Document:

DUK-2014.12.31-10K-EX-10.62

CONFIDENTIAL        EXECUTION COPY

_____________________________________________________________________________________

ASSET PURCHASE AGREEMENT
by and between
DUKE ENERGY PROGRESS, INC.
and
NORTH CAROLINA EASTERN MUNICIPAL POWER AGENCY

Dated as of September 5, 2014

_____________________________________________________________________________________

TABLE OF CONTENTS
Page
Article I DEFINITIONS; USAGE1
		
	Definitions.
	1

		
	Rules as to Usage.
	10

		
	Schedules and Exhibits.
	11

Article II SALE AND PURCHASE; PRICE; CLOSING11
		
	Sale and Purchase; Definition of Purchased Assets; Assumed Liability.
	11

		
	Purchase Price.
	12

		
	Allocation of Purchase Price for Tax Purposes.
	13

		
	The Closing.
	13

		
	Further Assurances.
	15

		
	Withholding.
	16

Article III REPRESENTATIONS AND WARRANTIES16
		
	Representations and Warranties of Seller.
	16

		
	Representations and Warranties of Purchaser.
	20

Article IV COVENANTS21
		
	Efforts to Close..
	21

		
	Preservation of Purchased Assets.
	23

		
	Notification.
	23

		
	Tax Matters.
	24

		
	Access to Information.
	25

		
	Spare Parts Inventory.
	25

		
	PE Pension Plan.
	25

Article V CONDITIONS TO CLOSING26
		
	Purchaser’s Conditions Precedent.
	26

		
	Seller’s Conditions Precedent.
	28

Article VI TERMINATION30
		
	Termination Prior to Closing.
	30

		
	Effect of Termination or Breach Prior to Closing.
	30

Article VII SURVIVAL; INDEMNIFICATION30
		
	Survival.
	30

		
	Seller Indemnification.
	31

		
	Purchaser Indemnification.
	31

Article VIII MISCELLANEOUS31
		
	Dispute Resolution.
	31

		
	Governing Law; Submission to Jurisdiction.
	31

		
	Specific Performance.
	32

		
	Notices.
	32

		
	Entire Agreement.
	33

		
	Expenses.
	33

		
	Public Announcements.
	33

		
	Confidentiality.
	33

		
	Waivers.
	34

		
	Amendment.
	34

		
	No Construction Against Drafting Party.
	34

		
	No Third-Party Beneficiary.
	35

		
	Headings.
	35

		
	Invalid Provisions.
	35

		
	No Assignment; Binding Effect..
	35

		
	Counterparts.
	35

Exhibit A – Knowledge
Exhibit B – Real Property Legal Description
Exhibit C – Plants Agreements Termination Agreement
Exhibit D – Bill of Sale
Exhibit E – Form of Deeds

ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the “Agreement”) is made and entered into effective as of September __, 2014 (the “Effective Date”), by and between NORTH CAROLINA EASTERN MUNICIPAL POWER AGENCY, a joint agency and public body and body corporate and politic organized and existing under North Carolina law (“Seller”), and DUKE ENERGY PROGRESS, INC., a North Carolina corporation (“Purchaser”).  Seller and Purchaser are also each referred to herein individually as a “Party” and collectively as the “Parties.”
RECITALS
WHEREAS, Purchaser and Seller each has an undivided ownership interest in the nuclear-fueled generation facilities known as the Shearon Harris Nuclear Plant, located in Wake County, North Carolina (the “Harris Plant”), and Brunswick Unit 1 (the “Brunswick 1 Plant”) and Brunswick Unit 2 (the “Brunswick 2 Plant”), each located in Brunswick County, North Carolina, and the coal-fueled generation facilities known as the Mayo Plant (the “Mayo Plant”) and Roxboro Unit 4 (the “Roxboro 4 Plant”), each of which is located in Person County, North Carolina (the Harris Plant, the Brunswick 1 Plant, the Brunswick 2 Plant, the Mayo Plant and the Roxboro 4 Plant, collectively, the “Plants”);
WHEREAS, Seller currently owns the following undivided ownership interests in the Plants:  16.17% in the Harris Unit No. 1 and 12.94% in the cancelled Harris Units No. 2, 3 and 4 (collectively, the “Harris Interest”), 18.33% in the Brunswick 1 Plant (the “Brunswick 1 Interest”), 18.33% in the Brunswick 2 Plant (the “Brunswick 2 Interest”), 16.17% in the Mayo Unit No. 1 and 12.94% in the cancelled Mayo Unit No. 2 (collectively, the “Mayo Interest”), and 12.94% in the Roxboro 4 Plant and 3.77% in the common facilities that support the Roxboro 4 Plant and the three (3) other coal-fired generation facilities located at the site of the Roxboro 4 Plant (collectively, the “Roxboro 4 Interest”, and together with the Harris Interest, the Brunswick 1 Interest, the Brunswick 2 Interest and the Mayo Interest, the “Seller’s Interests”); and
WHEREAS, Seller has agreed to sell to Purchaser, and Purchaser has agreed to purchase from Seller, the Seller’s Interests and certain related assets and accounts in accordance with, and subject to the terms and conditions of, this Agreement.
NOW, THEREFORE, in consideration of the Recitals set forth above, the respective covenants and agreements of the Parties herein set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the Parties, the Parties, intending to be legally bound, do hereby agree as follows: 
AGREEMENT
Article I     
 
DEFINITIONS; USAGE
Section 1.1.    Definitions.  Unless the context shall otherwise require, capitalized terms used in this Agreement shall have the meanings assigned to them in this Section 1.1.
“Additional Decommissioning Funds” means all funds, other than those held in the Nuclear Decommissioning Trust Funds, reserved or held by Seller, and not reported to the NRC in any DFA Report, for the purpose of funding or defraying the decommissioning costs, expenses or liabilities associated with spent fuel management and site restoration for the Harris Plant, the Brunswick 1 Plant or the Brunswick 2 Plant.
“Affiliate” of any Person means any other Person directly or indirectly Controlling, directly or indirectly Controlled by or under direct or indirect common Control with such Person.  
“Agreement” has the meaning given to it in the preamble hereof.
“Assigned Contracts” means the (i) License Agreement dated as of June 24, 1987, by and among North Carolina Eastern Municipal Power Agency, Cogentrix Carolina Leasing Corporation and Carolina Power & Light Company (N/K/A Duke Energy Progress, Inc.), recorded Book 698, page 365, Brunswick County Registry; and (ii) Lease dated September 3, 1996, by and among Carolina Power & Light Company (N/K/A Duke Energy Progress, Inc.), North Carolina Eastern Municipal Power Agency, as Landlords, and Brunswick County, as Tenant, recorded Book 1144, page 1175, Brunswick County Registry.
“Assumed Liabilities” has the meaning given to it in Section 2.1.3.
“Bill of Sale” has the meaning given to it in Section 2.4.1(b)(ii).
“Bond Fund Trustee” means The Bank of New York Trust Company, N.A., in its capacity as Bond Fund Trustee under the Bond Resolution.
“Bond Legislation” means legislation passed by the North Carolina General Assembly and enacted into law permitting Seller to issue bonds to refinance existing Indebtedness of Seller outstanding under the Bond Resolution and attributable to Seller’s Interest that cannot be repaid (or its payment provided for) with that portion of the Purchase Price described in Section 2.2.1(a) of this Agreement or other funds available to Seller.
“Bond Resolution” means Resolution R-2-82, adopted by the Board of Commissioners of Seller on April 1, 1982, as amended and supplemented.
“Brunswick 1 Interest” has the meaning given to it in the Recitals to this Agreement.
“Brunswick 1 Plant” has the meaning given to it in the Recitals to this Agreement.
“Brunswick 2 Interest” has the meaning given to it in the Recitals to this Agreement.
“Brunswick 2 Plant” has the meaning given to it in the Recitals to this Agreement.
“Business Day” means any day except Saturday, Sunday or any weekday that banks in Charlotte, North Carolina or New York, New York are closed.
“Catch-Up Pension Contribution” has the meaning given to it in Section 4.7(b).
“Closing” has the meaning given to it in Section 2.4.
“Closing Date” means the date on which the Closing occurs.  
“Code” means the Internal Revenue Code of 1986 and the regulations thereunder.
“Control” of any Person means the possession, directly or indirectly, of the power either to (a) vote more than fifty percent (50%) of the securities or interests having ordinary voting power for the election of directors (or other comparable controlling body) of such Person or (b) direct or cause the direction of management or policies of such Person, whether through the ownership of voting securities or interests, by contract or otherwise.
“Debt Service Support Contract” shall have the meaning given to it in Section 5.1.14.
“Decommissioning Trust Liabilities” means any and all Liabilities arising out of or related to Seller’s possession, management, operation, or use of the Nuclear Decommissioning Trusts or any of the funds, proceeds, or rights associated therewith or contained therein; provided, however, that, subject to compliance with the requirements set forth in Section 3.1.14, if, based on any DFA Report filed prior to Closing, the NRC determines before or after Closing that Seller fails to demonstrate financial assurance for its share of radiological decommissioning costs in accordance with NRC regulations, such failure shall not be deemed to be a Decommissioning Trust Liability. 
“Deeds” has the meaning given to it in Section 2.4.1(b)(iii).
“DFA Report” means any decommissioning financial assurance report filed by Seller, or on behalf of Seller, with the NRC pursuant to 10 CFR 50.75(f)(1) for the Harris Plant, the Brunswick 1 Plant or the Brunswick 2 Plant. 
“Disbursement Instructions” means the instructions delivered to Purchaser by Seller and the Bond Fund Trustee regarding that portion of the Purchase Price described in Section 2.2.1(a) of this Agreement to be deposited into the Escrow Deposit and/or Refunding Trust Fund by Purchaser at Closing.
“Disclosure Update” has the meaning given to it in Section 4.3.
“Effective Date” has the meaning given to it in the preamble to this Agreement.
“ElectriCities” means ElectriCities of North Carolina, Inc., a joint municipal assistance agency and public body and body corporate and politic organized and existing under North Carolina law.
“Escrow Deposit and/or Refunding Trust Fund” means the escrow or refunding trust fund or funds into which that portion of the Purchase Price described in Section 2.2.1(a) of this Agreement is to be deposited pursuant to an agreement between the Seller and the Bond Fund Trustee (such agreement, the “Escrow Deposit and/or Refunding Trust Fund Agreement”).
“Excluded Assets” has the meaning given to it in Section 2.1.2.  
“Excluded Liabilities” has the meaning given to it in Section 2.1.4.
“Existing Participant Power Sales Agreements” means, collectively, the existing Initial Project Power Sales Agreements between Seller and each Participant and the existing Supplemental Power Sales Agreements between Seller and each Participant. 
“Existing Participant Power Sales Agreement Termination Agreements” has the meaning given to it in Section 2.4.1(b)(xiii).
“Federal Power Act” means the Federal Power Act of 1935 and the regulations thereunder.
“FERC” means the Federal Energy Regulatory Commission.
“FERC 203 Approval” means the order issued by FERC under Section 203 of the Federal Power Act that approves the purchase of the Purchased Assets as contemplated by this Agreement.
“FERC 205 Approvals” means the order or orders issued by FERC under Section 205 of the Federal Power Act that accept or approve (i) all amendments to the rates in the Wholesale Power Sales Agreements, as proposed by Purchaser in the exercise of its sole discretion, to include recovery of the Purchase Price (including any acquisition adjustment above net book value of the Purchased Assets reflected therein) in such rates over a time period acceptable to Purchaser, as determined in Purchaser’s sole discretion, as well as recovery of a return, at a level acceptable to Purchaser, as determined in Purchaser’s sole discretion, on the unamortized balance of the Purchase Price, and (ii) the Full Requirements Power Purchase Agreement without any amendment or modification that is unacceptable to the Parties.
“FERC Accounting Approval” means the order or orders issued by FERC under the Federal Power Act that approve, without any condition, amendment or modification that is unacceptable to Purchaser, as determined in Purchaser’s sole discretion, all accounting practices or treatments proposed by Purchaser in connection with Purchaser’s proposal to recover under the Wholesale Power Sales Agreements and the Full Requirements Power Purchase Agreement the Purchase Price (including any acquisition adjustment above net book value of the Purchased Assets reflected therein) in such rates over a time period acceptable to Purchaser, as determined in Purchaser’s sole discretion as well as recovery of a return, at a level acceptable to Purchaser, as determined in Purchaser’s sole discretion, on the unamortized balance of the Purchase Price.
“Fuel Inventory” has the meaning given to it in Section 2.1.1(d).
“Full Requirements Power Purchase Agreement” means the Full Requirements Power Purchase Agreement by and between Seller and Purchaser dated as of even date herewith.  
“Full Requirements Power Sales Agreement” shall have the meaning given to it in Section 5.1.13.
“Governmental Authority” means any federal, state or local governmental entity, authority or agency, court, tribunal, regulatory commission or other body, whether legislative, judicial or executive (or a combination or permutation thereof).
“Harris Interest” has the meaning given to it in the Recitals to this Agreement.
“Harris Plant” has the meaning given to it in the Recitals to this Agreement.
“Indebtedness” means, with respect to any Person at any date, without duplication: (i) all obligations of such Person for borrowed money or in respect of loans or advances, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments or debt securities, (iii) all obligations arising from cash/book overdrafts, (iv) all indebtedness for the deferred purchase price of property or services with respect to which a Person is liable as obligor (other than trade payables incurred in the ordinary course of business), (v) all obligations in respect of capital leases, and (vi) all accrued interest prepayment premiums or penalties related to any of the foregoing.
“Independent Accounting Firm” means Grant Thornton LLP.
“Knowledge” or any similar phrase in this Agreement means (i) in the case of Seller, the actual knowledge of those officers and employees of Seller or ElectriCities listed in Exhibit A, or any other information which those officers and employees of Seller or ElectriCities listed in Exhibit A would reasonably be expected to be aware of in the prudent discharge of their duties (whether in their capacity as an officer or employee of Seller or ElectriCities) in the ordinary course of business but which may not be actually known to such Persons, and (ii) in the case of Purchaser, the actual knowledge of those officers and employees of Purchaser listed in Exhibit A, or any other information which those officers and employees of Purchaser listed in Exhibit A would reasonably be expected to be aware of in the prudent discharge of their duties in the ordinary course of business but which may not be actually known to such Persons.  In all events, a Party shall be deemed to have Knowledge of a matter of which such Party has received written notice.
“Law” means any statute, law, treaty, rule, code, common law, ordinance, regulation, permit, certificate or order of any Governmental Authority, or any judgment, decision, decree, injunction, writ, order or like action of any court, arbitrator or other Governmental Authority.
“Liability” means any Indebtedness, obligation and other liability of a Person (whether absolute, accrued, contingent, fixed, known or unknown or otherwise, and whether due or to become due).
“Lien” means any pledge, deed of trust, mortgage, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, or preference, priority or other security grant or agreement of any kind or nature whatsoever, including without limitation any conditional sale or other title retention agreement, any financing lease having substantially the same effect as any of the foregoing, or the filing of any financing statement or similar instrument under the Uniform Commercial Code as in effect in any relevant jurisdiction or comparable law of any jurisdiction, domestic or foreign, and any other lease, and any easement, restriction, condition, covenant, right-of-way or other encumbrance or title exception.
“Losses” has the meaning given to it in Section 7.2.
“Material Adverse Effect” means a material adverse effect on (a) any of the Plants or any of the other Purchased Assets, (b) the ability of Seller or Purchaser to perform its obligations under this Agreement or any of the other Transaction Agreements, or (c) the validity or enforceability of this Agreement or any of the other Transaction Agreements, or the rights or remedies of Seller or Purchaser hereunder or thereunder.  
“Mayo Interest” has the meaning given to it in the Recitals to this Agreement.
“Mayo Plant” has the meaning given to it in the Recitals to this Agreement.
“Municipalities’ Consent” means the unanimous consent of the Participants to, and approval of, (i) the consummation of the transactions contemplated by this Agreement (as the same may be amended by the Parties), including the sale of Seller’s Interests to Purchaser on the terms hereof, (ii) the Full Requirements Power Purchase Agreement (as the same may be amended by the Parties) and (iii) such other documents or agreements as may be necessary to effect or implement either of the foregoing, in form and substance reasonably satisfactory to Purchaser and Seller.
“Municipalities’ Consent Outside Date” has the meaning given to it in Section 6.1(d).
“NCUC” means the North Carolina Utilities Commission.
“NCUC Approval” means the order or orders issued by the NCUC that approve an amendment, transfer or issuance, as appropriate, of a Certificate of Public Convenience and Necessity for the Plants to reflect Seller’s transfer of the Purchased Assets to Purchaser.
“NCUC Rate Approvals” means approval by the NCUC of a retail power rate structure (including the rate structure that would result from implementation of the North Carolina Legislation) that makes, as determined in Purchaser’s sole discretion, the transactions contemplated by this Agreement economically viable for Purchaser and Purchaser’s stakeholders.
“North Carolina Legislation” means legislation passed by the North Carolina General Assembly and enacted into law that makes, as determined in Purchaser’s sole discretion, the transactions contemplated by this Agreement economically viable for Purchaser and Purchaser’s stakeholders.
“NRC” means the Nuclear Regulatory Commission.
“NRC Approvals” means the orders issued by the NRC that (i) approve the transfer of Seller's ownership licenses, Renewed License DPR-71 for Brunswick Steam Electric Plant, Unit 1, Renewed License DPR-62 for Brunswick Steam Electric Plant, Unit 2, and Renewed License NPF-63 for Shearon Harris Nuclear Power Plant, Unit 1, to Purchaser and (ii) authorize the distribution of the Nuclear Decommissioning Trust Funds to or for the benefit of Purchaser in accordance with the terms of the Nuclear Decommissioning Trust.
“Nuclear Decommissioning Trust” means the Decommissioning Trust Agreement, dated as of June 28, 1990 and effective as of June 29, 1990, between North Carolina Eastern Municipal Power Agency and U.S. Bank National Association (as successor to Wachovia Bank & Trust Company, N.A.), as Trustee, that has been established and is maintained by Seller pursuant to regulations promulgated by the NRC in order to fund Seller’s share of the radiological decommissioning costs for the Harris Plant, the Brunswick 1 Plant and the Brunswick 2 Plant.
“Nuclear Decommissioning Trust Funds” means the following separate trust funds established by the Trustee under the Nuclear Decommissioning Trust:
(a)    the Harris Unit No. 1 Decommissioning Trust Fund;
(b)    the Brunswick Unit No. 1 Decommissioning Trust Fund; and
(c)    the Brunswick Unit No. 2 Decommissioning Trust Fund. 
“OFA” means the Operating and Fuel Agreement, dated as of July 30, 1981, between Carolina Power & Light Company (N/K/A Duke Energy Progress, Inc.) and North Carolina Municipal Power Agency Number 3 (N/K/A North Carolina Eastern Municipal Power Agency), as amended.
“Outside Date” has the meaning given to it in Section 6.1(e).
“Participant” means each of the cities, towns or other municipal Governmental Authorities that have executed and are parties to an Initial Project Power Sales Agreement with Seller as of the Effective Date.
“Party” or “Parties” has the meaning given to it in the preamble to this Agreement.  
“PE Pension Plan” has the meaning given to it in Section 4.7.
“Permits” means permits, licenses, approvals, certificates and other authorizations of any Governmental Authority.
“Permitted Liens” means (i) those exceptions to title listed in Schedule 1.1 as of the date hereof, (ii) liens for Taxes or other governmental charges or assessments not yet due and delinquent or the validity of which is being contested in good faith by appropriate proceedings, (iii) mechanics’, carriers’, workers’, repairers’ and other similar liens and rights arising or incurred in the ordinary course of business for amounts not yet due and payable or the validity of which is being contested in good faith by appropriate proceedings, and (iv) zoning, entitlement, conservation restrictions and other land use and environmental regulations by any Governmental Authority.
“Person” means any individual, corporation, partnership, joint venture, association, joint stock company, trust, limited liability company, unincorporated organization, Governmental Authority or any other form of legal entity.
“Plants” has the meaning given to it in the Recitals to this Agreement.  
“Plants Agreements” means the (i) OFA, (ii) the Power Coordination Agreement, dated as of July 30, 1981, between Carolina Power & Light Company (N/K/A Duke Energy Progress, Inc.) and North Carolina Municipal Power Agency Number 3 (N/K/A North Carolina Eastern Municipal Power Agency), as amended, the (iii) the Power Coordination Agreement – 1988B For the Diesel New Resource Generating Project at Edenton, North Carolina, dated as of March 29, 1988, between Carolina Power & Light Company (N/K/A Duke Energy Progress, Inc.) and North Carolina Eastern Municipal Power Agency, (iv) the Power Coordination Agreement – 1988C For the Diesel New Resource Generating Project at Elizabeth City, North Carolina, dated as of March 29, 1988, between Carolina Power & Light Company (N/K/A Duke Energy Progress, Inc.) and North Carolina Eastern Municipal Power Agency, (v) the Agreement Applicable to Supplemental Load Beginning January 1, 2010, dated as of February 25, 2005, between Carolina Power & Light Company (N/K/A Duke Energy Progress, Inc.) and North Carolina Eastern Municipal Power Agency, as amended, (vi) the Power Supply Agreement Applicable to Supplemental Load Beginning January 1, 2018 Through December 31, 2031, dated as of October 31, 2011, between Carolina Power & Light Company dba Progress Energy Carolinas, Inc. (N/K/A Duke Energy Progress, Inc.) and North Carolina Eastern Municipal Power Agency, as amended, (vii) the Purchase, Construction, and Ownership Agreement, dated as of July 30, 1981, between Carolina Power & Light Company (N/K/A Duke Energy Progress, Inc.) and North Carolina Municipal Power Agency Number 3 (N/K/A the North Carolina Eastern Municipal Power Agency), as amended, (viii) the Cancellation Agreement between Carolina Power & Light Company and North Carolina Eastern Municipal Power Agency, dated as of April 21, 1982, related to the cancellation of Harris Units No. 3 and 4, (ix) the Cancellation Agreement between Carolina Power & Light Company and North Carolina Eastern Municipal Power Agency, dated as of December 23, 1985, related to the cancellation of Harris Unit No. 2, (x) the Cancellation Agreement between Carolina Power & Light Company and North Carolina Eastern Municipal Power Agency Regarding Cancellation of Mayo Unit No. 2, dated as of February 24, 1988, (xi) any other agreement between or among Seller or any of its Affiliates and Purchaser or any of its Affiliates entered into prior to the Effective Date and related to the ownership or operation of the Plants, interconnection, or the production, purchase, or sale of power, and (xii) with respect to each of (i) through (xi), including side letters or other agreements between or among Seller or its Affiliates and Purchaser or its Affiliates deriving from the transactions contemplated thereby.
“Plants Agreements Termination Agreement” has the meaning given to it in Section 2.4.1(a)(1). 
“Plants Liabilities” means all Liabilities (other than any Indebtedness incurred by Seller), costs, fees and expenses (including operating expenses) arising out of or related to the operation, ownership or use of the Plants prior to the Closing, regardless of when such Liabilities are actually suffered or incurred.  
“Plants Permits” has the meaning given to it in Section 3.1.12.
“Pre-Execution Update” has the meaning given to it in Section 4.3.
“Property Taxes” has the meaning given to it in Section 2.2.2.  
“PSCSC” means the Public Service Commission of South Carolina.
“PSCSC Rate Approvals” means approval by the PSCSC of a retail power rate structure (including the rate structure that would result from implementation of the South Carolina Legislation) that makes, as determined in Purchaser’s sole discretion, the transactions contemplated by this Agreement economically viable for Purchaser and Purchaser’s stakeholders.
“Purchase Price” has the meaning given to it in Section 2.2.1.
“Purchased Assets” has the meaning given to it in Section 2.1.1.  
“Purchaser” has the meaning given to it in the preamble to this Agreement.
“Purchaser’s Disclosure Schedule” means the schedule delivered to Seller by Purchaser herewith and dated as of the Effective Date, containing all lists, descriptions, exceptions and other information and materials as are required to be included therein by Purchaser pursuant to this Agreement, attached hereto as Schedule 3.2.
“Purchaser Indemnified Person” has the meaning given to it in Section 7.2.
“Purchaser Plants Liabilities” means all Plants Liabilities other than the Seller Plants Liabilities.
“Purchaser Required Consents” has the meaning given to it in Section 3.2.5.
“Real Property” means the real property upon which the Plants are located as described in Exhibit B attached hereto, and the real property upon which the support facilities of the Plants are located as described in Exhibit B attached hereto, in each case together with all buildings, structures and other improvements constructed thereon; rights, title and interests of Seller in and to all other easements, benefits, privileges and other rights appurtenant to such real property or in any way appertaining thereto, and all strips and gores and any land lying in the bed of any street or road open or closed adjoining such real property.
“Related Person” means with respect to any Person, such Person’s Affiliates, and the employees, officers, directors, agents, representatives, licensees and invitees of such Person and its Affiliates.
“Required Consents” means, collectively, the Purchaser Required Consents and the Seller Required Consents.
“Roxboro 4 Interest” has the meaning given to it in the Recitals to this Agreement.
“Roxboro 4 Plant” has the meaning given to it in the Recitals to this Agreement.
“Seller” has the meaning given to it in the preamble to this Agreement.
“Seller Indemnified Person” has the meaning given to it in Section 7.3.
“Seller Plants Liabilities” means the amount of (i) all Taxes attributable to Seller’s pre-Closing ownership interest in the Plants and (ii) the Seller’s obligations to compensate Purchaser for (A) services rendered or products delivered in connection with the Plants Agreements for all periods prior to Closing,  (B) any Service Costs attributable to pre-Closing time periods and (C) any Catch-Up Pension Contribution.
“Seller Required Consents” has the meaning given to it in Section 3.1.5.
“Seller’s Disclosure Schedule” means the schedule delivered to Purchaser by Seller herewith and dated as of the Effective Date, containing all lists, descriptions, exceptions and other information and materials as are required to be included therein by Seller pursuant to this Agreement and attached hereto as Schedule 3.1.
“Seller’s Interests” has the meaning given to it in the Recitals to this Agreement.
“Service Costs” means the cost associated with the present value of benefits attributed to a PE Pension Plan participant’s service in the current year plus administrative expenses of the PE Pension Plan.
“Solvent”, when used with respect to any Person, means that, as of any date of determination, (a) such Person will not have, as of such date, an unreasonably small amount of capital for the operation of the businesses in which it is engaged or proposed to be engaged following such date, and (b) such Person will be able to pay its Liabilities as they mature.  
“South Carolina Legislation” means legislation passed by the South Carolina General Assembly and enacted into law that makes, as determined in Purchaser’s sole discretion, the transactions contemplated by this Agreement economically viable for Purchaser and Purchaser’s stakeholders.
“Spare Parts Inventory” has the meaning given to it in Section 2.1.1(e).
“Tax” or “Taxes” means any and all taxes, including any interest, penalties, or other additions to tax that may become payable in respect thereof, imposed by any federal, state, local, or foreign government or any agency or political subdivision of any such government, which taxes shall include all income taxes, profits taxes, taxes on gains, alternative minimum taxes, estimated taxes, payroll and employee withholding taxes, unemployment insurance taxes, social security taxes, welfare taxes, disability taxes, severance taxes, license charges, taxes on stock, sales and use taxes, ad valorem taxes, value-added taxes, excise taxes, franchise taxes, gross receipts taxes, business license taxes, occupation taxes, real or personal property taxes, stamp taxes, environmental taxes, transfer taxes, workers’ compensation taxes, and other taxes, fees, duties, levies, customs, tariffs, imposts, assessments, obligations and charges of the same or of a similar nature to any of the foregoing or any amounts due in lieu thereof.
“Tax Returns” means any return, report, information return, claim for refund or other document (including any related or supporting information) supplied to or required to be supplied to any Taxing Authority with respect to Taxes, including any attachments, amendments and supplements thereto.
“Taxing Authority” means, with respect to any Tax, the Governmental Authority that imposes such Tax, and the Governmental Authority (if any) charged with the collection of such Tax.
“Transaction Agreements” means the following agreements:
(a)    this Agreement;
(b)    the Bill of Sale;
(c)    the Deeds;
(d)    the Plants Agreements Termination Agreement; and
(e)    the Full Requirements Power Purchase Agreement.
“Transfer Taxes” has the meaning given to it in Section 4.4(a).
“Update Period” has the meaning given to it in Section 4.3.
“Wholesale Power Sales Agreements” means the following wholesale power sales agreements (as the same may be amended, consolidated, supplemented, novated or replaced by the parties thereto from time to time) of Purchaser as of the Closing Date which utilize a formula rate: Power Supply and Coordination Agreement dated June 10, 2009 with Public Works Commission of the City of Fayetteville, North Carolina; Full Requirements Power Purchase Agreement dated June 28, 2012 with French Broad Electric Membership Cooperative; Second Amended and Restated Power Supply and Coordination Agreement dated February 7, 2014, with North Carolina Electric Membership Corporation; Full Requirements Power Purchase Agreement, dated October 28, 2013, with The City of Camden, South Carolina; and Second Amended and Restated Partial Requirements Service Agreement dated December 16, 2013 with Piedmont Electric Membership Corporation.
“2015 Expenditure Cap” means $78,000,000. 
“2016 Expenditure Cap” means $55,000,000. 
Section 1.2.    Rules as to Usage.  Except as otherwise expressly provided herein, the following rules shall apply to the usage of terms in this Agreement:
(a)    The terms defined above have the meanings set forth above for all purposes, and such meanings are equally applicable to both the singular and plural forms of the terms defined.
(b)    “Include,” “includes” and “including” shall be deemed to be followed by “without limitation” whether or not they are in fact followed by such words or words of like import.
(c)    “Writing,” “written” and comparable terms refer to printing, typing, and other means of reproducing in a visible form.
(d)    References to any document are references to that document as amended, consolidated, supplemented, novated or replaced by the parties thereto from time to time.
(e)    Any Law defined or referred to above means such Law as from time to time amended, modified or supplemented, including by succession of comparable successor Law.
(f)    References to a Person are also to its successors and assigns.
(g)    Any term defined above by reference to any agreement, instrument or Law has such meaning whether or not such agreement, instrument or Law is in effect.
(h)    “Hereof,” “herein,” “hereunder” and comparable terms refer, unless otherwise expressly indicated, to the entire agreement or instrument in which such terms are used and not to any particular article, section or other subdivision thereof or attachment thereto.  References in an instrument to “Article,” “Section,” or another subdivision or to an attachment are, unless the context otherwise requires, to the relevant article, section, subsection or subdivision of or an attachment to such agreement or instrument.  If such reference in this Agreement to “Article,” “Section,” or other subdivision does not specify an agreement or document, such reference refers to an article, section or other subdivision of this Agreement.  All references to exhibits or schedules in any agreement or instrument that is governed by this Agreement are to exhibits or schedules attached to such instrument or agreement.
(i)    Pronouns, whenever used in any agreement or instrument that is governed by this Agreement and of whatever gender, shall include natural Persons, corporations, limited liability companies, partnerships and associations of every kind and character.
(j)    References to any gender include, unless the context otherwise requires, references to all genders.
(k)    “Shall” and “will” have equal force and effect.
Section 1.3.    Schedules and Exhibits.  This Agreement consists of the Articles contained herein and the Schedules and Exhibits attached hereto, all of which constitute one and the same agreement with equal force and effect.
Article II     
 
SALE AND PURCHASE; PRICE; CLOSING
Section 2.1.    Sale and Purchase; Definition of Purchased Assets; Assumed Liability.
2.1.1.    Closing.  Seller shall sell, transfer, convey, assign and deliver to Purchaser, free and clear of all Liens (other than Permitted Liens), and Purchaser shall purchase and pay for, all of Seller’s right, title and interest in and to all assets and properties of Seller relating to its ownership interest in the Plants, including without limitation, Seller’s right, title and interest in and to the following assets (collectively, the “Purchased Assets”):
(l)    Seller’s Interests;
(m)    All Real Property (to the extent not included in Seller’s Interests);
(n)    the Nuclear Decommissioning Trust Funds and $26,000,000 of Additional Decommissioning Funds, and all proceeds and rights therein;
(o)    Nuclear fuel inventory purchased for the Harris Plant, the Brunswick 1 Plant and the Brunswick 2 Plant and residing in Seller’s nuclear fuel fleet inventory accounts and all accounts related to such nuclear fuel inventory ( the “Fuel Inventory”);
(p)    Spare parts inventory of the Plants and any related support facilities, including equipment, tools, goods and supplies (the “Spare Parts Inventory”); and
(q)    The Plants Permits.
2.1.2.    Excluded Assets.  The Purchased Assets shall not include Seller’s interest in the following agreements, assets and properties (the “Excluded Assets”), and Purchaser shall have no Liability with respect thereto:
(a)    Except as set forth in Section 2.1.1(c), cash, cash equivalents, bank deposits, and accounts and notes receivable, trade or otherwise;
(b)    Rights of Seller arising under this Agreement, the Transaction Agreements or any other instrument or document executed and delivered pursuant to this Agreement; 
(c)    All assets, properties and contractual rights of Seller other than the Purchased Assets; and
(d)    Any damages, costs or settlement amounts that are attributable to the Harris Interest, the Brunswick 1 Interest or the Brunswick 2 Interest and that are collected by Purchaser pursuant to or as a result of  (i) Carolina Power & Light Co., et. al. v United States, No. 11-869C in the United States Court of Federal Claims, and (ii) any similar action or proceeding initiated by DEP in the future against the United States related to damages associated with spent fuel storage costs incurred during the period beginning January 1, 2011 and ending on the Closing Date, provided that any such damages, costs or settlement amounts shall be reduced by Seller’s properly allocable ownership portion (calculated based on the applicable Seller’s Interests) of the litigation costs (including reasonable attorney fees) incurred by Purchaser or its Affiliates in or pursuant to such actions or proceedings, to the extent the same have not already been reimbursed by Seller (under the Plants Agreements or otherwise).
2.1.3.    Assumed Liabilities.  On the terms and subject to the conditions set forth in this Agreement, effective as of the Closing, Purchaser shall assume and satisfy or perform only the following Liabilities of Seller:
(a)    those Liabilities of Seller, other than the Decommissioning Trust Liabilities, directly related to the decommissioning of the Harris Plant, the Brunswick 1 Plant and the Brunswick 2 Plant; and
(b)    all Purchaser Plants Liabilities, other than the Decommissioning Trust Liabilities (clause (a) and (b) collectively, the “Assumed Liabilities”).
2.1.4.    Excluded Liabilities.  Except for the Assumed Liabilities, Purchaser shall have no liability or obligation whatsoever for, and Seller shall retain and continue to be responsible for, all of Seller’s duties, obligations and Liabilities, including the Decommissioning Trust Liabilities and the Seller Plants Liabilities, whether incurred or arising before or after Closing, (all of such retained duties, obligations and Liabilities being referred to herein as the “Excluded Liabilities”).  
Section 2.2.    Purchase Price.
2.2.1.    Amount.  In consideration of the sale, assignment, conveyance, transfer and delivery to Purchaser as of the Closing of Seller’s right, title and interest in and to the Purchased Assets, Purchaser shall pay to or on behalf of Seller an amount equal to the sum of (a) $1,200,000,000, plus (b) the lesser of (i) an amount equal to all payments made by Seller pursuant to Section 2.3 of the OFA on account of capital expenditures made with respect to the Seller’s Interests in the Plants from January 1, 2015 through December 31, 2015, as such amount is determined by Purchaser at least thirty (30) Business Days prior to Closing based on the books and records of the Plants maintained by Purchaser, or (ii) the 2015 Expenditure Cap, plus (c) the lesser of (i) an amount equal to all payments made by Seller pursuant to Section 2.3 of the OFA on account of capital expenditures made with respect to the Seller’s Interests in the Plants from January 1, 2016 through the Closing Date, as such amount is determined by Purchaser at least thirty (30) Business Days prior to Closing based on the books and records of the Plants maintained by Purchaser, or (ii) the 2016 Expenditure Cap (the total of (a), (b) and (c), the “Purchase Price”).
2.2.2.    Prorations.  Real, personal, Public Service Company ad valorem Taxes and payments in lieu of ad valorem Taxes with respect to the Purchased Assets (“Property Taxes”) will be prorated on a calendar year basis through the Closing Date.  Any special assessments or roll-back Taxes on or against the Purchased Assets shall be paid by Seller on or prior to the Closing Date.  If the actual amount of Property Taxes is not known on the Closing Date, such Taxes shall be prorated on the basis of the amount of such Taxes payable for the prior year, and shall be adjusted between the Parties when the actual amount of such Taxes payable in the year of Closing is known to Purchaser and Seller.  Within 30 days after the Property Tax liability is known for the calendar year in which the Closing occurs, Purchaser and Seller shall make such payments or credits between themselves as are necessary so that each Party bears only its pro rata portion of the actual Property Tax liability for the calendar year in which the Closing occurs.  All prorations shall be made as adjustments to the Purchase Price, provided that to the extent any charge or receipt to be prorated at Closing is not known as of the Closing Date, the Parties shall make the applicable proration and adjusting payments as soon as possible after Closing.
2.2.3.    Method of Payment of Purchase Price.  At Closing, Purchaser shall deliver the Purchase Price, as adjusted for the prorations and other adjustments hereunder, in United States dollars, by wire transfer of immediately available federal funds in accordance with the Disbursement Instructions provided by the Bond Fund Trustee.
Section 2.3.    Allocation of Purchase Price for Tax Purposes.  The Purchase Price shall be allocated among the Purchased Assets as of the Closing in accordance with a schedule to be prepared by Purchaser, using the allocation method provided by Section 1060 of the Code and the regulations thereunder.  The consent of Seller under this Section shall not be a condition to the Closing.  The Parties shall cooperate to comply with all substantive and procedural requirements of Section 1060 of the Code and the regulations thereunder, and except for any adjustment to the Purchase Price, the allocation shall be adjusted only if and to the extent necessary to comply with such requirements.  Purchaser and Seller agree that they will not take nor will they permit any Affiliate to take, for income Tax purposes, any position inconsistent with such allocation; provided, however, that (i) Purchaser’s cost may differ from the total amount allocated hereunder to reflect the inclusion in the total cost of items (for example, capitalized acquisition expenses) not included in the total amount so allocated, and (ii) the amount realized by Seller may differ from the amount allocated to reflect transaction costs that reduce the amount realized for federal income Tax purposes.  Transfer Taxes on the Deeds shall be calculated based on such allocation.
Section 2.4.    The Closing.  The closing of the transactions contemplated herein (the “Closing”) will take place at Purchaser’s offices in Charlotte, North Carolina (or such other location agreed to by the Parties), at 10:00 a.m. local time on the date as soon as practicable (but in no event longer than 10 Business Days) after all conditions to the Closing set forth in Section 5.1 and Section 5.2 have been satisfied or waived.  The Closing shall be deemed effective as of 12:01 A.M. Charlotte, North Carolina time on the Closing Date.
2.4.1.    Closing.
(a)    At the Closing, Purchaser shall (i) pay the Purchase Price in accordance with Section 2.2 and (ii) execute (as applicable) and deliver the following items to Seller:
(i)    a termination agreement in substantially the form and substance of Exhibit C attached hereto (the “Plants Agreements Termination Agreement”), pursuant to which the Parties shall terminate the Plants Agreements effective as of the Closing;
(ii)    the Required Consents obtained as of Closing to the extent Purchaser is the recipient or grantee thereof;
(iii)    a certificate of good standing (or equivalent certification) with respect to Purchaser issued within thirty (30) days prior to the Closing Date by the Secretary of State of the State of North Carolina;
(iv)    copies, certified by the Secretary or Assistant Secretary of Purchaser, of resolutions of Purchaser’s Board of Directors authorizing the execution and delivery of this Agreement and all of the other agreements and instruments, in each case, to be executed and delivered by Purchaser in connection herewith;
(v)    a certificate of the Secretary or Assistant Secretary of Purchaser identifying the name and title and bearing the signatures of the officers of Purchaser authorized to execute and deliver this Agreement and the other agreements and instruments contemplated hereby; and
(vi)    a certificate addressed to Seller dated as of the Closing Date executed by a duly authorized officer of Purchaser to the effect that the conditions set forth in Section 5.2.1 and Section 5.2.2 have been satisfied by Purchaser.
(b)    At the Closing, Seller shall execute (as applicable) and deliver or cause to be delivered the following items to Purchaser:
(i)    documentation, in form and substance satisfactory to Purchaser, required to vest full, complete and valid title in Purchaser in and to all right, title and interest of Seller in the Nuclear Decommissioning Trust Funds, and all proceeds and rights contained therein;
(ii)    a bill of sale in substantially the form of Exhibit D attached hereto (the “Bill of Sale”);
(iii)    special warranty deeds in substantially the form of Exhibit E attached hereto (the “Deeds”) and any other documents necessary to convey all of Seller’s right, title and interest in and to Seller’s Interests;
(iv)    the Plants Agreements Termination Agreement;
(v)    the Required Consents obtained as of Closing to the extent Seller is the recipient or grantee thereof;
(vi)    the Disbursement Instructions;
(vii)    payoff or release letters (or such other instruments satisfactory to Purchaser) providing for the release of any Liens (other than Permitted Liens) on the Purchased Assets;
(viii)    a certificate, duly completed and executed by Seller, certifying that Seller is not a foreign Person.  Such certificate shall be substantially in the form of the sample set forth in Treasury Regulation Section 1.1445-2(b)(2)(iv)(B);
(ix)    a certificate of existence with respect to Seller, issued within thirty (30) days prior to the Closing Date, issued by the Secretary of State of the State of North Carolina;
(x)    copies, certified by the Secretary or Assistant Secretary of Seller, of resolutions of Seller’s Board of Directors authorizing the execution and delivery of this Agreement and all of the other agreements and instruments, in each case, to be executed and delivered by Seller in connection herewith;
(xi)    a certificate of the Secretary or Assistant Secretary of Seller identifying the name and title and bearing the signatures of the officers of Seller authorized to execute and deliver this Agreement and the other agreements and instruments contemplated hereby; 
(xii)    a certificate addressed to Purchaser dated the Closing Date executed by a duly authorized officer of Seller to the effect that the conditions set forth in Section 5.1.1 and Section 5.1.2 have been satisfied by Seller; 
(xiii)    copies of the termination agreements, in form and substance satisfactory to Purchaser and fully executed by Seller and each Participant (collectively, the “Existing Participant Power Sales Agreement Termination Agreements”), pursuant to which each Existing Participant Power Sales Agreement shall be terminated effective as of the Closing; 
(xiv)    a completed Internal Revenue Service Form W-9 (Request for Taxpayer Identification Number and Certification) for Seller; 
(xv)    $26,000,000 in immediately available funds (representing the Additional Decommissioning Funds being purchased from Seller by Purchaser) by wire transfer to an account designated by Purchaser prior to Closing; and
(xvi)    if requested by Purchaser, an assignment agreement, in form and substance reasonably satisfactory to Purchaser and Seller, assigning Seller’s right, title and interest in the Assigned Contracts to Purchaser. 
Section 2.5.    Further Assurances.  Subject to the terms and conditions of this Agreement, at any time or from time to time after the Closing, at either Party’s request and without further consideration, the other Party shall execute and deliver to such Party such other instruments of sale, transfer, conveyance, assignment and confirmation, provide such materials and information and take such other actions as such Party may reasonably deem necessary or desirable in order more effectively (i) to transfer, convey and assign to Purchaser, and to confirm Purchaser’s title to, the Purchased Assets, (ii) to the full extent permitted by Law, to put Purchaser in actual possession of the Purchased Assets, and (iii) otherwise to consummate the transactions contemplated by this Agreement
Section 2.6.    Withholding.  Purchaser shall be entitled to deduct and withhold from any amount otherwise payable to Seller pursuant to this Agreement such amounts as it is required to deduct and withhold with respect to the making of such payment under any provision of applicable Law.  If any amount is so withheld, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to Seller.
Article III     
 
