or
any successor thereto.

“Securities” or “Security” shall have the meaning specified in section 2(1) of
the Securities Act.

“Securities Act” means the Securities Act of 1933, as amended from time to time,
and the rules and regulations promulgated thereunder from time to time in
effect.

 

Schedule B-8

--------------------------------------------------------------------------------

“Securities Exchange Act of 1934” means the Securities Exchange Act of 1934, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time in effect.

“Securities Laws” means the Securities Act, the Securities Exchange Act of 1934,
the Sarbanes-Oxley Act of 2002 and the applicable accounting and auditing
principles, rules, standards and practices promulgated, approved or incorporated
by the SEC or the PCAOB.

“Senior Financial Officer” means the chief financial officer, principal
accounting officer, treasurer or comptroller of the Company.

“Series A Closing” is defined in Section 3.2.

“Series A Notes” is defined in Section 1.

“Series B Closing” is defined in Section 3.3.

“Series B Notes” is defined in Section 1.

“Shareholders’ Equity” means, as of any date of determination, consolidated
shareholders’ equity of the Company and its Subsidiaries as of that date
determined in accordance with GAAP.

“Source” is defined in Section 6.2(a).

“Subsidiary” of a Person means a corporation, partnership, joint venture,
limited liability company or other business entity of which a majority of the
shares of securities or other interests having ordinary voting power for the
election of directors or other governing body (other than Securities or
interests having such power only by reason of the happening of a contingency)
are at the time beneficially owned, or the management of which is otherwise
controlled, directly, or indirectly through one or more intermediaries, or both,
by such Person. Unless otherwise specified, all references herein to a
“Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of
the Company.

“Subsidiary Guaranty” is defined in Section 9.8.

“Successor Corporation” is defined in Section 10.2(a).

“SVO” means the Capital Markets and Investment Analysis Office of the NAIC or
any successor to such Office.

“Swap Contract” means (a) any and all rate swap transactions, basis swaps,
credit derivative transactions, forward rate transactions, commodity swaps,
commodity options, forward commodity contracts, equity or equity index swaps or
options, bond or bond price or bond index swaps or options or forward bond or
forward bond price or forward bond index transactions, interest rate options,
forward foreign exchange transactions, cap transactions, floor transactions,
collar transactions, currency swap transactions, cross-currency rate swap
transactions, currency options, spot contracts, or any other similar
transactions or any

 

Schedule B-9

--------------------------------------------------------------------------------

combination of any of the foregoing (including any options to enter into any of
the foregoing), whether or not any such transaction is governed by or subject to
any master agreement, and (b) any and all transactions of any kind, and the
related confirmations, which are subject to the terms and conditions of, or
governed by, any form of master agreement published by the International Swaps
and Derivatives Association, Inc., any International Foreign Exchange Master
Agreement, or any other master agreement (any such master agreement, together
with any related schedules, a “Master Agreement”), including any such
obligations or liabilities under any Master Agreement.

“Swap Termination Value” means, in respect of any one or more Swap Contracts,
after taking into account the effect of any legally enforceable netting
agreement relating to such Swap Contracts, (a) for any date on or after the date
such Swap Contracts have been closed out and termination value(s) determined in
accordance therewith, such termination value(s), and (b) for any date prior to
the date referenced in clause (a), the amount(s) determined as the
mark-to-market value(s) for such Swap Contracts, as determined based upon one or
more mid-market or other readily available quotations provided by any recognized
dealer in such Swap Contracts.

“Synthetic Lease Obligation” means, with respect to any Person, the monetary
obligation of a Person under (a) a so-called synthetic, off-balance sheet or tax
retention lease, or (b) an agreement for the use or possession of property
creating obligations that do not appear on the balance sheet of such Person but
which, upon the insolvency or bankruptcy of such Person, would be characterized
as the indebtedness of such Person (without regard to accounting treatment).

“Total Capitalization” means, as of any date of determination, the sum of
(i) Shareholders’ Equity on such date plus (ii) Consolidated Funded Indebtedness
on such date.

“USA Patriot Act” means United States Public Law 107-56, Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, as amended from time to time,
and the rules and regulations promulgated thereunder from time to time in
effect.

