B Y - L A W S

                                       of

                         CAROLINA POWER & LIGHT COMPANY

                             Raleigh, North Carolina


                           (As Amended March 17, 2004)

                            Meetings of Stockholders


     Section 1. The annual meeting of the  stockholders  of the Company shall be
held at the principal  office of the Company,  on the second Wednesday of May in
each year, if not a legal holiday, and if a legal holiday,  then on the next day
not a legal holiday,  at ten o'clock A.M., or at such other date, or hour, or at
such other place within or without the State of North  Carolina as stated in the
notice of the meeting as the Board of Directors may determine.

     Section 2. Special  meetings of the stockholders of the Company may be held
upon call by a majority of the Board of Directors or of the Executive Committee,
or by the Chairman of the Board,  or by the  President  of the  Company,  at the
principal  office of the  Company or at such other  place  within or without the
State of North  Carolina,  and at such  time,  as may be  stated in the call and
notice.

     Section  3.  Written  notice  of the time and  place  of every  meeting  of
stockholders  may be given,  and shall be  deemed  to have been duly  given,  by
mailing  the same at least  ten,  but not more  than  sixty,  days  prior to the
meeting,  to each stockholder of record,  entitled to vote at such meeting,  and
addressed  to him at his  address as it appears on the  records of the  Company,
with  postage  thereon  prepaid.  Notice  may also be given by any other  lawful
means.

     Section 4. In accordance  with Section  55-7-20 of the General  Statutes of
North  Carolina,  the  Company,  or an  officer  having  charge of the record of
stockholders of the Company, shall prepare a list of stockholders which shall be
available for inspection by stockholders, or their agents or attorneys.

     Section 5. The  holders of a majority  of the stock of the  Company  having
voting powers must be present in person or  represented by proxy at each meeting
of the stockholders to constitute a quorum;  absent such quorum, the meeting may
be  adjourned  by a majority of shares  voting on a motion to  adjourn.  If such
adjournment is for less than thirty days,  notice other than announcement at the
meeting need not be given.  At any adjourned  meeting at which a quorum shall be
present or  represented,  any business may be  transacted  which might have been
transacted at the original meeting.


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     Section  6. (a) When a quorum is present  at any  meeting,  the vote of the
holders of a majority of the  outstanding  stock having  voting power present in
person or  represented  by proxy shall decide any question  brought  before such
meeting,  unless the  question  is one upon which by  express  provision  of any
applicable statute or of the Charter a different vote is required, in which case
such express provision shall govern and control the decision of such question.

     Section 6. (b) To be  properly  brought  before a meeting of  shareholders,
business  must be (i)  specified  in the  notice of meeting  (or any  supplement
thereto) given by or at the direction of the Board of Directors,  (ii) otherwise
properly  brought  before  the  meeting by or at the  direction  of the Board of
Directors or (iii)  otherwise  properly  brought  before an annual  meeting by a
shareholder  of the Company who was a  shareholder  of record at the time of the
giving of notice  provided for in Section 3 of these By-Laws and who is entitled
to vote at the meeting.  In addition to any other applicable  requirements,  for
business to be properly  brought before an annual meeting by a shareholder,  the
shareholder  must give timely notice of the proposal in writing to the Secretary
of the Company.  To be timely,  a  shareholder's  notice must be received by the
Secretary of the Company at the principal  executive  offices of the Company not
later than the close of business on the 60th day prior to the first  anniversary
of the immediately preceding year's annual meeting. In no event shall the public
announcement  of an adjournment or postponement of an annual meeting or the fact
that an annual  meeting is held after the  anniversary  of the preceding  annual
meeting  commence a new time  period for the giving of a  shareholder  notice as
described  above. A  shareholder's  notice shall set forth as to each matter the
shareholder  proposes to bring before the meeting (i) a brief description of the
business desired to be brought before the annual meeting, including the complete
text of any  resolutions  to be presented at the annual  meeting with respect to
such  business,  (ii) the reasons  for  conducting  such  business at the annual
meeting,  (iii)  the name and  address  of  record  of the  shareholder  and the
beneficial  owner,  if any, on whose behalf the proposal is made, (iv) the class
and number of shares of the Company which are owned by the  shareholder and such
beneficial  owner,  (v) a  representation  that the  shareholder  is a holder of
record of shares of the Company  entitled to vote at such meeting and intends to
appear in person or by proxy at the meeting to propose such  business,  and (vi)
any  material  interest of the  shareholder  and such  beneficial  owner in such
business.

