SEPARATION AND DISTRIBUTION AGREEMENT

Exhibit 2.1

EXECUTION COPY

SEPARATION AND DISTRIBUTION AGREEMENT

by and between

DUKE ENERGY CORPORATION

and

SPECTRA ENERGY CORP

Dated as of December 13, 2006

TABLE OF CONTENTS

 

 

i

 

ii

Schedules

 

 

iii

Exhibits

 

 

iv

SEPARATION AND DISTRIBUTION AGREEMENT

THIS SEPARATION AND DISTRIBUTION AGREEMENT (this “ Agreement ”), is entered into as of December 13, 2006, by and between Duke Energy Corporation, a Delaware corporation (“ Duke Energy ”), and Spectra Energy Corp (f/k/a Gas SpinCo, Inc.), a Delaware corporation (“ Spectra Energy ”), each a “ Party ” and together, the “ Parties ”.

R E C I T A L S :

WHEREAS, Duke Energy, acting through its direct and indirect Subsidiaries, currently conducts a number of businesses, including (i) the Gas Business, and (ii) the Power Business;

WHEREAS, the Board of Directors of Duke Energy has determined that it is appropriate, desirable and in the best interests of Duke Energy and its stockholders to separate Duke Energy into two separate, independent and publicly traded companies: (i) one comprising the Gas Business, which shall be owned and conducted, directly or indirectly, by Spectra Energy, and (ii) one comprising the Power Business which shall continue to be owned and conducted, directly or indirectly, by Duke Energy;

WHEREAS, in order to effect such separation, the Board of Directors of Duke Energy has determined that it is appropriate, desirable and in the best interests of Duke Energy and its stockholders: (i) to enter into a series of transactions whereby certain assets of Duke Energy and its Affiliates will be reorganized such that (A) Duke Energy and/or one or more other members of the Duke Energy Group will, collectively, own all of the Power Assets and assume (or retain) all of the Power Liabilities, and (B) Spectra Energy and/or one or more other members of the Spectra Energy Group will, collectively, own all of the Gas Assets and assume (or retain) all of the Gas Liabilities; and thereafter (ii) for Duke Energy to distribute to the holders of Duke Energy Common Stock on such record date as may be established by the Board of Directors of Duke Energy on a pro rata basis (in each case without consideration being paid by such stockholders) all of the issued and outstanding shares of common stock, par value $0.001 per share, of Spectra Energy (the “ Spectra Energy Common Stock ”) (such transactions, as may be amended or modified in accordance with the terms and subject to the conditions of this Agreement from time to time, the “ Separation ”);

WHEREAS, Duke Energy and Spectra Energy have determined that it is necessary and desirable, on or prior to the Effective Time, to allocate, transfer, retain or assign to the Spectra Energy Group the Gas Assets and Gas Liabilities, and to allocate, transfer, retain or assign to the Duke Energy Group the Power Assets and Power Liabilities;

WHEREAS, the Parties intend that Drop Down 1, Drop Down 2, Drop Down 3, and Drop Down 4 will each qualify under Section 351(a) of the Internal Revenue Code of 1986, as amended (the “ Code ”);

WHEREAS, the Parties intend that the Internal Contributions, the Internal Distributions, the Contribution and the Distribution will qualify under Sections 355 and

368(a)(1)(D) of the Code, and that this Agreement is intended to be, and is hereby adopted as, a plan of reorganization under Section 368 of the Code; and

WHEREAS, this Agreement sets forth the plans of reorganization and the process by which the Power Business and Gas Business will be reorganized and separated and, thereafter, all of the issued and outstanding shares of Spectra Energy Common Stock will be distributed to the holders of Duke Energy Common Stock;

WHEREAS, each of Duke Energy and Spectra Energy has determined that it is necessary and desirable to set forth the principal corporate transactions required to affect the reorganization, the Separation and the Distribution and to provide for other agreements that will govern certain other matters following the Effective Time.

NOW, THEREFORE, in consideration of the foregoing and the mutual agreements, provisions and covenants contained in this Agreement, the Parties hereby agree as follows:

ARTICLE I

DEFINITIONS AND INTERPRETATION

Section 1.1. General . As used in this Agreement, the following capitalized terms shall have the following meanings:

(1) “ Action ” shall mean any demand, action, claim, charge, suit, countersuit, arbitration, inquiry, subpoena, proceeding or investigation by or before any Governmental Entity or any arbitration or mediation tribunal.

(2) “ Affiliate ” shall mean, when used with respect to a specified Person, a Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with such specified Person. For the purposes of this definition and Section 1.1(134) , “control”, when used with respect to any specified Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or other interests, by Contract or otherwise.

