REORGANIZATION AGREEMENT

Exhibit 10.4

 

Execution Copy

 

 

REORGANIZATION AGREEMENT

 

by and among

 

CONOCOPHILLIPS,

 

DUKE CAPITAL LLC

 

and

 

DUKE ENERGY FIELD SERVICES, LLC

 

Dated as of May 26, 2005

 

TABLE OF CONTENTS

 

 

i

 

 

ii

 

iii

 

 

iv

 

v

REORGANIZATION AGREEMENT (this “ Agreement ”), dated as of May 26, 2005, by and among CONOCOPHILLIPS, a Delaware corporation (“ COP ”), DUKE CAPITAL LLC, a Delaware limited liability company (“ Duke ”), and DUKE ENERGY FIELD SERVICES, LLC, a Delaware limited liability company (“ Company ”).

 

RECITALS

 

Company indirectly owned all of the Equity Interests (as such term is defined below) in Texas Eastern Products Pipelines Company, LLC, a Delaware limited liability company (“ TEPPCO GP ”), which serves as the general partner of TEPPCO Partners, LP, a Delaware master limited partnership (“ TEPPCO ”). Company and Enterprise GP Holdings L.P. (“ GP Purchaser ”) are parties to a Purchase and Sale Agreement dated February 24, 2005 (the “ TEPPCO Agreement ”) pursuant to which Company sold to GP Purchaser all of the Equity Interests in TEPPCO GP (the “ TEPPCO GP Sale ” and “ TEPPCO GP Equity Interests ”, respectively) and TEPPCO Holdings, Inc., an indirectly wholly-owned subsidiary of Duke, sold certain limited partner units in TEPPCO.

 

In connection with the TEPPCO GP Sale, Company made a bona fide loan to Duke (the “ Duke Note ”) in an amount of $766,700,000, equal to 69.70% of the proceeds from the TEPPCO GP Sale, and a bona fide loan to COP (the “ COP Note ”) in an amount of $333,300,000, equal to 30.3% of the proceeds from the TEPPCO GP Sale.

 

COP desires to increase its indirect ownership interest in Company to a 50% Percentage Interest (as such term is defined below). This increase in COP’s indirect ownership interest in Company, and the corresponding dilution in Duke’s indirect ownership interest in Company, is to be accomplished through the transfers, distributions and contribution and the amendment and restatement of the Amended and Restated LLC Agreement (as defined herein) described below.

 

Duke, indirectly through DEFS Holding (as such term is defined below), owns an Equity Interest (as such term is defined below) in Company which has a 69.70% Percentage Interest. Duke, through DEFS Holding, is willing to transfer to COP Transferee (as such term is defined below) a portion of such Equity Interest equal to an approximate 6.47% Percentage Interest in accordance with and subject to the terms and conditions set forth in this Agreement.

 

All of the proceeds received by Company from the sale of the TEPPCO GP Equity Interests are to be distributed 100% to DEFS Holding in accordance with and subject to the terms and conditions set forth in this Agreement.

 

Company, through various subsidiaries, owns all of the Equity Interests in Canadian Holding Company and is willing to distribute those Equity Interests to DEFS Holding in accordance with and subject to the terms and conditions set forth in this Agreement.

 

COP, through one or more subsidiaries, owns the Empress System Business (as such term is defined below) and is willing to transfer the Empress System Business to Duke Transferee (as such term is defined below) in accordance with and subject to the terms and conditions set forth in this Agreement.

 

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NOW, THEREFORE, in consideration of the premises and the representations, warranties, covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto hereby agree as follows:

 

ARTICLE I

CERTAIN DEFINITIONS

 

As used in this Agreement, the following terms shall have the respective meanings set forth below:

 

“ $ ” shall mean United States Dollars.

 

“ Actively Employed ” shall mean, with respect to an individual and a specified date, that such individual is an employee of the relevant entity on such date and is either performing his or her regular occupation for his or her employer on such date (either at such employer’s usual places of business or at some location to which such employer’s business requires the employee to travel) or is on a previously scheduled and approved time-off, or such other leave of absence that would not have prevented such employee (if he or she had become a Continuing Employee as of the Applicable Closing Date) from receiving immediate coverage as of the Applicable Closing Date under the welfare benefit plans maintained by such individual’s employer that will be provided to Continuing Employees pursuant to the provisions of Article XI.

 

“ Affiliate ” shall mean, with respect to any Person, a Person directly or indirectly Controlling, Controlled by, or under common Control with such Person; provided, however, that for the absence of doubt, for periods after the Second Closing, neither Company nor any of its Subsidiaries shall be deemed an Affiliate of any member of the COP Group or the Duke Group.

 

“ Agreed Terms and Conditions ” shall mean, as to each Empress Commercial Agreement, general terms and conditions for such Empress Commercial Agreement that are mutually agreed to by COP and Duke pursuant to Section 3.2(b)(vi).

 

“ Agreement ” shall have the meaning set forth in the Preamble.

 

“ Amended and Restated LLC Agreement ” shall mean the Amended and Restated Limited Liability Company Agreement of Company, dated as of March 31, 2000, by and between Phillips Gas Company, a Delaware corporation, and Duke Energy Field Services Corporation, a Delaware corporation, as amended by the First Amendment to Amended and Restated Limited Liability Company Agreement of Company, dated as of August 4, 2000, and by the Second Amendment to Amended and Restated Limited Liability Company Agreement of Company, dated as of July 29, 2004, and as further amended, restated or supplemented from time to time until the Second Closing Date.

 

“ Applicable Basket ” shall mean (a) with respect to the Organizational Representations and Warranties, $25,000,000 and (b) with respect to the Business Representations and Warranties (i) relating to the Empress System or the Empress System Business, $5,000,000 and (ii) relating to the Canadian Assets Business or the Canadian Assets Subsidiaries, $7,000,000.

 

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“ Applicable Cap ” shall mean (a) with respect to the Organizational Representations and Warranties, $197,000,000 and (b) with respect to the Business Representations and Warranties (i) relating to the Empress System or the Empress System Business, $41,000,000 and (ii) relating to the Canadian Assets Business or the Canadian Assets Subsidiaries, $52,000,000.

 

“ Applicable Closing ” shall mean (a) with respect to the Subject Company Equity Interest, the First Closing, (b) with respect to the TEPPCO GP Sale Proceeds Amount, the Equity Interests in Canadian Holding Company, and the Second Closing Cash Amount, the Second Closing, and (c) with respect to the Empress System Business, the Empress Closing.

 

“ Applicable Closing Date ” shall mean (a) with respect to the Subject Company Equity Interest, the First Closing Date, (b) with respect to the TEPPCO GP Sale Proceeds Amount, the Equity Interests in Canadian Holding Company, and the Second Closing Cash Amount, the Second Closing Date, and (c) with respect to the Empress System Business, the Empress Closing Date.

 

“ Applicable Transferee ” shall mean (a) with respect to the Empress System Business, Duke Transferee and (b) with respect to the Equity Interests in Canadian Holding Company, DEFS Holding.

 

“ Applicable Transferor ” shall mean (a) with respect to the Empress System Business, ES Transferor, and (b) with respect to the Equity Interests in Canadian Holding Company, Company.

 

“ Asset Conveyance Documents ” shall mean those agreements, assignments, assumptions, assignment and novation agreements, transfers, conveyances, deeds, bills of sale, share transfers, powers of attorney and other instruments necessary to transfer the Empress System Business to Duke Transferee, including the Empress System Business Assignment.

 

“ Assumed Liabilities ” shall mean the “Assumed Liabilities” as defined in the Empress System Business Assignment.

 

“ Beneficially Own ” shall mean, with respect to any Equity Interest, having or sharing the power to direct or control the voting or disposition of such Equity Interest, and “ Beneficial Ownership ” has a corresponding meaning.

 

“ Beneficial Owner ” shall mean, with respect to any Equity Interest, a Person who Beneficially Owns such Equity Interest.

 

“ Business ” shall mean the “Business” as defined in the Empress System Business Assignment.

 

“ Business Day ” shall mean any day on which banks are generally open to conduct business in the State of New York.

 

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“ Business Representations and Warranties ” shall mean all representations and warranties set forth in Articles IV, V and VI of this Agreement (other than Organizational Representations and Warranties), in each case, to the extent relating to the Empress System Business, the Canadian Assets Business or Company, as applicable.

 

“ C$ ” shall mean Canadian Dollars.

 

“ Canadian Assets Business ” shall mean the businesses historically and currently conducted by Canadian Holding Company and the Canadian Assets Subsidiaries, including the assets and Liabilities thereof.

 

“ Canadian Assets Easements ” shall mean pipeline easements, rights-of-way, licenses and land use permits of or used by the Canadian Assets Subsidiaries.

 

“ Canadian Assets Employee ” shall mean any individual who is an employee of Company or a Subsidiary of Company principally employed in the Canadian Assets Business, including each such employee who is seconded to Company, Canadian Holding Company or a Canadian Assets Subsidiary other than those secondees listed on Exhibit F.

 

“ Canadian Assets Material Adverse Effect ” shall mean a Material Adverse Effect on the Canadian Assets Business, Canadian Holding Company or the Canadian Assets Subsidiaries, taken as a whole.

 

“ Canadian Assets Subsidiary ” or “ Canadian Assets Subsidiaries ” shall mean all of the Subsidiaries of Canadian Holding Company.

 

“ Canadian Cash ” shall mean, for any given date, all Canadian Dollars and Canadian cash equivalents (or United States Dollars or cash equivalents or cash or cash equivalents of any other denominations) held by Canadian Holding Company or any Canadian Assets Subsidiary as of such date.

 

“ Canadian Holding Company ” shall mean Duke Energy Field Services Canada Holdings, Inc., a Delaware corporation as to which all of the Equity Interests therein are held directly or indirectly by Company.

 

“ CFC ” means Conoco Funding Company, a Nova Scotia company.

 

“ Claim Notice ” shall have the meaning set forth in Section 10.3(a).

 

“ Closing ” shall mean as to each Applicable Closing Date, the consummation of the transactions scheduled to close on such Applicable Closing Date in accordance with the terms of this Agreement.

 

“ Code ” shall mean the United States Internal Revenue Code of 1986, as amended.

 

“ Commissioner ” shall have the meaning set forth in the definition of “Required Governmental Consent.”

 

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“ Company ” shall have the meaning set forth in the Preamble.

 

“ Company Disclosure Schedule ” shall mean those Schedules to this Agreement identified as being part of the “Company Disclosure Schedule” in this Agreement (including the table of contents thereof).

 

“ Company Plans ” shall mean all material employee benefit, bonus, incentive, deferred compensation, stock purchase, stock option, severance, change of control, fringe benefit, pension, retirement, profit sharing, stock appreciation, health, welfare, dental, disability, life insurance and similar plans, programmes, arrangements or practices relating to any Canadian Assets Employees that are sponsored or maintained by Company or any of its Affiliates or to which Company or any of its Affiliates contributes or is obligated to contribute on behalf of the Canadian Assets Employees, whether funded or unfunded, written or oral, insured or self-insured, registered or unregistered.

 

“ Company Retained Subsidiaries ” shall mean all Subsidiaries of Company other than Canadian Holding Company and the Canadian Assets Subsidiaries.

 

“ Continuing Canadian Assets Employee ” shall mean each Canadian Assets Employee as of the Second Closing Date.

 

“ Continuing Employee ” shall mean a Continuing Canadian Assets Employee or a Continuing Empress System Employee.

 

“ Continuing Empress System Employee ” shall have the meaning set forth in Section 11.1(a).

 

“ Contribution Agreement ” shall mean the Contribution Agreement, dated as of December 16, 1999, by and among Duke Energy, Phillips and the Company, as the same may be amended from time to time.

 

“ Contribution Date ” shall mean the Closing Date, as defined in the Contribution Agreement.

 

“ Control ” shall mean the possession, directly or indirectly, through one or more intermediaries, by any Person or group (within the meaning of Section 13(d)(3) under the Exchange Act) of both of the following:

 

(a) (i) in the case of a corporation, Beneficial Ownership of more than 25% of the outstanding Equity Interests thereof, (ii) in the case of a limited liability company, partnership, limited partnership or venture, the right to more than 25% of the distributions therefrom (including liquidating distributions); (iii) in the case of a trust or estate, including a business trust, more than 25% of the beneficial interest therein; and (iv) in the case of any other entity, more than 25% of the economic or beneficial interest therein; and

 

(b) in the case of any entity, the power or authority, through ownership of voting securities, by contract or otherwise, to control or direct the management and policies of the entity.

 

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“ Controlled Group Liability ” shall have the meaning set forth in Section 4.13(d).

 

“ COP ” shall have the meaning set forth in the Preamble.

 

“ COP Canada ” shall have the meaning set forth in Section 3.2(b)(v).

 

“ COP Canadian Pension Plan ” shall mean the ConocoPhillips’ Pension Plan applicable to the Empress System Employees.

 

“ COP Disclosure Schedule ” shall mean those Schedules to this Agreement identified as being part of the “COP Disclosure Schedule” in this Agreement (including the table of contents thereof).

 

“ COP Easements ” shall have the meaning set forth in Section 4.10(c).

 

“ COP Excess Canadian Cash ” shall have the meaning set forth in Section 3.3(a).

 

“ COP Group ” shall mean COP and its Subsidiaries (other than Company, any Subsidiary of Company and PTC after the Applicable Closing).

 

“ COP Indemnified Person ” shall have the meaning set forth in Section 10.1.

 

“ COP Intellectual Property ” shall have the meaning set forth in Section 4.12(a).

 

“ COP Leased Property ” shall mean any real property demised pursuant to a COP Lease.

 

“ COP Leases ” shall have the meaning set forth in Section 4.10(b).

 

“ COP Material Contracts ” shall have the meaning set forth in Section 4.9(a).

 

“ COP Note ” shall have the meaning set forth in the Recitals.

 

“ COP-Owned Fee Properties ” shall have the meaning set forth in Section 4.10(a).

 

“ COP Plans ” shall mean all material employee benefit, bonus, incentive, deferred compensation, stock purchase, stock option, severance, change of control, fringe benefit, pension, retirement, profit sharing, stock appreciation, health, welfare, dental, disability, life insurance and similar plans, programs, arrangements or practices covering any Empress System Employees that are sponsored or maintained by COP or any of its Affiliates or to which COP or any of its Affiliates contributes or is obligated to contribute on behalf of the Empress System Employees, whether funded or unfunded, written or oral, insured or self-insured, registered or unregistered.

 

“ COP Retained Affiliate ” shall mean all Affiliates of COP other than PTC.

 

“ COP Sale-Related Group ” shall mean, collectively, ES Transferor and PTC; provided , that when used in Article VII, “ COP Sale-Related Group ” shall also mean each other Affiliate of COP that owns any or all of the Empress System Business at any time between the date hereof and the Applicable Closing Date.

 

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“ COP Sale-Related Material Adverse Effect ” shall mean a Material Adverse Effect on the Empress System Business or PTC.

 

“ COP Transfer ” shall have the meaning set forth in Section 12.24.

 

“ COP Transferee ” shall mean CPGC.

 

“ CPCL ” shall mean ConocoPhillips Canada Limited, a Nova Scotia company.

 

“ CPGC ” means ConocoPhillips Gas Company, a Delaware corporation.

 

“ CPGC Deficit Cash on Hand Amount ” shall have the meaning set forth in Section 3.3(b).

 

“ Damages ” shall mean claims, liabilities, damages, penalties, judgments, assessments, losses, costs and expenses, including reasonable attorneys’ fees and expenses, incurred by the party seeking indemnification under this Agreement, net of (a) any insurance proceeds which such party receives in respect of such matter net of any costs incurred by such party in the nature of increased insurance premiums or similar costs related to such recovery (determined on a reasonable present value basis) and (b) any indemnity payments (less costs of collection thereof) which such party receives from parties other than the party against whom such claim is asserted under this Agreement.

 

“ DB Transfer Amount ” shall have the meaning set forth in Section 11.1(d)(ii).

 

“ Deficit Cash on Hand Amount ” shall have the meaning set forth in Section 3.3(b).

 

“ DEFS Holding ” shall mean Duke Energy Enterprises Corporation (formerly Duke Energy Field Services Corporation), a Delaware corporation.

 

“ DEFS Holding Excess Cash on Hand Amount ” shall have the meaning set forth in Section 3.3(b).

 

“ Designated Representatives ” shall have the meaning set forth in Section 7.1(a).

 

“ Direct Claim ” shall have the meaning set forth in Section 10.3(a).

 

“ Duke ” shall have the meaning set forth in the Preamble.

 

“ Duke Canadian Pension Plan ” shall have the meaning set forth in Section 11.1(d)(i).

 

“ Duke Disclosure Schedule ” shall mean those Schedules to this Agreement identified as being part of the “Duke Disclosure Schedule” in this Agreement (including the table of contents thereof).

 

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“ Duke Energy ” shall mean Duke Energy Corporation, a North Carolina corporation.

 

“ Duke Group ” shall mean Duke and its Subsidiaries (other than Company, any Subsidiary of Company, Canadian Holding Company (until the Second Closing) and any Canadian Assets Subsidiary (until the Second Closing)).

 

“ Duke Indemnified Person ” shall have the meaning set forth in Section 10.1.

 

“ Duke Note ” shall have the meaning set forth in the Recitals.

 

“ Duke Transfer ” shall have the meaning set forth in Section 12.24.

 

“ Duke Transferee ” shall mean one or more Subsidiaries of Duke designated by Duke ( provided that no more than one Subsidiary of Duke shall be the “Duke Transferee” for purposes of the transfer of the Empress System from CFC).

 

“ Empress Closing ” shall mean the consummation of the transfer of the Business and assumption of the Assumed Liabilities.

 

“ Empress Closing Date ” shall mean (a) provided neither Section 7.16(a) or (b) is applicable, the Empress Target Closing Date and (b) if Section 7.16(a) or (b) is applicable, the Replacement Empress Closing Date.

 

“ Empress Commercial Agreements ” shall mean:

 

(a) a Condensate Crude Oil Purchase Agreement incorporating the terms set forth on Exhibit H, any Agreed Terms and Conditions relating thereto and any other terms agreed upon by COP and Duke;

 

(b) an Iso-Butanes Purchase Agreement incorporating the terms set forth on Exhibit I, any Agreed Terms and Conditions relating thereto and any other terms agreed upon by COP and Duke;

 

(c) a Normal Butanes Purchase Agreement incorporating the terms set forth on Exhibit J, any Agreed Terms and Conditions relating thereto and any other terms agreed upon by COP and Duke;

 

(d) an Extraction Agreement incorporating the terms set forth on Exhibit K, any Agreed Terms and Conditions relating thereto and any other terms agreed upon by COP and Duke; and

 

(e) a Gas Supply Agreement incorporating the terms set forth on Exhibit L, any Agreed Terms and Conditions relating thereto and any other terms agreed upon by COP and Duke.

 

“ Empress Contingency ” shall have the meaning set forth in Section 7.16(a).

 

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“ Empress Financial Statements ” shall mean (a) the proforma December 31, 2004, unaudited balance sheet of the Empress System Business (including PTC) and (b) the proforma unaudited income statement of the Empress System Business (including PTC) for the fiscal year ending December 31, 2004, in each case attached as Exhibit D.

 

“ Empress Plant ” shall mean the 2,400 mmcfd cryogenic straddle plant on the TransCanada Pipelines Alberta system (including a 50,000 bbl/d natural gas liquids fractionator) included within the Empress System.

 

“ Empress System ” shall mean the “Assets” (as defined in the Empress System Business Assignment) which includes, for the avoidance of doubt, the PTC Pipeline.

 

“ Empress System Amount ” shall mean $233 million.

 

“ Empress System Business ” shall mean the “Business” (as defined in the Empress System Business Assignment) which includes, for the avoidance of doubt, the PTC Assets and Liabilities; provided , for the purpose of clarity, only the Assumed Liabilities of ES Transferor with respect to the Empress System Business shall be assumed by Duke Transferee in connection with the transactions contemplated hereby and such “Business” shall be transferred subject to the EnCana Dispute.

 

“ Empress System Business Assignment ” shall mean the General Assignment and Assumption Agreement in the form of Exhibit G.

 

“ Empress System Employee ” shall mean any individual who is an employee of COP or a Subsidiary of COP principally employed in the Empress System Business, including each such employee who is seconded to COP or a Subsidiary of COP.

 

“ Empress Target Closing Date ” shall mean the First Closing Date or, if the First Closing Date is a Canadian holiday, the next following Business Day that is not a Canadian holiday.

 

“ EnCana Dispute ” shall mean the disputes described on Schedule 4.8.

 

“ Environmental Law ” shall mean any and all applicable principles of common law and any and all applicable laws, statutes, ordinances, rules, regulations, or orders of any Governmental Entity pertaining to the protection of the environment or to Hazardous Materials in any and all jurisdictions in which the party in question and its Subsidiaries own property or conduct business, including, but not limited to: (x) with respect to assets or properties located in the U.S., the U.S. Clean Air Act, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, the Federal Water Pollution Control Act, the Occupational Safety and Health Act of 1970, the Resource Conservation and Recovery Act of 1976, the Safe Drinking Water Act, the Toxic Substances Control Act, the Hazardous & Solid Waste Amendments Act of 1984, the Superfund Amendments and Reauthorization Act of 1986, the Hazardous Materials Transportation Act, and the Oil Pollution Act of 1990; any U.S. state, local or other Governmental Entity laws implementing or substantially equivalent to the foregoing U.S. federal laws; any U.S. state, or local laws pertaining to the handling of oil and gas exploration, production, gathering, and processing wastes or the use, maintenance, and closure of pits and

 

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impoundments; and all other U.S. environmental conservation or protection laws all as amended from time to time from enactment or adoption through the date of this Agreement and (y) with respect to assets or properties located in Canada, the Canadian Environmental Protection Act, Canadian Environmental Assessment Act, Fisheries Act, and Transportation of Dangerous Goods Act; any Canadian provincial, territorial or local or other Governmental Entity laws implementing or substantially equivalent to the foregoing Canadian federal laws; any Canadian provincial, territorial or local or other Governmental Entity laws pertaining to the handling of oil and gas exploration, production, gathering, and processing wastes or the use, maintenance, and closure of pits and impoundments; and all other Canadian environmental conservation or protection laws all as amended from time to time from enactment or adoption through the date of this Agreement.

 

“ Equity Interests ” shall mean, with respect to any Person, any and all shares, interests, participations or other equivalents, including membership interests (however designated, whether voting or nonvoting or certificated or noncertificated), of equity of such Person, including, if such Person is a partnership, partnership interests (whether general or limited) and any other interest or participation that confers on a person the right to receive a share of the profits and losses of, or distributions of property of, such partnership, excluding debt securities convertible or exchangeable into such equity.

 

“ ERISA ” shall mean the Employee Retirement Income Security Act of 1974, as amended.

 

“ ERISA Affiliate ” shall mean, with respect to any Person, any other Person that is a member of a group described in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA that includes the first Person, or that is a member of the same “controlled group” as the first Person pursuant to Section 4001(a)(14) of ERISA.

 

“ ES Transferor ” shall mean each of (a) CPCL, (b) CFC and (c) ConocoPhillips Company, a Delaware corporation; provided , however , that for purposes of representations and warranties made as of the date hereof, “ES Transferor” shall not include CFC, and for purposes of representations and warranties made as of the Applicable Closing Date, “ES Transferor” shall not include CPCL except in relation to its ownership of the Equity Interests in PTC; provided , further , that with respect to any provision in this Agreement relating to the payment of funds, “ES Transferor” shall solely mean CFC; provided further, however, that for purposes of Sections 12.18(d) and 12.22, “ES Transferor” shall not include ConocoPhillips Company.

 

“ EUB ” means the Alberta Energy and Utilities Board.

 

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

 

“ First Closing ” shall mean the Closing to be consummated on the First Closing Date.

 

“ First Closing Cash Amount ” shall mean $440 million.

 

“ First Closing Date ” shall mean July 1, 2005 unless any of the conditions to each Party’s obligations hereunder have not been satisfied or waived by such date, in which case the

 

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“First Closing Date” shall be the first Business Day of the calendar month next following the month in which all conditions to each Party’s obligations hereunder have been satisfied or waived.

 

“ GAAP ” shall mean generally accepted accounting principles in the United States or in Canada, as applicable.

 

“ Governmental Entity ” shall mean any federal, state, provincial or territorial political subdivision or other government, governmental agency, department or instrumentality, regulatory authority, commission, board, tribunal or court, foreign or domestic.

 

“ GP Purchaser ” shall have the meaning set forth in the Recitals.

 

“ Granting Party ” shall have the meaning set forth in Section 7.1(a).

 

“ Hazardous Materials ” shall mean: (a) any chemicals, materials or substances defined or as included in the definition of “hazardous substances,” “hazardous materials,” “hazardous wastes,” “toxic substances,” or words of similar import, under any Environmental Law; (b) radioactive materials (other than naturally occurring radioactive materials), asbestos in any form that is or could be friable, polychlorinated biphenyls, radon, mercury, or lead-based paint; (c) any petroleum or petroleum products, natural gas or natural gas liquids; and (d) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any Governmental Entity; and (e) regulated constituents or substances in concentrations or levels that exceed numeric or risk-based standards established pursuant to Environmental Laws.

 

“ Hire Date ” means, in the case of a Canadian Assets Employee or an Empress System Employee, the effective date of such individual’s employment with Duke or an Affiliate of Duke.

 

“ HSR Act ” shall mean the United States Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

 

“ Income Tax Return ” means a Tax Return with respect to Income Taxes.

 

“ Income Taxes ” means U.S. federal, Canadian federal, provincial, territorial, state, local, municipal or foreign Taxes measured by income, net income and/or capital gain.

 

“ Indemnified Party ” shall mean the party seeking indemnification under Article VII or X.

 

“ Indemnifying Party ” shall mean the party against whom an indemnification claim is asserted under Article VII or X.

 

“ knowledge ” shall have the meaning set forth in Section 13.11.

 

“ Liabilities ” shall mean liabilities and obligations of any nature, whether known or unknown, absolute, accrued, contingent or otherwise and whether due or to become due.

 

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“ Lien ” shall mean any mortgage, pledge, hypothecation, security interest, encumbrance, lien, statutory deemed trust, charge or deposit arrangement or other arrangement having the practical effect of the foregoing.

 

“ Material Adverse Effect ” shall mean (a) with respect to the Empress System Business, the Canadian Assets Business or Company, as applicable, a material adverse effect on the business, operations, financial condition or results of operations of the Empress System Business, the Canadian Assets Business or Company, as applicable, and (b) with respect to any other Person, a material adverse effect on the business, operations, financial condition or results of operations of such Person and its Subsidiaries, taken as a whole; in each case excluding effects reasonably attributable to the general state of the industries in which the Empress System Business, the Canadian Assets Business, Company, or such Person and its Subsidiaries, as applicable, operate (including natural gas and petroleum price levels), to general economic conditions in the United States and Canada (including prevailing interest rate and stock market levels) or to the transactions contemplated by this Agreement.

 

“ Materiality Requirement ” shall have the meaning set forth in Section 10.6.

 

“ Minister ” shall have the meaning set forth in the definition of “Required Governmental Consent.”

 

“ Multiemployer Plans ” shall have the meaning as set forth in Section 4.13(c).

 

“ Multiple Offer Employees ” shall have the meaning set forth in Section 11.1(a).

 

“ NEB ” means the National Energy Board of Canada.

 

“ Neutral Firm ” shall have the meaning set forth in Section 12.20(a).

 

“ Organizational Representations and Warranties ” means the representations and warranties set forth in Sections 4.1, 4.2, 4.3, 4.6, 4.8 (without giving effect to clause (i) thereof), 5.1, 5.2, 5.3, 5.4, 5.5 (without giving effect to clause (a) thereof), 6.1, 6.2, 6.3, 6.4 and 6.5.

 

“ Party ” shall mean each of Duke, Company and COP.

 

“ Parent Company Agreement ” shall mean the Parent Company Agreement, dated as of March 31, 2000, by and among Phillips, Duke Energy, Company and Duke Energy Field Services Corporation, as amended by that certain First Amendment to Parent Company Agreement, dated as of May 25, 2000, that certain Second Amendment to Parent Company Agreement, dated as of August 4, 2000, and that certain Third Amendment to Parent Company Agreement, dated as of July 29, 2004, including all exhibits, schedules, annexes and other documents attached or otherwise part of the foregoing, as further amended, restated, supplemented or otherwise modified from time to time.

 

“ Pension Transfer Amount ” shall have the meaning set forth in Section 11.1(d)(iii).

 

“ Pension Transfer Date ” shall have the meaning set forth in Section 11.1(d)(iii).

 

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“ Percentage Interest ” shall have the meaning set forth in the Amended and Restated LLC Agreement.

 

“ Permit ” shall have the meaning set forth in Section 4.4.

 

“ Permitted Encumbrances ” shall mean, with respect to or upon any of the property or assets, whether owned as of the date hereof or thereafter, comprising the Empress System Business or the Canadian Assets Business, as applicable, any Liens, caveats, claims, rights (including rights of Governmental Entities), reservations, exceptions, easements, rights-of-way, conditions, restrictions (including restrictive covenants and zoning and land use restrictions imposed by applicable laws, regulations and ordinances), leases, licenses and other similar title exceptions or other imperfections of title, restrictions or encumbrances affecting such property or assets that either (a) affect such property or assets as of the date of this Agreement and are identified with reasonable particularity in the appropriate Disclosure Schedule, or (b) were not incurred in the borrowing of money and, individually and in the aggregate, do not and will not materially detract from the value of such property or assets or materially interfere with the use in the ordinary conduct of the business conducted with respect to such property or assets or present or impose any material financial obligations not reflected in the financial statements described in Section 4.5. Without limiting the generality of the foregoing definition, the following shall constitute “Permitted Encumbrances”: (x) all rights to consent by, required notices to, filings with, or other actions by Governmental Entities or authorities in connection with the sale or conveyance of such properties or assets, if the same are customarily obtained subsequent to the transfer of title; and (y) the terms and conditions of all easements, rights-of-way, leases and licenses included within such properties and assets, but only to the extent such terms and conditions would be acceptable to a reasonably prudent person acquiring those easements, rights-of-way, leases and licenses for the purposes for which they have been used.

 

“ Person ” shall mean any individual, partnership, firm, corporation, association, joint venture, limited liability company, trust or other entity, or any Governmental Entity.

 

“ Phillips ” means Phillips Petroleum Company, a Delaware corporation.

 

“ Post-Closing Period ,” with respect to any Person, means any taxable period beginning, with respect to such Person, after the Applicable Closing Date and the portion, beginning after such Applicable Closing Date, of any taxable period that includes, with respect to such Person, but does not end on, such Applicable Closing Date; provided , however , that for Canadian income Tax purposes, with respect to PTC, “Post-Closing Period” means any taxable period beginning, with respect to PTC, at or after the Applicable Closing and the portion, beginning at such Applicable Closing, of any taxable period that includes, with respect to PTC, but does not end prior to, such Applicable Closing. “ Post-First Closing Period ”, “ Post-Second Closing Period ” and “ Post-Empress Closing Period ” mean, respectively, the Post-Closing Period determined by reference to the specified Closing.

 

“ Pre-Closing Period ,” with respect to any Person, means any taxable period ending, with respect to such Person, on or prior to the Applicable Closing Date and the portion, ending on such Applicable Closing Date, of any taxable period that includes, with respect to such Person, but does not end on, such Applicable Closing Date; provided , however , that for Canadian

 

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income Tax purposes, with respect to PTC, “Pre-Closing Period” means any taxable period ending, with respect to PTC, prior to the Applicable Closing and the portion, ending immediately prior to such Applicable Closing, of any taxable period that includes, with respect to PTC, but does not end prior to, such Applicable Closing. “ Pre-First Closing Period ”, “ Pre-Second Closing Period ” and “ Pre-Empress Closing Period ” mean, respectively, the Pre-Closing Period determined by reference to the specified Closing. “ PTC ” shall mean Petroleum Transmission Company, a Canadian corporation.

 

“ PTC Assets and Liabilities ” shall mean (a) the assets consisting of easements, rights-of-way, permits, approvals, licenses and leases that are owned or held by PTC and over which the PTC Pipeline is located, and (b) the liabilities consisting of obligations owed by PTC to the counterparties including Governmental Entities under such easements, rights-of-way, permits, licenses and leases pursuant to the terms thereof as to periods following the Applicable Closing Date.

 

“ PTC Pipeline ” refers to the 6-inch 580 mile (933 km) pipeline system that transports (in batches) up to 15,000 bbl/d of propane, iso-butane and normal butane from the Empress Plant to PTC terminals, the Regina storage facilities and to interconnects with the Cochin pipeline.

 

“ Radio Licence ” means “radio licences” issued under the Radiocommunication Act (Canada) and the Regulations thereunder.

 

“ Replacement Empress Closing Date ” shall have the meaning set forth in Section 7.16(b)

 

“ Requested Party ” shall have the meaning set forth in Section 12.8.

 

“ Requesting Party ” shall have the meaning set forth in Section 12.8.

 

“ Required Empress Consents ” shall mean all consents or approvals (a) that are material to the conduct of the Empress System Business substantially in the manner conducted on the date hereof and on the Applicable Closing Date, (b) the failure to obtain which would materially adversely affect COP’s ability to consummate the transactions contemplated hereby or to perform its obligations hereunder, in each case with respect to the transfer of the Empress System Business, or (c) listed on Schedule 1.1(a).

 

“ Required Governmental Consents ” shall mean, to the extent applicable to the transactions contemplated by this Agreement, each of the following:

 

(a) the expiration or termination of any waiting periods under applicable United States antitrust or trade regulation laws and regulations, including under the HSR Act;

 

(b) the receipt of the confirmation of the EUB that it will approve the transfer of EUB Approval Number 6659 without any material adverse change to the terms and conditions that are attached to such EUB Approval Number 6659 (and with no subsequent indication to the contrary having been received);

 

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(c) the NEB’s approval of the transfer of the PTC Pipeline and related facilities to Duke Transferee;

 

(d) the approval to transfer Permit to Operate a Storage Facility dated May 8, 2000 as required by The Hazardous Substances and Waste Dangerous Goods Regulations (Sask.) regarding Facility Code DI-5;

 

(e) any of (i) the receipt of an advance ruling certificate pursuant to section 102 of the Competition Act (Canada) from the Commissioner of Competition (the “ Commissioner ”) under the Competition Act (Canada), (ii) the waiver by the Commissioner of the obligation to notify and supply information under Part IX of the Competition Act (Canada) pursuant to paragraph 113(c) of the Competition Act (Canada), and confirmation, in writing, from the Commissioner that she has no intention to file an application under Part VIII of the Competition Act (Canada) (a “no-action letter”), or (iii) the expiry of the statutory waiting period under section 123 of the Competition Act (Canada) and the receipt of a no-action letter from the Commissioner; and

 

(f) the receipt by the acquiring Party of notification from the minister responsible under the Investment Canada Act (the “ Minister ”) that any requisite approvals by the Minister of such transaction have been granted or deemed to have been granted on terms and conditions satisfactory to the acquiring party acting reasonably.

 

“ Second Amended and Restated LLC Agreement ” shall mean the form of agreement attached as Exhibit B.

 

“ Second Closing ” shall mean the Closing to be consummated on the Second Closing Date.

 

“ Second Closing Cash Amount ” shall mean $398 million, as such amount may be adjusted by Section 3.3(b).

 

“ Second Closing Date shall mean the first Business Day after the First Closing Date.

 

“ Second Request ” shall have the meaning set forth in Section 7.2(d).

 

“ Section 12.6(c) Tax Proceeding ” shall have the meaning set forth in Section 12.6(c).

 

“ Securities Act ” shall mean the Securities Act of 1933, as amended.

 

“ Shared Licenses ” shall have the meaning set forth in Section 7.14(b).

 

“ Subject Company Equity Interest ” shall have the meaning set forth in Section 2.1(a).

 

“ Subsidiary ” shall mean, when used with respect to any Person, any corporation, partnership, limited liability company, or other organization, whether incorporated or

 

 

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unincorporated, of which such Person owns or controls, directly or indirectly, 50% or more of the outstanding voting securities or equivalent equity interests; provided, however, that for the avoidance of doubt, for periods after the Second Closing, neither Company nor any of its Subsidiaries shall be deemed a Subsidiary of any member of the COP Group or the Duke Group.

 

“ Tax ” or “ Taxes ” shall mean all taxes (whether U.S. federal, Canadian federal, state, provincial, territorial, local, municipal or foreign) based upon or measured by income, net income and/or capital gain and any other tax of any kind whatsoever, including gross receipts, profits, capital, windfall profits, excise, sales, use, occupation, value added, goods and services, harmonized, ad valorem , transfer, franchise, withholding, payroll, employment, health, excise, stamp, premium, capital stock, production, business and occupation, disability, severance, or real or personal property taxes, fees, or assessments of any kind whatsoever (including, for greater certainty, employment insurance contributions and Canada pension plan contributions) imposed by any Governmental Entity, and includes any liability in respect of taxes of another Person, together with any interest or penalties or any other additions to tax imposed with respect thereto.

 

“ Tax Proceeding ” means any Tax audit, contest, litigation or other proceeding with or against a Governmental Entity.

 

“ Tax Returns ” or “ Returns ” shall mean returns, declarations, elections, statements, reports, forms, designations, property tax renditions or other documents or information, whether in tangible or electronic form, including any schedules or attachments thereto, required to be filed with or supplied to any Taxing Authority and any amendments thereto.

 

“ Taxing Authority ” shall mean any Governmental Entity having jurisdiction over the assessment, determination, collection or other imposition of any Tax.

 

“ TEPPCO ” shall have the meaning set forth in the Recitals.

 

“ TEPPCO Agreement ” shall have the meaning set forth in the Recitals.

 

“ TEPPCO GP ” shall have the meaning set forth in the Recitals.

 

“ TEPPCO GP Equity Interests ” shall have the meaning set forth in the Recitals.

 

“ TEPPCO GP Sale ” shall have the meaning set forth in the Recitals.

 

“ TEPPCO GP Sale Proceeds Amount ” shall mean $1,100,000,000 (and for clarification, excluding any adjustment under the TEPPCO Agreement to the purchase price for the TEPPCO GP Equity Interests or similar adjustment, all such adjustments being covered by Section 7.15).

 

“ Term Sheet Termination Agreement ” shall mean the Termination Agreement (Term Sheet), dated as of even date herewith, by and between COP and Duke Energy.

 

“ Third-Party Claim ” shall have the meaning set forth in Section 10.3(a).

 

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“ Trademarks and Logos ” shall have the meaning set forth in Section 7.8.

 

“ TSA ” shall have the meaning set forth in Section 3.2(b)(v).

 

“ Undertakings ” shall have the meaning set forth in Section 7.12.

 

ARTICLE II

TRANSACTIONS

 

Section 2.1 Initial Sale . (a) On the First Closing Date, Duke shall cause DEFS Holding to sell, assign and transfer to COP Transferee an Equity Interest in Company that has an approximate 6.47% Percentage Interest (the “ Subject Company Equity Interest ”).

 

(b) The consideration for the sale, assignment and transfer of the Subject Company Equity Interest shall consist of the payment by COP Transferee to DEFS Holding of the First Closing Cash Amount on the First Closing Date.

 

Section 2.2 Second Closing Date Transfers, Contribution and Distributions; Restatement of LLC Agreement . On the Second Closing Date, the following actions shall occur in the order indicated below (and the Parties agree to confirm upon request from time to time by any Party that the following actions did occur in the order indicated below):

 

(a) If Duke has repaid in full the Duke Note, Company shall make a cash distribution to DEFS Holding in an amount equal to 100% of the TEPPCO GP Sale Proceeds Amount.

 

(b) (i) On or prior to the Second Closing Date, Company shall cause all indebtedness of the Canadian Holding Company or any Canadian Assets Subsidiary, other than indebtedness owed by any Canadian Assets Subsidiary to another Canadian Assets Subsidiary or to Canadian Holding Company, to be contributed to the capital or exchanged for shares of the obligor and any Liens securing such indebtedness to be released.

 

(ii) Company shall cause the distribution to DEFS Holding of all of the Equity Interests in the Canadian Holding Company.

 

(c) On the Second Closing Date COP shall make, or cause CPGC to make, a cash contribution to Company in an amount equal to the Second Closing Cash Amount.

 

(d) Each of Duke and COP shall cause the Second Amended and Restated LLC Agreement to be executed by DEFS Holding and CPGC, respectively.

 

Section 2.3 Empress Closing Date . Subject to Section 7.16, COP shall cause the Empress System Business to be assigned, transferred and conveyed to Duke Transferee and the consideration for the assignment, transfer and conveyance of the Empress System Business to, and the assumption of the Empress System Business by, Duke Transferee shall consist of the payment by Duke Transferee to ES Transferor of the Empress System Amount on the Empress Closing Date and the assumption by Duke Transferee of the Assumed Liabilities.

 

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Section 2.4 Authorization of Company Action . No later than the First Closing Date, COP and Duke shall take such actions as may be necessary to cause their respective Subsidiary that serves as a member of Company to approve, authorize and instruct Company to engage in the transactions described in and contemplated by this Agreement.

 

ARTICLE III

THE CLOSING

 

Section 3.1 Closing Place and Date . Each Closing shall take place at the offices of Vinson & Elkins L.L.P., 1001 Fannin, Suite 2300, Houston, Texas 77002, at, in the case of the First Closing, 2:00 P.M., Houston, Texas time, on the First Closing Date, and at, in the case of the Second Closing, or the Empress Closing, 10:00 A.M., Houston, Texas time, on the Applicable Closing Date.

 

Section 3.2 Closing Date Deliveries .

 

(a) First Closing .

 

(i) COP Deliveries . At the First Closing, COP shall cause to be delivered the following:

 

(A) to Duke, the certificates required to be delivered by COP pursuant to Sections 7.16(a)(iii) and 8.1(a)(ii)(A);

 

(B) to Company, the certificate required to be delivered by COP pursuant to Section 8.3(a)(ii)(B); and

 

(C) to DEFS Holding, cash in an amount equal to the First Closing Cash Amount.

 

(ii) Duke Deliveries . At the First Closing, Duke shall cause to be delivered the following:

 

(A) to COP, the certificate required to be delivered by Duke pursuant to Section 8.2(a)(ii)(A);

 

(B) to Company, the certificate required to be delivered by Duke pursuant to Section 8.3(a)(ii)(A);

 

(C) to COP Transferee, an executed assignment of the Subject Company Equity Interest in the form of Exhibit C-1; and

 

(D) to COP Transferee, a certificate of non-foreign status of DEFS Holding which meets the requirements of Treasury Regulation 1.1445-2(b)(2).

 

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(iii) Company Deliveries . At the First Closing, Company shall cause to be delivered the following:

 

(A) to COP, the certificate required to be delivered by Company pursuant to Section 8.2(a)(ii)(B);

 

(B) to Duke, the certificate required to be delivered by Company pursuant to Section 8.1(a)(ii)(B); and

 

(C) to Canadian Holding Company or any Canadian Assets Subsidiary any amount payable pursuant to Section 3.3(a)(ii).

 

(b) Other Closings .

 

(i) COP Deliveries . At the Applicable Closing, COP shall cause to be delivered and contributed the following:

 

(A) subject to Section 7.16, to Duke Transferee, duly executed and (where applicable) notarized Asset Conveyance Documents pursuant to which the Empress System Business including the Equity Interests in PTC is transferred and conveyed to Duke Transferee, together with notarized copies of all resolutions by the board of directors (or similar management body) of ES Transferor to authorize such transfer and by the board of directors (or similar management body) of PTC and all other actions that are required to be taken to authorize and effect the transfer of the Equity Interests in PTC; and

 

(B) to Company from CPGC on the Second Closing Date, cash in an amount equal to the Second Closing Cash Amount.

 

(ii) Duke Deliveries . Subject to Section 7.16, at the Applicable Closing, Duke shall cause to be delivered to ES Transferor, cash in an amount equal to the Empress System Amount.

 

(iii) Company Deliveries . At the Second Closing (or, as to the distribution described in clause (C) below, on the sixth Business Day after the Second Closing Date), Company shall cause to be distributed and delivered the following:

 

(A) to DEFS Holding, if Duke has repaid in full the Duke Note, cash in an amount equal to the TEPPCO GP Sale Proceeds Amount;

 

(B) to DEFS Holding, an executed transfer of all of the Equity Interests in Canadian Holding Company in the form of Exhibit C-2, together with all resolutions by the directors (or similar management body) of Company and (if applicable) Canadian Holding Company and other actions required to be taken to authorize or effect that transfer as a distribution by Company to DEFS Holding; and

 

(C) to DEFS Holding and CPGC, cash in the amount required by Section 3.3(b).

 

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(iv) Second Amended and Restated LLC Agreement . At the Second Closing, each of COP, Duke and Company shall execute (or cause their respective Subsidiaries to execute, as applicable) and deliver to the other Parties counterparts of the Second Amended and Restated LLC Agreement.

 

(v) Transition Services Agreement . On the Applicable Closing Date for the Empress System Business, Duke Transferee and ConocoPhillips Canada Resources Corp. (“ COP Canada ”) shall enter into a Transition Services Agreement substantially in the form attached as Exhibit E, as modified and completed as follows (the “ TSA ”).

 

(A) The term shall be for a period of seven months commencing on the Applicable Closing Date, unless Duke Transferee elects to early terminate such service upon 30 days prior written notice.

 

(B) The services to be provided pursuant to the TSA shall be those services that have been provided by or through COP Canada or its Affiliates to the Empress System Business during the 12-month period preceding the Applicable Closing Date, to the extent so requested by Duke Transferee and to the extent not reasonably objected to by COP Canada (it being reasonable for COP Canada to object if it would require that COP Canada retain additional resources).

 

(C) The services shall notwithstanding anything in paragraph (b) but subject to the balance of this paragraph (c) include SAP, Entero Vision and desktop support. The services shall notwithstanding anything in paragraph (b) exclude (i) services currently performed by Empress System Employees who become Continuing Empress System Employees; (ii) the provision of shrinkage make-up or fuel gas or services with respect thereto; (iii) the provision of any configuration or source code information with respect to SAP; (iv) payroll services for the Continuing Empress System Employees after the Applicable Closing Date; (v) if Roger Baxter and/or John Doyle become Continuing Empress System Employees, Entero Vision support formerly provided by such employees; (vi) any services, including data access and internet connections, for the NGL marketing group of the Empress System Business once Duke completes transition to using Duke computer systems; or (vii) any IT or other support for computers owned by Duke or any of its Affiliates. Duke Transferee will use all reasonable efforts to cease using Entero Vision support by the second month after Applicable Closing Date, but in any event Duke shall cease using Entero Vision support by no later than the third month after the Applicable Closing Date. Duke Transferee shall also use all reasonable efforts to cease using IT support services for SAP by the third month after the Applicable Closing Date, but in any event shall cease using IT support services for SAP by the fourth month after the Applicable Closing Date.

 

(D) The rates for the services provided by COP Canada pursuant to the TSA shall be calculated to equal the amounts necessary to reimburse COP Canada for its fully burdened costs (without any profit mark-up) in providing such services.

 

(E) Modifications as may be agreed to by COP Canada and Duke Transferee, each acting reasonably.

 

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(vi) Empress Commercial Agreements . At the Applicable Closing for the transfer of the Business, each of COP and Duke shall execute (or cause their respective Subsidiaries to execute, as applicable) and deliver to the other Party counterparts of the Empress Commercial Agreements. COP and Duke shall use commercially reasonable efforts to agree upon general terms and conditions for each Empress Commercial Agreement.

 

(vii) Termination Agreement . At the Second Closing, the Parties shall execute and deliver (or cause to executed and delivered) an agreement in the form attached hereto as Exhibit A providing for the termination of the Parent Company Agreement in its entirety and for the terms and provisions thereof to have no further force or effect other than the provisions of Article VI of the Parent Company Agreement that provide for the termination of the Governance Agreement, as defined therein, which termination of the Governance Agreement shall continue to be valid and effective.

 

(c) Closing Actions . The cash payments and cash distributions, as applicable, to DEFS Holding, CPGC, ES Transferor and Company pursuant to Sections 3.2 and 3.3 shall be made by wire transfer of immediately available funds in United States Dollars to one or more accounts designated by the Person entitled to receive such payment or distribution. In connection with the Applicable Closing, COP shall take such actions as are necessary to cause PTC to have no assets or liabilities other than the PTC Assets and Liabilities.

 

(d) Asset Conveyance Documents . COP, Duke and Company shall cooperate in the preparation of all Asset Conveyance Documents, and all instruments referenced in Section 7.3(a), and the final form and content of all Asset Conveyance Documents and such instruments shall be subject to the approval of each of COP, Duke and Company, such approval not to be unreasonably withheld or delayed, but in any event such Asset Conveyance Documents and such instruments shall (a) not provide any representations, warranties or covenants (other than that the Applicable Transferor is transferring and the Applicable Transferee is assuming the Empress System Business, or Equity Interests being transferred) or otherwise cause COP or the Applicable Transferor to incur any greater liability than as contained in this Agreement and (b) shall be sufficient to transfer, subject to Section 7.16, the Empress System Business in its entirety to the Duke Transferee.

 

Section 3.3 Company Distributions . (a) On the First Closing Date, (i) the Company will (and Duke and COP will cause the Company to) determine an amount (the “ COP Excess Canadian Cash ”) equal to 30.3% of the amount, if any, by which Canadian Cash on the First Closing Date exceeds C$53,131,000, and (ii) if Canadian Cash is less than C$53,131,000 on such date, then Company shall transfer, or cause to be transferred by a Subsidiary of Company that is not Canadian Holding Company or any Canadian Assets Subsidiary, to Canadian Holding Company or any Canadian Assets Subsidiary, an aggregate amount of Canadian Dollars equal to the amount of any such deficit; provided , however , that any Profits or Losses (as defined in the Second Amended and Restated LLC Agreement) arising solely from such transfer (or a receipt or payment made to fund such transfer) shall be allocated 69.7% to DEFS Holding and 30.3% to CPGC.

 

(b) On the sixth Business Day after the Second Closing Date, the Company will (and Duke and COP will cause the Company to) distribute cash on hand (excluding

 

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Canadian Cash and any proceeds from the transactions contemplated by the Reorganization Agreement, including, but not limited to, the TEPPCO GP Sale Proceeds Amount and cash in the amount contributed pursuant to Section 3.2(b)(i)(B)) in excess of $280 million (such $280 million to be reduced by any third-party debt principal payments, and by capital expenditures to the extent such capital expenditures both (i) are in excess of $100,000,000 and (ii) require approval of Company’s Board of Directors and are approved after the date hereof and prior to the Second Closing Date by at least one of the Phillips Directors (as defined in the Amended and Restated LLC Agreement), in each case of such principal payments and capital expenditures, to the extent made between January 1, 2005 and the Second Closing Date) in the ratio of 69.7% to DEFS Holding (such amount to be distributed to DEFS Holding, the “ DEFS Holding Excess Cash on Hand Amount ”) and 30.3% to CPGC; provided , that in the event such cash on hand is less (the amount of any such deficit, the “ Deficit Cash on Hand Amount ”) than $280 million (such $280 million to be subject to the same reductions described immediately above), then DEFS Holding and CPGC shall on the sixth Business Day after the Second Closing Date contribute in the ratio of 69.7% by DEFS Holding and 30.3% by CPGC (such amount to be contributed by CPGC, the “ CPGC Deficit Cash on Hand Amount ”) an aggregate amount of cash equal to Deficit Cash on Hand Amount; and provided , however , that either (A) if the DEFS Holding Excess Cash on Hand Amount is equal to or greater than the COP Excess Canadian Cash, then the amount of cash distributed to DEFS Holding shall be reduced by, and the amount of cash distributed to CPGC shall be increased by, an amount equal to the COP Excess Canadian Cash, (B) if the CPGC Deficit Cash on Hand Amount is equal to or greater than the COP Excess Canadian Cash, then the amount of cash contributed by DEFS Holding shall be increased by, and the amount of cash contributed by CPGC shall be reduced by, an amount equal to the COP Excess Canadian Cash, (C) if the DEFS Holding Excess Cash on Hand Amount is less than the COP Excess Canadian Cash, then (i) the DEFS Holding Excess Cash on Hand Amount shall be distributed to CPGC (instead of to DEFS Holding) and (ii) the Second Closing Cash Amount shall be reduced by an amount equal to two times the excess of the COP Excess Canadian Cash over the DEFS Holding Excess Cash on Hand Amount, or (D) if the CPGC Deficit Cash on Hand Amount is less than the COP Excess Canadian Cash, then (i) the CPGC Deficit Cash on Hand Amount shall be contributed to the Company by DEFS Holding (instead of by CPGC) and (ii) the Second Closing Cash Amount shall be reduced by an amount equal to two times the excess of the COP Excess Canadian Cash over the CPGC Deficit Cash on Hand Amount.

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF COP

 

COP hereby represents and warrants that, except as disclosed in the COP Disclosure Schedule:

 

Section 4.1 Corporate Organization . (a) COP and ES Transferor are duly organized, validly existing and in good standing under the laws of their respective jurisdictions of incorporation or organization. Each of COP and ES Transferor has the organizational power and authority to own or lease all of its properties and assets and to carry on its business as it is now being conducted, and is duly licensed or qualified to do business in each jurisdiction (whether federal, state, provincial, territorial, local or foreign) in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary, except where the failure to be so licensed or qualified, individually or in the aggregate, would not have a Material Adverse Effect on COP or ES Transferor.

 

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(b) Schedule 4.1(b) of the COP Disclosure Schedule sets forth the organizational structure of ES Transferor and the jurisdiction and capitalization of PTC. All of the outstanding Equity Interests of PTC are validly issued, fully paid and non-assessable and are not subject to, nor were they issued in violation of, any preemptive rights, and such Equity Interests are owned by CPCL free and clear of any Lien with respect thereto. PTC (i) is duly organized and validly existing under the laws of its jurisdiction of incorporation, (ii) is duly licensed or qualified to do business and in good standing in each jurisdiction (whether federal, state, provincial, territorial, local or foreign) in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary, except where the failure to be so licensed or qualified, individually or in the aggregate would not have a Material Adverse Effect on PTC or the Empress System Business, and (iii) has all requisite organizational power and authority to own or lease its properties and assets and to carry on its business as now conducted. Except as described above, at the Applicable Closing there will not be any Equity Interests in PTC issued or outstanding or any subscriptions, options, warrants, calls, rights, convertible securities or other agreements or commitments of any character obligating PTC to issue, transfer or sell any of its Equity Interests, or any agreements, arrangements, or understandings granting any Person any rights in PTC. Except as set forth in Schedule 4.1(b) of the COP Disclosure Schedule, PTC does not hold any interest in any corporation, partnership, joint venture or other entity.

 

Section 4.2 Authority; Title; No Violation . (a) COP has full organizational power and authority to execute and deliver this Agreement and to consummate the transactions contemplated by this Agreement. The execution and delivery of this Agreement and the consummation of the transactions contemplated by this Agreement have been duly and validly approved by all organizational action on the part of COP. No other organizational proceedings on the part of COP or any member of the COP Sale-Related Group are necessary to approve this Agreement and to consummate the transactions contemplated by this Agreement. This Agreement has been duly and validly executed and delivered by COP and, assuming due authorization, execution and delivery by Duke and Company, constitutes a valid and binding obligation of COP, enforceable against COP in accordance with its terms.

 

(b) Subject to the EnCana Dispute, at the Applicable Closing, ES Transferor shall have good title to the Empress System Business and CPCL shall own all of the issued and outstanding Equity Interests in PTC, in each case, free and clear of any Liens, restrictions on transfer or voting or preemptive rights. COP and ES Transferor have the full power, right and authority to transfer and convey, or cause to be transferred and conveyed, to Duke Transferee at the Applicable Closing the Empress System Business (including the Equity Interests in PTC), subject to the EnCana Dispute.

 

(c) The execution, delivery and performance of this Agreement by COP do not, and the consummation by COP or any member of the COP Sale-Related Group of the transactions contemplated by this Agreement will not, (i) constitute a breach or violation of, or a default under, the certificate of incorporation or by-laws or other organizational documents of COP or any member of the COP Sale-Related Group, (ii) constitute a breach or violation of, or a

 

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default under, or trigger any “change of control” rights or remedies under, or give rise to any Lien, any acceleration of remedies, any buy-out or purchase right or any right of first offer or refusal or of termination under, any indenture, license, contract, agreement or other instrument to which COP or any member of the COP Sale-Related Group or of any of its respective Subsidiaries is a party or by which any of them or their respective properties or assets may be bound, or (iii) assuming receipt of the Required Governmental Consents, violate any law, rule, regulation, judgment, decree or order applicable to COP or any member of the COP Sale-Related Group or any of their respective properties or assets, except in the case of (ii) and (iii) above for such breaches, violations, defaults, liens, accelerations or rights as would not reasonably be expected, individually or in the aggregate, to result in a COP Sale-Related Material Adverse Effect or to adversely affect the ability of COP or any members of the COP Sale-Related Group to consummate the transactions contemplated by this Agreement.

 

Section 4.3 Consents and Approvals . Except for the Required Governmental Consents and as set forth on Schedule 4.3 of the COP Disclosure Schedule, no notice to, filing with, authorization of, exemption by, or consent or approval of, or the taking of any other action in respect of any Governmental Entity or any other Person on the part of COP or any member of the COP Sale-Related Group is necessary for the consummation by COP or ES Transferor of the transactions contemplated by this Agreement, except (a) where the failure to provide such notice, make such filing, or obtain such authorization, exemption, consent or approval would not, individually or in the aggregate, reasonably be expected to result in a COP Sale-Related Material Adverse Effect, or to adversely affect the ability of COP or any member of the COP Sale-Related Group to consummate the transactions contemplated by this Agreement and (b) any notices, consents or approvals required by the Amended and Restated LLC Agreement.

 

Section 4.4 Permits; Compliance with Applicable Law . As of the Applicable Closing Date, each member of the COP Sale-Related Group shall hold all licenses, franchises, registrations, permits, and authorizations (each, a “ Permit ”) necessary for the lawful conduct of the Empress System Business under and pursuant to all, and have complied with and are not in default under and/or in violation of any, applicable law, statute, Permit, order, rule or regulation of any Governmental Entity relating to any member of the COP Sale-Related Group or the Empress System Business (including the PTC Assets and Liabilities), as applicable, except in each case where the failure to hold such Permit or such noncompliance or default would not, individually or in the aggregate, have a COP Sale-Related Material Adverse Effect. To COP’s knowledge, the Empress System Business is not being nor has it been conducted in violation of any applicable law or any order, writ, injunction or decree of any Governmental Entity, except for any such violations which would not, individually or in the aggregate, have a COP Sale-Related Material Adverse Effect. No member of the COP Sale-Related Group has received any notice or other communication from any Governmental Entity asserting (i) any violation of law, statute, ordinance, order, rule or regulation or the terms of an agreement with any Governmental Entity, (ii) any violation of or failure to comply with any term or requirement of any Permit, or (iii) any revocation, withdrawal, suspension, cancellation, termination or modification of any Permit, except for violations, failures to comply, revocations, withdrawals, suspensions, cancellations, terminations or modifications which would not in the aggregate reasonably be expected to have a COP Sale-Related Material Adverse Effect. No notice of any pending investigation or violation of, noncompliance with or alleged liability under, any law, statute,

 

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ordinance, order, rule, regulation or Permit has been received by any member of the COP Sale-Related Group which would, individually or in the aggregate, reasonably be expected to have a COP Sale-Related Material Adverse Effect.

 

Section 4.5 Financial Statements and Information; Undisclosed Liabilities . The Empress Financial Statements fairly present in all material respects the results of the consolidated (or combined) operations and consolidated (or combined) financial positions of the Empress System Business, as the case may be, for the respective fiscal periods or as of the respective dates therein set forth. Each of such statements complies with applicable accounting requirements with respect thereto; and each of such statements has been prepared in accordance with GAAP consistently applied during the periods involved except as noted on such statements. There are no liabilities required by GAAP to be set forth on a consolidated (or combined) balance sheet of the Empress System Business, except (i) as set forth on the Empress Financial Statements, and (ii) for liabilities incurred in the ordinary course of business since December 31, 2004 and which would not have a Material Adverse Effect on the Empress System Business. At or prior to the Applicable Closing Date, the Empress System Business will be transferred and conveyed to Duke Transferee without any indebtedness to any Person.