     In the event that a shareholder attempts to bring business before a meeting
without  complying  with the  procedures  set forth in this Section  6(b),  such
business  shall not be transacted at such meeting.  The Chairman of the Board of
Directors,  or any other  individual  presiding  over the  meeting  pursuant  to
Section 8 of these By-Laws,  shall have the power and duty to determine  whether
any proposal to bring  business  before the meeting was made in accordance  with
the  procedures  set forth in this  Section  6(b),  and, if any  business is not
proposed  in  compliance  with this  Section,  to  declare  that such  defective
proposal  shall be  disregarded  and that such  proposed  business  shall not be
transacted at such meeting.

     Section 7. The Board of Directors in advance of any meeting of stockholders
may  appoint two voting  inspectors  to act at any such  meeting or  adjournment
thereof. If they fail to make such appointment, or if their appointees or any of
them fail to appear at the meeting of stockholders,  the chairman of the meeting
may appoint such inspectors or any inspector to act at that meeting.

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     Section 8.  Meetings  of the  stockholders  shall be  presided  over by the
Chairman of the Board of Directors, or, if he is not present, the President, or,
if the  President  is not  present,  a Vice  President,  or if  neither  of said
officers is present,  by a chairman  pro tem to be elected at the  meeting.  The
Secretary of the Company  shall act as secretary of such  meetings,  if present,
but if not present,  some person shall be appointed by the presiding  officer to
act during the meeting.

     Section 9. Each holder of  Preferred  Stock  and/or  Common  Stock shall at
every meeting of the  stockholders be entitled to one vote in person or by proxy
for each share of such stock held by such stockholder. Except where the transfer
books of the Company  have been closed or a date has been fixed as a record date
for the  determination of its  stockholders  entitled to vote, no share of stock
shall be voted at any election for directors  which has been  transferred on the
books of the  Company  within  twenty  days  next  preceding  such  election  of
directors.


                       Directors and Meetings of Directors

     Section 10. (a) The number of  directors  of the Company  shall not be less
than eleven (11) nor more than fifteen (15). The authorized number of directors,
within the limits above  specified,  shall be determined by the affirmative vote
of a majority of the whole board given at any regular or special  meeting of the
Board of Directors,  provided that, the number of directors shall not be reduced
to a number  less  than the  number of  directors  then in  office  unless  such
reduction  shall become  effective only at and after the next ensuing meeting of
the shareholders for the election of directors.  This subsection (a) was adopted
by the stockholders of the Company.

     (b) The  directors  shall  appoint from among their number a Chairman,  who
shall serve at the  pleasure of the Board.  Members of the Board of Directors of
the Company who are  full-time  employees  of the Company  shall retire from the
Board upon their  retirement  from  employment  or upon  attaining the age of 65
years,  whichever  occurs  first;  provided,  however,  that the Chairman of the
Board,  if then a  full-time  employee  of the  Company,  shall be  eligible  to
continue as a member of the Board until the first Annual Meeting of Shareholders
occurring at least one year after  retirement from employment or after attaining
the age of 65 years,  whichever  occurs first,  if so requested to remain by the
Board.  Those persons who are not employed full-time by the Company shall not be
eligible for election as a Director in any calendar year (or subsequent year) in
which he or she has reached or will reach the age of 73 years,  unless requested
by the  Chairman of the Board and approved on an annual basis by the full Board.
Otherwise,  any Director who reaches the age of 73 during a term of office shall
resign as of the first day of the month so following unless otherwise determined
by the Board.

     (c) The  election  of  directors  shall be held at the  annual  meeting  of
stockholders.  The  directors,  other  than  those  who  may  be  elected  under
circumstances specified in the Company's Restated Charter, as it may be amended,
by the holders of any class of stock having a  preference  over the Common Stock
as to dividends or in liquidation,  shall be classified  into three classes,  as
nearly equal in number as possible. The initial terms of directors first elected
or re-elected by the  stockholders  on the date this amendment to the By-Laws is
adopted shall be for the following terms of office:

                    Class I:                   One year
                    Class II:                  Two years
                    Class III:                 Three years

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and  until  their  successors  shall be  elected  and  shall  qualify.  Upon the
expiration  of the initial  term  specified  for each class of  directors  their
successors  shall be elected  for  three-year  terms or until such time as their
successors  shall be elected  and  qualified.  In the event of any  increase  or
decrease in the number of directors, the additional or eliminated directorships,
shall be classified  or chosen so that all classes of directors  shall remain or
become equal in number,  as nearly as possible.  This subsection (c) was adopted
by the stockholders of the Company.