 

Schedule B-10

--------------------------------------------------------------------------------

SCHEDULE 5.3

DISCLOSURE MATERIALS

 

A. Form 10-K for the Fiscal Years Ending:

October 31, 2008

October 31, 2009

October 31, 2010

October 31, 2011

 

B. Private Placement Memorandum dated February 2012

 

C. Investor Presentation dated February 6, 2012

 

D. Circle Letter dated February 15, 2012

 

E. Note Purchase Agreement dated March 27, 2012

 

F. Form 10-Q for the Fiscal Quarter ended January 31, 2012

 

Schedule 5.3

--------------------------------------------------------------------------------

SCHEDULE 5.4

SUBSIDIARIES OF THE COMPANY AND OWNERSHIP OF SUBSIDIARY STOCK

 

Name of subsidiary

   Jurisdiction of Organization    % of Equity
Interests
owned by
Company
and/or each
other
Subsidiary  

Piedmont Energy Partners, Inc.

   North Carolina      100 % 

Piedmont Hardy Storage Company, LLC

   North Carolina      100 % 

Piedmont ENCNG Company, LLC

   North Carolina      100 % 

Piedmont Energy Company

   North Carolina      100 % 

Piedmont Interstate Pipeline Company

   North Carolina      100 % 

Piedmont Intrastate Pipeline Company

   North Carolina      100 % 

Piedmont Propane Company

   North Carolina      100 % 

AGREEMENTS REGARDING SECTION 5.4(D)

Note Agreement, dated as of September 21, 1992, between the Company and
Provident Life and Accident Insurance Company (Section 6A)

 

Schedule 5.4

--------------------------------------------------------------------------------

SCHEDULE 5.5

FINANCIAL STATEMENTS

 

1. Form 10-K Annual Reports for fiscal years ended October 31, 2008, October 31,
2009, October 31, 2010 and October 31, 2011

 

2. Form 10-Q Quarterly Report for the fiscal quarter ended January 31, 2012

 

Schedule 5.5

--------------------------------------------------------------------------------

SCHEDULE 5.15

EXISTING INDEBTEDNESS

Obligor in each case is Piedmont Natural Gas Company, Inc. except as otherwise
noted.

 

Description

  

Obligee

   Principal amount
outstanding as of
January 31, 2012
(in thousands)     

Provisions limiting

amount of, or

otherwise

imposing

restrictions on the

incurring of,

Indebtedness

Senior Notes:

        

8.51% due 2017

   Provident Life and Accident Insurance Company    $ 35,000       6B(2) -
Restrictions on Funded Debt

2.92% due 2016

   Private Investors - See NPA dated 5/6/2011    $ 40,000       9.7 -
restriction regarding pari passu status of notes thereunder          10.5 -
restriction on Consolidated Funded Indebtedness

4.24% due 2021

   Private Investors - See NPA dated 5/6/2011    $ 160,000       9.7 -
restriction regarding pari passu status of notes thereunder          10.5 -
restriction on Consolidated Funded Indebtedness

Medium-Term Notes

  

Publicly held by nominee The Depository Trust & Clearing Corporation

 

The Bank of New York Mellon Trust Company, N.A. (as

      None

 

Schedule 5.15-1

--------------------------------------------------------------------------------

   successor to Citibank, N.A.), Trustee     

5.00%, due 2013

      $ 100,000     

6.87%, due 2023

      $ 45,000     

8.45%, due 2024

      $ 40,000     

7.40%, due 2025

      $ 55,000     

7.50%, due 2026

      $ 40,000     

7.95%, due 2029

      $ 60,000     

6.00%, due 2033

      $ 100,000     

Revolving Credit Agreement dated as of January 25, 2011

   Various institutional lenders Bank of America, N.A., as Administrative Agent
   $ 457,500 1    7.06 - restriction on Consolidated Funded Indebtedness

Letters of Credit

   Liberty Mutual    $ 2,125         National Union    $ 762     

Bonds

       

Licenses and Permits

   Various Municipal Governments    $ 2,277     

Notary Public

   State of TN    $ 10     

Guarantee Payment

   State of NC Motor Fuel    $ 63     

Performance/Payment

   City of Washington, NC and    $ 594     

 

1 

Since March 1, 2012, the Company has been issuing short-term, unsecured
commercial paper, the proceeds of which have been used in part to pay down and
replace the outstanding amounts under the Revolving Credit Agreement.

 

Schedule 5.15-2

--------------------------------------------------------------------------------

   Johnson Controls, Inc.      