REPRESENTATIONS AND WARRANTIES
Section 3.1.    Representations and Warranties of Seller.  Except as specifically set forth in Seller’s Disclosure Schedule attached hereto as Schedule 3.1, Seller hereby represents and warrants to Purchaser that all of the statements contained in this Section 3.1 are true and correct as of the Effective Date.  Each exception and other response to this Agreement set forth in Seller’s Disclosure Schedule is identified by reference to, or has been grouped under a heading referring to, a specific individual section of this Agreement, and, except as otherwise specifically stated with respect to such exception, relates only to such section.
3.1.4.    Existence.  Seller is a joint agency and public body and body corporate and politic organized, validly existing under the Laws of the State of North Carolina, Seller has all requisite corporate power and authority to own, lease and operate its properties and to carry out its business as it is now being conducted, and is duly qualified in each jurisdiction in which the nature of its business or the ownership or leasing of its assets and properties makes such qualification necessary.     
3.1.5.    Authority.  Seller has full corporate power and authority to execute and deliver this Agreement and the Transaction Agreements to which it is or will be a party, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby.  Seller’s Board of Directors has the power and authority to bind Seller with respect to the execution and delivery of this Agreement (including any amendments hereto) and the Transaction Agreements (including any amendments thereto) to which Seller is or will be a party, and the performance by Seller of its obligations hereunder and thereunder, and Seller’s Board of Directors has approved the execution and delivery by Seller of this Agreement and the Transaction Agreements to which it is or will be a party, and the performance by Seller of its obligations hereunder and thereunder.  Accordingly, the execution and delivery by Seller of this Agreement and the Transaction Agreements to which it is or will be a party, and the performance by Seller of its obligations hereunder and thereunder, have been duly and validly authorized by all required corporate action by Seller, and no other action on the part of Seller, its directors, commissioners, or Participants is necessary.  Resolution No. R-8-95 adopted by the Board of Commissioners of Seller, effective as of July 11, 1995, was duly adopted by the Board of Commissioners and such resolution remains effective.  Resolution No. R-8-95 has been amended by Resolution Nos. EAR-3-96, EAR-2-01, EAR-5-04 and EAR-1-09, adopted on August 9. 1996, May 2, 2001, December 15, 2004 and January 28, 2009, respectively, and a true and accurate copy of Resolution No. R-8-95, and each of the amendments, is attached to Section 3.1.2 of Seller’s Disclosure Schedule.  A complete and accurate list of all Participants is set forth in Section 3.1.2 of Seller’s Disclosure Schedule.
3.1.6.    Binding Agreement.  This Agreement and the Transaction Agreements to which Seller is or will be a party have been, or will be when delivered, duly executed and delivered by such Seller and, assuming due and valid authorization, execution and delivery thereof by Purchaser, this Agreement and the Transaction Agreements to which Seller is or will be a party are, or will be when delivered, valid and binding obligations of Seller enforceable against Seller in accordance with their terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other similar laws of general application affecting enforcement of creditors’ rights generally and (ii) to the extent that the availability of the remedy of specific performance or injunctive or other forms of equitable relief may be subject to equitable defenses or would be subject to the discretion of the court before which any proceeding therefor may be brought.
3.1.7.    No Conflicts.  The execution and delivery by Seller of this Agreement does not, and the execution and delivery by Seller of the Transaction Agreements to which it is or will be a party, the performance by Seller of its obligations under this Agreement and such Transaction Agreements, and the consummation of the transactions contemplated hereby and thereby shall not:
(a)    conflict with or result in a violation or breach of any of the terms, conditions or provisions of Seller’s (i) bylaws or other applicable documents relating to the operation, governance or management of Seller, or (ii) articles of incorporation or other applicable organizational or charter documents relating to the creation of Seller;
(b)    assuming all of the Seller Required Consents have been obtained, result in a default, penalty, or any adjustment in required payments (or give rise to any right of termination, cancellation or acceleration) under any of the terms, conditions or provisions of any note, bond, deed of trust, indenture, license, agreement, lease or other instrument or obligation to which Seller is party or by which Seller or any of the Purchased Assets may be bound, except for such defaults, penalties or adjustments (or rights of termination, cancellation or acceleration) as to which requisite waivers or consents have been obtained in writing (true and correct copies of which waivers or consents have been furnished to Purchaser); or
(c)    assuming all of the Seller Required Consents have been obtained, conflict with or result in a violation or breach of any term or provision of any Law applicable to Seller or the Purchased Assets.
3.1.8.    Approvals and Filings.  Except as set forth in Section 3.1.5 of Seller’s Disclosure Schedule (all items set forth on Section 3.1.5, the “Seller Required Consents”), no consent, approval or action of, filing with or notice to any Governmental Authority or other Person by Seller is required in connection with the execution, delivery and performance by Seller of this Agreement or any of the Transaction Agreements to which it is or will be a party or the consummation of the transactions contemplated hereby or thereby.
3.1.9.    Legal Proceedings.  There are no claims, actions, proceedings or investigations pending with respect to which Seller has received notice, has been served or entered an appearance or, to Seller’s Knowledge, threatened against Seller before any Governmental Authority that could reasonably be expected (i) to result in the issuance of an order restraining, enjoining or otherwise prohibiting or making illegal the consummation of the transactions contemplated by this Agreement or any of the Transaction Agreements, (ii) to adversely affect the ownership, operation or maintenance of any of the Purchased Assets, (iii) result in a Lien on any of the Purchased Assets or (iv) individually or in the aggregate, to have a Material Adverse Effect.  There are no outstanding judgments, rules, orders, writs, injunctions or decrees of any Governmental Authority relating specifically to Seller or the Purchased Assets.
3.1.10.    Compliance with Laws.  Seller is not in violation of or in default in any material respect under any Law applicable to Seller or, to Seller’s Knowledge, the Purchased Assets.  Except as set forth in Section 3.1.7 of Seller’s Disclosure Schedule, Seller has not received notification alleging that it is in violation of any Law applicable to Seller or the Purchased Assets.
3.1.11.    Title; Solvency.  Except as set forth in Section 3.1.8 of Seller’s Disclosure Schedule, Seller has good and valid title to all of its properties and assets constituting the Purchased Assets other than Seller’s Interests and the Real Property (it being understood that the representations and warranties applicable to Seller’s Interests and the Real Property are set forth in Section 3.1.9), free and clear of all Liens except Permitted Liens.  Seller is, and from the Effective Date until immediately following the Closing will be, Solvent.
3.1.12.    Real Property.  Except as set forth in Section 3.1.9 of Seller’s Disclosure Schedule, Seller has good, valid and marketable fee simple title to Seller’s Interests and the Real Property, free and clear of all Liens other than Permitted Liens.  Seller has not received notice of any action, litigation, condemnation or other proceeding of any kind with respect to or concerning Seller’s Interests or the Real Property, and none of the foregoing are pending, or to Seller’s Knowledge, threatened.  Seller has not received any notice, and Seller does not have any Knowledge, that the Real Property (or any portion of it) is in violation of any applicable zoning, flood, building or other code, or any other legal requirement or private restriction.  Other than Permitted Liens, there are no commitments to or agreements with any Governmental Authority affecting the use or ownership of Seller’s Interests or the Real Property.  
3.1.13.    Indebtedness.  Except as set forth in Section 3.1.10 of Seller’s Disclosure Schedule (which shall set forth the Indebtedness of Seller by series and amount thereof), Seller does not have any Indebtedness related to the Purchased Assets or for which the Purchased Assets have been pledged as collateral or pursuant to which the Purchased Assets are otherwise encumbered or subject to restriction on transfer.
3.1.14.    Contracts and Agreements.  Except for the Plants Agreements and any agreements listed in Section 3.1.11 of Seller’s Disclosure Schedule, there are no agreements, indentures, security agreements, deeds of trust and other contracts relating to the development, design, construction, ownership, operation or maintenance of the Purchased Assets, to which Seller is a party.  Section 3.1.11 of Seller’s Disclosure Schedule sets forth all agreements to which Seller is a party and to which Purchaser is not a party that are related to the sale or purchase of power.  The Plants Agreements constitute lawful, valid and legally binding obligations of Seller, and are enforceable against Seller in accordance with their terms.  Each Plants Agreement is in full force and effect and constitutes the entire agreement by and between the parties thereto, no party to any Plants Agreement has repudiated any provision thereof, and no fact, event or circumstance has occurred that constitutes, or could reasonably be expected to constitute, a default under any Plants Agreement.
3.1.15.    Permits.  Section 3.1.12 of Seller’s Disclosure Schedule sets forth all Permits acquired or held by or in the name of Seller in connection with the ownership, operation, maintenance or use of the Purchased Assets (the “Plants Permits”).  Seller is in compliance with each Plants Permit and Seller has not received notice of violation or noncompliance of any Plants Permit from any Governmental Authority or any other Person.  Seller has not received any notice alleging that any such Plants Permit (i) is not in full force and effect, or (ii) is subject to any legal proceeding or to any unsatisfied condition that (A) is not reasonably expected to be satisfied or (B) if not satisfied could reasonably be expected to allow material modification or revocation thereof.
3.1.16.    Taxes.
(a)    Seller has filed or will file when due all Tax Returns that are required to be filed on or before the Closing Date with respect to the Purchased Assets and has paid or will pay in full all Taxes required to be paid with respect to the Purchased Assets; and (ii) such Tax Returns were prepared or will be prepared in the manner required by applicable Laws.  Seller has not received any notice that any Taxes relating to any period prior to the Closing Date are owing that have not been paid on or before the Closing Date.
(b)    Seller has not extended or waived the application of any statute of limitations of any jurisdiction regarding the assessment or collection of any Tax of Seller with respect to the Purchased Assets.
(c)    None of the Purchased Assets are subject to any Liens for Taxes, other than Permitted Liens.
(d)    There are no audits, claims, assessments, levies, administrative or judicial proceedings pending, or to Seller’s Knowledge, threatened, proposed or contemplated with respect to the Purchased Assets by any Taxing Authority.
3.1.17.    Nuclear Decommissioning Funds.  Seller funds the Nuclear Decommissioning Trust Funds and Additional Decommissioning Funds by making annual deposits to the same, which deposits are funded from Seller’s revenues derived from the sale of power and energy to its Participants.  Section 3.1.14 of Seller’s Disclosure Schedule sets forth the value of each Nuclear Decommissioning Trust Fund as of December 31, 2013.  As of Closing, Seller shall have deposited into the Nuclear Decommissioning Trust Funds, in accordance with and pursuant to the requirements, terms and conditions set forth in the Nuclear Decommissioning Trust and applicable Law and consistent with current and past practices, all amounts scheduled to be deposited therein from January 1, 2013 through the Closing Date as set forth in the DFA Report dated March 28, 2013 that was filed by Purchaser, on behalf of Seller, with the NRC for the calendar year ending December 31, 2012 (ADAMS Accession Number ML 13091A025).  As of Closing, Seller shall have on deposit in the Additional Decommissioning Funds account $26,000,000 of Additional Decommissioning Funds.  The Nuclear Decommissioning Trust Funds and the Additional Decommissioning Funds are the sole and exclusive trusts, funds or accounts in which Seller maintains any deposits or reserves for nuclear decommissioning costs, liabilities or expenses.  Until Closing, Seller shall manage and invest the Nuclear Decommissioning Trust Funds in accordance with and pursuant to the requirements, terms and conditions set forth in the Nuclear Decommissioning Trust and applicable Law and consistent with current and past practices.
3.1.18.    Brokers.  All negotiations relative to this Agreement and the transactions contemplated hereby have been carried out by Seller directly with Purchaser without the intervention of any Person on behalf of Seller in such manner as to give rise to any valid claim by any Person against Purchaser for a finder’s fee, brokerage commission or similar payment.
3.1.19.    Third Party Rights.  There are no contracts or agreements (written or oral) with, or options, commitments or rights in favor of, any Person to directly or indirectly acquire any of the Purchased Assets.
3.1.20.    Payments.  Seller has not, directly or indirectly, paid or delivered or agreed to pay or deliver any fee, commission or other sum of money or item of property, however characterized, to any Person that is in any manner related to Purchased Assets in violation of any Law.  Neither Seller, nor any officer, director or employee of Seller, has received or, as a result of the consummation of the transactions contemplated hereby, will receive, any rebate, kickback or other improper or illegal payment from any Person.
3.1.21.    No Misstatements or Omissions.  No representation or warranty made by Seller in this Agreement, and no statement contained in any certificate or schedule furnished or to be furnished by Seller pursuant hereto, contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make such representation or warranty or such statement not misleading.
Section 3.2.    Representations and Warranties of Purchaser.  Except as specifically set forth in Purchaser’s Disclosure Schedule attached hereto as Schedule 3.2, Purchaser hereby represents and warrants to Seller that all of the statements contained in this Section 3.2 are true and correct as of the Effective Date.  Each exception and other response to this Agreement set forth in Purchaser’s Disclosure Schedule is identified by reference to, or has been grouped under a heading referring to, a specific individual section of this Agreement, and, except as otherwise specifically stated with respect to such exception, relates only to such section.
3.2.1.    Existence.  Purchaser is a corporation, duly incorporated, validly existing and in good standing under the Laws of the State of North Carolina.  Purchaser has all requisite corporate power and authority to own, lease and operate its properties and to carry out its business as it is now being conducted.
3.2.2.    Authority.  Purchaser has full power and authority to execute and deliver this Agreement and the Transaction Agreements to which it is or will be a party, to perform its obligations hereunder and thereunder, and to consummate the transactions contemplated hereby and thereby.  The execution and delivery by Purchaser of this Agreement and the Transaction Agreements to which it is or will be a party, and the performance by Purchaser of its obligations hereunder and thereunder, have been duly and validly authorized by all required action by Purchaser, and no other action on the part of Purchaser is necessary.
3.2.3.    Binding Agreement.  This Agreement and the Transaction Agreements to which Purchaser is or will be a party have been, or will be when delivered, duly executed and delivered by Purchaser and, assuming due and valid authorization, execution and delivery thereof by Seller, this Agreement and the Transaction Agreements to which Purchaser is or will be a party are, or will be when delivered, valid and binding obligations of Purchaser, enforceable against Purchaser in accordance with their terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other similar laws of general application affecting enforcement of creditors’ rights generally and (ii) the availability of the remedy of specific performance or injunctive or other forms of equitable relief may be subject to equitable defenses and would be subject to the discretion of the court before which any proceeding therefor may be brought.
3.2.4.    No Conflicts.  The execution and delivery by Purchaser of this Agreement do not, and the execution and delivery by Purchaser of the Transaction Agreements to which it is or will be a party, the performance by Purchaser of its obligations under this Agreement and such Transaction Agreements and the consummation of the transactions contemplated hereby and thereby shall not:
(a)    conflict with or result in a violation or breach of any of the terms, conditions or provisions of Purchaser’s articles of incorporation or bylaws;
(b)    result in a default, penalty, or any adjustment in required payments (or give rise to any right of termination, cancellation or acceleration) under any of the terms, conditions or provisions of any note, bond, deed of trust, indenture, license, agreement, lease or other instrument or obligation to which Purchaser is a party or by which Purchaser or any of its assets and properties may be bound, except for such defaults, penalties or adjustments (or rights of termination, cancellation or acceleration) as to which requisite waivers or consents have been obtained or that would not materially and adversely impact Purchaser’s ability to perform its obligations under this Agreement or the Transaction Agreements to which it is or will be a party; or
(c)    assuming the Purchaser Required Consents have been obtained, conflict with or result in a violation or breach of any term or provision of any Law applicable to Purchaser or any of its assets and properties, except with respect to any violations or breaches that would not materially and adversely impact Purchaser’s ability to perform its obligations under this Agreement or the Transaction Agreements to which it is or will be a party.
3.2.5.    Approvals and Filings.  Except as set forth in Section 3.2.5 of Purchaser’s Disclosure Schedule (all items set forth on Section 3.2.5, the “Purchaser Required Consents”), no consent, approval or action of, filing with or notice to any Governmental Authority or other Person by Purchaser is required in connection with the execution, delivery and performance by Purchaser of this Agreement or any of the Transaction Agreements to which it is or will be a party or the consummation by Purchaser of the transactions contemplated hereby or thereby.
3.2.6.    Legal Proceedings.  There are no claims, actions, proceedings or investigations pending or, to Purchaser’s Knowledge, threatened against Purchaser before any Governmental Authority that would reasonably be expected to result in the issuance of an order restraining, enjoining or otherwise prohibiting or making illegal the consummation of the transactions contemplated by this Agreement or any of the Transaction Agreements.
3.2.7.    Brokers.  All negotiations relative to this Agreement and the transactions contemplated hereby have been carried out by Purchaser directly with Seller without the intervention of any Person on behalf of Purchaser in such manner as to give rise to any valid claim by any Person against Seller for a finder’s fee, brokerage commission or similar payment
3.2.8.    No Misstatements or Omissions.  No representation or warranty made by Purchaser in this Agreement, and no statement contained in any certificate or schedule furnished or to be furnished by Purchaser pursuant hereto, contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make such representation or warranty or such statement not misleading.