     (d) Subject to the rights of holders of any  securities or  obligations  of
the  Company   conferring   special  rights  regarding  election  of  directors,
nominations  for the  election  of  directors  shall  be made  by the  Board  of
Directors or by any  shareholder  entitled to vote in  elections  of  directors;
provided  however,  that any  shareholder  entitled  to vote in the  election of
directors may nominate one or more persons for election as directors  only at an
annual meeting and if written notice of such  shareholder's  intent to make such
nomination or nominations has been received,  either by personal  delivery or by
United States registered or certified mail, postage prepaid, by the Secretary of
the Company at the principal executive offices of the Company not later than the
close of business  on the 120th  calendar  day before the date of the  Company's
proxy statement  released to shareholders in connection with the previous year's
annual meeting.  In no event shall the public  announcement of an adjournment or
postponement of an annual meeting commence a new time period for the giving of a
shareholder's  notice as  described  above.  Each notice shall set forth (i) the
name  and  address  of  record  of the  shareholder  who  intends  to  make  the
nomination, the beneficial owner, if any, on whose behalf the nomination is made
and of the  person or  persons  to be  nominated,  (ii) the class and  number of
shares of the  Company  that are owned by the  shareholder  and such  beneficial
owner,  (iii) a  representation  that the  shareholder  is a holder of record of
shares of the Company  entitled to vote at such meeting and intends to appear in
person or by proxy at the meeting to nominate the person or persons specified in
the  notice,   (iv)  a  description  of  all  arrangements,   understandings  or
relationships  between the  shareholder and each nominee and any other person or
persons  (naming  such person or persons)  pursuant to which the  nomination  or
nominations are to be made by the  shareholder,  and (v) such other  information
regarding each nominee  proposed by such  shareholder as would be required to be
disclosed in  solicitations  of proxies for election of directors in an election
contest,  or is otherwise required to be disclosed,  pursuant to the proxy rules
of the Securities and Exchange  Commission,  had the nominee been nominated,  or
intended to be nominated, by the Board of Directors, and shall include a consent
signed by each such nominee to serve as a director of the Company if so elected.
In the  event  that a  shareholder  attempts  to  nominate  any  person  without
complying  with the  procedures  set forth in this Section  10.(d),  such person
shall not be  nominated  and shall not stand for election at such  meeting.  The
Chairman of the Board of Directors,  or any other individual  presiding over the
meeting pursuant to Section 8 of these By-Laws, shall have the power and duty to
determine  whether a  nomination  proposed to be brought  before the meeting was
made in accordance  with the procedures set forth in this Section 10.(d) and, if
any  proposed  nomination  is not in  compliance  with this Section  10.(d),  to
declare that such defective proposal shall be disregarded.

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     Section  11. In case of any  vacancy  in the  number of  directors  through
death,  resignation,  disqualification,  increase in the number of  directors or
other cause, the remaining directors present at the meeting, by affirmative vote
of a majority thereof,  though less than a quorum, may elect a successor to hold
office until the next  shareholders'  meeting at which directors are elected and
until the election of his successor.

     Section 12.  Regular  meetings of the Board of  Directors  shall be held at
times fixed by  resolution of the Board,  and special  meetings may be held upon
the written call of the Executive Committee, or by the Chairman of the Board, or
by the  President  or by  any  two  directors;  and  the  Secretary  or  officer
performing his duties shall give reasonable notice of all meetings of directors;
provided, that a meeting may be held without notice immediately after the annual
election,  and notice need not be given of regular  meetings held at times fixed
by resolution of the Board.  Meetings may be held at any time without  notice if
all the  directors  are present,  or if those not present  waive  notice  either
before or after the meeting.  All regular and special  meetings shall be held at
the  principal  offices of the Company,  provided  that the Board,  from time to
time, may order that any meeting be held  elsewhere  within or without the State
of North Carolina. A majority of the whole Board of Directors shall constitute a
quorum, and the act of a majority of the directors present at a meeting at which
a quorum is present shall be the act of the Board of Directors, unless a greater
proportion is required by the Charter.