Workers Compensation

   South Carolina and Tennessee    $ 835      

Expansion Equity Contribution Agreement as of January 26, 2011 by and among
TransCardinal Company, LLC, PSNC Cardinal Pipeline Company, Piedmont Intrastate
Pipeline Company (Obligor), Cardinal Pipeline Company, LLC and Cardinal
Operating Company, LLC

   Cardinal Pipeline Company, LLC    $ 2,250       None

 

Schedule 5.15-3

--------------------------------------------------------------------------------

SCHEDULE 10.4

EXISTING LIENS

The Company and its Subsidiaries are lessees under various leases which the
Company anticipates should be construed as operating leases. If so construed,
the assets subject to such leases should be the property of the applicable
lessors thereunder, and the interests of such lessor in such assets should not
constitute a Lien granted by the Company or any of its Subsidiaries.
Notwithstanding the foregoing, the Company has determined to disclose the
above-described leases in an abundance of caution.

 

     Future Payments  

Lease Description

   Fiscal Year 2012 - Thereafter  

Real Property

   $ 52,746,622.69   

IS Hardware Leases

   $ 639,351.00   

[Pipeline] Lease

   $ 436,481.70      

 

 

 

Total

   $ 53,822,455.39   

 

Schedule 10.4

--------------------------------------------------------------------------------

EXHIBIT 1(a)

[FORM OF SERIES A NOTE]

PIEDMONT NATURAL GAS COMPANY, INC.

3.47% SERIES A SENIOR NOTE DUE JULY 16, 2027

 

No. [            ]     [Date] $[            ]     PPN: 720186 E#8

FOR VALUE RECEIVED, the undersigned, PIEDMONT NATURAL GAS COMPANY, INC. (herein
called the “Company”), a corporation organized and existing under the laws of
the State of North Carolina, hereby promises to pay to [            ], or
registered assigns, the principal sum of [            ] DOLLARS (or so much
thereof as shall not have been prepaid) on July 16, 2027, with interest
(computed on the basis of a 360-day year of twelve 30-day months) (a) on the
unpaid balance hereof at the rate of 3.47% per annum from the date hereof,
payable semiannually on the 1st day of June and December in each year and at
maturity, commencing with the June 1 or December 1 next succeeding the date
hereof, until the principal hereof shall have become due and payable (whether at
maturity, upon notice of prepayment or otherwise), and (b) to the extent
permitted by applicable law, on any overdue payment of interest and, during the
continuance of an Event of Default, on such unpaid balance and on any overdue
payment of any Make-Whole Amount, at a rate per annum from time to time equal to
the greater of (i) 5.47%, or (ii) 2% over the rate of interest publicly
announced by Bank of America, N.A. from time to time in New York, New York as
its “base” or “prime” rate, payable semiannually as aforesaid (or, at the option
of the registered holder hereof, on demand).

Payments of principal of, interest on and any Make-Whole Amount with respect to
this Note are to be made in lawful money of the United States of America at Bank
of America, N.A. in New York, New York or at such other place as the Company
shall have designated by written notice to the holder of this Note as provided
in the Note Purchase Agreement referred to below.

This Note is one of a series of Senior Notes (herein called the “Notes”) issued
pursuant to the Note Purchase Agreement, dated as of March 27, 2012 (as from
time to time amended, modified, supplemented, restated and/or replaced from time
to time, the “Note Purchase Agreement”), between the, Company and the respective
Purchasers named therein and is entitled to the benefits thereof. Each holder of
this Note will be deemed, by its acceptance hereof, to have (i) agreed to the
confidentiality provisions set forth in Section 20 of the Note Purchase
Agreement and (ii) made the representations set forth in Section 6 of the Note
Purchase Agreement. Unless otherwise indicated, capitalized terms used in this
Note shall have the respective meanings ascribed to such terms in the Note
Purchase Agreement.

The Company waives all relief from valuation and appraisement laws.

 

Exhibit 1(a)-1

--------------------------------------------------------------------------------

This Note is a registered Note and, as provided in the Note Purchase Agreement,
upon surrender of this Note for registration of transfer accompanied by a
written instrument of transfer duly executed, by the registered holder hereof, a
new Note for a like principal amount will be issued to, and registered in the
name of, the transferee. Prior to due presentment for registration of transfer,
the Company may treat the Person in whose name this Note is registered as the
owner hereof for the purpose of receiving payment and for all other purposes,
and the Company will not be affected by any notice to the contrary.

The Company will make required prepayments of principal on the dates and in the
amounts specified in the Note Purchase Agreement. This Note is also subject to
optional prepayment, in whole or from time to time in part, at the times and on
the terms specified in the Note Purchase Agreement, but not otherwise.