Article IV     
 
COVENANTS
Section 4.1.    Efforts to Close.  After the Effective Date and prior to Closing:
4.1.9.    Required Consents; Other Covenants.
(a)    Each Party shall provide reasonable cooperation to the other Parties in obtaining consents, approvals or actions of, making all filings with and giving all notices to Governmental Authorities or other Persons required of the other Party in connection with obtaining any Required Consents with respect to the transactions contemplated hereby and by the Transaction Agreements, including the following:
(i)    As soon as practicable following the completion of the preparation of the applicable filing materials and supporting documentation to the satisfaction of Purchaser, as determined in Purchaser’s sole discretion, Purchaser shall file with the FERC all documents reasonably required to obtain the FERC 203 Approval, the FERC 205 Approvals and the FERC Accounting Approval.  Seller shall take all actions reasonably requested by Purchaser to support such filings and any related proceedings, including filing any supporting memoranda or other documents with the FERC related to such filings and any related proceedings; and
(ii)    As soon as practicable following the Effective Date, Purchaser shall file with the NRC all documents reasonably required to obtain the NRC Approvals.
(b)    The Parties shall furnish to each other’s counsel such necessary information and assistance as the other Party may request in connection with its preparation of any such filing or submission that is necessary to obtain the foregoing consents, approvals or actions.  The Parties shall consult with each other as to the appropriate time of making such filings and submissions and shall make such filings and submissions at the agreed upon time.  The Parties shall keep each other apprised of the status of any communications with and any inquiries or requests for additional or supplemental information from applicable Governmental Authorities and shall provide any such additional or supplemental information that may be reasonably requested in connection with any such filings or submissions.
4.1.10.    Fulfillment of Conditions.
(a)    Each Party shall use commercially reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable under Law to consummate and make effective the purchase, sale, assignment, conveyance, transfer and delivery of the Purchased Assets and the assumption of the Assumed Liabilities pursuant to this Agreement.  Such actions shall include each Party using its commercially reasonable efforts to ensure satisfaction of the conditions precedent to its obligations hereunder, including, (i) with respect to Purchaser, initiating commercially reasonable efforts to (A) secure passage of the North Carolina Legislation at such time following the Effective Date deemed appropriate by Purchaser (as determined in Purchaser’s sole discretion) and (B) procure the NCUC Rate Approvals as soon as practicable following the date the North Carolina Legislation is enacted into Law, (ii) with respect to Seller, initiating commercially reasonable efforts to (A) secure passage of the Bond Legislation concurrently with (and in no event before) Purchaser’s efforts to secure passage of the North Carolina Legislation and (B) procure the Municipalities’ Consent as soon as practicable following the date the Bond Legislation is enacted into Law, and (iii) with respect to Purchaser and Seller, jointly filing with the NCUC all documents reasonably required to obtain the NCUC Approval at such time following the Effective Date deemed appropriate by Purchaser (as determined in Purchaser’s sole discretion).  The Parties shall consult on and coordinate all principal activities, procurement efforts, meetings, submissions and filings undertaken or made, as applicable, by Purchaser and Seller to the North Carolina General Assembly in connection with the North Carolina Legislation and the Bond Legislation and the NCUC in connection with the NCUC Approval. In no event shall (x) Purchaser, with respect to the North Carolina Legislation, include in the draft of such legislation introduced on behalf of Purchaser for approval by the North Carolina General Assembly any subject matter other than that which is necessary, as determined in Purchaser’s sole discretion, to (i) make the transactions contemplated by this Agreement economically viable for Purchaser and Purchaser’s stakeholders or (ii) otherwise facilitate the consummation of the transactions contemplated by this Agreement, or (y) Seller, with respect to the Bond Legislation, include in the draft of such legislation introduced on behalf of Seller for approval by the North Carolina General Assembly any subject matter other than that which is necessary, as determined in Seller’s sole discretion, to (i) permit Seller to issue bonds to refinance existing Indebtedness of Seller outstanding under the Bond Resolution and attributable to the Seller’s Interest that cannot be repaid (or its payment provided for) with that portion of the Purchase Price described in Section 2.2.1(a) of this Agreement or other funds available to Seller or (ii) otherwise facilitate the consummation of the transactions contemplated by this Agreement.   Neither Purchaser nor Seller shall be deemed to have violated their respective covenants set forth in the immediately preceding sentence in the event that, during the legislative process, any other Person (other than on behalf of Purchaser or Seller) introduces additional subject matter or material beyond that described in the immediately preceding sentence to the North Carolina Legislation or the Bond Legislation, as applicable. 
(b)    Each Party shall give notice to the other promptly after becoming aware of (i) the occurrence or non-occurrence of any event whose occurrence or nonoccurrence would be likely to cause any representation or warranty contained in this Agreement to be untrue or inaccurate in any material respect at any time from the Effective Date hereof to the Closing Date and (ii) any failure of a Party to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder.
Section 4.2.    Preservation of Purchased Assets.
(c)    After the Effective Date and prior to Closing, (i) Seller shall preserve and maintain those of the Purchased Assets described in Sections 2.1.1(c) and (f); and (ii) Seller shall fulfill its obligations under the Plants Agreements in the usual and ordinary course of business.
(d)    After the Effective Date and prior to Closing Seller shall, and shall cause its Related Persons (including ElectriCities and any of ElectriCities’ Related Persons) to, (i) continue to operate its business and affairs in the ordinary course of business, consistent with past practices, including maintaining the Nuclear Decommissioning Trusts as required by the applicable trust documentation in effect as of the Effective Date and otherwise consistent with all Laws and (ii) contribute all necessary funds to the Additional Decommissioning Funds, and take all other actions necessary in connection therewith, to cause there to be $26,000,000 of Additional Decommissioning Funds as of Closing.
(e)    Except to the extent expressly contemplated by this Agreement, without the prior written consent of Purchaser (which Purchaser may withhold in its sole discretion), after the Effective Date and prior to Closing, Seller shall not, and shall cause its Related Persons (including ElectriCities and any of ElectriCities’ Related Persons) not to: (i) distribute, disburse, dispose of, sell, lease, transfer, pledge, assign or encumber, or incur or permit to exist any Lien (other than a Permitted Lien) on, any of the Purchased Assets, including (A) any disbursements of funds from the Nuclear Decommissioning Trusts or (B) any disbursement of Additional Decommissioning Funds that would result in there being less than $26,000,000 of Additional Decommissioning Funds as of Closing; (ii) amend its certificate of incorporation, bylaws or any other documents or instruments relating to the operation, governance, management or creation of Seller; (iii) take any action that alters the regulatory status of Seller or the Purchased Assets; (iv) take any action that could result in a loss, in whole or in part, of the authority of Seller’s Board of Directors, or fail to take any action that could prevent any such loss of authority, to (A) legally bind Seller and (B) take all actions necessary or desirable on behalf of Seller to consummate the transactions contemplated by this Agreement; (v) take any action that adversely affects the Purchased Assets or impairs the ability of the Parties to consummate the transactions contemplated by this Agreement, or fail to take any action that could prevent the same; (vi) enter into any agreement or commitment to do or engage in any of the foregoing; or (vii) enter into any discussions or negotiations with any Person (other than Purchaser and its Related Persons) or provide any information to any Person (other than Purchaser and its Related Persons) in furtherance of any of the foregoing.
Section 4.3.    Notification.  Seller shall update, amend, modify or add additional sections to Seller’s Disclosure Schedule, as applicable (each, a “Disclosure Update”) between the Effective Date and the Closing Date (the “Update Period”) to reflect any (a) matter, fact, circumstance or event first arising after the Effective Date that, if had it existed on the Effective Date, would have been required to be set forth in Seller’s Disclosure Schedule as of the Effective Date, or (b) any matter, fact, circumstance or event becoming known to Seller during the Update Period that arose prior to the Effective Date that was required to be set forth in Seller’s Disclosure Schedule as of the Effective Date but was omitted (each item identified pursuant to this clause (b), a “Pre-Execution Update”).  Such Disclosure Update shall be in the form of an amendment or supplement to Seller’s Disclosure Schedule specifying the section or sections of Seller’s Disclosure Schedule to be updated thereby.   If any Disclosure Update, standing on its own or taken together with any prior Disclosure Updates, discloses any matter, fact, circumstance or event that constitutes a material breach or inaccuracy of any representation or warranty of Seller, then Purchaser may terminate this Agreement if (x) Purchaser delivers written notice of termination to Seller not later than thirty (30) days following Purchaser’s receipt of the Disclosure Update, and (y) Seller fails to cure such material breach or inaccuracy within thirty (30) following Seller’s receipt of such termination notice from Purchaser, with the effective date of termination being the expiration of such thirty (30) day cure period.   If Purchaser does not, in the case of any such Disclosure Update that give Purchaser the right to terminate the Agreement as set forth in the immediately preceding sentence, deliver any such written notice of termination to Seller within such thirty (30) day period, Purchaser shall be deemed to have forever waived its right to terminate this Agreement pursuant to Section 6.1(b) solely with respect to such Disclosure Update.  If the Closing occurs, then with respect to any Pre-Execution Update, the representations and warranties of Seller contained in Article III shall not be deemed to have been qualified by such Pre-Execution Update, and the information contained in such Pre-Execution Update shall not be deemed to have cured any breach of any such representation or warranty contained in Article III, and Purchaser shall have the right to seek indemnification from Seller for any Losses arising out of or resulting from such breach in accordance with Article VII.
Section 4.4.    Tax Matters.
(d)    Notwithstanding any other provision of this Agreement, all applicable sales, transfer, use, stamp, conveyance, value added,  excise, and other similar Taxes, if any, and other similar costs of Closing, that may be imposed upon, or payable, collectible or incurred in connection with the transfer of the Purchased Assets to Purchaser or otherwise as a result of the transfer of the Purchased Assets (“Transfer Taxes”) shall be borne solely by Seller; provided, however, that all recording or filing fees payable in connection with the recording or filing of the transfer of record of the Purchased Assets to Purchaser in the appropriate public registries shall be paid by Purchaser.  Seller, at its own expense, will file, to the extent required by applicable Law, all necessary Tax Returns and other documentation with respect to all such Transfer Taxes, and if required by applicable Law, Purchaser will join in the execution of any such Tax Returns or other documentation.
(e)    With respect to Taxes to be prorated in accordance with Section 2.2.2, Purchaser shall prepare and timely file all Tax Returns required to be filed after the Closing with respect to the Purchased Assets, if any, and shall duly and timely pay all such Taxes shown to be due on such Tax Returns.  Purchaser’s preparation of any such Tax Returns that are material shall be subject to Seller’s approval, which shall not be unreasonably withheld, conditioned or delayed.  Purchaser shall make such Tax Returns available for Seller’s review and approval not later than 15 Business Days prior to the due date for filing such Tax Return and shall make such changes as are reasonably requested by Seller.  Within 10 Business Days after Purchaser’s payment of such Taxes, Seller shall pay to Purchaser, or Purchaser shall pay to Seller, as appropriate, the difference between (i) Seller’s proportionate share of the amount shown as due on such Tax Return determined in accordance with Section 2.2.2 and (ii) the amount paid by Seller at the Closing Date pursuant to Section 2.2.2.
(f)    Seller and Purchaser shall provide the other with such assistance as may reasonably be requested in connection with the preparation of any Tax Return, any audit or other examination by any Taxing Authority, or any judicial or administrative proceedings relating to Liability for Taxes, and each will retain and provide the requesting Party with any records or information that may be relevant to such return, audit, or examination, proceedings or determination.  Any information obtained pursuant to this Section 4.4 or pursuant to any other Section hereof providing for the sharing of information or review of any Tax Return or other schedule relating to Taxes shall be kept confidential by the Parties.
(g)    Purchaser shall remit to Seller any refund or credit of Taxes, if and when actually received by Purchaser, to the extent such Taxes are attributable to any taxable period, or portion thereof, ending on or before the Closing Date and were paid by Seller to the applicable Taxing Authority or to Purchaser pursuant to this Agreement.
(h)    Any payment by Purchaser or Seller to the other pursuant to this Section 4.4 shall be treated for all purposes by both Parties as an adjustment to the Purchase Price, to the maximum extent permitted by Law.
(i)    In the event that a dispute arises between Seller and Purchaser regarding Taxes or any amount due under this Section 4.4, the Parties shall attempt in good faith to resolve such dispute and any agreed upon amount shall be paid to the appropriate Party.  If such dispute is not resolved within 30 days, the Parties shall submit the dispute to the Independent Accounting Firm for resolution within 30 days thereafter, which resolution shall be final, conclusive and binding on the Parties.  Notwithstanding anything in this Agreement to the contrary, the fees and expenses of the Independent Accounting Firm in resolving the dispute shall be borne by Purchaser, on the one hand, and Seller, on the other hand, in inverse proportion as they may prevail on matters resolved by the Independent Accounting Firm, which proportionate allocations shall also be determined by the Independent Accounting Firm at the time its determination on the merits of the matters submitted is rendered.  Any payment required to be made as a result of the resolution of the dispute by the Independent Accounting Firm shall be made within 10 days after such resolution as required for the applicable Tax.
Section 4.5.    Access to Information.  From the Effective Date until the Closing, Seller shall afford to Purchaser and its Related Persons, reasonable access to all their respective books, contracts, commitments, personnel, records, properties, offices and other facilities related to the Purchased Assets and, during such period, Seller shall furnish promptly to Purchaser all available information concerning the Purchased Assets as Purchaser may reasonably request; provided, however, that any such investigation shall be conducted during normal business hours upon reasonable advance notice to Seller, under the supervision of Seller’s personnel (to the extent such investigation is conducted on the premises of Seller) and in such a manner as not to materially interfere with the normal operations of Seller; provided, further, that Seller may withhold (a) any document or information if not doing so would result in a loss of the ability to successfully assert the attorney-client privilege, provided that in each case Seller shall use commercially reasonable efforts to disclose the pertinent information contained therein in a manner so that such privilege is maintained or (b) such portions of documents or information relating to matters that are highly sensitive if the exchange of such documents (or portions thereof) or information, as determined by Seller’s outside counsel, would reasonably be expected to result in violation of antitrust Laws, provided that Seller has used reasonable efforts to maximize the delivery of such information.
Section 4.6.    Spare Parts Inventory.   From the Effective Date until the Closing, Purchaser shall maintain inventory levels of spare parts of the Plants and any related support facilities, including equipment, tools, goods and supplies, in the ordinary course of business, and shall not engage in any adverse distinction or undue discrimination against the Plants, including, but not limited to, the build-up of Spare Parts Inventory to levels that are not consistent with practices at other generating facilities owned and operated by Purchaser.
Section 4.7.    PE Pension Plan.   Purchaser maintains the Progress Energy Pension Plan (the “PE Pension Plan”), which provides retirement benefits to certain current and former employees of the Plants.  Seller is obligated under the OFA to pay its properly allocable ownership portion of certain costs associated with operating, administering and funding the PE Pension Plan, including, but not limited to, Service Costs and benefit funding expenses. 
(a)    From the Effective Date through the Closing Date, Seller shall, in accordance with the OFA, pay Purchaser the lesser of (i) its properly allocable ownership portion of the Service Costs, or (ii) Seller’s properly allocable ownership portion of the actual contributions made to the PE Pension Plan by Purchaser.
(b)    In the event that on the last day of the plan year immediately preceding the Closing Date the PE Pension Plan’s funding status, as determined by the actuarial report performed for the PE Pension Plan for that plan year by the PE Pension Plan’s independent actuarial consultants, in a manner consistent with past practices, was below 100%, the Seller shall, within thirty (30) days prior to the Closing Date, pay Purchaser an amount equal to Seller’s properly allocable ownership portion of the aggregate contribution required to return the PE Pension Plan to 100% funded status as of the last day of the plan year preceding the Closing Date (such amount, the “Catch-Up Pension Contribution”).  Notwithstanding the foregoing, in the event that the actuarial report for the plan year immediately preceding the Closing Date is incomplete as of the Closing Date, Seller shall pay Purchaser Seller’s Catch-Up Pension Contribution within thirty (30) days following receipt of written notice from Purchaser of the actuarial report’s finding with respect to the applicable year end funding level and an assessment of Seller’s properly allocable ownership portion of contributions required to return the PE Pension Plan to 100% funded status.
(c)    In the event that this Agreement is terminated in accordance with Section 6.1, Seller shall, within thirty (30)  days of the termination, pay Purchaser  an amount equal to (x) Seller’s properly allocable ownership portion of all PE Pension Plan expenses pursuant to the OFA minus (y) amounts actually paid in accordance with Section 4.7(a) above.
Article V     
 