     Section 13. The business and affairs of the Company shall be managed by its
Board of Directors, which may exercise all such powers of the Company and do all
such lawful acts and things  which are not by law or by the Charter  directed or
required to be exercised or done by the stockholders;  provided,  however,  that
the  officers  of the  Company  shall,  without  prior  action  of the  Board of
Directors,  perform  all acts and things  incidental  to the usual and  ordinary
course of the business in which the Company is engaged as  hereinafter  provided
by the By-Laws or as may  hereafter be delegated  by the Board of  Directors.  A
majority of the Board of Directors may create one or more Committees and appoint
other members of the Board of Directors to serve on such  Committees.  Each such
Committee shall have two or more members, who serve at the pleasure of the Board
of Directors.  Any such Committee may exercise authority over any matters except
those matters  described in Section  55-8-25(e) of the General Statutes of North
Carolina.

     Section  14. A majority  of the whole  Board of  Directors,  present at any
meeting  held after  their  election  in each  year,  may  appoint an  Executive
Committee, to consist of three or more directors, which Committee shall have and
may exercise,  during the intervals between meetings of the Board, by a majority
vote of those present at a meeting,  all the powers vested in the Board,  except
the  following  matters as more fully  described  in Section  55-8-25(e)  of the
General Statutes of North Carolina:

     -    Authorize distributions;
     -    Approve or propose to  shareholders  action that is by law required to
          be approved by the shareholders;
     -    Fill vacancies on the Board of Directors or on any of its Committees;
     -    Amend  the   Company's   Articles   of   Incorporation   pursuant   to
          N.C.G.S.ss.55-10-102;
     -    Adopt, amend or repeal the Company's By-Laws;
     -    Approve a plan of merger not requiring shareholder approval;
     -    Authorize or approve  reacquisition  of shares,  except according to a
          formula or method prescribed by the Board of Directors; or
     -    Authorize  or approve the  issuance  or sale or  contract  for sale of
          shares, or determine the designation and relative rights, preferences,
          and limitations of a class or series of shares.

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A majority of the whole Board of Directors present at any meeting shall have the
power  at any  time to  change  the  membership  of such  Committee  and to fill
vacancies in it. The  Executive  Committee may make rules for the conduct of its
business. A majority of the members of said Committee shall constitute a quorum.
The  Chairman of the  Executive  Committee  shall be  appointed  by the Board of
Directors from the membership of the Executive Committee.

                                     Notices

     Section 15.  Notices to directors or  stockholders  shall be in writing and
given  personally or by mail to the directors and by mail to the stockholders at
their addresses appearing on the books of the Company;  provided,  however, that
no notice need be given any  stockholder or director whose address is outside of
the United  States.  Notice by mail shall be deemed to be given at the time when
the same shall be mailed.  Notice to directors may also be given verbally, or by
telegram,  or  cable,  and any such  notice  shall be  deemed  to be given  when
delivered  to and  accepted  for  transmittal  by an office of the  transmitting
company.

     Section  16.  Whenever  any  notice  is  required  to be  given  under  the
provisions  of  applicable  statutes  or of the Charter or of these  By-Laws,  a
waiver  thereof in  writing,  signed by the person or persons  entitled  to said
notice,  whether  before  or after  the time  stated  therein,  shall be  deemed
equivalent to the giving of such notice in apt time.

              Officers, Their Authority, and Their Terms of Office

     Section 17. The Board of Directors shall annually at its first meeting held
after the  Annual  Meeting  of  Stockholders,  or as soon  thereafter  as may be
practical,  elect the officers of the Company, who shall consist of a President,
one or more Senior Executive Vice Presidents and Executive Vice Presidents,  two
or more Senior Vice Presidents,  three or more Vice Presidents,  a Secretary,  a
Treasurer, a Controller and such other officers or assistant officers and agents
as may be appointed  by the Board of  Directors.  At other  times,  the Board of
Directors  or any  Committee to which it  delegates  the  authority to do so may
elect  officers to fill any new office or a vacancy in any office  occurring  by
virtue of the incumbent's death,  resignation,  removal or otherwise at any duly
convened  meeting of the Board or of the Committee.  The officer shall serve for
the period specified or until a successor is chosen. From time to time the Board
of  Directors  may also  elect a Vice  Chairman  who shall  have such  duties as
described  herein and as may from time to time be directed.  Any two offices may
be held by the same  person,  but no officer  may act in more than one  capacity
where action of two or more officers is required.  The Vice Chairman, if any, of
the Board of Directors  shall be chosen from among the Directors,  but the other
officers need not be Directors of the Company