If an Event of Default occurs and is continuing, the principal of this Note may
be declared or otherwise become due and payable in the manner, at the price
(including any applicable Make-Whole Amount) and with the effect provided in the
Note Purchase Agreement.

This Note shall be construed and enforced in accordance with, and the rights of
the Company and the holder of this Note shall be governed by, the law of the
State of New York excluding choice-of-law principles of the law of such State
that would permit the application of the laws of a jurisdiction other than such
State.

 

PIEDMONT NATURAL GAS COMPANY, INC. By:  

 

Name:   Title:  

 

Exhibit 1(a)-2

--------------------------------------------------------------------------------

EXHIBIT 1(b)

[FORM OF SERIES B NOTE]

PIEDMONT NATURAL GAS COMPANY, INC.

3.57% SERIES B SENIOR NOTE DUE JULY 16, 2027

 

No. [            ]     [Date] $[            ]     PPN: 720186 F*1

FOR VALUE RECEIVED, the undersigned, PIEDMONT NATURAL GAS COMPANY, INC. (herein
called the “Company”), a corporation organized and existing under the laws of
the State of North Carolina, hereby promises to pay to [            ], or
registered assigns, the principal sum of [            ] DOLLARS (or so much
thereof as shall not have been prepaid) on July 16, 2027, with interest
(computed on the basis of a 360-day year of twelve 30-day months) (a) on the
unpaid balance hereof at the rate of 3.57% per annum from the date hereof,
payable semiannually on the 1st day of June and December in each year and at
maturity, commencing with the June 1 or December 1 next succeeding the date
hereof, until the principal hereof shall have become due and payable (whether at
maturity, upon notice of prepayment or otherwise), and (b) to the extent
permitted by applicable law, on any overdue payment of interest and, during the
continuance of an Event of Default, on such unpaid balance and on any overdue
payment of any Make-Whole Amount, at a rate per annum from time to time equal to
the greater of (i) 5.57%, or (ii) 2% over the rate of interest publicly
announced by Bank of America, N.A. from time to time in New York, New York as
its “base” or “prime” rate, payable semiannually as aforesaid (or, at the option
of the registered holder hereof, on demand).

Payments of principal of, interest on and any Make-Whole Amount with respect to
this Note are to be made in lawful money of the United States of America at Bank
of America, N.A. in New York, New York or at such other place as the Company
shall have designated by written notice to the holder of this Note as provided
in the Note Purchase Agreement referred to below.

This Note is one of a series of Senior Notes (herein called the “Notes”) issued
pursuant to the Note Purchase Agreement, dated as of March 27, 2012 (as from
time to time amended, modified, supplemented, restated and/or replaced from time
to time, the “Note Purchase Agreement”), between the, Company and the respective
Purchasers named therein and is entitled to the benefits thereof. Each holder of
this Note will be deemed, by its acceptance hereof, to have (i) agreed to the
confidentiality provisions set forth in Section 20 of the Note Purchase
Agreement and (ii) made the representations set forth in Section 6 of the Note
Purchase Agreement. Unless otherwise indicated, capitalized terms used in this
Note shall have the respective meanings ascribed to such terms in the Note
Purchase Agreement.

--------------------------------------------------------------------------------

The Company waives all relief from valuation and appraisement laws.

This Note is a registered Note and, as provided in the Note Purchase Agreement,
upon surrender of this Note for registration of transfer accompanied by a
written instrument of transfer duly executed, by the registered holder hereof, a
new Note for a like principal amount will be issued to, and registered in the
name of, the transferee. Prior to due presentment for registration of transfer,
the Company may treat the Person in whose name this Note is registered as the
owner hereof for the purpose of receiving payment and for all other purposes,
and the Company will not be affected by any notice to the contrary.

The Company will make required prepayments of principal on the dates and in the
amounts specified in the Note Purchase Agreement. This Note is also subject to
optional prepayment, in whole or from time to time in part, at the times and on
the terms specified in the Note Purchase Agreement, but not otherwise.

If an Event of Default occurs and is continuing, the principal of this Note may
be declared or otherwise become due and payable in the manner, at the price
(including any applicable Make-Whole Amount) and with the effect provided in the
Note Purchase Agreement.

This Note shall be construed and enforced in accordance with, and the rights of
the Company and the holder of this Note shall be governed by, the law of the
State of New York excluding choice-of-law principles of the law of such State
that would permit the application of the laws of a jurisdiction other than such
State.

 

PIEDMONT NATURAL GAS COMPANY, INC. By:  

 

Name:   Title: