Document:

Exhibit 4.1

 

Execution Copy

 

 

DUKE ENERGY CAROLINAS, LLC

 

TO

 

THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.,

Trustee

 

NINETY-FOURTH SUPPLEMENTAL INDENTURE

 

Dated as of December 8, 2011

 

 

CREATING TWO SERIES OF FIRST AND REFUNDING

MORTGAGE BONDS

$350,000,000 FIRST AND REFUNDING MORTGAGE BONDS, 1.75% SERIES DUE 2016

$650,000,000 FIRST AND REFUNDING MORTGAGE BONDS, 4.25% SERIES DUE 2041

 

 

SUPPLEMENTAL TO

FIRST AND REFUNDING MORTGAGE

DATED AS OF DECEMBER 1, 1927

 

 

Drawn By and Return To Robinson, Bradshaw & Hinson, P.A.

101 N. Tryon Street, Suite 1900, Charlotte, NC  28246

 

 

SUPPLEMENTAL INDENTURE, bearing date as of the 8th day of December, 2011, made and entered into by and between Duke Energy Carolinas, LLC, a limited liability company duly organized and existing under the laws of the State of North Carolina, hereinafter called the “Company”, party of the first part, and The Bank of New York Mellon Trust Company, N.A. (formerly known as The Bank of New York Trust Company, N.A.), a national banking association, having a corporate trust office at 900 Ashwood Parkway, Suite 425, Atlanta, Georgia 30338, hereinafter called the “Trustee”, as Trustee, party of the second part. The Trustee is the successor to JPMorgan Chase Bank, N.A. (formerly known as The Chase Manhattan Bank, formerly known as Chemical Bank (successor to Morgan Guaranty Trust Company of New York)), as Trustee.

 

WHEREAS the Company’s predecessor is Duke Energy Corporation (formerly known as Duke Power Company), a corporation organized under the laws of the State of North Carolina, which converted its form of organization on April 3, 2006 from a North Carolina corporation to a North Carolina limited liability company named “Duke Power Company LLC,” which changed its name to Duke Energy Carolinas, LLC on October 1, 2006; and

 

WHEREAS Duke Power Company, a New Jersey corporation, hereinafter called the “New Jersey Company”, duly executed and delivered its First and Refunding Mortgage, dated as of December 1, 1927, to Guaranty Trust Company of New York, as Trustee, to secure its First and Refunding Mortgage Gold Bonds, to be issued from time to time in series as provided in said Mortgage, and has from time to time duly executed and delivered supplemental indentures, including supplemental indentures dated as of September 1, 1947 and February 1, 1949, to Guaranty Trust Company of New York (the corporate name of which has been changed to Morgan Guaranty Trust Company of New York), as Trustee, and a supplemental indenture dated as of February 1, 1960 to Morgan Guaranty Trust Company of New York, as Trustee, supplementing and modifying said Mortgage (said Mortgage, as so supplemented and modified by the supplemental indentures dated as of September 1, 1947, February 1, 1949 and February 1, 1960, being hereinafter referred to as the “original indenture”); and

 

WHEREAS bonds of a series known as the “First and Refunding Mortgage Bonds, 2.65% Series Due 1977” (herein called “bonds of the 2.65% Series”), bonds of a series known as the “First and Refunding Mortgage Bonds, 2 7/8% Series Due 1979” (herein called “bonds of the 1979 Series”), bonds of a series known as the “First and Refunding Mortgage Bonds, 6 3/8% Series Due 1998” (herein called “bonds of the 1998 Series”), bonds of a series known as the “First and Refunding Mortgage Bonds, Pollution Control Facilities Revenue Refunding Series Due 2014” (herein called “bonds of the 1990 Pollution Control Series”), bonds of a series known as the “First and Refunding Mortgage Bonds, City of Greensboro Series Due 2027” (herein called “bonds of the 2027 City of Greensboro Series”), bonds of a series known as the “First and Refunding Mortgage Bonds, Medium-Term Notes Series” (herein called “bonds of the Medium-Term Notes Series”), bonds of a series known as the “First and Refunding Mortgage Bonds, 6 5/8% Series B Due 2003” (herein called “bonds of the 2003 Series B”), bonds of a series known as the “First and Refunding Mortgage Bonds, 6 3/8% Series Due 2008” (herein called “bonds of the 2008 Series”), bonds of a series known as the “First and Refunding Mortgage Bonds, 5 7/8% Series C Due 2003” (herein called “bonds of the 2003 Series C”), bonds of a series known as the

 

 

“First and Refunding Mortgage Bonds, Pollution Control Facilities Revenue Refunding Series Due 2014” (herein called “bonds of the 1993 Pollution Control Series”), bonds of a series known as the “First and Refunding Mortgage Bonds, 6 1/4% Series B 2004” (herein called “bonds of the 2004 Series B”), bonds of a series known as the “First and Refunding Mortgage Bonds, 7% Series Due 2033” (herein called “bonds of the 2033 Series”), bonds of a series known as the “First and Refunding Mortgage Bonds, 6 7/8% Series B Due 2023” (herein called “bonds of the 2023 Series B”), bonds of a series known as the “First and Refunding Mortgage Bonds, 6 3/4% Series Due 2025” (herein called “bonds of the 2025 Series”), bonds of a series known as the “First and Refunding Mortgage Bonds, 7 7/8% Series Due 2024” (herein called “bonds of the 2024 Series”), bonds of a series known as the “First and Refunding Mortgage Bonds, 7 1/2% Series B Due 2025” (herein called “bonds of the 2025 Series B”), bonds of a series known as the “First and Refunding Mortgage Bonds, 7 1/2% Series Due 1999” (herein called “bonds of the 1999 Series”), bonds of a series known as the “First and Refunding Mortgage Bonds, 7% Series Due 2000” (herein called “bonds of the 2000 Series”), bonds of a series known as the “First and Refunding Mortgage Bonds, 7% Series B Due 2000” (herein called “bonds of the 2000 Series B”), bonds of a series known as the “First and Refunding Mortgage Bonds, 6.625% Series Due 2003” (herein called “bonds of the 2003 Series”), bonds of a series known as the “First and Refunding Mortgage Bonds, 9 5/8% Series Due 2020” (herein called “bonds of the 9 5/8% Series due 2020”), bonds of a series known as the “First and Refunding Mortgage Bonds, 8 3/4% Series Due 2021” (herein called “bonds of the 2021 Series”), bonds of a series known as “First and Refunding Mortgage Bonds, 7% Series Due 2005” (herein called “bonds of the 2005 Series”), bonds of a series known as “First and Refunding Mortgage Bonds, 3.75% Series A Due 2008” (herein called “bonds of the 3.75% Series A”), bonds of series known as “First and Refunding Mortgage Bonds, 3.75% Series B Due 2008” (herein called “bonds of the 3.75% Series B,” and together with the bonds of the 3.75% Series A, the “bonds of the 3.75% Series”), bonds of a series known as “First and Refunding Mortgage Bonds, 7 3/8% Series Due 2023” (herein called “bonds of the 7 3/8% Series”), bonds of a series known as “First and Refunding Mortgage Bonds, 4 1/2% Series Due 2010” (herein called “bonds of the 4 1/2% Series”), bonds of a series known as “First and Refunding Mortgage Bonds, 5.30% Series Due 2015” (herein called “bonds of the 5.30% Series”), bonds of a series known as “First and Refunding Mortgage Bonds, 5.25% Series Due 2018” (herein called “bonds of the 5.25% Series”), bonds of a series known as “First and Refunding Mortgage Bonds, 6.00% Series Due 2038” (herein called “bonds of the 6.00% Series”), bonds of a series known as “First and Refunding Mortgage Bonds, 2007A Pledge Series Due 2040” (herein called “bonds of the 2007A Pledge Series”), bonds of a series known as “First and Refunding Mortgage Bonds, 2007B Pledge Series Due 2040” (herein called “bonds of the 2007B Pledge Series”), bonds of a series known as “First and Refunding Mortgage Bonds, 5.10% Series B Due 2018” (herein called “bonds of the 5.10% Series”), bonds of a series known as “First and Refunding Mortgage Bonds, 6.05% Series B Due 2038” (herein called “bonds of the 6.05% Series”), bonds of a series known as “First and Refunding Mortgage Bonds, 5.75% Series C Due 2013 (herein called “bonds of the 2013 Series C”), bonds of a series known as “First and Refunding Mortgage Bonds, 7.00% Series C Due 2018 (herein called “bonds of the 2018 Series C”), bonds of a series known as “First and Refunding Mortgage Bonds, Pollution Control Facilities Revenue Refunding Series Due 2017” (herein called “bonds of the 2009 Pollution Control Series”), bonds of a series known as “First and Refunding Mortgage Bonds, 5.30% Series Due 2040” (herein called “bonds of the 2040 Series”), bonds of a series known as “First and Refunding Mortgage Bonds, 4.30% Series due 2020”(herein called “bonds of the 2020

 

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Series”), bonds of a series known as “First and Refunding Mortgage Bonds, Solid Waste Disposal Revenue Bonds Series 2010A Due 2031” (herein called “bonds of the 2010A Solid Waste Disposal Series”), bonds of a series known as “First and Refunding Mortgage Bonds, Solid Waste Disposal Revenue Bonds Series 2010B Due 2031” (herein called “bonds of the 2010B Solid Waste Disposal Series”), bonds of a series known as “First and Refunding Mortgage Bonds, Solid Waste Disposal Revenue Bonds Series 2010C Due 2040” (herein called “bonds of the 2010C Solid Waste Disposal Series”), bonds of a series known as “First and Refunding Mortgage Bonds, Solid Waste Disposal Revenue Bonds Series 2010D Due 2040 (herein called “bonds of the 2010D Solid Waste Disposal Series”), bonds of a series known as “First and Refunding Mortgage Bonds, 3.90% Series due 2021” (herein called “bonds of the 3.90% Series”) and such other bonds that have heretofore been issued and (except for bonds of the 2.65% Series, bonds of the 1979 Series, bonds of the 1998 Series, bonds of the 1990 Pollution Control Series, bonds of the Medium Term Notes Series, bonds of the 2003 Series B, bonds of the 2008 Series, bonds of the 2003 Series C, bonds of the 1993 Pollution Control Series, bonds of the 2004 Series B, bonds of the 2033 Series, bonds of the 2023 Series B, bonds of the 2025 Series, bonds of the 2024 Series, bonds of the 2025 Series B, bonds of the 1999 Series, bonds of the 2000 Series, bonds of the 2000 Series B, bonds of the 2003 Series, bonds of the 9 5/8% Series due 2020, bonds of the 2021 Series, bonds of the 2005 Series, bonds of the 3.75% Series, bonds of the 7 3/8% Series, bonds of the 2007A Pledge Series, bonds of the 2007B Pledge Series, bonds of the 4 1/2% Series, and other such bonds which have been redeemed or retired in their entirety) are the only bonds now outstanding under the original indenture as heretofore supplemented; and

 

WHEREAS the Company has duly executed and delivered a supplemental indenture, dated as of June 15, 1964, to Morgan Guaranty Trust Company of New York, as Trustee, for the purpose of evidencing the succession by merger of the Company to the New Jersey Company and the assumption by the Company of the covenants and conditions of the New Jersey Company in the original indenture and to enable the Company to have and exercise the powers and rights of the New Jersey Company under the original indenture in accordance with the terms thereof and whereby the Company assumed and agreed to pay duly and punctually the principal of and interest on the bonds issued under the original indenture in accordance with the provisions of said bonds and the coupons thereto appertaining and the original indenture, and agreed to perform and fulfill all the terms, covenants and conditions of the original indenture binding upon the New Jersey Company, and

 

WHEREAS Morgan Guaranty Trust Company of New York resigned as Trustee under the original indenture as heretofore supplemented and Chemical Bank was appointed successor Trustee, said resignation and appointment having taken effect on August 30, 1994 pursuant to an Instrument of Resignation, Appointment and Acceptance dated as of August 30, 1994 among the Company, Morgan Guaranty Trust Company of New York, as Trustee, and Chemical Bank (now known as JPMorgan Chase Bank, N.A.), as successor Trustee; and

 

WHEREAS JPMorgan Chase Bank, N.A. resigned as Trustee and The Bank of New York Mellon Trust Company, N.A. (formerly known as The Bank of New York Trust Company, N.A.) was appointed successor Trustee, said resignation and appointment having taken effect on September 24, 2007 pursuant to an Instrument of Resignation, Appointment and Acceptance

 

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dated as of September 24, 2007 among the Company, JPMorgan Chase Bank, N.A., as Trustee, and The Bank of New York Mellon Trust Company, N.A., as successor Trustee; and

 

WHEREAS the Company desires to create under the original indenture, as heretofore supplemented and as to be supplemented by this supplemental indenture, two new series of bonds, to be known as its “First and Refunding Mortgage Bonds, 1.75% Series due 2016” and its “First and Refunding Mortgage Bonds, 4.25% Series due 2041”, and to determine the terms and provisions and the form of the bonds of each such series; and

 

WHEREAS for the purposes hereinabove recited, and pursuant to due limited liability company action, the Company has duly determined to execute and deliver to the Trustee a supplemental indenture in the form hereof supplementing the original indenture (the original indenture, as previously supplemented by supplemental indentures and as hereby supplemented, being sometimes hereinafter referred to as the “Indenture”); and

 

WHEREAS all conditions and requirements necessary to make this supplemental indenture a valid, legal and binding instrument in accordance with its terms have been done and performed, and the execution and delivery hereof have been in all respects duly authorized:

 

NOW, THEREFORE, THIS INDENTURE WITNESSETH:

 

That in consideration of the premises and of the sum of one dollar duly paid by the Company to the Trustee at or before the execution and delivery of these presents, the receipt whereof is hereby acknowledged, the Company hereby covenants and agrees with the Trustee and its successors in the trust under the Indenture as follows:

 

PART ONE.

 

BONDS OF THE 1.75% SERIES AND BONDS OF THE 4.25% SERIES

 

SECTION 1.           BONDS OF THE 1.75% SERIES

 

SECTION 1.1    The Company hereby creates a new series of bonds to be issued under and secured by the Indenture and known as its First and Refunding Mortgage Bonds, 1.75% Series due 2016 (herein called “bonds of the 1.75% Series”) and the Company hereby establishes, determines and fixes the terms and provisions of the bonds of the 1.75% Series as hereinafter in this Part One set forth.

 

Each bond of the 1.75% Series shall be dated the date of its authentication (except that if any such bond shall be authenticated on any interest payment date, it shall be dated the following day) and interest shall be payable on the principal represented thereby commencing June 15, 2012, from June 15 or December 15, as the case may be, next preceding the date thereof to which interest has been paid, unless such date of authentication is prior to June 15, 2012, in which case interest shall be payable from December 8, 2011; provided, however, that interest shall be payable on each bond of the 1.75% Series authenticated after the record date (as defined

 

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in the next succeeding paragraph of this Section 1.1) with respect to any interest payment date and prior to such interest payment date, only from such interest payment date.

 

Interest on any bond of the 1.75% Series shall be paid to the person who, according to the bond register of the Company, is the registered holder of such bond of the 1.75% Series at the close of business on the applicable record date, and such interest payments shall be made by check mailed to such registered holder at his last address shown on such bond register or, at the option of the Company, by wire transfer at such place and to such account at a banking institution in the United States as may be designated in writing to the Trustee at least sixteen (16) days prior to the date of payment by the Person entitled thereto (provided, that if the bonds of the 1.75% Series are represented by Global Securities held by the Depositary, payment may be made pursuant to the procedures of the Depositary); provided, however, that, if the Company shall default in the payment of the interest due on any interest payment date on any bond of the 1.75% Series, such defaulted interest shall be paid to the registered holder of such bond (or any bond or bonds of the 1.75% Series issued upon transfer, exchange or substitution thereof) on the date of subsequent payment of such defaulted interest or, at the election of the Company, to the person in whose name such bond (or any bond or bonds of the 1.75% Series issued upon transfer, exchange or substitution thereof) is registered on a subsequent record date established by notice given by mail by or on behalf of the Company to the holders of all bonds of the 1.75% Series not less than ten (10) days preceding such subsequent record date. The term “record date” as used in this Section 1.1 shall mean, with respect to any semi-annual interest payment date, the close of business on the June 1 or December 1, whether or not a business day, next preceding such interest payment date or, in the case of a payment of defaulted interest, the close of business on any subsequent record date established as provided above.

 

SECTION 1.2    All bonds of the 1.75% Series shall mature as to principal on December 15, 2016 and shall bear interest at a rate of 1.75% per annum, payable semi-annually on the fifteenth day of June and December in each year, commencing on the fifteenth day of June, 2012. Interest on the bonds of the 1.75% Series will be computed on the basis of a 360-day year consisting of twelve 30-day months.

 

SECTION 1.3    The bonds of the 1.75% Series shall be fully registered bonds, without coupons, in denominations of two thousand dollars ($2,000) and integral multiples of one thousand dollars ($1,000) in excess thereof, all such bonds to be numbered, and shall be transferable and exchangeable as provided in the form of bond set forth as Exhibit A to this supplemental indenture. The provisions of §1.19 and any other provision in the Indenture in respect of coupon bonds or reservation of coupon bond numbers shall be inapplicable to the bonds of the 1.75% Series.

 

SECTION 1.4    The bonds of the 1.75% Series may be redeemed at the option of the Company, in whole or in part at any time and from time to time, at a redemption price equal to the greater of (1) 100% of the principal amount of the bonds of the 1.75% Series to be redeemed and (2) the sum of the present values of the remaining scheduled payments of principal and interest on the bonds of the 1.75% Series being redeemed (exclusive of interest accrued to the redemption date) discounted to the redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 15 basis points, plus, in either case, accrued and unpaid interest on the principal amount being

 

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redeemed to the date of such redemption. The Company shall notify the Trustee of the redemption price with respect to any redemption pursuant to this paragraph promptly after the calculation thereof. The Trustee shall not be responsible for calculating said redemption price.

 

The bonds of the 1.75% Series are also subject to redemption through the operation of the Replacement Fund provided in Part Two of this supplemental indenture or through the application of moneys paid to the Trustee pursuant to the provisions of §5.05 of the Indenture, at any time or from time to time prior to maturity, upon prior notice as hereinafter provided, at the redemption prices specified in the fourth paragraph of the reverse side of the form of bond set forth as Exhibit A to this supplemental indenture, together with interest accrued thereon to the date fixed for redemption thereof.

 

In the event that any redemption date is not a Business Day, the Company shall pay the redemption price on the next Business Day without any interest or other payment due to the delay.

 

All such redemptions of bonds of the 1.75% Series shall be effected as provided in Article 3 of the Indenture except that, in case a part only of the bonds of the 1.75% Series is to be paid and redeemed, the particular bonds or part thereof shall be selected by the Trustee in such manner as the Trustee in its uncontrolled discretion shall determine to be fair and in any case where several bonds are registered in the same name, the Trustee may treat the aggregate principal amount so registered as if it were represented by one bond and except that when bonds are redeemed in part only the notice given to any particular holder need state only the principal amount of the bonds of that holder which is to be redeemed and except that notice to the holders of bonds to be redeemed shall be given by mailing to such holders a notice of such redemption, first class mail postage prepaid, not later than the thirtieth day, and not earlier than the sixtieth day, before the date fixed for redemption, at their last addresses as they shall appear upon the bond register of the Company. Any notice which is mailed in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the holder receives such notice; and failure duly to give such notice by mail, or any defect in such notice, to the holder of any bond designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other bond. No publication of notice of such redemption shall be required.

 

SECTION 1.5    The limit upon the aggregate principal amount of the bonds of the 1.75% Series which may be authenticated and delivered pursuant to this Ninety-Fourth Supplemental Indenture shall be $350,000,000.  Notwithstanding the foregoing, the Company may, without the consent of the holders of the bonds of the 1.75% Series, reopen the bonds of the 1.75% Series and issue an unlimited amount of additional bonds having the same ranking, interest rate, maturity and other terms as the bonds of the 1.75% Series authenticated and delivered pursuant to this Ninety-Fourth Supplemental Indenture, other than, if applicable, the initial interest accrual date and interest payment date; provided, that, the Company may reopen the bonds of the 1.75% Series only if the additional bonds issued will be fungible for United States federal income tax purposes with the bonds of the 1.75% Series authenticated and delivered pursuant to this Ninety-Fourth Supplemental Indenture.  Any such additional bonds will be consolidated with and form a single series of bonds

 

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under the Indenture with the bonds of the 1.75% Series authenticated and delivered pursuant to this Ninety-Fourth Supplemental Indenture.

 

SECTION 1.6    The place or places of payment (as to principal and premium, if any, and interest), redemption, transfer, exchange and registration of the bonds of the 1.75% Series shall be the office or offices or the agency or agencies of the Company in the Borough of Manhattan, The City of New York, designated from time to time by the Board of Directors of the Company (provided, that if the bonds of the 1.75% Series are represented by Global Securities held by or on behalf of the Depositary, the procedures of the Depositary may be followed for any action under this Section 1.6 of Part One).

 

SECTION 1.7    The form of the bonds of the 1.75% Series and the certificate of the Trustee to be endorsed on such bonds, respectively, shall be in substantially the form set forth in Exhibit A hereto.

 

SECTION 2.           BONDS OF THE 4.25% SERIES

 

SECTION 2.1    The Company hereby creates a new series of bonds to be issued under and secured by the Indenture and known as its First and Refunding Mortgage Bonds, 4.25% Series due 2041 (herein called “bonds of the 4.25% Series”,  and together with the bonds of the 4.25% Series, the “Bonds”) and the Company hereby establishes, determines and fixes the terms and provisions of the bonds of the 4.25% Series as hereinafter in this Part One set forth.

 

Each bond of the 4.25% Series shall be dated the date of its authentication (except that if any such bond shall be authenticated on any interest payment date, it shall be dated the following day) and interest shall be payable on the principal represented thereby commencing June 15, 2012, from June 15 or December 15, as the case may be, next preceding the date thereof to which interest has been paid, unless such date of authentication is prior to June 15, 2012, in which case interest shall be payable from December 8, 2011; provided, however, that interest shall be payable on each bond of the 4.25% Series authenticated after the record date (as defined in the next succeeding paragraph of this Section 2.1) with respect to any interest payment date and prior to such interest payment date, only from such interest payment date.

 

Interest on any bond of the 4.25% Series shall be paid to the person who, according to the bond register of the Company, is the registered holder of such bond of the 4.25% Series at the close of business on the applicable record date, and such interest payments shall be made by check mailed to such registered holder at his last address shown on such bond register or, at the option of the Company, by wire transfer at such place and to such account at a banking institution in the United States as may be designated in writing to the Trustee at least sixteen (16) days prior to the date of payment by the Person entitled thereto (provided, that if the bonds of the 4.25% Series are represented by Global Securities held by the Depositary, payment may be made pursuant to the procedures of the Depositary); provided, however, that, if the Company shall default in the payment of the interest due on any interest payment date on any bond of the 4.25% Series, such defaulted interest shall be paid to the registered holder of such bond (or any bond or bonds of the 4.25% Series issued upon transfer, exchange or substitution thereof) on the date of subsequent payment of such defaulted interest or, at the election of the Company, to the person

 

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in whose name such bond (or any bond or bonds of the 4.25% Series issued upon transfer, exchange or substitution thereof) is registered on a subsequent record date established by notice given by mail by or on behalf of the Company to the holders of all bonds of the 4.25% Series not less than ten (10) days preceding such subsequent record date. The term “record date” as used in this Section 2.1 shall mean, with respect to any semi-annual interest payment date, the close of business on the June 1 or December 1, whether or not a business day, next preceding such interest payment date or, in the case of a payment of defaulted interest, the close of business on any subsequent record date established as provided above.

 

SECTION 2.2    All bonds of the 4.25% Series shall mature as to principal on December 15, 2041 and shall bear interest at a rate of 4.25% per annum, payable semi-annually on the fifteenth day of June and December in each year, commencing on the fifteenth day of June, 2012. Interest on the bonds of the 4.25% Series will be computed on the basis of a 360-day year consisting of twelve 30-day months.

 

SECTION 2.3    The bonds of the 4.25% Series shall be fully registered bonds, without coupons, in denominations of two thousand dollars ($2,000) and integral multiples of one thousand dollars ($1,000) in excess thereof, all such bonds to be numbered, and shall be transferable and exchangeable as provided in the form of bond set forth as Exhibit A to this supplemental indenture. The provisions of §1.19 and any other provision in the Indenture in respect of coupon bonds or reservation of coupon bond numbers shall be inapplicable to the bonds of the 4.25% Series.

 

SECTION 2.4    At any time before June 15, 2041, the bonds of the 4.25% Series may be redeemed at the option of the Company, in whole or in part and from time to time, at a redemption price equal to the greater of (1) 100% of the principal amount of the bonds of the 4.25% Series to be redeemed and (2) the sum of the present values of the remaining scheduled payments of principal and interest on the bonds of the 4.25% Series being redeemed (exclusive of interest accrued to the redemption date) discounted to the redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 20 basis points, plus, in either case, accrued and unpaid interest on the principal amount being redeemed to the date of such redemption. The Company shall notify the Trustee of the redemption price with respect to any redemption pursuant to this paragraph promptly after the calculation thereof. The Trustee shall not be responsible for calculating said redemption price.

 

At any time on or after June 15, 2041, the bonds of the 4.25% Series may be redeemed at the option of the Company, in whole or in part and from time to time, at a redemption price equal to 100% of the principal amount of the bonds of the 4.25% Series to be redeemed plus accrued and unpaid interest on the principal amount being redeemed to the date of such redemption.

 

The bonds of the 4.25% Series are also subject to redemption through the operation of the Replacement Fund provided in Part Two of this supplemental indenture or through the application of moneys paid to the Trustee pursuant to the provisions of §5.05 of the Indenture, at any time or from time to time prior to maturity, upon prior notice as hereinafter provided, at the redemption prices specified in the fifth paragraph of the reverse side of the form of bond set forth as Exhibit B to this supplemental indenture, together with interest accrued thereon to the date fixed for redemption thereof.

 

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In the event that any redemption date is not a Business Day, the Company shall pay the redemption price on the next Business Day without any interest or other payment due to the delay.

 

All such redemptions of bonds of the 4.25% Series shall be effected as provided in Article 3 of the Indenture except that, in case a part only of the bonds of the 4.25% Series is to be paid and redeemed, the particular bonds or part thereof shall be selected by the Trustee in such manner as the Trustee in its uncontrolled discretion shall determine to be fair and in any case where several bonds are registered in the same name, the Trustee may treat the aggregate principal amount so registered as if it were represented by one bond and except that when bonds are redeemed in part only the notice given to any particular holder need state only the principal amount of the bonds of that holder which is to be redeemed and except that notice to the holders of bonds to be redeemed shall be given by mailing to such holders a notice of such redemption, first class mail postage prepaid, not later than the thirtieth day, and not earlier than the sixtieth day, before the date fixed for redemption, at their last addresses as they shall appear upon the bond register of the Company. Any notice which is mailed in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the holder receives such notice; and failure duly to give such notice by mail, or any defect in such notice, to the holder of any bond designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other bond. No publication of notice of such redemption shall be required.

 

SECTION 2.5    The limit upon the aggregate principal amount of the bonds of the 4.25% Series which may be authenticated and delivered pursuant to this Ninety-Fourth Supplemental Indenture shall be $650,000,000.  Notwithstanding the foregoing, the Company may, without the consent of the holders of the bonds of the 4.25% Series, reopen the bonds of the 4.25% Series and issue an unlimited amount of additional bonds having the same ranking, interest rate, maturity and other terms as the bonds of the 4.25% Series authenticated and delivered pursuant to this Ninety-Fourth Supplemental Indenture, other than, if applicable, the initial interest accrual date and interest payment date; provided, that, the Company may reopen the bonds of the 4.25% Series only if the additional bonds issued will be fungible for United States federal income tax purposes with the bonds of the 4.25% Series authenticated and delivered pursuant to this Ninety-Fourth Supplemental Indenture.  Any such additional bonds will be consolidated with and form a single series of bonds under the Indenture with the bonds of the 4.25% Series authenticated and delivered pursuant to this Ninety-Fourth Supplemental Indenture.

 

SECTION 2.6    The place or places of payment (as to principal and premium, if any, and interest), redemption, transfer, exchange and registration of the bonds of the 4.25% Series shall be the office or offices or the agency or agencies of the Company in the Borough of Manhattan, The City of New York, designated from time to time by the Board of Directors of the Company (provided, that if the bonds of the 4.25% Series are represented by Global Securities held by or on behalf of the Depositary, the procedures of the Depositary may be followed for any action under this Section 2.6 of Part One).

 

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SECTION 2.7    The form of the bonds of the 4.25% Series and the certificate of the Trustee to be endorsed on such bonds, respectively, shall be in substantially the form set forth in Exhibit B hereto.

 

PART TWO.

 

REPLACEMENT FUND.

 

SECTION 1.         So long as any of the Bonds are outstanding, the Company will continue to maintain the Replacement Fund set forth in, and in accordance with the applicable terms and conditions now contained in, Part Two of the supplemental indenture dated as of February 1, 1949, and the covenants on the part of the Company contained in such Part Two shall continue and remain in full force and effect, whether or not bonds of the 1979 Series are outstanding and to the same extent as though the words “or any bonds of the 1.75% Series or the 4.25% Series” were inserted after the word “Series” appearing in the second line of Section 1 and the second line of Section 4 of said Part Two of said supplemental indenture dated as of February 1, 1949.

 

SECTION 2.         If at any time (a) any of the Bonds are outstanding and (b) no Outstanding Mortgage Bonds (as defined in Section 1 of Part Three of this supplemental indenture) entitled to the benefit of the Replacement Fund are outstanding and (c) cash which shall have been deposited with the Trustee pursuant to such Replacement Fund shall not within five years from the date of deposit thereof have been paid out, or used or set aside by the Trustee for the payment, purchase or redemption of bonds, pursuant to such Replacement Fund, such cash shall, if in excess of fifty thousand dollars ($50,000), be applied to the redemption of bonds of the 1.75% Series and the 4.25% Series on a pro rata basis as between such series in an aggregate principal amount sufficient to exhaust as nearly as possible the full amount of such cash. Anything in Section 5 of Part Two of the aforesaid supplemental indenture dated as of February 1, 1949, in Section 3 of Part Two of the supplemental indentures dated as of May 1, 1993, July 1, 1993, August 1, 1993, August 20, 1993, May 1, 1994, February 25, 2003, March 21, 2003 and September 23, 2003, in Section 3 of Part Three of the supplemental indenture dated as of March 1, 1990 and in Section 5 of Part Four of the supplemental indenture dated as of March 1, 1993 to the contrary notwithstanding, no cash shall be paid over to the Company thereunder if at the time any bonds of the 1.75% Series or the 4.25% Series are then outstanding, and such cash shall in such event be applied as in this Part Two set forth.

 

SECTION 3.         Whenever all of the Bonds and all of the Outstanding Mortgage Bonds entitled to the benefit of the Replacement Fund shall have been paid, purchased or redeemed, the Trustee shall, upon application of the Company, pay to or upon the order of the Company all cash theretofore deposited with the Trustee pursuant to the provisions of the Replacement Fund and not previously disposed of pursuant to the provisions of the Replacement Fund, and shall deliver to the Company any bonds which shall theretofore have been deposited with the Trustee pursuant to the provisions of the Replacement Fund or paid, purchased or redeemed pursuant to the provisions of the Replacement Fund.

 

11

 

PART THREE.

 

ADDITIONAL COVENANTS OF THE COMPANY

 

SECTION 1.         Whether or not the covenants on the part of the Company contained in Part Three of the supplemental indenture dated as of February 1, 1949 are modified with the consent of the holders of bonds of the 2027 City of Greensboro Series, the 5.30% Series, the 5.25% Series, the 6.00% Series, the 5.10% Series, the 6.05% Series, the 2013 Series C, the 2018 Series C, the 2009 Pollution Control Series, the 2040 Series, the 2020 Series, the 2010A Solid Waste Disposal Series, the 2010B Solid Waste Disposal Series, the 2010C Solid Waste Disposal Series, the 2010D Solid Waste Disposal Series or the 3.90% Series (collectively, the “Outstanding Mortgage Bonds”), such covenants on the part of the Company contained in said Part Three shall continue and remain in full force and effect so long as any of the Bonds are outstanding and to the same extent as though the words “or so long as any bonds of the 1.75% Series or the 4.25% Series are outstanding” were inserted after the words “so long as any of the bonds of the 1979 Series or any bonds of the 2.65% Series are outstanding” wherever such words appear in said Part Three of the supplemental indenture dated as of February 1, 1949.

 

SECTION 2.         Whether or not the second sentence of paragraph (a) of §2.08 of the original indenture (making certain provisions for the definition of the term “net amount” applicable while bonds of the 2.65% Series were outstanding and which was originally set forth in Section 4 of Article One of the supplemental indenture dated as of September 1, 1947 and which is corrected and clarified by Section 2 of Part Four of the supplemental indenture dated as of February 1, 1968) is modified with the consent of the holders of any of the Outstanding Mortgage Bonds, said sentence shall continue and remain in full force and effect so long as any Bonds are outstanding, and with the same force and effect as though said sentence had stated that such provisions were to be applicable so long as any of the bonds of the 1.75% Series or the 4.25% Series are outstanding.

 

PART FOUR.

 

GLOBAL SECURITIES; TRANSFER AND EXCHANGE

 

SECTION 1.         The bonds of the 1.75% Series shall initially be issued in the form of one or more Global Securities registered in the name of the Depositary (which initially shall be The Depository Trust Company) or its nominee. Except under the limited circumstances described below, bonds of the 1.75% Series represented by such Global Security or Global Securities shall not be exchangeable for, and shall not otherwise be issuable as, bonds of the 1.75% Series in definitive form. The Global Securities described in this Part Four may not be transferred except by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or to a successor Depositary or its nominee.

 

None of the Company, the Trustee nor any agent of the Company or the Trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of a Global Security or maintaining, supervising or reviewing any records relating to such beneficial ownership interests.

 

12

 

A Global Security shall be exchangeable for bonds of the 1.75% Series registered in the names of persons other than the Depositary or its nominee only if (i) the Depositary notifies the Company that it is unwilling or unable to continue as a Depositary for such Global Security and no successor Depositary shall have been appointed by the Company within 90 days of receipt by the Company of such notification, or if at any time the Depositary ceases to be a clearing agency registered under the Exchange Act at a time when the Depositary is required to be so registered to act as such Depositary and no successor Depositary shall have been appointed by the Company within 90 days after it becomes aware of such cessation, (ii) an Event of Default has occurred and is continuing with respect to the bonds of the 1.75% Series or (iii) the Company in its sole discretion, and subject to the procedures of the Depositary, determines that such Global Security shall be so exchangeable. Any Global Security that is exchangeable pursuant to the preceding sentence shall be exchangeable for bonds of the 1.75% Series registered in such names as the Depositary shall direct.

 

SECTION 2.         The bonds of the 4.25% Series shall initially be issued in the form of one or more Global Securities registered in the name of the Depositary (which initially shall be The Depository Trust Company) or its nominee. Except under the limited circumstances described below, bonds of the 4.25% Series represented by such Global Security or Global Securities shall not be exchangeable for, and shall not otherwise be issuable as, bonds of the 4.25% Series in definitive form. The Global Securities described in this Part Four may not be transferred except by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or to a successor Depositary or its nominee.

 

None of the Company, the Trustee nor any agent of the Company or the Trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of a Global Security or maintaining, supervising or reviewing any records relating to such beneficial ownership interests.

 

A Global Security shall be exchangeable for bonds of the 4.25% Series registered in the names of persons other than the Depositary or its nominee only if (i) the Depositary notifies the Company that it is unwilling or unable to continue as a Depositary for such Global Security and no successor Depositary shall have been appointed by the Company within 90 days of receipt by the Company of such notification, or if at any time the Depositary ceases to be a clearing agency registered under the Exchange Act at a time when the Depositary is required to be so registered to act as such Depositary and no successor Depositary shall have been appointed by the Company within 90 days after it becomes aware of such cessation, (ii) an Event of Default has occurred and is continuing with respect to the bonds of the 4.25% Series or (iii) the Company in its sole discretion, and subject to the procedures of the Depositary, determines that such Global Security shall be so exchangeable. Any Global Security that is exchangeable pursuant to the preceding sentence shall be exchangeable for bonds of the 4.25% Series registered in such names as the Depositary shall direct.

 

SECTION 3.         Depository Legend.  Each of the Global Securities shall bear the following legend (the “Depository Legend”) on the face thereof:

 

“UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW

 

13

 

YORK CORPORATION (“DTC”), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

 

TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO DTC, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.”

 

SECTION 4.         Transfer and Exchange.

 

(a)           Every bond of the 1.75% Series  or the 4.25% Series presented or surrendered for registration of transfer or for exchange shall (if so required by the Company or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed, by the Holder thereof or his attorney duly authorized in writing.

 

(b)           No service charge shall be made for any registration of transfer or exchange of bonds of the 1.75% Series or the 4.25% Series, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration or transfer or exchange of bonds of the 1.75% Series or the 4.25% Series.

 

SECTION 5.         Definitions.  The following defined terms used herein shall, unless the context otherwise requires, have the meanings specified below. Capitalized terms used herein for which no definition is provided herein shall have the meanings set forth in the Indenture.

 

“Business day” means any day other than a day on which banks in New York City are required or authorized to be closed.

 

“Comparable Treasury Issue” means the United States Treasury security selected by the Quotation Agent as having an actual or interpolated maturity comparable to the remaining term of the Bonds to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of a comparable maturity to the remaining term of such Bonds.

 

“Comparable Treasury Price” means, with respect to any redemption date, (A) the average of the Reference Treasury Dealer Quotations for such redemption date, after excluding

 

14

 

the highest and lowest such Reference Treasury Dealer Quotations, or (B) if the Quotation Agent obtains fewer than four such Reference Treasury Dealer Quotations, the average of all such quotations.

 

“Depositary” means a clearing agency registered under the Exchange Act that is designated to act as Depositary for the bonds of the 1.75% Series or the 4.25% Series, which Depositary shall initially be The Depository Trust Company.

 

“Depository Legend” means a legend set forth in Section 3 of this Part Four.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Global Security” means a Bond in global form.

 

“Holder” means a Person in whose name a bond of the 1.75% Series or the 4.25% Series is registered in the registration books maintained by the Trustee.

 

“Person” means any individual, corporation, partnership, limited liability company or corporation, joint venture, trust, unincorporated organization or government or any agency or political subdivision thereof.

 

“Quotation Agent” means one of the Reference Treasury Dealers appointed by the Company.

 

“Reference Treasury Dealer” means each of Barclays Capital Inc., Citigroup Global Markets Inc., Deutsche Bank Securities Inc. and J.P. Morgan Securities LLC, plus one other financial institution appointed by the Company at the time of any redemption or their respective affiliates or successors which are primary U.S. Government securities dealers in the United States (a “Primary Treasury Dealer”); provided, however, that if any of the foregoing or their affiliates or successors shall cease to be a Primary Treasury Dealer, the Company shall substitute therefor another Primary Treasury Dealer.

 

“Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Quotation Agent, of the bid and asked prices for the applicable Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Quotation Agent by such Reference Treasury Dealer at 5:00 p.m., New York City time, on the third business day preceding such redemption date.

 

“Treasury Rate” means, with respect to any redemption date, the rate per annum equal to the semi-annual equivalent yield to maturity or interpolated maturity (on a day count basis) of the applicable Comparable Treasury Issue, assuming a price for such Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the applicable Comparable Treasury Price for such redemption date.

 

15

 

PART FIVE.

 

MISCELLANEOUS.

 

SECTION 1.

 

(a)           For the purposes of §2.10 of the Indenture and for the purposes of any modification of the provisions of the Replacement Fund referred to in Part Two of this supplemental indenture, the covenants and provisions on the part of the Company which are set forth or incorporated in Part Two of this supplemental indenture shall be for the benefit only of the holders of the bonds of the 1.75% Series and the 4.25% Series. Such covenants and provisions shall remain in force and be applicable only so long as any bonds of the 1.75% Series or the 4.25% Series shall be outstanding, and, subject to the provisions of paragraph (2) of subdivision (c) of §10.01 of the Indenture, any such covenants and provisions may be modified with respect to the bonds of the 1.75% Series or the 4.25% Series with the consent, in writing or by vote at a bondholders’ meeting of the holders of sixty-six and two-thirds per cent (66 2/3%) of the principal amount of the bonds of the 1.75% Series or the 4.25% Series, as the case may be, at the time outstanding and without the consent of the holders of any other bonds then outstanding under the Indenture; provided that no such consent shall be effective to waive any past default under such covenants and provisions, and its consequences, unless the consent of the holders of at least a majority in principal amount of all bonds then outstanding under the Indenture is obtained. Such covenants shall be deemed to be additional covenants and none of them shall affect or derogate from, or relieve the Company from, its obligation to comply with any of the other covenants, conditions, requirements or provisions of the Indenture or any other supplemental indenture.

 

(b)           For the purposes of §2.10 of the Indenture and for the purposes of any modification of the provisions of Part Three of this supplemental indenture, the covenants and provisions on the part of the Company which are set forth or incorporated in said Part Three shall be for the benefit only of the holders of the bonds of the 1.75% Series and the 4.25% Series. Such covenants and provisions shall remain in force and be applicable only so long as any bonds of the 1.75% Series or the 4.25% Series shall be outstanding, and, subject to the provisions of paragraph (2) of subdivision (c) of §10.01 of the Indenture, any such covenants and provisions may be modified with respect to the bonds of the 1.75% Series or the 4.25% Series with the consent, in writing or by vote at a bondholders’ meeting of the holders of sixty-six and two-thirds per cent (66 2/3 %) of the principal amount of the bonds of the 1.75% Series or the 4.25% Series, as the case may be, at the time outstanding and without the consent of the holders of any other bonds then outstanding under the Indenture; provided that no such consent shall be effective to waive any past default under such covenants and provisions, and its consequences, unless the consent of the holders of at least a majority in principal amount of all bonds then outstanding under the Indenture is obtained. Such covenants shall be deemed to be additional covenants and none of them shall affect or derogate from, or relieve the Company from, its obligation to comply with any of the other covenants, conditions, requirements or provisions of the Indenture or any other supplemental indenture.

 

16

 

SECTION 2.         All terms contained in this supplemental indenture shall, except as specifically provided herein or except as the context may otherwise require, have the meanings given to such terms in the Indenture.

 

SECTION 3.         In case any one or more of the provisions contained in this supplemental indenture should be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision contained in this supplemental indenture, and, to the extent, but only to the extent, that such provision is invalid, illegal or unenforceable, this supplemental indenture shall be construed as if such provision had never been contained herein.

 

SECTION 4.         The Trustee hereby accepts the trusts herein declared and provided upon the terms and conditions in the Indenture set forth.

 

SECTION 5.         This supplemental indenture may be executed in several counterparts, each of which shall be an original, and all collectively but one instrument.

 

SECTION 6.         In addition to the amendment provisions of the Indenture, the terms and conditions of this supplemental indenture and the bonds of the 1.75% Series or the 4.25% Series may be modified, amended or supplemented by the Company and the Trustee, without the consent of the holders of the bonds of the 1.75% Series or the 4.25% Series, and if not inconsistent with the Indenture, to cure ambiguities in this supplemental indenture or the bonds of the 1.75% Series or the 4.25% Series, or correct defects or inconsistencies in the provisions of this supplemental indenture or the bonds of the 1.75% Series or the 4.25% Series or to provide for such appropriate additional provisions in this supplemental indenture or the bonds of the 1.75% Series or the 4.25% Series as are necessary for certificated bonds to be issued in lieu of Global Securities or to reflect additional provisions related to the issuance of Global Securities (including changes in the procedures of the Depositary).

 

17

 

IN WITNESS WHEREOF, Duke Energy Carolinas, LLC, the party of the first part hereto, has caused this supplemental indenture to be signed in its name by one of its Senior Vice Presidents and its company seal to be hereunto affixed, and the same to be attested by one of its Assistant Secretaries, and The Bank of New York Mellon Trust Company, N.A., the party of the second part hereto, in token of its acceptance of the trust hereby created, has caused this supplemental indenture to be signed in its name by one of its Vice Presidents and its corporate seal to be hereunto affixed, and the same to be attested by one of its Senior Associates, all as of the day and year first above written.

 

 

	
 
    	
DUKE   ENERGY CAROLINAS, LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   David S. Maltz
    
	
 
    	
 
    	
Name:   
    	
David   S. Maltz
    
	
 
    	
 
    	
Title:
    	
Vice   President
    

 

	
[COMPANY   SEAL]
    	
 
    
	
 
    	
 
    
	
ATTEST:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
  /s/   Robert T. Lucas
    	
 
    	
 
    
	
Name:
    	
Robert   T. Lucas III
    	
 
    
	
Title:
    	
Assistant   Secretary
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
Signed,   sealed, executed, acknowledged and delivered by Duke Energy Carolinas, LLC,   in the presence of:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
  /s/   Delcia S. Dunlap
    	
 
    	
 
    
	
Delcia   S. Dunlap
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
  /s/   Jacqueline Williams
    	
 
    	
 
    
	
Jacqueline   Williams
    	
 
    
				

 

18

 

	
 
    	
The   Bank of New York Mellon Trust Company, N.A., as Trustee
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Van K. Brown
    
	
 
    	
 
    	
Name:
    	
Van   K. Brown
    
	
 
    	
 
    	
Title:
    	
Vice   President
    
	
 
    	
 
    
	
 
    	
 
    
	
ATTEST:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
  /s/   Lee Ann Willis
    	
 
    	
 
    
	
Name:
    	
Lee   Ann Willis
    	
 
    
	
Title:
    	
Senior   Associate
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
Signed,   sealed, executed, acknowledged and delivered by The Bank of New York Mellon   Trust Company, N.A., in the presence of:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
  /s/   Zac Vaughn
    	
 
    	
 
    
	
Zac   Vaughn
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
  /s/   Reda Sabaliauskaite
    	
 
    	
 
    
	
Reda   Sabaliauskaite
    	
 
    
						

 

19

 

	
State   of Georgia
    	
)
    
	
 
    	
)   ss.:
    
	
County   of Dekalb
    	
)
    

 

Personally appeared before me, Zac Vaughn, and made oath that he saw Van K. Brown, a, Vice President and Lee Ann Willis, a Senior Associate, respectively, of The Bank of New York Mellon Trust Company, N.A., sign, attest and affix hereto the corporate seal of said The Bank of New York Mellon Trust Company, N.A., and, as the act and deed of said corporation, deliver the within written and foregoing deed, and that he, with Reda Sabaliauskaite, witnessed the execution thereof.

 

	
 
    	
  /s/   Zac Vaughn
    
	
 
    	
Zac   Vaughn
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Sworn   and subscribed before me this 8th day of December, 2011.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
  /s/   David Dawes
    
	
 
    	
David   Dawes
    
	
 
    	
Notary   Public
    
	
 
    	
Commission   Expires 2/9/15
    

 

[NOTARIAL SEAL]

 

	
State   of Georgia
    	
)
    
	
 
    	
)   ss.:
    
	
County   of Dekalb
    	
)
    

 

I, David Dawes, a Notary Public in and for the State and County aforesaid, certify that Lee Ann Willis personally came before me this day and acknowledged that she is a Senior Associate of The Bank of New York Mellon Trust Company, N.A., a national banking association, and that, by authority duly given and as the act of the corporation, the foregoing instrument was signed in its name by one of its Vice Presidents, sealed with its corporate seal, and attested by herself as one of its Senior Associates.

 

Witness may hand and official seal, this 8th day of December, 2011.

 

	
 
    	
  /s/   David Dawes
    
	
 
    	
David   Dawes
    
	
 
    	
Notary   Public
    
	
 
    	
Commission   Expires 2/9/15
    

 

[NOTARIAL SEAL]

 

20

 

	
State   of North Carolina
    	
)
    
	
 
    	
)   ss.:
    
	
County   of Mecklenburg
    	
)
    

 

I, Jennie M. Raine, a notary public of Mecklenburg County, North Carolina, certify that Delcia S. Dunlap personally appeared before me this day, and being duly sworn, stated that in her presence David S. Maltz executed the foregoing instrument, and that she, with Jacqueline Williams, witnessed the execution thereof.

 

Witness my hand and official seal, this the 8th day of December, 2011.

 

	
 
    	
  /s/   Delcia S. Dunlap
    
	
 
    	
Delcia   S. Dunlap
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
  /s/   Jennie M. Raine
    
	
 
    	
Name:   Jennie M. Raine
    
	
 
    	
Notary   Public
    
	
 
    	
 
    
	
 
    	
My   Commission Expires August 12, 2016
    

 

[NOTARIAL SEAL]

 

	
State   of North Carolina
    	
)
    
	
 
    	
)   ss.:
    
	
County   of Mecklenburg
    	
)
    

 

I, Jennie M. Raine, a Notary Public in and for the State and County aforesaid, certify that Robert T. Lucas III personally came before me this day and acknowledged that he is an Assistant Secretary of Duke Energy Carolinas, LLC, a North Carolina limited liability company, and that, by authority duly given and as the act of the company, the foregoing instrument was signed in its name by one of its Vice Presidents, sealed with its seal, and attested by himself as one of its Assistant Secretaries.

 

Witness my hand and official seal, this the 8th day of December, 2011.

 

	
 
    	
  /s/   Jennie M. Raine
    
	
 
    	
Name:   Jennie M. Raine
    
	
 
    	
Notary   Public
    
	
 
    	
 
    
	
 
    	
My   Commission Expires August 12, 2016
    

 

[NOTARIAL SEAL]

 

21

 

EXHIBIT A

 

FORM OF DUKE ENERGY CAROLINAS, LLC

FIRST AND REFUNDING MORTGAGE BOND, 1.75% SERIES DUE 2016

 

[FACE SIDE OF BOND]

 

[DEPOSITORY LEGEND, IF APPLICABLE]

 

DUKE ENERGY CAROLINAS, LLC

 

FIRST AND REFUNDING MORTGAGE BOND,

1.75% SERIES DUE 2016

 

	
No.
    	
$
    
	
CUSIP   No.
    	
26442CAL8
    
	
ISIN
    	
US26442CAL81
    

 

Duke Energy Carolinas, LLC, a North Carolina limited liability company (hereinafter called the “Company”), for value received, hereby promises to pay to                                or registered assigns, the principal sum of                                Dollars on December 15, 2016 in any coin or currency of the United States of America which at the time of payment shall be legal tender for the payment of public and private debts, at the office or agency of the Company in the Borough of Manhattan, The City of New York, and to pay interest thereon at said office or agency from the interest payment date next preceding the date hereof to which interest on outstanding bonds of this series has been paid (unless the date hereof is prior to June 15, 2012, in which case from December 8, 2011, and unless the date hereof is subsequent to a record date (as defined below) and prior to the next succeeding June 15 or December 15, in which case from the next succeeding June 15 or December 15, as the case may be), at the rate of 1.75% per annum, in like coin or currency, semi-annually on June 15 and December 15 in each year, commencing June 15, 2012, until the principal hereof shall become due and payable. Such interest payments shall be made to the person in whose name this bond is registered at the close of business on the June 1 or December 1, whether or not a business day, next preceding each semi-annual interest payment date (a “record date”) (subject to certain exceptions provided in the Indenture hereinafter mentioned), at his last address as it shall appear upon the bond register of the Company.

 

The provisions of this bond are continued on the reverse hereof and such continued provisions shall for all purposes have the same effect as though fully set forth in this place.

 

This bond shall not become or be valid or obligatory for any purpose until the Trustee shall have signed the form of certificate endorsed hereon.

 

A-1

 

IN WITNESS WHEREOF, the Company has caused this instrument to be signed in its name by its President or one of its Vice Presidents, manually or by facsimile signature, and its company seal to be hereto affixed, or a facsimile thereof to be hereon engraved, lithographed or printed, and to be attested by the manual or facsimile signature of its Secretary or one of its Assistant Secretaries.

 

	
Dated:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
DUKE   ENERGY CAROLINAS, LLC
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
 
    	
Title:
    
	
 
    	
 
    	
 
    
	
ATTEST:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    

 

CERTIFICATE OF AUTHENTICATION

 

This bond is one of the bonds, of the series designated therein, described in the within-mentioned Indenture.

 

	
 
    	
The   Bank of New York Mellon Trust Company, N.A., as Trustee
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Authorized   Signatory
    

 

A-2

 

[REVERSE SIDE OF BOND]

 

This bond is one of the bonds of a series, designated specially as First and Refunding Mortgage Bonds, 1.75% Series due 2016, of an authorized issue of bonds of the Company, without limit as to aggregate principal amount, designated generally as First and Refunding Mortgage Bonds, all issued and to be issued under and equally and ratably secured by a First and Refunding Mortgage dated as of December 1, 1927, duly executed by Duke Power Company, a New Jersey corporation (hereinafter called the “New Jersey Company”), to Guaranty Trust Company of New York, as Trustee (The Bank of New York Mellon Trust Company, N.A., as successor trustee), as supplemented and modified by indentures supplemental thereto, including a supplemental indenture dated December 8, 2011 providing for said series (said First and Refunding Mortgage as so supplemented and modified being hereinafter referred to as the “Indenture”), to which Indenture reference is made for a description of the property mortgaged, the nature and extent of the security, the rights of the holders of the bonds in respect thereof, the terms and conditions upon which the bonds are secured and the restrictions subject to which additional bonds secured thereby may be issued. To the extent permitted by, and as provided in, the Indenture, modifications or alterations of the Indenture, or of any indenture supplemental thereto, and of the rights and obligations of the Company and of the holders of the bonds, may be made with the consent of the Company by the affirmative vote, or with the written consent, of the holders of not less than 66 2/3% in principal amount of the bonds then outstanding, and by the affirmative vote, or with the written consent, of the holders of not less than 66 2/3% in principal amount of the bonds of any series then outstanding and affected by such modification or alteration, in case one or more but less than all of the series of bonds then outstanding under the Indenture are so affected, evidenced, in each case, as provided in the Indenture; provided that any supplemental indenture may be modified in accordance with the provisions contained therein for its modification; and provided, further, that no such modification or alteration shall be made which will affect the terms of payment of the principal of, or interest or premium on, this bond, or the right of any bondholder to institute suit for the enforcement of any such payment on or after the respective due dates expressed in this bond, or reduce the percentage required for the taking of any such action. Any such affirmative vote of, or written consent given by, any holder of this bond is binding upon all subsequent holders hereof as provided in the Indenture.

 

In case an event of default as defined in the Indenture shall occur, the principal of all the bonds outstanding thereunder may become or be declared due and payable at the time, in the manner and with the effect provided in the Indenture.

 

The bonds of this series may be redeemed at the option of the Company, in whole or in part at any time and from time to time, at a redemption price equal to the greater of (1) 100% of the principal amount of the bonds of this series to be redeemed and (2) the sum of the present values of the remaining scheduled payments of principal and interest on such bonds (exclusive of interest accrued to the redemption date), discounted to the redemption date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 15 basis points, plus, in either case, accrued and unpaid interest on the principal amount being redeemed to the date of such redemption.

 

A-3

 

“Business day” means any day other than a day on which banks in New York City are required or authorized to be closed.

 

“Comparable Treasury Issue” means the United States Treasury security selected by the Quotation Agent as having an actual or interpolated maturity comparable to the remaining term of the bonds of this series to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of a comparable maturity to the remaining term of such bonds.

 

“Comparable Treasury Price” means, with respect to any redemption date, (A) the average of the Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest such Reference Treasury Dealer Quotations, or (B) if the Quotation Agent obtains fewer than four such Reference Treasury Dealer Quotations, the average of all such quotations.

 

“Quotation Agent” means one of the Reference Treasury Dealers appointed by the Company.

 

“Reference Treasury Dealer” means each of Barclays Capital Inc., Citigroup Global Markets Inc., Deutsche Bank Securities Inc. and J.P. Morgan Securities LLC, plus one other financial institution appointed by the Company at the time of any redemption or their respective affiliates or successors which are primary U.S. Government securities dealers in the United States (a “Primary Treasury Dealer”); provided, however, that if any of the foregoing or their affiliates or successors shall cease to be a Primary Treasury Dealer, the Company shall substitute therefor another Primary Treasury Dealer.

 

“Reference Treasury Dealer Quotation” means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Quotation Agent, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Quotation Agent by such Reference Treasury Dealer at 5:00 p.m., New York City time, on the third business day preceding such redemption date.

 

“Treasury Rate” means, with respect to any redemption date, the rate per annum equal to the semi-annual equivalent yield to maturity or interpolated maturity (on a day count basis) of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date.

 

The bonds of this series are also subject to redemption for the Replacement Fund for bonds of this series provided for in the supplemental indenture dated as of December 8, 2011, providing for this series, or upon application of moneys arising from a taking of any of the mortgaged property by eminent domain or similar action, at any time or from time to time prior to maturity, at 100% of their principal amount, in each case together with accrued interest up to, but not including, the date fixed for redemption.

 

A-4

 

Redemption is in every case to be effected at the office or agency of the Company in the Borough of Manhattan, The City of New York, upon at least thirty, but not more than sixty, days’ prior notice, given by mail as more fully provided in the Indenture.

 

If this bond or any portion hereof ($2,000 and integral multiples of $1,000 in excess thereof) is called for redemption and payment is duly provided, this bond or such portion thereof shall cease to bear interest from and after the date fixed for such redemption.

 

This bond is transferable, as provided in the Indenture, by the registered owner hereof in person or by duly authorized attorney, at the office or agency of the Company in the Borough of Manhattan, The City of New York, upon surrender and cancellation of this bond, and thereupon a new bond of the same series and of like aggregate principal amount will be issued to the transferee in exchange herefor as provided in the Indenture; or the registered owner of this bond, at his option, may surrender the same for cancellation at said office or agency of the Company and receive in exchange herefor the same aggregate principal amount of bonds of the same series of authorized denominations; all subject to the terms of the Indenture but without payment of any charges other than a sum sufficient to reimburse the Company for any stamp taxes or other governmental charges incident thereto.

 

This bond is a company obligation only and no recourse whatsoever, either directly or through the Company or any trustee, receiver, assignee or any other person, shall be had for the payment of the principal of or premium, if any, or interest on this bond, or for the enforcement of any claim based hereon, or otherwise in respect hereof or of the Indenture, against any promoter, subscriber to the capital stock, incorporator, or any past, present or future stockholder, member, officer or director of the Company as such, or of any successor or predecessor corporation or entity, whether by virtue of any constitutional provision, statute or rule of law, or by the enforcement of any assessment, penalty, subscription or otherwise, any and all such liability of promoters, subscribers, incorporators, stockholders, members, officers and directors being waived and released by each successive holder hereof by the acceptance of this bond, and as a part of the consideration for the issue hereof, and being likewise waived and released by the terms of the Indenture.

 

[END OF BOND FORM]

 

A-5

 

ABBREVIATIONS

 

The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or regulations:

 

	
TEN   COM—as tenants in common
    	
 
    	
UNIF   GIFT MIN ACT-
    	
 
    	
Custodian
    	
 
    
	
 
    	
 
    	
 
    	
(Cust)
    	
 
    	
(Minor)
    

 

TEN ENT —as tenants by the entireties

 

	
JT   TEN—as joint tenants with rights of
    	
 
    	
under Uniform Gifts to
    
	
survivorship   and not as tenants in common
    	
 
    	
Minors   Act
    	
 
    
	
 
    	
 
    	
 
    	
(State)
    

 

Additional abbreviations may also be used though not on the above list.

 

FOR VALUE RECEIVED, the undersigned hereby sell(s) and transfer(s) unto (please insert Social Security or other identifying number of assignee)

 

PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE OF ASSIGNEE

 

the within bond and all rights thereunder, hereby irrevocably constituting and appointing

 

agent to transfer said bond on the books of the Company, with full power of substitution in the premises.

 

	
Dated:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
NOTICE:   The signature to this assignment must correspond with the name as written   upon the face of the within instrument in every particular without alteration   or enlargement, or any change whatever.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Signature   Guarantee:
    	
 
    

 

A-6

 

SIGNATURE GUARANTEE

 

Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Trustee, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Trustee in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

 

A-7

 

EXHIBIT B

 

FORM OF DUKE ENERGY CAROLINAS, LLC

FIRST AND REFUNDING MORTGAGE BOND, 4.25% SERIES DUE 2041

 

[FACE SIDE OF BOND]

 

[DEPOSITORY LEGEND, IF APPLICABLE]

 

DUKE ENERGY CAROLINAS, LLC

 

FIRST AND REFUNDING MORTGAGE BOND,

4.25% SERIES DUE 2041

 

	
No.
    	
 
    	
 
    	
$
    
	
CUSIP   No.
    	
26442CAM6
    	
 
    	
 
    
	
ISIN
    	
US26442CAM64
    	
 
    	
 
    

 

Duke Energy Carolinas, LLC, a North Carolina limited liability company (hereinafter called the “Company”), for value received, hereby promises to pay to                                or registered assigns, the principal sum of                                Dollars on December 15, 2041 in any coin or currency of the United States of America which at the time of payment shall be legal tender for the payment of public and private debts, at the office or agency of the Company in the Borough of Manhattan, The City of New York, and to pay interest thereon at said office or agency from the interest payment date next preceding the date hereof to which interest on outstanding bonds of this series has been paid (unless the date hereof is prior to June 15, 2012, in which case from December 8, 2011, and unless the date hereof is subsequent to a record date (as defined below) and prior to the next succeeding June 15 or December 15, in which case from the next succeeding June 15 or December 15, as the case may be), at the rate of  4.25% per annum, in like coin or currency, semi-annually on June 15 and December 15 in each year, commencing June 15, 2012, until the principal hereof shall become due and payable. Such interest payments shall be made to the person in whose name this bond is registered at the close of business on the June 1 or December 1, whether or not a business day, next preceding each semi-annual interest payment date (a “record date”) (subject to certain exceptions provided in the Indenture hereinafter mentioned), at his last address as it shall appear upon the bond register of the Company.

 

The provisions of this bond are continued on the reverse hereof and such continued provisions shall for all purposes have the same effect as though fully set forth in this place.

 

This bond shall not become or be valid or obligatory for any purpose until the Trustee shall have signed the form of certificate endorsed hereon.

 

B-1

 

IN WITNESS WHEREOF, the Company has caused this instrument to be signed in its name by its President or one of its Vice Presidents, manually or by facsimile signature, and its company seal to be hereto affixed, or a facsimile thereof to be hereon engraved, lithographed or printed, and to be attested by the manual or facsimile signature of its Secretary or one of its Assistant Secretaries.

 

Dated:

 

	
 
    	
 
    	
DUKE   ENERGY CAROLINAS, LLC
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
 
    	
Title:
    
	
 
    	
 
    	
 
    
	
ATTEST:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    

 

CERTIFICATE OF AUTHENTICATION

 

This bond is one of the bonds, of the series designated therein, described in the within-mentioned Indenture.

 

	
 
    	
 
    	
The   Bank of New York Mellon Trust Company, N.A., as Trustee
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    	
Authorized   Signatory
    

 

B-2

 

[REVERSE SIDE OF BOND]

 

This bond is one of the bonds of a series, designated specially as First and Refunding Mortgage Bonds, 4.25% Series due 2041, of an authorized issue of bonds of the Company, without limit as to aggregate principal amount, designated generally as First and Refunding Mortgage Bonds, all issued and to be issued under and equally and ratably secured by a First and Refunding Mortgage dated as of December 1, 1927, duly executed by Duke Power Company, a New Jersey corporation (hereinafter called the “New Jersey Company”), to Guaranty Trust Company of New York, as Trustee (The Bank of New York Mellon Trust Company, N.A., as successor trustee), as supplemented and modified by indentures supplemental thereto, including a supplemental indenture dated December 8, 2011 providing for said series (said First and Refunding Mortgage as so supplemented and modified being hereinafter referred to as the “Indenture”), to which Indenture reference is made for a description of the property mortgaged, the nature and extent of the security, the rights of the holders of the bonds in respect thereof, the terms and conditions upon which the bonds are secured and the restrictions subject to which additional bonds secured thereby may be issued. To the extent permitted by, and as provided in, the Indenture, modifications or alterations of the Indenture, or of any indenture supplemental thereto, and of the rights and obligations of the Company and of the holders of the bonds, may be made with the consent of the Company by the affirmative vote, or with the written consent, of the holders of not less than 66 2/3% in principal amount of the bonds then outstanding, and by the affirmative vote, or with the written consent, of the holders of not less than 66 2/3% in principal amount of the bonds of any series then outstanding and affected by such modification or alteration, in case one or more but less than all of the series of bonds then outstanding under the Indenture are so affected, evidenced, in each case, as provided in the Indenture; provided that any supplemental indenture may be modified in accordance with the provisions contained therein for its modification; and provided, further, that no such modification or alteration shall be made which will affect the terms of payment of the principal of, or interest or premium on, this bond, or the right of any bondholder to institute suit for the enforcement of any such payment on or after the respective due dates expressed in this bond, or reduce the percentage required for the taking of any such action. Any such affirmative vote of, or written consent given by, any holder of this bond is binding upon all subsequent holders hereof as provided in the Indenture.

 

In case an event of default as defined in the Indenture shall occur, the principal of all the bonds outstanding thereunder may become or be declared due and payable at the time, in the manner and with the effect provided in the Indenture.

 

At any time before June 15, 2041, the bonds of this series may be redeemed at the option of the Company, in whole or in part and from time to time, at a redemption price equal to the greater of (1) 100% of the principal amount of the bonds of this series to be redeemed and (2) the sum of the present values of the remaining scheduled payments of principal and interest on such bonds (exclusive of interest accrued to the redemption date), discounted to the redemption date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 20 basis points, plus, in either case, accrued and unpaid interest on the principal amount being redeemed to the date of such redemption.

 

At any time on or after June 15, 2041, the bonds of this series may be redeemed at the option of the Company, in whole or in part and from time to time, at a redemption price equal to 

 

B-3

 

100% of the principal amount of the bonds of this series to be redeemed plus accrued and unpaid interest on the principal amount being redeemed to the date of such redemption.

 

“Business day” means any day other than a day on which banks in New York City are required or authorized to be closed.

 

“Comparable Treasury Issue” means the United States Treasury security selected by the Quotation Agent as having an actual or interpolated maturity comparable to the remaining term of the bonds of this series to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of a comparable maturity to the remaining term of such bonds.

 

“Comparable Treasury Price” means, with respect to any redemption date, (A) the average of the Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest such Reference Treasury Dealer Quotations, or (B) if the Quotation Agent obtains fewer than four such Reference Treasury Dealer Quotations, the average of all such quotations.

 

“Quotation Agent” means one of the Reference Treasury Dealers appointed by the Company.

 

“Reference Treasury Dealer” means each of Barclays Capital Inc., Citigroup Global Markets Inc., Deutsche Bank Securities Inc. and J.P. Morgan Securities LLC, plus one other financial institution appointed by the Company at the time of any redemption or their respective affiliates or successors which are primary U.S. Government securities dealers in the United States (a “Primary Treasury Dealer”); provided, however, that if any of the foregoing or their affiliates or successors shall cease to be a Primary Treasury Dealer, the Company shall substitute therefor another Primary Treasury Dealer.

 

“Reference Treasury Dealer Quotation” means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Quotation Agent, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Quotation Agent by such Reference Treasury Dealer at 5:00 p.m., New York City time, on the third business day preceding such redemption date.

 

“Treasury Rate” means, with respect to any redemption date, the rate per annum equal to the semi-annual equivalent yield to maturity or interpolated maturity (on a day count basis) of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date.

 

The bonds of this series are also subject to redemption for the Replacement Fund for bonds of this series provided for in the supplemental indenture dated as of December 8, 2011, providing for this series, or upon application of moneys arising from a taking of any of the mortgaged property by eminent domain or similar action, at any time or from time to time prior 

 

B-4

 

to maturity, at 100% of their principal amount, in each case together with accrued interest up to, but not including, the date fixed for redemption.

 

Redemption is in every case to be effected at the office or agency of the Company in the Borough of Manhattan, The City of New York, upon at least thirty, but not more than sixty, days’ prior notice, given by mail as more fully provided in the Indenture.

 

If this bond or any portion hereof ($2,000 and integral multiples of $1,000 in excess thereof) is called for redemption and payment is duly provided, this bond or such portion thereof shall cease to bear interest from and after the date fixed for such redemption.

 

This bond is transferable, as provided in the Indenture, by the registered owner hereof in person or by duly authorized attorney, at the office or agency of the Company in the Borough of Manhattan, The City of New York, upon surrender and cancellation of this bond, and thereupon a new bond of the same series and of like aggregate principal amount will be issued to the transferee in exchange herefor as provided in the Indenture; or the registered owner of this bond, at his option, may surrender the same for cancellation at said office or agency of the Company and receive in exchange herefor the same aggregate principal amount of bonds of the same series of authorized denominations; all subject to the terms of the Indenture but without payment of any charges other than a sum sufficient to reimburse the Company for any stamp taxes or other governmental charges incident thereto.

 

This bond is a company obligation only and no recourse whatsoever, either directly or through the Company or any trustee, receiver, assignee or any other person, shall be had for the payment of the principal of or premium, if any, or interest on this bond, or for the enforcement of any claim based hereon, or otherwise in respect hereof or of the Indenture, against any promoter, subscriber to the capital stock, incorporator, or any past, present or future stockholder, member, officer or director of the Company as such, or of any successor or predecessor corporation or entity, whether by virtue of any constitutional provision, statute or rule of law, or by the enforcement of any assessment, penalty, subscription or otherwise, any and all such liability of promoters, subscribers, incorporators, stockholders, members, officers and directors being waived and released by each successive holder hereof by the acceptance of this bond, and as a part of the consideration for the issue hereof, and being likewise waived and released by the terms of the Indenture.

 

[END OF BOND FORM]

 

B-5

 

ABBREVIATIONS

 

The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or regulations:

 

	
TEN   COM—as tenants in common
    	
 
    	
UNIF   GIFT MIN ACT-
    	
 
    	
Custodian
    	
 
    
	
 
    	
 
    	
 
    	
(Cust)
    	
 
    	
(Minor)
    

 

TEN ENT —as tenants by the entireties

 

	
JT   TEN—as joint tenants with rights of
    	
 
    	
under Uniform Gifts to
    
	
survivorship   and not as tenants in common
    	
 
    	
Minors   Act
    	
 
    
	
 
    	
 
    	
 
    	
(State)
    

 

Additional abbreviations may also be used though not on the above list.

 

FOR VALUE RECEIVED, the undersigned hereby sell(s) and transfer(s) unto (please insert Social Security or other identifying number of assignee)

 

PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE OF ASSIGNEE

 

the within bond and all rights thereunder, hereby irrevocably constituting and appointing

 

agent to transfer said bond on the books of the Company, with full power of substitution in the premises.

 

 

	
Dated:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
NOTICE:   The signature to this assignment must correspond with the name as written   upon the face of the within instrument in every particular without alteration   or enlargement, or any change whatever.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Signature   Guarantee:
    	
 
    

 

B-6

 

SIGNATURE GUARANTEE

 

Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Trustee, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Trustee in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

 

B-7Exhibit 10.1

 

ROCKWOOD HOLDINGS, INC.
 RESTRICTED STOCK UNIT AWARD AGREEMENT

 

THIS AGREEMENT (the “Agreement”), is made, effective as of December 2, 2011 (the “Grant Date”) between Rockwood Holdings, Inc., a Delaware corporation (hereinafter called the “Company”), and [NAME], an employee of the Company or an Affiliate, hereinafter referred to as the “Employee”.  For purposes of this Agreement, capitalized terms not otherwise defined above or below, or in the 2009 Stock Incentive Plan for Rockwood Holdings, Inc. and Subsidiaries (the “Plan”), shall have the meanings set forth in Appendix A attached to this Agreement and incorporated by reference herein.

 

WHEREAS, the Company desires to grant the Employee performance-based restricted stock unit awards as provided for hereunder (the “Restricted Stock Unit Awards”), ultimately payable in shares of common stock of the Company, par value $0.01 per share (the “Common Stock”), pursuant to the Plan, the terms of which are hereby incorporated by reference and made a part of this Agreement; and

 

WHEREAS, the committee of the Company’s Board appointed to administer the Plan (the “Committee”) has determined that it would be to the advantage and best interest of the Company and its shareholders to grant the shares of Common Stock that may be issued hereunder to the Employee as an incentive for increased efforts during his term of office with the Company or an Affiliate, and has advised the Company thereof and instructed the undersigned officers to grant said Restricted Stock Unit Awards.

 

NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto do hereby agree as follows:

 

1.             Grant of the Restricted Stock Units.  Subject to the terms and conditions of the Plan and the additional terms and conditions set forth in this Agreement, the Company hereby grants to the Employee the opportunity to vest in performance-based Restricted Stock Unit Awards, which shall vest in accordance with Section 2(a) herein (the “RSUs”) up to a number of RSUs equal to the product of (x) 1.5 multiplied by (y) your Target RSU Award (as defined below), which shall be rounded up to the nearest whole number of RSUs in the event that the such product results in a fractional number of RSUs (the “Maximum RSU Award”).  Your Target RSU Award shall be [insert target number of RSUs] RSUs (the “Target RSU Award”).(1)  An “RSU” represents the right to receive one share of Common Stock.  The RSUs shall vest and become nonforfeitable in accordance with Section 2 hereof.

 

(1)  Target RSU Award will be based on the desired grant value divided by the product of (1) the average closing stock price for the 20 trading days leading up to and including the Grant Date and (2) the value of each performance share as a percentage of the closing stock price on the Grant Date.

 

 

2.             Vesting.

 

(a)           RSUs.  The vesting of the RSUs shall be subject to the satisfaction of the Code of Ethics Requirement, as well as the conditions set forth in both subsection (i)(A), (B) or (C), as applicable, and subsection (ii) of this Section 2(a):

 

(i)            Service Vesting Requirement.

 

(A)          Unless otherwise provided in this Agreement, so long as the Employee continues to be employed by the Company or its Subsidiaries through January 1, 2015 (the “Vesting Date”), the Employee shall, on the Vesting Date, vest in a number of RSUs (not to exceed the number of RSUs provided in the Maximum RSU Award set forth in Section 1 above) determined based on the formulas set forth in Section 2(a)(ii) below.

 

(B)           If, prior to the Vesting Date (and absent the occurrence of any Change in Control), the Employee’s employment with Company and its Subsidiaries is terminated for any reason (other than due to the Employee’s death, Disability or Retirement), then the RSUs shall be forfeited by the Employee without consideration as of such termination date and this Agreement shall terminate without payment in respect thereof.  Notwithstanding the previous sentence, if, prior to the Vesting Date (and absent the occurrence of any Change in Control), the Employee’s employment with the Company and its Subsidiaries is terminated by the Company and its Subsidiaries other than for Cause, then the Committee has the sole discretion to elect whether this Agreement will remain outstanding and, as of the Vesting Date, whether the Employee will become entitled to receive a distribution of a number of shares of Common Stock equal to the product of (x) the number of RSUs in which the Employee would have become vested pursuant to Section 2(a)(ii) below, if the Employee had remained employed with the Company or a Subsidiary through the Vesting Date, and (y) a fraction, the numerator of which is equal to the number of days between (and including) the Grant Date and the date such employment so terminates, and the denominator of which is equal to 1097 (such fraction, the “Proration Factor”) (such shares, the “Prorated RSU Shares”).

 

(C)           If, during the Performance Period (and absent the occurrence of any Change in Control), the Employee’s employment with the Company and its Subsidiaries is terminated by the Employee due to the Employee’s death, Disability or Retirement, then this Agreement shall remain outstanding and, as of the Vesting Date, the Employee shall become entitled to receive a distribution of Prorated RSU Shares (determined based on the formula set forth in Section 2(a)(i)(B) above); provided that, in the event of a termination by the Employee due to Retirement, the distribution of Prorated RSU Shares are conditioned upon compliance with any non-compete, non-solicitation, non-disclosure and non-disparagement restrictions in any agreement or policy with the Company or its Affiliates during the remaining portion of the Performance Period and violation of any such restrictions shall result in immediate forfeiture of the entire amount of Prorated RSU Shares.

 

(ii)           Performance Vesting Requirement.

 

(A)          The RSUs shall, so long as the Employee remains employed with the Company or its Subsidiaries through the Vesting Date (or the provisions of Section 2(a)(i)

 

2

 

otherwise apply), vest on the Vesting Date in an amount equal to the product of (1) the Target RSU Award and (2) the applicable Total Shareholder Return Multiplier, as determined under Schedule I attached hereto and incorporated by reference herein.

 

(B)           Whether and to what extent the RSUs shall vest shall be determined by the Committee at its first meeting following the end of the Performance Period (which shall occur in no event later than 75 days after the end of the calendar year in which the Performance Period ends (i.e., by no later than March 15, 2015)), upon the Committee’s certification of achievement of the applicable performance goals set forth in Section 2(a)(ii)(A) above.

 

(iii)          Settlement of RSUs.  Promptly after the Vesting Date (but in no event later than 75 days after the end of the calendar year in which the Performance Period ends (i.e., by no later than March 15, 2015)) the Company shall distribute to the Employee a number of shares of Common Stock equal to the number of RSUs that become vested in accordance with Section 2(a) hereof.  Any number of RSUs that do not become vested in accordance with Section 2(a) hereof (to the extent not already previously forfeited pursuant to Section 2(a)(i)(B) above) shall, effective as of the Vesting Date, be forfeited by the Employee without consideration and this Agreement shall terminate without payment in respect thereof.

 

(b)           Effect of Change in Control.  Notwithstanding anything set forth in Section 2(a) above, if there occurs a Change in Control, the following rules shall apply with respect to the RSUs granted hereunder in lieu of the provisions of Section 2(a) above:

 

(i)            Unless otherwise determined by the Committee, if a Change in Control occurs prior to the Vesting Date and the Employee is still employed with the Company or its Subsidiaries upon the occurrence of such Change in Control, then this Restricted Stock Unit Award shall be converted into a right to receive a cash payment equal to the sum of (x) the product of (1) the Target RSU Award and (2) the Total Shareholder Return Multiplier, as determined under Schedule I attached hereto, and (3) the CIC Per Share Price (such product of clauses (1), (2) and (3), the “CIC Cash Value”)  and (y) an amount equal to the interest on the CIC Cash Value at a rate equal to LIBOR plus 2.0% per annum, computed on the basis of a year of 364 days, calculated daily for each day following the closing date of the Change in Control transaction through the date immediately preceding the date on which such cash payment becomes vested (the sum of clauses (x) and (y), the “CIC Settlement Amount”).  The Employee shall become 100% vested in the CIC Settlement Amount on the Vesting Date, so long as the Employee remains employed with the Company, any subsidiary or successor or acquirer thereof (or any of its affiliates) in the Change in Control through the Vesting Date, subject to the provisions of Section 2(b)(ii) below.  The CIC Settlement Amount shall be paid to the Employee within ten (10) business days after the Vesting Date.

 

(ii)           Notwithstanding Section 2(b)(i) above, if the Employee’s employment with the Company and its Subsidiaries is terminated by the Company and its Subsidiaries other than for Cause or by the Employee for Good Reason during the twenty-four (24) month period following the Change in Control (and prior to the Vesting Date), the Employee shall be immediately vest in the right to receive the CIC Settlement Amount, and the Employee shall receive payment of the CIC Settlement Amount within ten (10) business days following such termination date.

 

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3.             Dividend Equivalents.  With respect to each cash dividend or distribution (if any) paid with respect to Common Stock to holders of record on and after the Grant Date, a number of shares of Common Stock shall be accrued on the books and records of the Company, in an amount equal to the quotient of (a) the product of (i) the amount of such dividend or distribution paid with respect to one share of Common Stock, multiplied by (ii) the number of vested RSUs (if any) granted hereunder then held by the Employee, divided by (b) the Fair Market Value on the applicable dividend record date.  At such time(s) thereafter as the Employee receives a distribution of shares of Common Stock in respect of his or her vested RSUs granted hereunder pursuant to the applicable provision of Section 2 above, the Company shall also distribute to the Employee such number of shares of Common Stock accrued under this Section 3 that relate to the vested RSUs in respect of which such distribution of shares is otherwise being made.  In the event of any stock dividend, the provisions of Section 9 of the Plan shall apply to this Restricted Stock Unit Award.

 

4.             Limitation on Obligations.  The Company’s obligation with respect to the RSUs granted hereunder is limited solely to the delivery to the Employee of shares of Common Stock on the date when such shares are due to be delivered hereunder, and in no way shall the Company become obligated to pay cash in respect of such obligation, except as otherwise expressly provided for herein.  This Restricted Stock Unit Award shall not be secured by any specific assets of the Company or any of its Subsidiaries, nor shall any assets of the Company or any of its subsidiaries be designated as attributable or allocated to the satisfaction of the Company’s obligations under this Agreement.

 

5.             Rights as a Stockholder.  The Employee shall not have any rights of a common stockholder of the Company unless and until the Employee receives the shares of Common Stock pursuant to Section 2 above.  As soon as practicable following the date that the Employee becomes entitled to receive the shares of Common Stock pursuant to Section 2, certificates for the Common Stock shall be delivered to the Employee or to the Employee’s legal guardian or representative.

 

6.             Transferability.  The RSUs shall not be subject to alienation, garnishment, execution or levy of any kind, and any attempt to cause any such awards to be so subjected shall not be recognized.  The shares of Common Stock acquired by the Employee pursuant to Section 2 of this Agreement may not at any time be transferred, sold, assigned, pledged, hypothecated or otherwise disposed of unless such transfer, sale, assignment, pledge, hypothecation or other disposition complies with applicable securities laws.

 

7.             Purchaser’s Employment by the Company.   Nothing contained in this Agreement obligates the Company or any Subsidiary to employ the Employee in any capacity whatsoever or prohibits or restricts the Company (or any Subsidiary) from terminating the employment, if any, of the Employee at any time or for any reason whatsoever, with or without Cause, and the Employee hereby acknowledges and agrees that neither the Company nor any other Person has made any representations or promises whatsoever to the Employee concerning the Employee’s employment or continued employment by the Company or any Affiliate thereof.  No payment under this Agreement shall be taken into account in determining any benefits under any pension, retirement, savings, profit sharing, group insurance, welfare or benefit plan of the Company unless provided otherwise in such other plan.

 

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8.             Change in Capitalization.  Except as provided in Section 2(b) above, in the event of any change in the outstanding Common Stock by reason of a stock split, spin-off, stock dividend, stock combination or reclassification, recapitalization or merger, Change in Control, or similar event, the provisions of Section 8 of the Plan shall govern the treatment of this Restricted Stock Unit Award.

 

9.             Withholding.   It shall be a condition of the obligation of the Company upon delivery of Common Stock or cash, as applicable, to the Employee pursuant to Section 2 above that the Employee pay to the Company such amount as may be requested by the Company for the purpose of satisfying any liability for any federal, state or local income or other taxes required by law to be withheld with respect to such Common Stock or cash, as applicable.  The Company shall be authorized to take such action as may be necessary, in the opinion of the Company’s counsel (including, without limitation, withholding Common Stock or cash, as applicable, otherwise deliverable to the Employee hereunder and/or withholding amounts from any compensation or other amount owing from the Company to the Employee), to satisfy the obligations for payment of the minimum amount of any such taxes.  In addition, if the Company’s accountants determine that there would be no adverse accounting implications to the Company, the Employee may be permitted to elect to use Common Stock otherwise deliverable to the Employee hereunder to satisfy any such obligations, subject to such procedures as the Company’s accountants may require.  The Employee is hereby advised to seek his own tax counsel regarding the taxation of the grant of RSUs made hereunder.

 

10.           Securities Laws.  Upon the delivery of any Common Stock to the Employee, the Company may require the Employee to make or enter into such written representations, warranties and agreements as the Committee may reasonably request in order to comply with applicable securities laws or with this Agreement.  The delivery of the Common Stock hereunder shall be subject to all applicable laws, rules and regulations and to such approvals of any governmental agencies as may be required.

 

11.           Clawback; Forfeiture on Violation of Code of Ethics.

 

(a)           The Committee in its sole discretion may impose on the RSUs provided for in this Agreement, either through an amendment to the Plan or through a policy that upon adoption by the Committee will be incorporated into this Agreement by reference effective as of the date of such adoption, that the Employee’s rights, payments, and benefits with respect to this Agreement shall be subject to reduction, cancellation, forfeiture or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions provided in this Agreement, as required by applicable law. Such events may include, but shall not be limited to, a restatement of the Company’s financial statements to reflect adverse results from those previously released financial statements, as a consequence of errors, omissions, fraud, or misconduct, or the Employee’s failure to satisfy the Code of Ethics Requirement.

 

(b)           In the event that the Employee fails to satisfy the Code of Ethics Requirement, all RSUs granted hereunder (to the extent not already previously forfeited) may be immediately forfeited by the Employee without consideration based upon a determination by the Committee and this Agreement shall terminate without payment in respect thereof.

 

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12.           Section 409A of the Code.  In the event that it is reasonably determined by the Company that, as a result of the deferred compensation tax rules under Section 409A of the Code (and any related regulations or other pronouncements thereunder) (the “Deferred Compensation Tax Rules”), benefits that the Employee is entitled to under the terms of this Agreement may not be made at the time contemplated by the terms hereof or thereof, as the case may be, without causing Employee to be subject to tax under the Deferred Compensation Tax Rules, the Company shall, in lieu of providing such benefit when otherwise due under this Agreement, instead provide such benefit on the first day on which such provision would not result in the Employee incurring any tax liability under the Deferred Compensation Tax Rules; which day, if the Employee is a “specified employee” (within the meaning of the Deferred Compensation Tax Rules), shall, in the event the benefit to be provided is due to the Employee’s “separation from service” (within the meaning of the Deferred Compensation Tax Rules) with the Company and its Subsidiaries, be the first day following the six-month period beginning on the date of such separation from service.

 

13.           Notices.  Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of its Secretary, and any notice to be given to the Employee shall be addressed to him at the address given beneath his signature hereto.  By a notice given pursuant to this Section 13, either party may hereafter designate a different address for notices to be given to him.  Any notice which is required to be given to the Employee shall, if the Employee is then deceased, be given to the Employee’s personal representative if such representative has previously informed the Company of his status and address by written notice under this Section 13.  Any notice shall have been deemed duly given when enclosed in a properly sealed envelope or wrapper addressed as aforesaid, deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service

 

14.           Governing Law.  The laws of the State of Delaware (or if the Company reincorporates in another state, the laws of that state) shall govern the interpretation, validity and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws.

 

15.           Restricted Stock Unit Award Subject to Plan.   The Restricted Stock Unit Award shall be subject to all applicable terms and provisions of the Plan, to the extent applicable to the Common Stock.   In the event of any conflict between this Agreement and the Plan, the terms of the Plan shall control.

 

16.           Signature in Counterparts.  This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

 

[Signatures on next page.]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the date hereof.

 

	
 
    	
ROCKWOOD   HOLDINGS, INC.
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    
	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
EMPLOYEE
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
[NAME]
    

 

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Schedule I

 

The Total Shareholder Return Multiplier shall be subject to the achievement of Total Shareholder Return Rank, as follows:

 

	
Total Shareholder Return Rank
    	
 
    	
Total Shareholder Return Multiplier
    
	
Less than 25%
    	
 
    	
0%
    
	
25%
    	
 
    	
25%
    
	
50%
    	
 
    	
100%
    
	
75% or greater
    	
 
    	
150%
    

 

The Total Shareholder Return Multiplier shall be a linear interpolation for any achievement of the Total Shareholder Return Rank which falls between the above target percentage quartiles, as applicable; provided that, there shall be no linear interpolation for a Total Shareholder Return Rank that is less than 25%.

 

The Company shall communicate to the Employee the Total Shareholder Return Rank as soon as administratively practicable following the date the Board and/or the Committee determines such rank.

 

 

Appendix A

 

Definitions

 

“Beginning Stock Price” shall mean, for purposes of determining the Total Shareholder Return for each of the Company and each company in the Peer Group, respectively, the average closing price per share of common stock for the sixty (60) trading day period ending immediately prior to January 1, 2012.

 

“Cause” shall mean (i) the Employee’s willful and continued failure to perform duties, which are within the control of the Employee and consistent with such Employee’s title and position, that is not cured within 15 days following written notice of such failure, (ii) the Employee’s conviction of or plea of guilty or no contest to a (x) felony or (y) crime involving moral turpitude, (iii) the Employee’s willful malfeasance or misconduct which is injurious to the Company or its Subsidiaries, other than in a manner that is insignificant or inconsequential, (iv) a breach by Employee of the material terms of any non-compete, non-solicitation or confidentiality covenants or agreements by which the Employee may be bound, following notice of such breach (which notice may be oral or written) or (v) any violation by the Employee of any material written Company policy after written notice of such breach, if such violation is shown by the Company to be reasonably expected to result in material injury to the business, reputation or financial condition of the Company.

 

“Change in Control” shall mean the earliest to occur of the following:

 

(i)            any Person (which term shall mean any individual, corporation, partnership, group, association or other “person,” as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended, other than the Company or any employee benefit plans sponsored by the Company) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under such Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company’s outstanding Voting Securities (which term shall mean securities which under ordinary circumstances are entitled to vote for the election of directors) other than through the purchase of Voting Securities directly from the Company through a private placement;

 

(ii)           individuals who constitute the Board on the date hereof (the “Incumbent Board”) cease for any reason to constitute at least a majority thereof, provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors comprising the Incumbent Board shall from and after such election be deemed to be a member of the Incumbent Board;

 

(iii)          a merger or consolidation involving the Company or its stock or an acquisition by the Company, directly or indirectly or through one or more subsidiaries, of another entity or its stock or assets in exchange for the stock of the Company is consummated, unless, immediately following such transaction, 50.1% or more of the then outstanding Voting Securities of the surviving or resulting corporation or entity will be (or is) then beneficially owned, directly or indirectly, by the individuals and entities who were the beneficial owners of the Company’s

 

 

outstanding Voting Securities immediately prior to such transaction (treating, for purposes of determining whether the 50.1% continuity test is met, any ownership of the Voting Securities of the surviving or resulting corporation or entity that results from a stockholder’s ownership of the stock of, or other ownership interest in, the corporation or other entity with which the Company is merged or consolidated as not owned by persons who were beneficial owners of the Company’s outstanding Voting Securities immediately prior to the transaction); or

 

(iv)          all or substantially all of the assets of the Company are sold or transferred to a Person as to which (A) the Incumbent Board does not have authority (whether by law or contract) to directly control the use or further disposition of such assets and (B) the financial results of the Company and such Person are not consolidated for financial reporting purposes.

 

Notwithstanding the foregoing, a Change in Control shall not be deemed to occur unless such transaction or occurrence constitutes a change in ownership or effective control within the meaning of Section 409A(a)(2)(A)(v) of the Code.

 

“CIC Per Share Price” shall mean the price per share paid for one share of Common Stock in the Change in Control transaction (with the value of any security that is paid as consideration in the Change in Control determined by the Committee as of the date of such Change in Control).

 

“Code of Ethics Requirement” shall mean the Employee complies with the Company’s Code of Business Conduct and Ethics, dated November 23, 2009 or, if applicable, the Company’s Code of Ethics for Executive Officers and Financial Officers, as adopted July 29, 2005, as the same may be amended from time to time.

 

“Disability” shall mean a determination, made at the request of the Employee or upon the reasonable request of the Company set forth in a notice to the Employee, by a physician selected by the Company and the Employee, that the Employee is unable to perform his duties as an employee of the Company or its Subsidiaries and in all reasonable medical likelihood such inability will continue for a period in excess of 180 consecutive days.

 

“Ending Stock Price” shall mean, for purposes of determining the Total Shareholder Return for each of the Company and each company in the Peer Group, respectively, the average closing price per share of common stock for the sixty (60) trading day period ending immediately prior to January 1, 2015; except that in the event of a Change in Control, (a) the Ending Stock Price for the Company shall be the CIC Per Share Price and (b) the Ending Stock Price for each other company in the Peer Group shall be the average closing price per share of common stock for the sixty (60) trading day period ending immediately prior to the Change in Control.

 

“Good Reason” shall mean without the Employee’s consent, (i) a reduction in the Employee’s base salary or annual bonus opportunity (other than a reduction in base salary that is offset by an increase in bonus opportunity upon the attainment of reasonable financial targets, which reduction may not exceed 10% of the Employee’s base salary in any 12 month period), (ii) a substantial reduction in the Employee’s duties and responsibilities, which continues beyond 15 days after written notice by the Employee to the Company of such reduction, (iii) the elimination

 

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or reduction of the Employee’s eligibility to participate in the Company’s benefit programs that is inconsistent with the eligibility of similarly situated employees of the Company to participate therein, (iv) a transfer of the Employee’s primary workplace by more than 35 miles from the current workplace, (v) any serious chronic mental or physical illness of an immediate family member that requires the Employee to terminate his or her employment with Company because of a substantial interference with his or her duties at the Company or (vi) any failure by the Company to pay when due any payment owed to the Employee within 15 days after the date such payment becomes due. In order for Employee to resign pursuant to this definition of “Good Reason”, Employee shall have first given written notice of the alleged defect within thirty (30) business days of the event giving rise to such claim of Good Reason, and the same shall not have been cured (if capable of cure) within thirty (30) business days of such written notice.

 

“LIBOR” shall mean the three-month London interbank offered rate as published in the Wall Street Journal on the business day following the closing date of the Change in Control transaction and each anniversary thereafter.

 

“Peer Group” shall mean the companies that comprise the Dow Jones U.S. Chemicals Index as in effect on December 31, 2014.

 

“Performance Period” shall mean the Company’s fiscal year beginning on January 1, 2012 and ending on December 31, 2014.

 

“Proration Factor” shall mean a fraction, the numerator of which is equal to the number of days between (and including) the Grant Date and the date such employment so terminates, and the denominator of which is equal to 1097.

 

“Retirement” shall mean retirement at age 62 or over (or such other age as may be approved by the Board of Directors) after having been employed by the Company or a Subsidiary for at least ten years.

 

“Total Shareholder Return Multiplier” shall mean the percentage as set forth on Schedule I attached hereto.

 

“Total Shareholder Return” shall mean the amount equal to (x) the Ending Stock Price minus the Beginning Stock Price, plus (x) the amount of any dividends paid on a per share basis (calculated as if such dividends had been reinvested in the applicable company’s common stock) cumulatively over the Performance Period, divided by (z) the Beginning Stock Price.

 

“Total Shareholder Return Rank” shall mean a fraction (expressed as a percentage) equal to (x) the number of companies in the Peer Group in respect of which the Company’s Total Shareholder Return equals or exceeds each such Peer Group company’s Total Shareholder Return, divided by (y) the total number of companies in the Peer Group.

 

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