CONDITIONS TO CLOSING
Section 5.1.    Purchaser’s Conditions Precedent.  The obligations of Purchaser hereunder to execute or deliver the items it is required to deliver pursuant to Section 2.4.1(a) are subject to the fulfillment, at or before the Closing, of each of the following conditions (all or any of which may be waived in whole or in part by Purchaser in its sole discretion):
5.1.2.    Representations and Warranties.  Each of the representations and warranties made by Seller in this Agreement that are qualified as to materiality or Material Adverse Effect shall be true and correct on and as of the Closing Date as though made on and as of the Closing Date.  Each of the representations and warranties made by Seller in this Agreement that are not qualified as to materiality or Material Adverse Effect shall be true and correct in all material respects on and as of the Closing Date as though made on and as of the Closing Date.
5.1.3.    Performance.  Seller shall have performed and complied with the agreements, covenants and obligations required by this Agreement to be so performed or complied with by Seller at or before the Closing Date.
5.1.4.    Law.  There shall not be in effect at the Closing Date any preliminary or permanent injunction or other order or decree by any federal or state court which prevents the consummation of the transactions contemplated by this Agreement or any Law restraining, enjoining or otherwise prohibiting or making illegal the consummation of the transactions contemplated by this Agreement.
5.1.5.    NCUC Approval.  The NCUC Approval shall have been duly obtained and be in full force and effect, shall not have been reversed, stayed, enjoined, set aside, annulled or suspended, and shall not have imposed or required any condition or modification unacceptable to Purchaser.
5.1.6.    FERC 203 Approval.  The FERC 203 Approval shall have been duly obtained and be in full force and effect, shall not have been reversed, stayed, enjoined, set aside, annulled or suspended, and shall not have imposed or required any condition or modification unacceptable to Purchaser.
5.1.7.    FERC 205 Approvals.  The FERC 205 Approvals shall have been duly obtained and be in full force and effect, shall not have been reversed, stayed, enjoined, set aside, annulled or suspended, and shall not have imposed or required any condition or modification unacceptable to Purchaser.
5.1.8.    FERC Accounting Approval.  The FERC Accounting Approval shall have been duly obtained and be in full force and effect, shall not have been reversed, stayed, enjoined, set aside, annulled or suspended, and shall not have imposed or required any condition or modification unacceptable to Purchaser.
5.1.9.    NRC Approvals.  The NRC Approvals shall have been duly obtained and be in full force and effect, shall not have been reversed, stayed, enjoined, set aside, annulled or suspended, and shall not have imposed or required any condition or modification unacceptable to Purchaser.
5.1.10.    Required Consents.  Purchaser shall have received evidence reasonably satisfactory to Purchaser that, in addition to the NCUC Approvals, the FERC 203 Approval, the FERC 205 Approvals, the FERC Accounting Approval and the NRC Approvals, all other Required Consents have been duly obtained and are in full force and effect, shall not have been reversed, stayed, enjoined, set aside, annulled or suspended, and shall not have imposed or required any condition or modification unacceptable to Purchaser.
5.1.11.    Plant Permits.  Purchaser shall have received evidence reasonably satisfactory to Purchaser that all Plant Permits have, or promptly following Closing will be, transferred to Purchaser without any condition or modification thereof unacceptable to Purchaser.
5.1.12.    Municipalities’ Consent.  The Municipalities’ Consent shall have been duly obtained and be in full force and effect, shall not have been reversed, stayed, enjoined, set aside, annulled or suspended, and shall not have imposed or required any condition or modification unacceptable to Purchaser.
5.1.13.    State Rate Approvals.  The North Carolina Legislation, the NCUC Rate Approvals, the South Carolina Legislation and the PSCSC Rate Approvals shall each have been procured and remain in full force and effect and shall not have been reversed, stayed, enjoined, set aside, annulled or suspended, and shall not have imposed or required any condition or modification unacceptable to Purchaser.
5.1.14.    Full Requirements Power Sales Agreements.  Each Participant shall have entered into a Full Requirements Power Sales Agreement (each, a “Full Requirements Power Sales Agreement”), incorporating the terms and conditions stipulated or required in the Full Requirements Power Purchase Agreement and otherwise in form and substance reasonable satisfactory to Purchaser, pursuant to which Seller agrees to sell to each such Participant and each such Participant agrees to purchase from Seller, such Participant’s full requirements bulk power supply, and no such Full Requirements Power Sales Agreement shall have been modified, amended or changed in a manner unacceptable to Purchaser.
5.1.15.    Debt Service Support Contracts.  Each Participant shall have entered into a Debt Service Support Contract (each, a “Debt Service Support Contract”), pursuant to which Seller agrees to issue bonds to refinance Seller’s existing Indebtedness outstanding under the Bond Resolution and attributable to the Seller’s Interest and each Participant agrees to fix, charge and collect rates, fees and charges for service to the customers of its electric system at least sufficient to provide revenues adequate to meet its obligations under the Debt Service Support Contract and the Full Requirements Power Sales Agreement.
5.1.16.    Full Requirements Power Purchase Agreement.  The Full Requirements Power Purchase Agreement shall have been executed by each of Purchaser and Seller, and the term of the Full Requirements Power Purchase Agreement shall not have expired or otherwise been validly terminated thereunder (nor shall notice of any such termination have been issued by either Purchaser or Seller in accordance with the terms thereof).
5.1.17.    Deliveries.  Seller shall have executed and delivered to Purchaser the items set forth in Section 2.4.1(b).
5.1.18.    Condition of Plants.  There shall not have been or occurred, since the Effective Date, any material damage, destruction or loss (whether or not covered by insurance) with respect to any of the Plants, including all real and personal property constituting all or a part of the same.
5.1.19.    Seller’s Indebtedness.  Contingent only upon the disbursement of that portion of the Purchase Price described in Section 2.2.1(a) to the Escrow Deposit and/or Refunding Trust Fund pursuant to the Disbursement Instructions, all of Seller’s Indebtedness outstanding under the Bond Resolution and attributable to the Seller’s Interest shall have been fully defeased and is no longer outstanding under the Bond Resolution.
5.1.20.    Material Adverse Effect.  There shall not have been or occurred, since the Effective Date, any event, occurrence or circumstance that would reasonably be expected to result in or give rise to a Material Adverse Effect.  
Section 5.2.    Seller’s Conditions Precedent.  The obligations of Seller hereunder to execute or deliver the items it is required to deliver pursuant to Section 2.4.1(b) are subject to the fulfillment, at or before the Closing, of each of the following conditions (all or any of which may be waived in whole or in part by Seller in its sole discretion):
5.2.1.    Representations and Warranties.  Each of the representations and warranties made by Purchaser in this Agreement that are qualified by materiality or Material Adverse Effect shall be true and correct on and as of the Closing Date as though made on and as of the Closing Date.  Each of the representations and warranties made by Purchaser in this Agreement that are not qualified by materiality or Material Adverse Effect shall be true and correct in all material respects on and as of the Closing Date as though made on and as of the Closing Date.
5.2.2.    Performance.  Purchaser shall have performed and complied with the agreements, covenants and obligations required by this Agreement to be so performed or complied with by Purchaser at or before the Closing Date.
5.2.3.    Law.  There shall not be in effect at the Closing Date any preliminary or permanent injunction or other order or decree by any federal or state court which prevents the consummation of the transactions contemplated by this Agreement or any Law restraining, enjoining or otherwise prohibiting or making illegal the consummation of the transactions contemplated by this Agreement.
5.2.4.    NRC Approvals.  The NRC Approvals shall have been duly obtained and be in full force and effect and shall not have been reversed, stayed, enjoined, set aside, annulled or suspended.
5.2.5.    Bond Legislation.  The Bond Legislation shall have been enacted into Law and remain in full force and effect without amendment or modification unacceptable to Seller.
5.2.6.    Municipalities’ Consent.  The Municipalities’ Consent shall have been duly obtained and be in full force and effect, shall not have been reversed, stayed, enjoined, set aside, annulled or suspended.
5.2.7.    Full Requirements Power Sales Agreements .  Each Participant shall have entered into a new Full Requirements Power Sales Agreement, incorporating the terms and conditions stipulated or required in the Full Requirements Power Purchase Agreement and otherwise in form and substance reasonable satisfactory to Seller, pursuant to which Seller agrees to sell to each such Participant and each such Participant agrees to purchase from Seller, such Participant’s all-requirements bulk power supply, and no such Full Requirements Power Sales Agreement shall have been modified, amended or changed in a manner unacceptable to Seller.
5.2.8.    Debt Service Support Contract.  Each Participant shall have entered into a Debt Service Support Contract pursuant to which Seller agrees to issue bonds to refinance Seller’s existing Indebtedness outstanding under the Bond Resolution and attributable to the Seller’s Interest and each Participant agrees to fix, charge and collect rates, fees and charges for service to the customers of its electric system at least sufficient to provide revenues adequate to meet its obligations under the Debt Service Support Contract and the Full Requirements Power Sales Agreement.
5.2.9.    Full Requirements Power Purchase Agreement.  The Full Requirements Power Purchase Agreement shall have been executed by each of Purchaser and Seller, and the term of the Full Requirements Power Purchase Agreement shall not have expired or otherwise been validly terminated thereunder (nor shall notice of any such termination have been issued by either Purchaser or Seller in accordance with the terms thereof). 
5.2.10.    Deliveries.  Purchaser shall have executed and delivered to Seller the items set forth in Section 2.4.1(a).
5.2.11.    Seller’s Indebtedness.  Contingent only upon the disbursement of that portion of the Purchase Price described in Section 2.2.1(a) to the Escrow Deposit and/or Refunding Trust Fund pursuant to the Disbursement Instructions, all of Seller’s Indebtedness outstanding under the Bond Resolution and attributable to the Seller’s Interest shall have been fully defeased and is no longer outstanding under the Bond Resolution
5.2.12.    Material Adverse Effect.  There shall not have been or occurred, since the Effective Date, any event, occurrence or circumstance that would reasonably be expected to result in or give rise to a material adverse effect with respect to Purchaser’s ability (a) to consummate the transactions contemplated by this Agreement or (b) perform its obligations under the Full Requirements Power Purchase Agreement in all material respects. 
Article VI     
 
TERMINATION
Section 6.1.    Termination Prior to Closing.  This Agreement may be terminated, and the transactions contemplated hereby may be abandoned:
(a)    at any time before the Closing, by Seller or Purchaser upon notice to the other, in the event that any Law becomes effective restraining, enjoining, or otherwise prohibiting or making illegal the consummation of the transactions contemplated by this Agreement;
(b)    at any time before the Closing, by Seller or Purchaser upon notice to the other, in the event (i) of a breach hereof by the non-terminating Party (or Parties, as applicable) that would reasonably be expected to give rise to a Material Adverse Effect, if the non-terminating Party (or Parties, as applicable) fails to cure such breach within 30 days following notification thereof by the terminating Party (or Parties, as applicable); or (ii) any condition to such Party’s (or Parties’, as applicable) obligations under this Agreement (other than the payment of money hereunder) becomes impossible or impracticable to satisfy with the use of commercially reasonable efforts, so long as such impossibility or impracticability is not caused by a breach hereof by such Party (or Parties, as applicable); 
(c)    at any time before the Closing, by Purchaser  in accordance with Section 4.3; 
(d)    by Purchaser upon written notice to Seller at any time following the date that falls 3 months after the date that the Bond Legislation is enacted into Law (the “Municipalities’ Consent Outside Date”), if the Municipalities’ Consent is not obtained on or prior to the Municipalities’ Consent Outside Date; or
(e)    at any time following December 31, 2016 (the “Outside Date”), by Seller or Purchaser upon notice to the other if the Closing shall not have occurred on or before such date and such failure to consummate is not caused by a breach of this Agreement by the terminating Party, provided, however, that the Outside Date may be extended by mutual written agreement of the Parties.
Section 6.2.    Effect of Termination or Breach Prior to Closing.  If this Agreement is validly terminated pursuant to Section 6.1, this Agreement shall terminate and the transactions contemplated hereby shall be abandoned without further action by the Parties hereto.  If the Agreement is validly terminated as provided herein, (a) there shall be no liability or obligation on the part of Seller or Purchaser, except that the provisions of ARTICLE VII and this Section 6.2 shall continue to apply following any such termination, and (b) all filings, applications and other submissions made pursuant to this Agreement, to the extent practicable, shall be withdrawn from the Governmental Authority or other Person to which they were made.  Notwithstanding any other provision in this Agreement to the contrary, if this Agreement is validly terminated by Purchaser or Seller pursuant to Section 6.1(b)(i) or by Purchaser pursuant to Section 6.1(c), then the terminating Party may exercise such remedies as may be available at law or in equity with respect to the breach precipitating such termination.
Article VII     
 
SURVIVAL; INDEMNIFICATION
Section 7.1.    Survival.  The representations and warranties of Seller and Purchaser contained in this Agreement shall survive the Closing and shall expire on the date that is three (3) years after the Closing Date.  Notwithstanding the preceding sentence, the representations and warranties contained in Sections 3.1.1, 3.1.2, 3.1.3, 3.1.8, 3.1.9, 3.1.12, 3.1.13, 3.1.14, 3.2.1, 3.2.2, and 3.23 and the representations and warranties set forth in the Deeds shall survive indefinitely after the Closing.  The covenants and agreements of the Parties contained in ARTICLES II, IV, VII and VIII of this Agreement shall survive the Closing for (i) the time period(s) set forth in the respective Sections contained in such Articles, or (ii) if no time period is so specified, until 90 days after the expiration of the applicable statute of limitations.
Section 7.2.    Seller Indemnification.  Seller shall indemnify, reimburse and hold harmless Purchaser and each of its Affiliates and its and their respective directors, officers, employees, successors and assigns (each, including Purchaser, a “Purchaser Indemnified Person”) from and against any and all Liabilities, claims, demands, assessments, judgments, orders, decrees, actions, cause of actions, litigations, suits, investigations or other proceedings or damages, costs (including operating costs) or expenses (including reasonable attorney fees and operating expenses) (collectively, “Losses”) that any such Purchaser Indemnified Person incurs, suffers or becomes liable for from and after the Closing as a result of (a) the inaccuracy or breach of any representation or warranty of Seller contained in this Agreement, (b) the breach of any covenant or agreement of Seller contained in this Agreement, or (c) any Excluded Liability.
Section 7.3.    Purchaser Indemnification.  Purchaser agrees that it shall indemnify, reimburse and hold harmless Seller and each of its Affiliates and their respective directors, commissioners, officers, employees, agents, successors and assigns (each, including Seller, a “Seller Indemnified Person”) from and against any and all Losses that any such Seller Indemnified Person incurs, suffers or becomes liable for from and after the Closing as a result of (a) the inaccuracy or breach of any representation or warranty of Purchaser contained in this Agreement, (b) the breach of any covenant or agreement of the Purchaser contained in this Agreement, or (c) any Assumed Liability, except to the extent Losses resulting from any Assumed Liability are related to the inaccuracy or breach of any representation or warranty of Seller contained in this Agreement.  

Article VIII     
 
MISCELLANEOUS
Section 8.1.    Dispute Resolution.  Any dispute or claim arising under this Agreement that is not resolved in the ordinary course of business shall be referred to a panel consisting of a senior executive of Purchaser (President or a Vice President) and Seller (Chief Executive Officer or member of Executive Management), with authority to decide or resolve the matter in dispute, for review and resolution.  Such senior executives shall meet and in good faith attempt to resolve the dispute within 30 days.  If the Parties are unable to resolve a dispute pursuant to this Section 8.1, either Party may enforce its rights under this Agreement at law or in equity subject to the provisions of this Agreement, including Section 8.2.
Section 8.2.    Governing Law; Submission to Jurisdiction.   THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA APPLICABLE TO A CONTRACT EXECUTED AND PERFORMED IN SUCH STATE, WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF.  Each Party hereto irrevocably submits to the exclusive jurisdiction of the General Court of Justice, Superior Court Division, Wake County, North Carolina and, if applicable, the United States District Court, Eastern District of North Carolina, Raleigh Division, for the purposes of any action arising out of or based upon this Agreement or relating to the subject matter hereof.    Each Party hereto further agrees that service of any process, summons, notice or document by U.S.  registered mail to such Party’s respective address set forth in Section 8.4 shall be effective service of process for any action, suit or proceeding with respect to any matters to which it has submitted to jurisdiction in this Section 8.2.  Each Party hereto irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding in the federal or states courts set forth in this Section 8.2, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.  
Section 8.3.    Specific Performance.  EACH PARTY AGREES THAT DAMAGE REMEDIES SET FORTH IN THIS AGREEMENT MAY BE DIFFICULT OR IMPOSSIBLE TO CALCULATE OR OTHERWISE INADEQUATE TO PROTECT ITS INTERESTS AND THAT IRREPARABLE DAMAGE MAY OCCUR IN THE EVENT THAT PROVISIONS OF THIS AGREEMENT ARE NOT PERFORMED BY THE PARTIES IN ACCORDANCE WITH THE SPECIFIC TERMS OF THIS AGREEMENT.  ANY PARTY MAY SEEK TO REQUIRE THE PERFORMANCE OF ANY OTHER PARTY’S OBLIGATIONS UNDER THIS AGREEMENT THROUGH AN ORDER OF SPECIFIC PERFORMANCE RENDERED BY A COURT OF COMPETENT JURISDICTION AS PROVIDED IN SECTION 8.2.
Section 8.4.    Notices.
8.4.1.    All notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be deemed given upon receipt by the applicable Party at the following addresses (or at such other address for a party as shall be specified by like notice):
If to Purchaser, to:
Duke Energy Progress, Inc.
411 Fayetteville Street
Raleigh, NC  27601
Email:  harold.james@duke-energy.com
Attn:  Harold James, Jr. – Vice President Wholesale Power
with copies to:

Duke Energy Progress, Inc.
550 South Tryon Street, 45th Floor
Charlotte, NC 28202
Attn: Greer Mendelow
Email:  Greer.Mendelow@duke-energy.com
Facsimile: (980) 373-9962
Moore & Van Allen PLLC 
Bank of America Corporate Center 
100 N. Tryon Street 
Suite 4700 
Charlotte, North Carolina 28202-4003 
Attn:    Stephen D. Hope and Rob Rust
Email:  stevehope@mvalaw.com; robrust@mvalaw.com  
Facsimile:  (704) 378-2036 and (704) 339-5864
If to Seller, to:

North Carolina Eastern Municipal Power Agency 
1427 Meadow Wood Boulevard
Raleigh, North Carolina 27604
Attn:  Roy Jones – Chief Operating Officer 
Email:  rjones@electricities.org
with a copies to:

North Carolina Eastern Municipal Power Agency 
1427 Meadow Wood Boulevard
Raleigh, North Carolina 27604
Attn:  David Barnes – Chief Legal and Ethics Officer
Email:  dbarnes@electricities.org

Poyner Spruill LLP
130 South Franklin Street
Rocky Mount, North Carolina 27804
Attn:  Michael S. Colo
Email:  mscolo@poynerspruill.com

Section 8.5.    Entire Agreement.  This Agreement and the Transaction Agreements supersede all prior discussions and agreements between the Parties with respect to the subject matter hereof and thereof, including, in each case, all schedules and exhibits thereto, and contain the sole and entire agreement between the Parties hereto with respect to the subject matter hereof and thereof.
Section 8.6.    Expenses.  Except as otherwise expressly provided in this Agreement, whether or not the transactions contemplated hereby are consummated, each Party will pay its own costs and expenses incurred in connection with the negotiation, execution and performance under this Agreement and the Transaction Agreements and the transactions contemplated hereby and thereby.  
Section 8.7.    Public Announcements.  Any public announcement or similar publicity with respect to this Agreement or the transactions contemplated hereby will be issued, if at all, at such time and in such manner as mutually agreed to by Seller and Purchaser.  Notwithstanding the foregoing, no Party shall be prohibited from making, issuing or releasing any announcements, statements or acknowledgments that such party customarily issues in connection with acquisition or sale transactions or is required to make, issue or release by applicable Law or by any listing agreement with or listing rules of a securities exchange or trading market inter-dealer quotation system; provided however that, in the case of any press release or other similar written statement, the other Party has been afforded at least 3 Business Days to review and comment on such written material.  
Section 8.8.    Confidentiality.  Each Party hereto will hold, and will use commercially reasonable efforts to cause its Related Persons to hold, in strict confidence from any Person (other than any such Related Persons), this Agreement, the Transaction Agreements and all documents and information concerning the other Party or any of its Related Persons furnished to it by the other Party or such other Party’s Related Persons in connection with this Agreement or the transactions contemplated hereby, unless (a) compelled to disclose by judicial or administrative process (including in connection with obtaining the necessary approvals of this Agreement and the transactions contemplated hereby of Governmental Authorities), or by other requirements of Law, including without limitation, the North Carolina Public Records law, or by any listing agreement with or listing rules of a securities exchange or trading market inter-dealer quotation system or necessary or desirable to disclose in order to obtain the Required Consents, or (b) disclosed in an action or proceeding brought by a Party hereto in pursuit of its rights or in the exercise of its remedies hereunder, except to the extent that such documents or information can be shown to have been (x) previously known by the Party receiving such documents or information, (y) in the public domain (either prior to or after the furnishing of such documents or information hereunder) through no fault of such receiving Party or (z) later acquired by the receiving Party from another source if the receiving Party is not aware that such source is under an obligation to another Party hereto to keep such documents and information confidential.  In the event the transactions contemplated hereby are not consummated, upon the request of the other Party, each Party hereto will, and will use commercially reasonable efforts to cause its Related Persons to, promptly (and in no event later than five (5) Business Days after such request) destroy or cause to be destroyed all copies of confidential documents and information furnished by the other Party in connection with this Agreement or the transactions contemplated hereby and destroy or cause to be destroyed all notes, memoranda, summaries, analyses, compilations and other writings related thereto or based thereon prepared by the Party furnished such documents and information or its Related Persons; provided, however, that (i) outside legal counsel for each Party may retain one copy of confidential documents and information furnished by the other Party, (ii) each Party and its Related Persons may retain any materials that are required to be maintained pursuant to Law or such Party or Related Person’s compliance or regulatory policies or procedures, including any documents presented to a board of directors or transaction review committee and (iii) each Party and its Related Persons may retain any system back-up media such as copies of any electronic records or files created pursuant to automatic archiving or back-up procedures, provided that all confidential documents and information retained pursuant to (i), (ii) or (iii) shall continue to be held in strict confidence in accordance with the confidentiality provisions herein.  The obligations contained in this Section 8.8 shall survive until the first to occur of Closing or, if this Agreement is terminated pursuant to ARTICLE VI, one year following the termination of this Agreement.
Section 8.9.    Waivers.
8.9.1.    Grant of Waivers.  Any term or condition of this Agreement may be waived at any time by the Party that is entitled to the benefit thereof, but no such waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the Party waiving such term or condition.  No waiver by any Party of any term or condition of this Agreement, in any one or more instances, shall be deemed to be or construed as a waiver of the same or any other term or condition of this Agreement on any future occasion.  All remedies, either under this Agreement or by Law or otherwise afforded, will be cumulative and not alternative.
8.9.2.    Exercise of Remedies.  No failure or delay of any Party, in any one or more instances, (1) in exercising any power, right or remedy (other than failure or unreasonable delay in giving notice of default) under this Agreement or (ii) in insisting upon the strict performance by the other Party of such other Party’s covenants, obligations or agreements under this Agreement, shall operate as a waiver, discharge or invalidation thereof, nor shall any single or partial exercise of any such right, power or remedy or insistence on strict performance, or any abandonment or discontinuance of steps to enforce such a right, power or remedy or to enforce strict performance, preclude any other or future exercise thereof or insistence thereupon or the exercise of any other right, power or remedy.  The covenants, obligations, and agreements of a defaulting Party and the rights and remedies of the other Party upon a default shall continue and remain in full force and effect with respect to any subsequent breach, act or omission.
Section 8.10.    Amendment.  This Agreement and any of the Transaction Agreements may be amended, supplemented or modified only by a written instrument duly executed by or on behalf of each Party hereto.
Section 8.11.    No Construction Against Drafting Party.  The language used in this Agreement is the product of each Party’s efforts, and each Party hereby irrevocably waives the benefits of any rule of contract construction that disfavors the drafter of a contract or the drafter of specific words in a contract.
Section 8.12.    No Third-Party Beneficiary.  The terms and provisions of this Agreement are intended solely for the benefit of each Party hereto and their respective successors or permitted assigns, and it is not the intention of the Parties to confer third-party beneficiary rights upon any other Person.
Section 8.13.    Headings.  The headings used in this Agreement have been inserted for convenience of reference only and do not define or limit the provisions hereof.
Section 8.14.    Invalid Provisions.  If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future Law, and if the rights or obligations of any Party hereto under this Agreement will not be materially and adversely affected thereby, (a) such provision will be fully severable, (b) this Agreement will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, (c) the remaining provisions of this Agreement will remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance therefrom and (d) Purchaser and Seller shall negotiate an equitable adjustment in the provisions of the Agreement with a view toward effecting the purposes of the Agreement, and the validity and enforceability of the remaining provisions, or portions or applications thereof, shall not be affected thereby.
Section 8.15.    No Assignment; Binding Effect.  Neither this Agreement nor any right, interest or obligation hereunder may be assigned by any Party hereto without the prior written consent of the other Party hereto and any attempt to do so will be void, except for assignments and transfers by Purchaser to an Affiliate (provided any such assignment or transfer will not relieve Purchaser of its obligations hereunder) or by Purchaser (but not Seller) by operation of Law.  This Agreement is binding upon, inures to the benefit of and is enforceable by the Parties and their respective successors and assigns.
Section 8.16.    Counterparts.  This Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.  Each Party expressly acknowledges the effectiveness of .pdf, facsimile or other electronic signatures as originals.
[Signature Page Follows.]

IN WITNESS WHEREOF, the Parties have caused this Agreement to be signed by their respective duly authorized officers as of the Effective Date.
PURCHASER:    DUKE ENERGY PROGRESS, INC.

    
By:                        
Name:  
Title:

    
		
	SELLER:
	NORTH CAROLINA EASTERN MUNICIPAL POWER AGENCY

    
By:                        
Name:  
Title:

    
                    

EXHIBIT A

Knowledge

Seller:

		
	1.
	T. Graham Edwards, Chief Executive Officer of ElectriCities

		
	2.
	Roy Jones, Chief Operating Officer of ElectriCities

		
	3.
	Tim Tunis, Chief Financial Officer of ElectriCities

		
	4.
	David Barnes, Chief Legal & Ethics Officer of ElectriCities

		
	5.
	Richard N. Hicks, Chair of the Board of Directors of Seller

		
	6.
	D. Ronald Hovis, Vice Chair of the Board of Directors of Seller

		
	7.
	Grant W. Goings, Secretary of the Board of Directors of Seller

For purposes of determining the accuracy of Section 5.1.1 of the Agreement, the foregoing list shall also include anyone succeeding to any of the foregoing positions between the Effective Date and Closing.

Purchaser:

1.    Kent Fonvielle, Director – Joint Owner & Point of Delivery of Duke Energy Corp.
2.    Harold James, Vice President – Wholesale Power Sales of Duke Energy Corp.
3.   Greer Mendelow, Deputy General Counsel of Duke Energy Corp.

For purposes of determining the accuracy of Section 5.2.1 of the Agreement, the foregoing list shall also include anyone succeeding to any of the foregoing positions between the Effective Date and Closing.

EXHIBIT B

Real Property Legal Description

See Attached

EXHIBIT C

Plants Agreements Termination Agreement

PLANTS AGREEMENTS TERMINATION AGREEMENT
THIS PLANTS AGREEMENTS TERMINATION AGREEMENT (this “Agreement”) is made and entered into effective as __________, 201__ (the “Effective Date”), by and between NORTH CAROLINA EASTERN MUNICIPAL POWER AGENCY, a joint agency and public body and body corporate and politic organized and existing under North Carolina law (“Seller”), and DUKE ENERGY PROGRESS, INC., a North Carolina corporation (“Purchaser”).  Seller and Purchaser are also each referred to herein individually as a “Party” and collectively as the “Parties.”  All capitalized terms used but not defined herein shall have the meanings set forth in the APA (as defined below).
WHEREAS, pursuant to the terms of that certain Asset Purchase Agreement dated as of _____________, 2014 (as amended, modified and supplemented, the “APA”), by and between Seller and Buyer, Seller and Buyer agreed to terminate the Plants Agreements effective as of the Closing; and
WHEREAS, Seller and Buyer desire to enter into this Agreement to effect the termination of the Plants Agreements as of the Closing and to address certain other matters in connection therewith;
NOW, THEREFORE, in consideration of the mutual covenants contained herein, and intending to be legally bound, the Parties hereby agree as follows:
1.Termination of Plants Agreements.  Effective as of, and conditional upon the occurrence of, the Closing, the Plants Agreements shall terminate and notwithstanding anything therein to the contrary, be of no further force or effect, and neither Party shall have any rights, obligations or liabilities thereunder or with respect thereto.
2.    Miscellaneous.
(a)    Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of North Carolina applicable to a contract executed and performed in such state, without giving effect to the conflicts of laws principles thereof.  Each Party hereto irrevocably submits to the exclusive jurisdiction of the General Court of Justice, Superior Court Division, Wake County, North Carolina, and, if applicable, the United States District Court, Eastern District of North Carolina, Raleigh Division, for the purposes of any action arising out of or based upon this Agreement or relating to the subject matter hereof.  Each Party further expressly waives any objection based on forum non-conveniens or any objection to venue of any such action.
(b)    Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective successors and assigns; provided, however, this Agreement shall not be assignable by either Party without the written consent of the other Party, except for assignments by Purchaser to an Affiliate (provided any such assignment will not relieve Purchaser of its obligations hereunder) or by Purchaser (but not by Seller) by operation of Law.
(c)    Severability.  Should any term, covenant, condition or provision of this Agreement be held to be invalid or unenforceable, the balance of this Agreement shall remain in full force and effect and shall stand as if the unenforceable provision did not exist.
(d)    Waiver.  No failure or delay by either Party in exercising any rights under this Agreement shall operate as a waiver of such rights, and no waiver of any breach shall constitute a waiver of any prior, concurrent or subsequent breach.
(e)    Entire Agreement.  This Agreement constitutes the entire agreement between the Parties with respect to the subject matter hereof and supersedes all other agreements, oral or written, between Seller and Buyer prior to the date of this Agreement regarding the subject matter hereof.
(f)    Counterparts.  This Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.  Each Party expressly acknowledges the effectiveness of .pdf, facsimile or other electronic signatures as originals.
[Signatures on Following Page]

IN WITNESS WHEREOF, the Parties have caused this Agreement to be signed by their respective duly authorized officers as of the Effective Date.
PURCHASER:    DUKE ENERGY PROGRESS, INC.
    
By:                        
Name: 
Title:
    
		
	SELLER:
	NORTH CAROLINA EASTERN MUNICIPAL POWER AGENCY

    
By:                        
Name: 
Title:

EXHIBIT D

Bill of Sale

This BILL OF SALE (this “Bill of Sale”) is made effective as of the _____ day of ____________, 201__, by NORTH CAROLINA EASTERN MUNICIPAL POWER AGENCY, a joint agency and public body and body corporate and politic organized and existing under North Carolina law (“Seller”), to DUKE ENERGY PROGRESS, INC., a North Carolina corporation (“Purchaser”).
WHEREAS, Seller and Purchaser have entered into an Asset Purchase Agreement dated as of ________________, 2014 (as amended, modified and supplemented, the “Asset Purchase Agreement”) providing for, subject to the terms and conditions set forth therein, the sale, transfer, conveyance, assignment and delivery by Seller to Purchaser of, among other Purchased Assets, Fuel Inventory  and Spare Parts Inventory, free and clear of all Liens (other than Permitted Liens).  All capitalized terms used but not defined herein shall have the meanings set forth in the Asset Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller hereby sells, transfers, conveys, assigns and delivers to Purchaser all of Seller’s right, title and interest in and to the Fuel Inventory and Spare Parts Inventory free and clear of all Liens (other than Permitted Liens).
This Bill of Sale is being executed and delivered pursuant and subject to the Asset Purchase Agreement.  Nothing in this Bill of Sale shall, or shall be deemed to, defeat, limit, alter, impair, enhance or enlarge any right, obligation, claim or remedy created by the Asset Purchase Agreement. In the event of any conflict between this Bill of Sale and the Asset Purchase Agreement, the Asset Purchase Agreement shall control.
This Bill of Sale shall be binding upon Seller and its successors and assigns and shall inure to the benefit of Purchaser and its successors and assigns.
Subject to the terms and conditions of the Asset Purchase Agreement, at any time or from time to time after the Closing, at Purchaser’s request and without further consideration, Seller shall execute and deliver to Purchaser such other instruments of sale, transfer, conveyance, assignment and confirmation, provide such materials and information and take such other actions as Purchaser may reasonably deem necessary or desirable in order more effectively (i) to transfer, convey and assign to Purchaser, and to confirm Purchaser’s title to, the Fuel Inventory and Spare Parts Inventory, (ii) to the full extent permitted by Law, to put Purchaser in actual possession of the Fuel Inventory and Spare Parts Inventory, and (iii) otherwise to consummate the transactions contemplated by the Asset Purchase Agreement and this Bill of Sale.
This Bill of Sale shall be governed by and construed and enforced in accordance with the laws of the State of North Carolina without giving effect to the principles of conflicts of law thereof.
This Bill of Sale may be executed by .pdf or other electronic signature, which shall be deemed an original.
[ Signatures on Following Page ]

IN WITNESS WHEREOF, the undersigned has caused this Bill of Sale to be executed and delivered as of this _____ day of ______________ 201__.
NORTH CAROLINA EASTERN MUNICIPAL POWER AGENCY
By:    
Name:
Title:

EXHIBIT E

Form of DeedsESV-EX10.62-12.31.2014

EXHIBIT 10.62
ENSCO INTERNATIONAL INCORPORATED

2005 CASH INCENTIVE PLAN

(As Revised and Restated for Amendments Through November 10, 2014)

SECTION 1
ESTABLISHMENT AND PURPOSE

a.Purpose.  This Plan is established (i) to offer selected Employees, including officers, of the Company or its Subsidiaries an opportunity to participate in the growth and financial success of the Company, (ii) to provide the Company an opportunity to attract and retain the best available personnel for positions of substantial responsibility, (iii) to provide incentives to such Employees by means of performance-related incentives to achieve short-term performance goals, and (iv) to promote the growth and success of the Company’s business by aligning the financial interests of Employees with that of the other stockholders of the Company.  Toward these objectives, this Plan provides for the grant of Annual Performance Bonuses and Discretionary Bonuses.

b.Effective Date; Stockholder Approval.  This Plan is effective as of January 1, 2005, subject to the prior approval of the Committee and by a vote at the Company’s 2005 Annual Meeting of Stockholders (the “2005 Annual Meeting”) of the owners of at least a majority of the shares of the common stock of the Company, present in person or by proxy and entitled to vote, and shall apply to the Annual Performance Bonuses and Discretionary Bonuses awarded to each Participant in respect of 2005 and thereafter.  If this Plan is approved by the stockholders of the Company at the 2005 Annual Meeting, the ENSCO International Incorporated Key Employees’ Incentive Compensation Plan, as revised and restated effective January 1, 2003 (the “KEIP”), shall be frozen and no additional bonuses shall be awarded under the KEIP, but the KEIP shall continue to apply to and govern the determination and payment of bonuses awarded under the KEIP for fiscal years of the Company beginning prior to January 1, 2005.  Any Annual Performance Bonus awarded under this Plan to a Covered Employee will be contingent on the approval of this Plan by the Company’s stockholders.  If their approval is not obtained, any Annual Performance Bonuses awarded under this Plan to a Covered Employee will be rescinded.