 

Section 4.6 Broker’s Fees . Neither COP nor any of its Subsidiaries (including the COP Sale-Related Group) nor any of their respective officers or directors has employed any broker or finder or incurred any liability for any broker’s fees, commissions or finder’s fees in connection with the transactions contemplated by this Agreement which would be payable by Company, any Subsidiary of Company, PTC, Duke or any Subsidiary of Duke.

 

Section 4.7 Absence of Certain Changes or Events . Except for changes or events consented to or approved by Duke in writing pursuant to Section 7.4, from December 31, 2004 through the date of this Agreement, the Empress System Business has been operated in the ordinary and normal course in all material respects and there has not been:

 

(a) any event (whether covered by insurance or not) which, individually or in the aggregate, has had or would reasonably be expected to have a COP Sale-Related Material Adverse Effect;

 

(b) except as set forth on Schedule 4.7(b), any increase in compensation (including severance or termination pay) payable to or to become payable to any consultants, officers, directors, employees or agents working in connection with the Empress System Business or any change in any insurance, pension, or other benefit plan, payment or arrangement made to, for or with any of such consultants, officers, directors, employees or agents, in each case other than (i) increases or changes reasonably consistent with past practices and applicable to at least 10% of the employees of COP and its Subsidiaries, or (ii) other increases that are in accordance with past practice and are not material in the aggregate;

 

(c) any change in financial accounting methods, principles or practices by the Empress System Business materially affecting its assets, Liabilities or businesses, except insofar as may have been required by a change in GAAP;

 

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(d) any indebtedness for borrowed money incurred with regard to the Empress System Business other than from COP or its Affiliates, any issuance of debt securities by either ES Transferor or PTC in relation to the Empress System Business, or other than to COP or its Affiliates, any assumption, guarantee, endorsement or other action which would result in the Empress System Business having responsibility for the obligations of any other Persons, or any mortgage or encumbrance on properties or assets of the Empress System Business, other than Liens that do not materially restrict or detract from the value of such properties or assets; or

 

(e) any declaration, setting aside or payment of any dividend or any other similar distribution (other than in cash), directly or indirectly, with respect to PTC’s securities.

 

Section 4.8 Legal Proceedings . (a) As of the date of this Agreement, except as set forth on Schedule 4.8 of the COP Disclosure Schedule, neither COP nor ES Transferor nor any of their respective Subsidiaries is a party to any, and there are no pending or, to COP’s knowledge, threatened, legal, administrative, arbitral or other proceedings, claims, actions or governmental or regulatory investigations of any nature against or otherwise affecting any ES Transferor or any of its Subsidiaries which (i) arise out of or relate to the Empress System Business and would reasonably be expected to result in material injunctive relief or in damages to any ES Transferor and any of their Subsidiaries in excess of $1,000,000 in the aggregate or (ii) would adversely affect the ability of COP to consummate and cause ES Transferor to consummate the transactions contemplated by this Agreement.

 

(b) As of the date of this Agreement, there are no injunctions, orders, judgments or decrees imposed upon or otherwise affecting COP or any of its Subsidiaries or assets which, individually or in the aggregate, have had, or would reasonably be expected to have, a COP Sale-Related Material Adverse Effect.

 

Section 4.9 Contracts . (a) Schedule 4.9(a) of the COP Disclosure Schedule sets forth a true and complete list as of the date of this Agreement of all contracts, agreements and commitments of the following categories, whether oral or written, express or implied, primarily relating to the Empress System Business or by which any of the assets or properties comprising the Empress System Business are bound (excluding the agreements to be entered into on the Closing contemplated by this Agreement) (collectively, the “ COP Material Contracts ”):

 

(i) any contract (other than gas or natural gas liquids purchase and/or sale agreements) involving or requiring expenditures or receipts of more than $200,000 in any calendar year and not cancelable or terminable within one year from the Applicable Closing Date;

 

(ii) any contract (other than those contracts described in clause (viii) immediately below) involving or requiring expenditures or receipts of more than $500,000 in any calendar year or any material contract that grants a right of first refusal or a right of first negotiation or other preferential right to a third-party;

 

(iii) any partnership, joint venture or operating agreements with regard to material assets of the Empress System Business;

 

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(iv) any contract containing covenants limiting the freedom to engage in any line of business or compete with any Person or operate at any location;

 

(v) any contract between ES Transferor or PTC relating to the Empress System Business, on one hand, and any Affiliate of COP (other than ES Transferor and PTC), on the other hand;

 

(vi) any collective bargaining agreement;

 

(vii) any employment, personal services, consulting, noncompetition, severance, golden parachute or similar contract, for officers, directors or other individuals either (x) having a term of longer than one year or (y) requiring payments in excess of $75,000 per calendar year;

 

(viii) any contract having a term of one year or more that pertains to the purchase, sale, processing, treating, compression, gathering, storage, exchange, extraction, transportation or transmission or marketing of natural gas in all its forms and all other hydrocarbons (including such contracts relating to liquid products), together with all deposits (either in products or cash) related to such contracts, involving the delivery or receipt of more than 1,000 mcf per day (or 200 bbl/d if relating to liquid products), and any liquids balancing agreement or similar arrangement;

 

(ix) any contract that pertains to the processing of natural gas having a term that exceeds 31 days and involving the delivery or receipt of more than 50 mmcfd;

 

(x) any contract that pertains to the purchase, sale, processing, treating, exchange, extraction, transportation or transmission or marketing of natural gas liquids involving the delivery or receipt of more than 50,000 bbls over the term of the contract or that pertains to the storage of natural gas liquids involving more than 30,000 bbls over the term of the contract;

 

(xi) any contract entered into since December 31, 2004 for the acquisition or disposition, sale or lease of properties or assets (by merger, purchase or sale of assets or stock or otherwise) requiring aggregate expenditures or receipts in excess of $1,000,000;

 

(xii) any material lease of one or more railcars; and

 

(xiii) any commitment or agreement to enter into any of the foregoing.

 

(b) As of the date of this Agreement, each COP Material Contract is a valid, binding and enforceable (except as such enforceability may be subject to any bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other laws, now or hereafter in effect, relating to or limiting creditors’ rights generally) obligation of ES Transferor or PTC. As of the date of this Agreement, there is no default under any COP Material Contract by any member of the COP Sale-Related Group or, to COP’s knowledge, by any other party thereto, and no event has occurred that with the lapse of time or the giving of notice or both would constitute a default thereunder by any member of the COP Sale-Related Group, or to COP’s knowledge,

 

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any other party, which default or event, individually or in the aggregate, would reasonably be expected to have a COP Sale-Related Material Adverse Effect. As of the date of this Agreement, no party to any COP Material Contract has given notice to any member of the COP Sale-Related Group or made a claim against any member of the COP Sale-Related Group with respect to any breach or default thereunder which breach or default, individually or in the aggregate, would reasonably be expected to have a COP Sale-Related Material Adverse Effect. As of the date of this Agreement, there has been no amendment or modification of any of the COP Material Contracts except as specifically listed in Schedule 4.9(a) of the COP Disclosure Schedule. The enforceability of any COP Material Contract shall not be impaired by the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby or thereby, and, as of the date of this Agreement, no COP Material Contract requires that a transaction of the kind contemplated by this Agreement receive the approval of any party to such COP Material Contract, except where such impairments or failures to receive approvals, individually or in the aggregate, would not reasonably be expected to have a COP Sale-Related Material Adverse Effect.

 

(c) PTC is not a party to any loan agreement, mortgage, indenture, security agreement or other agreement or instrument relating to the borrowing of money by, or any extension of credit to, PTC.

 

(d) As of the date of this Agreement, COP has delivered to Duke or otherwise made available to Duke at the offices of COP or its Subsidiaries true, correct and complete copies of all COP Material Contracts relating to the Empress System Business.

 

Section 4.10 Real Property . (a) Fee Properties . Except as otherwise set forth on Schedule 4.10(a) of the COP Disclosure Schedule, as of the date of this Agreement, ES Transferor or PTC owns good and marketable and record title to all real property listed on Schedule 4.10(a) of the COP Disclosure Schedule (collectively, the “ COP-Owned Fee Properties ”), free and clear of all Liens and encumbrances, except for Permitted Encumbrances and subject to the EnCana Dispute. Schedule 4.10(a) of the COP Disclosure Schedule identifies all real property assets the fee title to which is owned or held by ES Transferor or PTC as of the date of this Agreement and which are material to the Empress System Business.

 

(b) Realty Leases . As of the date of this Agreement, with respect to all leases of real property of or used by ES Transferor or PTC with respect to the Empress System Business (collectively, the “ COP Leases ”), beneficial interest in the COP Leases relating to the Empress System Business is owned and held by ES Transferor in each case free and clear of Liens, encumbrances and claims of those claiming by, through, or under COP or any member of the COP Sale-Related Group, but not otherwise, subject to Permitted Encumbrances. Schedule 4.10(b) of the COP Disclosure Schedule identifies all leases of real property, other than easements and rights-of-way, a leasehold interest in which is owned or held by ES Transferor or PTC, as of the date of this Agreement and which are material to the Empress System Business. Except as otherwise set forth in Schedule 4.10(b) of the COP Disclosure Schedule, as of the date of this Agreement each of the COP Leases is a valid, binding and enforceable (except as such enforceability may be subject to any bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other laws, now or hereafter in effect, relating to or limiting creditors’ rights generally) obligation of each of the lessee and of the lessor under such COP Lease. As of

 

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the date of this Agreement, except where, individually or in the aggregate, there would not reasonably be expected to be a COP Sale-Related Material Adverse Effect or as otherwise set forth in Schedule 4.10(b) of the COP Disclosure Schedule, (A) the enforceability of any of the COP Leases will not be impaired by the execution or delivery of this Agreement, and (B) no member of the COP Sale-Related Group is currently participating in any discussions or negotiations regarding termination of any COP Lease of a property at which such member of the COP Sale-Related Group conducts business operations prior to the scheduled expiration of such COP Lease by reason of a breach or alleged breach by the tenant thereunder.