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     Section  18.  The Board of  Directors  shall  appoint  the Chief  Executive
Officer who shall be either the Chairman,  the Vice Chairman or the President of
the Company. In the event the Chief Executive Officer is unavailable at the time
for needed action, or in other  circumstances as directed by the Chief Executive
Officer, then the Chairman, the Vice Chairman, if any, or the President if there
is no Vice Chairman,  who is not then serving as Chief Executive Officer,  shall
be the  next  officer  in line of  authority  to  perform  the  duties  of Chief
Executive Officer.  If the Chairman,  the Vice Chairman and the President should
be  unavailable  at the time for needed  action,  or in other  circumstances  as
directed  by the  Chief  Executive  Officer,  then the next  officer  in line of
authority to perform the duties of the Chief Executive Officer shall be a Senior
Executive  Vice President or Executive Vice President as designated by the Chief
Executive Officer.

     Section 19. Any officer may be reassigned duties by appropriate  members of
Senior  Management  at any time.  Any officer may be removed  from office at any
time by the Board of  Directors,  or by any  Committee to which it delegates the
authority to remove officers from office, without prejudice to the rights of the
officer  removed  under an  employment  agreement  in  writing  previously  duly
authorized  by the Board of Directors or an Executive  Committee of the Board of
Directors.  Any officer may resign at any time by giving  written  notice to the
Board of  Directors,  the  President or any other  officer of the Company.  Such
resignation  shall  take  effect  at the time  specified  therein,  and,  unless
otherwise  specified  therein,  the acceptance of such resignation  shall not be
necessary to make it effective.

     Section 20. The Board of  Directors or the Chief  Executive  Officer of the
Company may require the  Treasurer and any other  officer,  employee or agent of
the Company to give bond, in such sum and with such surety or sureties as either
shall determine, for the faithful discharge of their duties.

     Section  21.  Unless  otherwise  provided  by the Board of  Directors,  the
Company's Chief Executive Officer is vested with full power, authority,  and the
duty,  to perform in person,  and by  delegation  of  authority  to  subordinate
officers and  employees of the Company,  all acts and things deemed by him to be
reasonably necessary or desirable to direct,  handle, and manage, and in general
carry on the  Company's  business  transactions  authorized  by its Charter,  in
respect  to all  matters  except  those  which by law must be  performed  by the
Directors,  including but not limited to the  following:  (a)  constructing  and
contracting  for  the  construction  of  generating  plants  authorized  by  the
Directors;  (b)  operating and  maintaining  generating  plants and  appurtenant
works; (c) constructing,  maintaining, and operating substations,  lines and all
other facilities, appurtenant to the transmission,  distribution and delivery of
electricity;   (d)  acquiring  by  direct  purchase,   gift,  exchange,   or  by
condemnation, all rights of way, easements, lands, and estates in lands, flowage
and water rights; (e) acquiring,  maintaining and disposing of tools, machinery,
appliances,   materials,   vehicles,  and  other  appurtenant  facilities;   (f)
employing,  and fixing  compensation  of,  Company  personnel  (except  that the
compensation of the Chief Executive  Officer and the other Company employees who
are members of the Board shall be fixed by the Board of Directors) in compliance
with any procedures  established by the Board;  (g) borrowing money from time to
time for terms not exceeding three years, and in connection  therewith  pledging
the credit of the Company and executing  unsecured loan  agreements,  promissory
notes, and other desirable instruments evidencing obligations to the lender; (h)
fixing the rates and conditions of service and dealing with regulatory bodies in
respect  thereto,  and  promoting  the use of  electricity  by  means  of  sales
representatives,  advertising and otherwise; (i) collecting and keeping accounts
of all monies due the Company and making and preserving records of the Company's
properties and accounts and fiscal affairs; and (j) possessing,  preserving, and
protecting all property,  assets,  and interests of the Company and instituting,
prosecuting,  intervening in, and defending actions and proceedings in any court
or  before  any  administrative  agency  or  tribunal  affecting  the  Company's
interests and welfare.