SECTION 2
DEFINITIONS

For purposes of this Plan, the following terms have the following meanings, unless another definition is clearly indicated by particular usage and context:
“Annual Performance Bonus” shall mean an Award of cash granted under Section 5 of this Plan that is paid solely on account of the attainment of a specified performance target in relation to one or more Performance Goals.
“Award” shall mean any Annual Performance Bonus or Discretionary Bonus, whether granted singly, in combination or in tandem, to a Participant pursuant to such applicable terms, conditions, and limitations as the Committee may establish and set forth in the applicable Award Notice in order to fulfill the objectives of this Plan.

“Award Notice” shall mean the document issued, either in writing or an electronic medium, by the Committee to a Participant evidencing the grant of an Award, and setting forth the terms, conditions and limitations applicable to that Award, including any amendments thereto.
“Board” shall mean the board of directors of the Company, as duly elected from time to time.
“Change in Control” shall mean the occurrence of any of the following events: (a) a change in the ownership of the Company, which occurs on the date that any one person, or more than one person acting as a group, acquires ownership of stock of the Company that, together with stock held by such person or group, constitutes more than 50% of the total voting power of the stock of the Company, or (b) a majority of the members of the Board is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election.  The determination of whether a Change in Control has occurred shall be determined by the Committee consistent with Section 409A of the Code.
Notwithstanding the foregoing, a “Change in Control” of the Company shall not be deemed to have occurred by virtue of the consummation of any transaction or series of related transactions immediately following which the beneficial owners of the voting stock of the Company immediately before such transaction or series of transactions continue to have a majority of the direct or indirect ownership in one or more entities which, singly or together, immediately following such transaction or series of transactions, either (a) own all or substantially all of the assets of the Company as constituted immediately prior to such transaction or series of transactions, or (b) are the ultimate parent with direct or indirect ownership of all of the voting stock of the Company after such transaction or series of transactions.  
“Code” shall mean the Internal Revenue Code of 1986, as amended, and as interpreted by the regulations thereunder.
“Committee” shall mean the Nominating, Governance and Compensation Committee of the Board, or such other Committee as may be appointed by the Board from time to time, which shall be comprised solely of two or more persons who are Disinterested Directors.  The Chief Executive Officer of the Company, or such other officers of the Company as may be designated by the Chief Executive Officer of the Company from time to time, may assume any or all of the powers and responsibilities prescribed for the Committee with respect to Awards to Employees who are not Covered Employees or officers of the Company, and to that extent, the term “Committee” as used herein shall also be applicable to the Chief Executive Officer or such other designated officers.  
“Company” shall mean ENSCO International Incorporated, a Delaware corporation, or any successor thereto.
“Covered Employee” shall mean, effective January 1, 2007, an Employee who would be subject to Section 162(m) of the Code such that on the last day of the taxable year, the Employee (a) is the principal executive officer of the Company (or is acting in such capacity), or (b) if the total compensation of such Employee for that taxable year is required to be reported to stockholders of the Company under the Exchange Act by reason of such Employee being among the three highest compensated officers of the Company for the taxable year (other than the principal executive officer or the principal financial officer of the Company) as determined pursuant to the executive compensation disclosure rules under the Exchange Act contained in Item 402 of Regulation S-K, as amended by the Securities and Exchange Commission on September 8, 2006.
“Director” shall mean a member of the Board.

“Discretionary Bonuses”  shall mean the amount, if any, awarded to a Participant during a Performance Period by the Committee pursuant to Section 6.
“Disinterested Director” shall mean a member of the Board who is (a) a “non-employee director,” within the meaning of Rule 16b‐3(b)(3) promulgated under the Exchange Act, (b) an “outside director,” within the meaning of Section 162(m)(4)(C)(i) of the Code, and (c) “independent” within the meaning of the applicable rules and regulations of the Securities and Exchange Commission and the New York Stock Exchange (or, in each case, any successor provision or term).
“Effective Date” shall mean January 1, 2005.
“Employee” shall include every individual performing Services for the Company or its Subsidiaries if the relationship between such individual and the Company or its Subsidiaries is the legal relationship of employer and employee.  This definition of “Employee” is qualified in its entirety and is subject to the definition set forth in Section 3401(c) of the Code.
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and as interpreted by the rules and regulations promulgated thereunder.
“GAAP” means generally accepted accounting principles.
“Incentive Award” shall mean the total of each Participant’s Annual Performance Bonus Award plus his or her Discretionary Bonus Award, if any, for that Performance Period.
“Normal Retirement Age” shall mean with respect to a Participant the later of (a) his or her 65th birthday, or (b) the date a Participant has credit for a “period of service” under the ENSCO Savings Plan of at least twenty (20) years, considering for purposes of this Plan (i) with respect to any Participant hired before the Effective Date, any other prior service recognized previously by the Company as of his or her date of hire by the Company or any Subsidiary, and (ii) with respect to any Participant hired after the Effective Date, any other prior service recognized by the Committee.  The Committee, in its discretion, may consider a Participant whose employment terminates after his or her 62nd birthday but prior to satisfying the requirements specified in the preceding sentence to have retired on or after his or her Normal Retirement Age.
“Participants” shall mean those individuals described in Section 1 of this Plan selected by the Committee who are eligible under Section 4 of this Plan for grants of Awards.
“Performance Goals” shall mean, with respect to any Annual Performance Bonus, the business criteria (and related factors) selected by the Committee to measure the level of performance of the Company during the Performance Period, in each case, prepared on the same basis as the financial statements published for financial reporting purposes, except as adjusted pursuant to Section 5(e).  The Committee may select as the Performance Goal for a Performance Period any one or combination of the following Company measures, as interpreted and defined by the Committee, which measures (to the extent applicable) will be determined in accordance with GAAP:
a.Net income as a percentage of revenue;
b.Earnings per share;
c.Return on net assets employed before interest and taxes (RONAEBIT);
d.Operating margin as a percentage of revenue; 
e.Safety performance relative to industry standards and the Company annual target;
f.Strategic team goals;
g.Net operating profit after taxes;

h.Net operating profit after taxes per share;
i.Return on invested capital;
j.Return on assets or net assets;
k.Total stockholder return;
l.Relative total stockholder return (as compared with a peer group of the Company);
m.Earnings before income taxes;
n.Net income;
o.Free cash flow;
p.Free cash flow per share;
q.Revenue (or any component thereof);
r.Revenue growth; or
		
	s.
	Any other performance objective approved by the stockholders of the Company in accordance with Section 162(m) of the Code.

As of the Effective Date, the Committee has determined to determine the earning of Annual Performance Bonuses on the attainment of a specific performance target in relation to one or more of the six Performance Goals listed above in paragraphs (a)-(f).
“Performance Period” shall mean that period established by the Committee at the time any Annual Performance Bonus is awarded or, except in the case of any award to a Covered Employee, at any time thereafter, during which any Performance Goals specified by the Committee with respect to such Award are to be measured.  It is intended that the Performance Period will coincide with the fiscal year of the Company.
“Permanent and Total Disability” shall mean that an individual is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve (12) months.  An individual shall not be considered to suffer from Permanent and Total Disability unless such individual furnishes proof of the existence thereof in such form and manner, and at such times, as the Committee may reasonably require.  The scope of this definition shall automatically be reduced or expanded to the extent the comparable definition in the ENSCO International Incorporated 2005 Long-Term Incentive Plan is reduced or expanded from time to time.
“Plan” shall mean this ENSCO International Incorporated 2005 Cash Incentive Plan, as amended from time to time.
“Plan Schedule” shall mean a schedule that constitutes a part of this Plan and details certain particulars with respect to this Plan and Annual Performance Bonus Awards hereunder for one or more Performance Periods, including the relative Performance Goals, specific performance factors and targets related to these Performance Goals, award criteria, and the targeted amounts of each Annual Performance Bonus Award granted to a Participant.  Each Plan Schedule that is applicable to Covered Employees and officers of the Company (as defined in Section 4(b)) shall be adopted by the Committee or shall be prepared by the appropriate officers of the Company based on resolutions, minutes or consents adopted by the Committee.  Each Plan Schedule that is applicable to Employees who are not Covered Employees or officers of the Company shall be adopted in consultation with the Committee by the Chief Executive Officer of the Company or such other officers of the Company as may be designated by the Chief Executive Officer of the Company from time to time.  There may be more than one Plan Schedule under this Plan.  Each Plan Schedule is incorporated herein by reference and thereby made a part of this Plan, and references herein to this Plan shall include the Plan Schedule.
“Services” shall mean services rendered to the Company or any of its Subsidiaries as an Employee.

“Subsidiary” shall mean any corporation as to which more than fifty percent (50%) of the outstanding voting stock or shares shall now or hereafter be owned or controlled, directly by a person, any Subsidiary of such person, or any Subsidiary of such Subsidiary.
SECTION 3
ADMINISTRATION

		
	a.
	General Administration.  This Plan shall be administered by the Committee.  

b.Authority of Committee.  The Committee shall administer this Plan so as to comply at all times with the Exchange Act and, subject to the Code, shall otherwise have sole and absolute and final authority to interpret this Plan and to make all determinations specified in or permitted by this Plan or deemed necessary or desirable for its administration or for the conduct of the Committee’s business, including, without limitation, the authority to take the following actions:

		
	(i)
	To interpret and administer this Plan and to apply its provisions;

		
	(ii)
	To adopt, amend or rescind rules, procedures and forms relating to this Plan;

		
	(iii)
	To authorize any person to execute, on behalf of the Company, any instrument required to carry out the purposes of this Plan;

		
	(iv)
	To determine when Awards are to be granted under this Plan;

		
	(v)
	To select the Employees and Participants to whom Awards may be awarded from time to time;

		
	(vi)
	To determine the type or types of Award to be granted to each Participant hereunder;

		
	(vii)
	To determine the potential cash bonus to be made subject to each Award;

		
	(viii)
	To prescribe the terms, conditions and restrictions, not inconsistent with the provisions of this Plan, of any Award granted hereunder;

		
	(ix)
	To determine whether, to what extent, and under what circumstances Awards may be settled in cash, reduced, varied, canceled or suspended;

		
	(x)
	To determine whether, to what extent and under what circumstances payment of cash and other amounts payable with respect to an Award made under this Plan shall be deferred either automatically or at the election of the Participant;

		
	(xi)
	To amend or modify any outstanding Awards, in its discretion, in accordance with Section 5(e);

		
	(xii)
	To establish and interpret Performance Goals and the specific performance factors and targets in relation to the Performance Goals in connection with any Award of an Annual Performance Bonus; provided that in any case, the Performance Goals may be based on either a single period or cumulative results, aggregate or per-share data or results computed independently or with respect to a peer group; 

		
	(xiii)
	Evaluate the level of performance over a Performance Period and certify the level of performance attained with respect to Performance Goals and specific performance factors and targets related to Performance Goals;

		
	(xiv)
	Waive or amend any terms, conditions, restriction or limitation on an Award, except that (A) this Subsection 3(b)(xiv) shall not apply to an Annual Performance Bonus Award held by a Covered Employee, and (B) the terms and conditions of Awards to an Employee who is subject to the reporting requirements of Section 16(a) of the Exchange Act cannot be modified, amended, or waived other than on account of death, disability, retirement, a change in control, or a termination of employment in connection with a business transfer;

		
	(xv)
	Appoint such agents as it shall deem appropriate for proper administration of this Plan; and

		
	(xvi)
	To take any other actions deemed necessary or advisable for the administration of this Plan.

The Committee may, in its sole and absolute discretion, and subject to the provisions of this Plan, from time to time delegate any or all of its authority to administer this Plan to any other persons or committee as it deems necessary or appropriate for the proper administration of this Plan, except that no such delegation shall be made in the case of Awards intended to be qualified under Section 162(m) of the Code or Awards held by Employees who are subject to the reporting requirements of Section 16(a) of the Exchange Act.  All interpretations and determinations of the Committee made with respect to the granting of Awards shall be final, conclusive and binding on all interested parties.  The Committee may make grants of Awards on an individual or group basis.  
c.Employment of Advisors.  The Committee may employ attorneys, consultants, accountants, and other advisors, and the Committee, the Company and the officers and directors of the Company may rely upon the advice, opinions or valuations of the advisors employed.

d.Limitation of Liability/Rights of Indemnification.  No member of the Committee or any person acting as a delegate of the Committee with respect to this Plan shall be liable for any action that is taken or is omitted to be taken or for any losses resulting from any action, interpretation, construction or omission made in good faith with respect to this Plan or any Award granted under this Plan.  In addition to such other rights of indemnification as they may have as directors, members of the Committee shall be indemnified by the Company against any reasonable expenses, including attorneys’ fees actually and necessarily incurred, which they or any of them may incur by reason of any action taken or failure to act under or in connection with this Plan or any Award granted thereunder, and against all amounts paid by them in settlement of any claim related thereto (provided such settlement is approved by independent legal counsel selected by the Company), or paid by them in satisfaction of a judgment in any such action, suit or proceeding that such director or Committee member is liable for negligence or misconduct in the performance of his or her duties; provided that within sixty (60) days after institution of any such action, suit or proceeding a director or Committee member shall in writing offer the Company the opportunity, at its own expense, to handle the defense of the same. 

SECTION 4
ELIGIBILITY

a.General Rule.  Initially, this Plan has a four-tiered design which will utilize different corporate goals, thresholds, criteria and weighting to determine the Annual Performance Bonuses earned by the Employees who may be eligible for an Award under this Plan; the eligible Employees are described in this Section 4.  The Committee or the Chief Executive Officer may determine from time to time to revise or expand the tiers described in Sections 4(b)-(e).

b.Corporate Officers.  This group consists of Employees who are officers of the Company from the Chief Executive Officer to the Controller who have an impact on the strategic direction of the Company.

c.Business Unit Management.  This group consists of Employees who are key business unit leaders of the Company or its Subsidiaries ranging from general managers to directors of staff functions in the business units.  

d.Corporate Key Employees.  This group consists of Employees who are department directors, managers, and a few select key senior professionals such as critical engineering talent.  

e.Business Unit Key Employees.  This group includes Employees who are business unit managers, including rig managers, functional managers, and select key senior professionals.

f.New Employees.  Eligible positions from which individuals may be selected for participation are described in Sections 4(b)-(e).  A new or current Employee who moves into an eligible position and becomes an Employee described in Sections 4(b)-(e) during a Performance Period may participate for that Performance Period at the discretion of the Chief Executive Officer of the Company.  Such individual's Award will be prorated for the portion of the Performance Period the individual was eligible.

SECTION 5
ANNUAL PERFORMANCE BONUSES

a.Annual Performance Bonuses.  The Committee may grant Annual Performance Bonuses under this Plan in the form of cash to the eligible Employees determined under Section 4 in the amounts and pursuant to the terms and conditions that the Committee may determine and set forth in the Award Notice, subject to the provisions of this Section 5.

b.Performance Periods.  Annual Performance Bonuses will be awarded in connection with a twelve-(12) month Performance Period, which will be the fiscal year of the Company.

c.Eligible Participants.  Prior to the commencement of each Performance Period beginning before January 1, 2010, the Committee will determine the Employees who will be eligible to receive an Annual Performance Bonus under this Plan with respect to that Performance Period; provided that the Committee may determine the eligibility of any Employee, other than a Covered Employee, after the commencement of the Performance Period.  For any Performance Period beginning after December 31, 2009, the Committee may elect to determine the Employees who will be eligible to receive an Annual Performance Bonus under this Plan with respect to any such Performance Period after the commencement of that Performance Period as long as the Committee’s determinations are made in writing by not later than ninety (90) days after the commencement of that Performance Period and the outcome is substantially uncertain at the time that the determinations are made.  An Award Notice shall be provided to each Participant under this Plan as soon as administratively feasible after such Participant becomes eligible for a Performance Period.  An Award Notice shall specify the applicable Performance Period, and the Performance Goals, specific performance factors and targets related to the Performance Goals, award criteria, and the targeted amount of his or her Annual Performance Bonus, as well as any other applicable terms of the Annual Performance Bonus for which he or she is eligible.  

d.Performance Goals; Specific Performance Targets; Award Criteria.

(i)Prior to the commencement of each Performance Period beginning before January 1, 2010, the Committee shall fix and establish in writing (A) the Performance Goals that will apply to that Performance Period; (B) with respect to Performance Goals, the specific performance factors and targets related to each Participant and, if achieved, the targeted amount of his or her Annual Performance Bonus; and (C) subject to Subsection (e) below, the criteria for computing the amount that will be paid with respect to each level of attained performance.  The Committee shall also set forth the minimum level of performance, based on objective factors and criteria, that must be attained during the Performance Period before any Performance Goal is deemed to be attained and any Annual Performance Bonus will be earned and become payable, and the percentage of the Annual Performance Bonus that will be earned and become payable upon attainment of various levels of performance that equal or exceed the minimum required level.  For any Performance Period beginning after December 31, 2009, the Committee may elect to determine the 

Performance Goals and make the other determinations described in the preceding sentences of this Subsection (d)(i) with respect to each Annual Performance Bonus awarded for that Performance Period after the commencement of that Performance Period as long as all such required determinations are made by the Committee by not later than ninety (90) days after the commencement of that Performance Period, and the outcome is substantially uncertain at the time that the required determinations are made.  The Committee shall adopt the Plan Schedule for a particular Performance Period prior to the applicable deadline for that Performance Period specified in this Subsection (d)(i).