 

(c) Easements . As of the date of this Agreement, with respect to pipeline easements, rights-of-way, licenses and land use permits of or used by ES Transferor or PTC with respect to the Empress System Business (collectively, the “ COP Easements ”), beneficial interest in the COP Easements is owned or held by ES Transferor or PTC, in each case free and clear of Liens, encumbrances and claims of those claiming by, through, or under COP or the COP Sale-Related Group, but not otherwise, subject to Permitted Encumbrances.

 

Section 4.11 Environmental Matters . As of the date of this Agreement, except for matters that, individually or in the aggregate, would not reasonably be expected to have a COP Sale-Related Material Adverse Effect, (i) the properties, operations and activities of COP and its Affiliates (with respect to the Empress System Business) have been and are in compliance with all applicable Environmental Laws; (ii) COP and its Affiliates (with respect to the Empress System Business) are not subject to any existing, pending or, to COP’s knowledge, threatened, action, suit, proceeding or remediation activity under any Environmental Law; (iii) Hazardous Materials have not at any time been released or disposed of at the properties currently owned, operated, leased or used by COP or its Affiliates (with respect to the Empress System Business), and Hazardous Materials were not released or disposed of at properties previously owned, operated, leased or used by COP or its Affiliates (with respect to the Empress System Business) at any time prior to the sale or other disposition of such previously owned properties; (iv) the previous and current methods of releasing or disposing of Hazardous Materials generated, used, treated, recycled or stored at, upon or under the properties previously or currently owned, operated, leased or used by COP or its Affiliates relating to the Empress System Business, have been disclosed to Duke, and none of COP or its Affiliates (with respect to the Empress System Business) are subject to any liability under applicable Environmental Laws arising in connection with the transportation and off-site disposal of any such Hazardous Materials; and (v) COP has not restricted access for the review of and copying by Duke all of the environmental reports, documents, data and other information prepared by or for COP or its Affiliates relating to the properties previously or currently owned, operated, leased or used by COP or its Affiliates in connection with the Empress System Business; provided , however , that the foregoing representations, as they apply to any property, operation, activity or any member of the COP Sale-Related Group prior to the date such property, operation, activity or member of the COP Sale-Related Group became owned or controlled, directly or indirectly, by COP, shall be limited to COP’s knowledge.

 

Section 4.12 Intellectual Property . (a) As of the date of this Agreement, except for the Trademarks and Logos of COP, ES Transferor has such ownership of or such rights by license or other agreement to use all patents and patent applications, trademarks and service marks, trademark and service mark registrations and applications, trade names, logos,

 

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copyrights and copyright registrations and applications technology, know-how, processes and other intellectual property rights, United States or foreign (collectively, the “ COP Intellectual Property ”), as are necessary to permit the Duke Transferee of the Empress System Business to conduct the Empress System Business as currently conducted, except where the failure to have such ownership, license or right to use would not, individually or in the aggregate, have a COP Sale-Related Material Adverse Effect.

 

(b) As of the date of this Agreement, (i) to COP’s knowledge, neither the use of the COP Intellectual Property nor the conduct of the business of the COP Sale-Related Group as currently conducted infringes the intellectual property rights of any third-party and there are no present or threatened infringements of the COP Intellectual Property by any third-party, except, in either case, for such infringements which would not, individually or in the aggregate, have a COP Sale-Related Material Adverse Effect; and (ii) there are no pending or, to COP’s knowledge, threatened proceedings or litigation or other adverse claims by any person relating to the use by any member of the COP Sale-Related Group of any COP Intellectual Property or any third-party intellectual property.

 

Section 4.13 Employee Benefit Plans . (a) Schedule 4.13(a) of the COP Disclosure Schedule includes a complete list of all COP Plans that are in effect as of the date of this Agreement. None of the COP Plans listed in Schedule 4.13(a) of the COP Disclosure Schedule is sponsored or maintained by PTC.

 

(b) As of the date of this Agreement, with respect to each COP Plan listed in Schedule 4.13(a) of the COP Disclosure Schedule, COP has delivered or made available to Duke a true, correct and complete copy of the current summary plan description and plan document.

 

(c) As of the date of this Agreement, no COP Plans listed in Schedule 4.13(a) of the COP Disclosure Schedule are “multiemployer plans” within the meaning of Section 4001(a)(3) of ERISA (“ Multiemployer Plans ”) None of PTC or any of its ERISA Affiliates has, at any time during the last six years, contributed to or been obligated to contribute to any Multiemployer Plan, and none of PTC or any of its ERISA Affiliates has incurred any withdrawal liability under Part I of Subtitle E of Title IV of ERISA that has not been satisfied in full.

 

(d) There does not now exist, nor do any circumstances exist that could result in, any Controlled Group Liability of COP or any of its ERISA Affiliates that would be, or would reasonably be expected to become, a liability following the Applicable Closing of Duke, PTC or any of their respective Affiliates. “ Controlled Group Liability ” means any and all liabilities (i) under Title IV of ERISA, (ii) under Section 302 of ERISA, (iii) under Sections 412 and 4971 of the Code, (iv) as a result of a failure to comply with the continuation coverage requirements of Section 601 et seq. of ERISA and Section 4980B of the Code and (v) under corresponding or similar provisions of foreign laws or regulations.

 

(e) Except as specifically provided in Article XI and except for equity or other long-term incentive compensation granted by COP and its Affiliates to Empress System Employees, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (either alone or in conjunction with any other event) result

 

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in, cause the accelerated vesting or delivery of, or increase the amount or value of, any material payment or benefit to any Empress System Employee. The consummation of the transactions contemplated by this Agreement will not constitute a “change in ownership or control” of COP within the meaning of Treasury Regulation Section 1.280G 1.

 

(f) With respect to the COP Canadian Pension Plan, as of the date of this Agreement: (i) COP has delivered to Duke true and correct copies of the most recent actuarial report, funding agreement and annual information return filed with the Canada Revenue Agency; (ii) it has been established, registered, qualified, invested and administered, in all material respects, in accordance with all applicable laws, statutes, rules and regulations, and in accordance with its terms; (iii) to COP’s knowledge, no fact or circumstance exists that would reasonably be expected to adversely affect the existing tax status of the COP Canadian Pension Plan; (iv) except as provided in this Agreement, it has not been the subject of any proposed or completed merger or asset transfer; and (v) no fact or circumstance exists that has given rise to, or could reasonably be expected to give rise to, a partial wind-up or termination.

 

Section 4.14 Labor Relations . (a) Schedule 4.14(a) of the COP Disclosure Schedule sets forth a true, correct and complete list of all Empress System Employees as of May 9, 2005. COP has delivered to Duke information regarding each Empress System Employee’s job title, base salary or base wages, original hire date, service date, accrued vacation, and employer’s name (including whether such Empress System Employee’s employment is covered by a collective bargaining agreement). To COP’s knowledge and except as would not, individually or in the aggregate, reasonably be expected to cause a COP Sale-Related Material Adverse Effect, all Empress System Employees are lawfully permitted under applicable immigration laws, statutes, rules and regulations to work in the country in which they perform the primary duties of their employment.

 

(b) As of the date of this Agreement, except as would not, individually or in the aggregate, reasonably be expected to cause a COP Sale-Related Material Adverse Effect, with respect to the Empress System Employees, COP and its Affiliates are in compliance with all applicable laws respecting employment and employment practices, terms and conditions of employment, wages, hours of work, employment discrimination, equal opportunity, affirmative action, workers’ compensation, pay equity, unemployment insurance, immigration and occupational safety and health. There are no outstanding claims, complaints, investigations or orders under any such applicable laws, except for claims, complaints, investigations, orders or failures to comply that would not, individually or in the aggregate, reasonably be expected to cause a COP Sale-Related Material Adverse Effect. None of COP and its Affiliates are engaged in any unfair labor practices as defined in the National Labor Relations Act or other applicable law, except as would not, individually or in the aggregate, reasonably be expected to cause a COP Sale-Related Material Adverse Effect. As of the date of this Agreement, there is no labor dispute, strike, slowdown, stoppage or lockout actually pending, or, to COP’s knowledge, threatened against or affecting the employment of any of the Empress System Employees. Except as identified on Schedule 4.14(b) of the COP Disclosure Schedule, there are no collective bargaining agreements or other labor union agreements or binding understandings (in respect of collective agreements) relating to the employment of any of the Empress System Employees. As of the date of this Agreement, COP has no knowledge of any labor union organizing activity within the last year relating to Empress System Employees. To COP’s knowledge, no union has applied to have COP and its Affiliates declared a related or successor employer pursuant to applicable laws with respect to Empress System Employees.

 

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(c) Except as would not, individually or in the aggregate, reasonably be expected to cause a COP Sale-Related Material Adverse Effect, (i) there are no outstanding assessments, penalties, fines, liens, charges, surcharges, or other amounts due or owing pursuant to any workplace safety and insurance legislation in respect of the Empress System Employees, (ii) COP and its Affiliates have not been reassessed in respect of the Empress System Employees under such legislation during the past three years, and (iii) to COP’s knowledge, no audit in respect of the Empress System Employees is currently being performed pursuant to any applicable workplace safety and insurance legislation.

 

Section 4.15 Transactions with Affiliates . Except for transactions contemplated by this Agreement, (a) no director or officer of COP or its Affiliates is currently directly or indirectly a party to any transaction with ES Transferor or PTC relating to the Empress System Business, including in each case any agreement, arrangement or understanding, written or oral, providing for the employment of, furnishing of services by, rental of real or personal property from or otherwise requiring payment to any such director or officer, and (b) with respect to the Empress System Business, neither ES Transferor nor PTC has any outstanding material contract, agreement or other arrangement with COP or any of its Affiliates and has not engaged in any material transaction with COP or its Affiliates, in each case since December 31, 2004.

 

Section 4.16 Personal Property . As of the date of this Agreement, ES Transferor and PTC own and hold valid title to, or leasehold interests in, the personal property owned or used by them in respect of the Empress System Business, free and clear of all Liens, except for such Liens which, individually or in the aggregate, would not reasonably be expected to have a COP Sale-Related Material Adverse Effect, a