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                              Certificates of Stock

     Section 22. Every holder of stock in the Company  shall be entitled to have
a certificate or  certificates  certifying the number of fully paid shares owned
by him in the Company  which shall be in form  consistent  with law and with the
Charter of the Company and as shall be approved by the Board of  Directors.  The
stock  certificates  shall be signed by: 1) either the  Chairman of the Board of
Directors  or the  President,  and 2) either the  Secretary or  Treasurer.  Such
signatures may be facsimile or other similar method.

     Section 23. All  transfers  of stock of the Company  shall be made upon its
books by authority  of the holder of the shares or of his legal  representative,
and before a new certificate is issued the old certificate  shall be surrendered
for  cancellation,  provided  that in case any  certificate  is lost,  stolen or
destroyed,  a new certificate  therefor may be issued pursuant to the provisions
of Section 24 hereof.

     Section  24. No  certificate  of shares  of stock of the  Company  shall be
issued  in place of any  certificate  alleged  to have  been  lost or  stolen or
destroyed,  except upon the approval of the Board of  Directors  who may require
delivery  to the  Company of a bond in such sum as it may direct and  subject to
its approval as indemnity against any claim in respect to such lost or stolen or
destroyed certificate;  provided that the Board of Directors may delegate to the
Company's  Transfer  Agent  and  Registrar  authority  to  issue  and  register,
respectively,  from time to time without further action or approval of the Board
of Directors,  new certificates of stock to replace certificates  reported lost,
stolen or  destroyed  upon receipt of an affidavit of loss and bond of indemnity
in form  and  amount  and with  corporate  surety  satisfactory  to them in each
instance  protecting  the Company and them against loss.  Such legal evidence of
such loss or theft or  destruction  shall be furnished to the Board of Directors
as may be required by them.

     Section 25. The Board of Directors  shall have power and  authority to make
all such rules and  regulations as it may deem  expedient  concerning the issue,
transfer,  conversion and registration of certificates for shares of the capital
stock of the Company,  not  inconsistent  with the laws of North  Carolina,  the
Charter of the Company and these  By-Laws.  The Board of Directors is authorized
to appoint one or more transfer  agents and  registrars for the capital stock of
the Company.

     Section  26.  The Board of  Directors  shall  have power to close the stock
transfer books or in lieu thereof to fix record dates as authorized by law.

                                     General

     Section 27. Subject to the  provisions of the  applicable  statutes and the
Charter of the Company,  dividends, either cash or stock, upon the capital stock
of the Company may be declared by the Board of Directors at any meeting thereof.

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     Section 28. Deeds, bonds, notes, mortgages and contracts of the Company may
be executed on behalf of the Company by the President,  or a Vice President,  or
any one of such other  persons as shall from time to time be  authorized  by the
Board of  Directors,  and when  necessary  or  appropriate  may be  attested  or
countersigned by the Secretary or an Assistant Secretary, or the Treasurer or an
Assistant Treasurer.  The corporate seal of the Company may be affixed to deeds,
bonds,  notes,  mortgages,  contracts or stock  certificates  by an  appropriate
officer of the Company by  impression  thereon,  or, by order of an  appropriate
officer of the  Company,  a  facsimile  of said seal may be  affixed  thereto by
engraving, printing, lithograph or other method.

     Section 29. The monies of the Company shall be deposited in the name of the
Company  in such  bank or banks  or trust  company  or  trust  companies  as the
Treasurer, with approval of the Chief Executive Officer, shall from time to time
select,  and shall be drawn out only by checks or other orders signed by persons
designated by resolution by the Board of Directors.

     Section  30. As and when  used in any of the  foregoing  By-Laws  the words
"stockholder" and "stockholders"  shall be deemed and held to be synonymous with
the words "shareholder" and "shareholders", and the word "stock" shall be deemed
and held to be synonymous with the words "share" or "shares",  respectively,  as
used in Chapter 55 of the General Statutes of North Carolina.