(ii)The Committee may, in its discretion, select Performance Goals and specific performance factors and targets that measure the performance of the Company or one or more business units, divisions or Subsidiaries of the Company.  The Committee may select Performance Goals and specific performance targets that are absolute or relative to the performance of one or more peer companies or an index of peer companies.  Annual Performance Bonuses awarded to Participants who are not Covered Employees will be based on the Performance Goals and payment formulas that the Committee, in its discretion, may establish for these purposes.  These Performance Goals and formulas may be the same as or different than the Performance Goals and formulas that apply to Covered Employees.

		
	e.
	Adjustments.  

i.In order to assure the incentive features of this Plan and to avoid distortion in the operation of this Plan, the Committee may make adjustments in the Performance Goals, specific performance factors and targets related to those Performance Goals and award criteria established by it for any Performance Period under this Section 5, whether before or after the end of the Performance Period to the extent it deems appropriate in its sole discretion, which shall be conclusive and binding upon all parties concerned, to compensate for or reflect any extraordinary changes which may have occurred during the Performance Period which significantly affect factors that formed part of the basis upon which such Performance Goals, specific performance targets related to those Performance Goals and award criteria were determined.  Such changes may include, without limitation, changes in accounting practices, tax, regulatory or other laws or regulations, or economic changes not in the ordinary course of business cycles.  The Committee also reserves the right to adjust Annual Performance Bonus Awards to insulate them from the effects of unanticipated, extraordinary, major business developments, e.g., unusual events such as a special asset writedown, sale of a division, etc.  The determination of financial performance achieved for any Performance Period may, but need not be, adjusted by the Committee to reflect such extraordinary, major business developments.  Any such determination shall not be affected by subsequent adjustments or restatements.  Effective January 1, 2009, the Committee also reserves the right to decrease by up to twenty-five percent (25%) the amount of the Annual Performance Bonus Award determined by the Committee pursuant to Section 5(f) to be payable for the Performance Period to any Participant who is the Chief Executive Officer or a senior executive of the Company to reflect the determination by the Committee pursuant to Section 6, as amended, of the level of that Participant’s achievement (or non-achievement) of the individual goals previously established by the Committee for that Participant for the Performance Period.  The determination of the amount of the decrease, if any, in the amount of any such Participant’s Annual Performance Bonus for the Performance Period shall be determined by the Committee in connection with its determinations under Section 5(f) and Section 6 for the Performance Period.

ii.In the event of any change in outstanding shares of the Company by reason of any stock dividend or split, recapitalization, merger, consolidation, combination or exchange of shares or other similar corporate change, the Committee shall make such adjustments, if any, that it deems appropriate in the Performance Goals, specific performance factors and targets related to those Performance Goals and 

award criteria established by it under this Section 5 for any Performance Period not then completed; any and all such adjustments to be conclusive and binding upon all parties concerned.

iii.Notwithstanding the foregoing provisions of this Subsection (e) and the subsequent provisions of Subsections (f) and (i), with respect to (A) any Annual Performance Bonus Award, the Committee shall not have any discretion granted by this Subsection (e) or Subsections (f) and (i) to the extent that reserving or exercising such discretion would be impermissible under Section 409A of the Code, and (B) any Annual Performance Bonus Award to a Covered Employee that is intended to be “performance-based compensation” for purposes of Section 162(m) of the Code, the Committee shall not have any discretion granted by this Subsection (e) or Subsections (f) and (i) to the extent that reserving or exercising such discretion would cause any such Annual Performance Bonus Award not to qualify for the exemption from the limitation on deductibility imposed by Section 162(m) of the Code that is set forth in Section 162(m)(4)(C) of the Code.  

f.Payment, Certification.  As soon as administratively feasible after the end of each Performance Period, the Committee shall determine whether the Performance Goals applicable to Annual Performance Bonus Awards for such Performance Period were satisfied and, if such Performance Goals were satisfied in whole or in part, the amount payable for each Participant granted an Annual Performance Bonus Award.  No Annual Performance Bonus Award will be deemed to be earned and payable with respect to any Covered Employee or other Employee subject to the reporting requirements of Section 16(a) of the Exchange Act until the Committee certifies in writing the level of performance attained for the Performance Period in relation to the applicable Performance Goals.  For purposes of this Subsection (f), approved minutes of the Committee meeting in which the certification is made shall be treated as a written certification.  In applying Performance Goals, the Committee may, in its discretion, exclude unusual or infrequently occurring items (including any event listed in Section 9 of the ENSCO International Incorporated 2005 Long-Term Incentive Plan and the cumulative effect of changes in the law, regulations or accounting rules), and may determine no later than ninety (90) days after the commencement of any applicable Performance Period to exclude other items, each determined in accordance with GAAP (to the extent applicable) and as identified in the financial statements, notes to the financial statements or discussion and analysis of management.

g.Form of Payment.  Annual Performance Bonuses will be paid in cash in accordance with Section 7. 

h.Limitation on Amount of Annual Performance Bonuses.  The maximum amount that may be paid pursuant to an Annual Performance Bonus Award for any Performance Period to any one individual under this Plan is $2,500,000.

i.Section 162(m) of the Code.  To the extent that it is the intent of the Company and the Committee that any Annual Performance Bonus Award be “performance-based compensation” for purposes of Section 162(m) of the Code, this Section 5 shall be interpreted in a manner that satisfies the applicable requirements of Section 162(m)(4)(C) of the Code and related regulations and this Plan shall be operated so that the Company may take a full tax deduction for such Annual Performance Bonus.  If any provision of this Plan or any Annual Performance Bonus would otherwise frustrate or conflict with this intent, that provision shall be interpreted and deemed amended so as to avoid this conflict and such terms or provisions shall be deemed inoperative to the extent necessary to avoid the conflict with the requirements of Section 162(m) of the Code without invalidating the remaining provisions hereof.  With respect to any intended compliance with Section 162(m) of the Code, if this Plan does not contain any provision required to be included herein under Section 162(m) of the Code, such provisions shall be deemed to be incorporated herein with the same force and effect as if such provision had been set out at length herein.

j.Promotion or Transfer.  In the event of promotion or transfer during the Performance Period, the Incentive Award will be determined on a pro rata basis at the different job levels and/or different units or unit sectors.  Promotion or transfer after the Performance Period does not affect determination of the Incentive Award amount for that Performance Period.

k.Acceleration.  Each Participant who has been granted an Annual Performance Bonus Award that is outstanding as of the date of a Change in Control will have his or her Annual Performance Bonus Award interpreted as if the specific targets related to the Performance Goals have been achieved to a level of performance, as of the date of Change in Control, that would cause all (100%) of the Participant’s targeted amount under the Annual Performance Bonus to become payable in an amount determined by multiplying that targeted amount by a fraction, the numerator of which is the number of days in the Performance Period that had elapsed as of the Change in Control date and the denominator of which is 365.  The Committee or the Chief Executive Officer may, however, determine in its or his or her sole discretion not to apply the pro rata reduction described in the preceding sentence.  

l.Disqualification of Award.  This Plan is intended to align Employee and stockholder interests.  Occasionally unusual circumstances may arise that are not anticipated by this Plan.  Should a situation occur where a Participant is deemed to have (A) breached the Company’s Code of Business Conduct (Ethics) Policy, (B) materially breached any other policy of the Company, or (C) experienced a significant incident involving a fatal or serious injury to an Employee under the supervision of the Participant or significant damage to the property of the Company and its Subsidiaries or the environment which is caused by the actions or inactions of the Participant or one or more Employees under his or her supervision, the Committee, in its sole discretion, may disqualify the Participant from earning or receiving payment of any Award for a given Performance Period in whole or in part.  Participation in future Performance Periods may be considered independent of this decision.

SECTION 6
DISCRETIONARY BONUSES

The Committee has designed this Plan with the intent to ensure that this Plan design regarding Annual Performance Bonus Awards will eliminate or minimize the need for the Award of any Discretionary Bonuses.  The Committee recognizes, however, that unusual circumstances may occur that prevent paying appropriate rewards to a few key eligible Employees.  In recognition of truly extraordinary performance, occasional Discretionary Bonuses Awards may be required and granted by the Committee.  In summary, while Discretionary Bonus Awards are made entirely at the discretion of the Committee, they are primarily intended to provide a means of redressing rare inequities in Annual Performance Bonus Award determinations or to reward exemplary performance on a very limited basis.  Discretionary Bonuses will be paid in cash in accordance with Section 7.  
 Notwithstanding the limitations of the preceding paragraph of this Section 6 to the contrary, effective January 1, 2009, the Committee may determine to make a Discretionary Bonus Award to the Chief Executive Officer and/or to any Participant selected by the Chief Executive Officer who is senior executive of the Company for the period coinciding with the Performance Period based upon the Committee’s determination regarding the level of that Participant’s achievement (or non-achievement) of the individual goals previously established by the Committee (and, with respect to the Chief Executive Officer, are ratified by the Board, and with respect to each such senior executive, are based on recommendations from the Chief Executive Officer) for that Participant for such period.  The amount of the Discretionary Bonus that may be payable to any such Participant pursuant to this paragraph may not exceed twenty-five percent (25%) of the amount of the Annual Performance Bonus Award determined by the Committee pursuant to Section 5(f) to be payable 

for that Performance Period to such Participant.  As provided in Section 5(e)(i), as amended, the determination by the Committee pursuant to this paragraph with respect to any such Participant may result in a decrease in the amount of the Annual Performance Bonus determined by the Committee pursuant to Section 5(f) for the Performance Period.  The Committee shall make its determinations under this paragraph in connection with its determinations under Section 5(f) for the Performance Period.  

SECTION 7
PAYMENT; TAX WITHHOLDING

a.Eligibility for Non-Tax Deferred Payment.  Except as provided in Sections 7(c) and (d) below, upon the Committee’s written certification in accordance with Section 5(f) that a payment for an Annual Performance Bonus Award with respect to a Performance Period is due under the Plan, each Participant who has been granted an Annual Performance Bonus Award with respect to such Performance Period and who has remained continuously employed by the Company or a Subsidiary until the last day of such Performance Period shall be entitled to the payment amount applicable to such Participant’s Annual Performance Bonus Award certified by the Committee for such Performance Period and his or her Discretionary Bonus Award, if any.  Payments under this Plan shall be made in cash in one lump sum payment.  Effective January 1, 2009, it is intended that payments under this Plan shall be made as soon as administratively feasible after the end of the Performance Period following written certification by the Committee under Section 5(f) that payment of Incentive Awards are due and no later than the December 31st of the year following the year in which that Performance Period ends in order to ensure that this Plan complies with the specified time of payment requirement of Section 409A(a)(2)(A)(iv) of the Code and Treas. Reg. §§1.409A-3(a)(4) and (b). 

b.Tax Deferred Payment.  If an Award recipient for any Performance Period is eligible to participate in any deferred compensation program sponsored and administered by the Company, he or she may elect, prior to the first day of that Performance Period, to defer all or any portion of that Award payment under the terms and conditions, and up to the limits, determined in the discretion of the Committee and as permitted by the terms of that deferred compensation plan.  Notwithstanding the preceding sentence of this Subsection (b), in the case of an Award granted to a Participant described in the preceding sentence for any Performance Period beginning after December 31, 2009, an initial deferral election may be made by that Participant after the commencement of the Performance Period with respect to the portion of the Award which constitutes “performance-based compensation” under Section 409A of the Code; provided that (i) any such election must be made on or before the date that is six months before the end of the Performance Period, (ii) the Participant must perform services continuously from the later of the beginning of the Performance Period or the date all of the required performance criteria are established under Section 5(d) or, if applicable, under the second paragraph of Section 6, through the date an election is made under that deferred compensation program, and (iii) in no event may an election to defer performance-based compensation be made after such compensation has become readily ascertainable.  For purposes of this Subsection (b), if the performance-based compensation is a specified or calculable amount, the compensation shall be considered to be readily ascertainable if and when the amount is first substantially certain to be paid.  If the performance-based compensation is not a specified or calculable amount because, for example, the amount may vary based upon the level of performance, the compensation, or any portion of the compensation, shall be considered to be readily ascertainable when the amount is first both calculable and substantially certain to be paid.  

Except as provided in the next paragraph of this Subsection (b), (i) an Annual Performance Bonus Award granted in accordance Sections 5(c) and 5(d)(i) shall be considered to constitute performance-based compensation under Section 409A of the Code, and (ii) a Discretionary Bonus Award granted for a Performance Period in accordance with the second paragraph of Section 6 shall be considered to constitute 

performance-based compensation under Section 409A of the Code to the extent the amount of such Discretionary Bonus, or the entitlement to such Discretionary Bonus, is contingent on the satisfaction of organizational or individual performance criteria relating to the Performance Period which were established in writing while the outcome was substantially uncertain and by not later than ninety (90) days after the commencement of the Performance Period to which the criteria relates.  
For purposes of this Subsection (b), performance-based compensation under Section 409A of the Code shall not include any amount or portion of any amount of an Award that will be paid either regardless of performance, or based upon a level of performance, that is substantially certain to be met at the time the criteria is established.  The amount payable under an Award may be performance-based compensation under Section 409A of the Code where the amount will be paid regardless of satisfaction of the performance criteria due to the Participant’s death, Permanent and Total Disability, or a Change in Control, provided that a payment made under such circumstances without regard to the satisfaction of the performance criteria shall not constitute performance-based compensation under Section 409A of the Code. 
Any portion of any Award not deferred under this section of this Plan will be paid as described under Subsection (a).  
c.Retirement, Permanent and Total Disability or Death.  If a Participant was granted an Incentive Award for a Performance Period beginning after December 31, 2008 and his or her employment with the Company and its Subsidiaries terminates during the Performance Period by reason of death, Permanent and Total Disability, or retirement on or after Normal Retirement Age, the Incentive Award shall be determined on a pro rata basis for that Performance Period by comparing the actual level of performance to the specific targets related to the Performance Goals and individual performance goals established by the Committee for that Participant for that Performance Period and then multiplying that amount by a fraction, the numerator of which is the number of days in the Performance Period that had elapsed as of the date of such employment termination and the denominator of which is 365.  The amount determined pursuant to the preceding sentence of this Subsection (c) shall become payable as provided in Subsection (a).  In the event of death, payment shall be made to the beneficiary or beneficiaries as designated on the Participant’s beneficiary designation form under the Company’s group term life insurance program.  In the absence of a beneficiary designation form, payment of the Incentive Award shall be made to the estate of the deceased Participant.  Any amount that has been deferred as provided under Subsection (b) shall be processed in accordance with the applicable deferred compensation plan.

d.Employee Termination or Resignation.  Except as provided in Subsection (c) or in Section 7(e) or (f) below, if a Participant resigns before his or her Normal Retirement Age or is terminated by the Company or any Subsidiary of the Company, and such employment resignation or termination occurs before the payment date of the Participant’s Incentive Award, if any, then such Participant shall forfeit that unpaid Incentive Award and shall not be entitled to receive any payment under this Plan with respect to his or her Incentive Award for such Performance Period.

e.Challenge to Control-Committee Discretion.  The Committee may, in its discretion, direct that all employment continuation requirements be waived if it finds, in its sole discretion, that a major challenge to the control of the Company exists; subject, however, to the requirement that the exercise of such discretion shall result in all Annual Performance Bonus Awards for any Performance Period beginning after December 31, 2008 being determined on a pro-rated basis consistent with the procedure described in Subsection (c).  Any amount that has been deferred as provided under Subsection (b) shall be processed in accordance with the applicable deferred compensation plan.

f.Change in Control-Automatic Acceleration of Incentive Awards.  If in fact a Change in Control occurs, all Incentive Awards will be determined and paid to Participants within sixty (60) days of such event.

g.Tax Withholding.  Incentive Awards under this Plan will be subject to tax withholding as required by law.  Any deferred payments pursuant to Subsection (b) shall be subject to tax withholding as provided in the applicable deferred compensation plan.

h.Impact on Employee Benefits.  Incentive Awards paid under this Plan shall not be included in the determination of an Employee’s eligible compensation when determining benefits under other benefit programs.

SECTION 8
NO EMPLOYMENT RIGHTS

No provisions of this Plan under any Award Notice shall be construed to give any Participant any right to remain an Employee of, or provide Services to, the Company or any of its Subsidiaries or to affect the right of the Company to terminate any Employee’s service at any time, with or without cause.
SECTION 9
FUNDING AND STATUS OF PLAN

This Plan is a payroll practice of the Company and not an employee benefit plan within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).  This Plan is not funded in the sense of a "funded plan" under ERISA, or Internal Revenue Service or other government regulations, which prescribe certain Participant rights and fiduciary obligations.  Funding for this Plan will be equivalent to the sum of individual Incentive Awards.  Funding is for accounting purposes only and does not confer any rights to Participants to any portion of such funds or any other Company assets except under this Plan rules and Award guidelines.  To the extent that a Participant acquires a right to receive payment from the Company under this Plan, such right shall be no greater than the rights of any unsecured creditor of the Company.
SECTION 10
TERM OF PLAN; EFFECT OF AMENDMENT OR TERMINATION

a.Effective Date; Term of Plan.  This Plan shall continue in effect until terminated under this Section 

b.Amendment and Termination.  The Committee in its sole discretion may terminate this Plan at any time and may amend this Plan at any time in such respects as the Committee may deem advisable; provided, no amendment, suspension or termination of this Plan shall materially adversely affect the rights of a Participant with respect to compensation previously earned and not yet paid.  In the event that this Plan shall be suspended or terminated during the course of a Performance Period, an Incentive Award calculated in accordance with the terms of this Plan prior to such event will be paid to Participants on a pro rata basis.
  

SECTION 11
ALIENATION AND SUBORDINATION OF BENEFITS

No benefit or payment under this Plan may be subject to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, lien or charge, by operation of law or otherwise, including levy, garnishment, pledge, or bankruptcy, except by will or the laws of descent and distribution, and any attempt to treat otherwise shall be void.  No payment or benefit shall be in any manner liable for or subject to the recipient’s debts, contracts, liabilities, or torts except where legislation provides for regulatory action or court order (garnishment, etc.) to supersede this restriction.

GOVERNING LAW

THIS PLAN AND ANY AND ALL AWARD NOTICES EXECUTED IN CONNECTION WITH THIS PLAN SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.

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