                              Amendment of By-Laws

     Section  31. The Board of  Directors  shall have power from time to time to
adopt,  amend,  alter, add to, and repeal By-Laws for the Company by affirmative
vote of a majority of the directors then holding office, provided, however, that
the By-Laws may not be amended by the Board of  Directors to require more than a
majority of the voting shares for a quorum at a stockholder's  meeting,  or more
than a majority  vote at such  meeting,  except  where  higher  percentages  are
required by law. Any By-Laws so made or any provisions thereof may be altered or
repealed by vote of the  holders of a majority of the total  number of shares of
the Company  then issued and  outstanding  and  entitled to vote  thereon at any
annual  stockholders'  meeting.  Additionally,  any By-Law  adopted,  amended or
repealed by the  stockholders  may not be readopted,  amended or repealed by the
Board of Directors  unless the Charter or a By-Law  adopted by the  stockholders
authorizes  the Board of  Directors  to adopt,  amend or repeal that  particular
By-Law or the By-Laws generally.

                       Indemnity of Officers and Directors

     Section 32. (a) The Company shall reimburse or indemnify any past,  present
or future  officer or director of the Company for and against  such  liabilities
and  expenses as are  authorized  by (1) a resolution  adopted by the  Company's
stockholders  at a special  meeting held on December  31, 1943,  which is made a
part hereof as though incorporated herein, or (2) by Sections 55-8-54,  55-8-55,
55-8-56 and 55-8-57 of the General  Statutes of North Carolina.  Persons serving
as officers or directors  of the Company or serving in any such  capacity at the
request of the Company in any other  corporation,  partnership,  joint  venture,
trust or other enterprise shall be provided reimbursement and indemnification by
the Company to the maximum extent  allowed  hereunder or under  applicable  law,
including without limitation Sections 55-8-54,  55-8-55,  55-8-56 and 55-8-57 of
the General Statutes of North Carolina.

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<PAGE>

     (b) In addition to the  reimbursement  and  indemnification  provisions set
forth  above,  any person who at any time serves or has served (1) as an officer
or director of the  Company,  or (2) at the request of the Company as an officer
of director (or in any position of similar  authority,  by whatever title known)
of any other corporation, partnership, joint venture, trust or other enterprise,
or (3) as an  individual  trustee or  administrator  under any employee  benefit
plan,  shall have a right to be indemnified by the Company to the fullest extent
permitted by law against (i) all reasonable expenses, including attorney's fees,
actually  and  necessarily  incurred  by him in  connection  with  any  pending,
threatened or completed  action,  suit or proceeding,  whether civil,  criminal,
administrative or investigative, and whether or not brought by the Company or on
behalf of the  Company  in a  derivative  action,  seeking to hold him liable by
reason of or arising out of his status as such or his  activities  in any of the
foregoing  capacities,  and (ii)  payments  made by him in  satisfaction  of any
judgement,  money  decree,  fine,  penalty or  settlement  for which he may have
become liable in any such action, suit or proceeding;  provided,  however,  that
the Company  shall not  indemnify  any person  against  liability or  litigation
expense he may incur on account of his  activities  which were at the time taken
known or believed by him to be clearly in conflict  with the best  interests  of
the Company.

     (c) The Board of  Directors  shall take all action as may be  necessary  or
appropriate  to authorize  the Company to pay all amounts  required  under these
Sections 32(a),(b) and (c) of the By-Laws  including,  without limitation and to
the extent deemed to be appropriate,  necessary, or required by law (1) making a
good faith  evaluation of the manner in which the claimant for  indemnity  acted
and of the  reasonable  amount of indemnity due such  individual,  or (2) making
advances of costs and expenses,  or (3) giving notice to, or obtaining  approval
by, the shareholders of the Company.

     (d) Any person who serves or has served in any of the aforesaid  capacities
for or on behalf of the  Company  shall be deemed to be doing or to have done so
in reliance  upon, and as  consideration  for, the rights of  reimbursement  and
indemnification   provided  for  herein.   Such  rights  of  reimbursement   and
indemnification  shall inure to the benefit of the legal representatives of such
individuals, shall include amounts paid in settlement and shall not be exclusive
of any other rights to which such  individuals  shall be entitled apart from the
provisions of this Section.

     (e) The Company may, in its sole discretion,  wholly or partially indemnify
and advance  expenses to any employee or agent of the Company to the same extent
as provided herein for officers and directors.

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