(3) “ Agent ” shall mean the Bank of New York, N.A.

(4) “ Agreement ” shall have the meaning set forth in the preamble hereof.

(5) “ Agreement Disputes ” shall have the meaning set forth in Section 9.1 .

(6) “ Allocated Percentage ” means the Duke Energy Percentage or the Spectra Energy Percentage, as the case may be.

(7) “ Amended Financial Reports ” shall have the meaning set forth in Section 5.3(b) .

 

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(8) “ Ancillary Agreements ” shall mean all of the written Contracts, instruments, assignments or other arrangements (other than this Agreement) entered into in connection with the transactions contemplated hereby, including the Conveyancing and Assumption Instruments, the Tax Matters Agreement, the Transition Services Agreement, the Employee Matters Agreement, and the 100% Quota Share Reinsurance Agreements.

(9) “ Assets ” shall mean assets, properties, claims and rights (including goodwill), wherever located (including in the possession of vendors or other third parties or elsewhere), of every kind, character and description, whether real, personal or mixed, tangible, intangible or contingent, in each case whether or not recorded or reflected or required to be recorded or reflected on the Records or financial statements of any Person, including (but not limited to) the following:

(i) all accounting and other legal and business books, records, ledgers and files whether printed, electronic or written;

(ii) all apparatuses, computers and other electronic data processing and communications equipment, fixtures, machinery, rolling stock, equipment, furniture, office equipment, automobiles, trucks, aircraft and other transportation equipment, special and general tools, test devices, prototypes and models and other tangible personal property;

(iii) all inventories of products, goods, materials, parts, raw materials and supplies;

(iv) all interests in real property of whatever nature, including easements, whether as owner, mortgagee or holder of a Security Interest in real property, lessor, sublessor, lessee, sublessee or otherwise;

(v) all interests in any capital stock or other equity interests of any Subsidiary or any other Person, all bonds, notes, debentures or other securities issued by any Subsidiary or any other Person, all loans, advances or other extensions of credit or capital contributions to any Subsidiary or any other Person and all other investments in securities of any Person;

(vi) all licenses, Contracts, leases of personal property, open purchase orders for raw materials, supplies, parts or services, unfilled orders for the manufacture and sale of products and other Contracts or commitments;

(vii) all deposits, letters of credit and performance and surety bonds;

(viii) all written (including in electronic form) technical information, data, specifications, research and development information, engineering drawings and specifications, operating and maintenance manuals, and materials and analyses prepared by consultants and other third parties;

(ix) all Intellectual Property;

 

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(x) all Software;

(xi) all cost information, sales and pricing data, customer prospect lists, supplier records, customer and supplier lists, customer and vendor data, correspondence and lists, product data and literature, artwork, design, development and business process files and data, vendor and customer drawings, specifications, quality records and reports and other books, records, studies, surveys, reports, plans and documents;

(xii) all prepaid expenses, trade accounts and other accounts and notes receivables;

(xiii) all rights under Contracts, all claims or rights against any Person, chooses in action or similar rights whether sounding in tort, contract or otherwise, whether accrued or contingent;

(xiv) all rights under insurance policies and all rights in the nature of insurance, indemnification or contribution;

(xv) all licenses, permits, approvals and authorizations which have been issued by any Governmental Entity;

(xvi) all cash or cash equivalents, bank accounts, brokerage accounts, lock boxes and other deposit arrangements; and

(xvii) all interest rate, currency, commodity or other swap, collar, cap or other hedging or similar Contracts or arrangements.

(10) “ Audited Party ” shall have the meaning set forth in Section 5.3(b) .

(11) “ Business ” shall mean the Gas Business or the Power Business, as applicable.

(12) “ Business Day ” means any day that is not a Saturday, a Sunday or any other day on which banks are required or authorized by Law to be closed in New York, New York.

(13) “ Business Entity ” shall mean any corporation, partnership, limited liability company or other entity which may legally hold title to Assets.

(14) “Campeche Companies” shall mean the business, assets and liabilities of Compania de Servicios de Compression de Campeche, S.A. de C.V. and the related entities set forth on Schedule 1.1(14) .

(15) “ Captive Gas Policies ” shall mean all Policies, whether or not in force at the Effective Time, issued by the Captive Insurers, which cover risks pertaining solely to Spectra Energy and/or any other member of the Spectra Energy Group.

(16) “ Captive Insurers ” shall mean any or all of the following insurance companies: Bison Insurance Company Limited, NorthSouth Insurance Company Limited, Cinergy Risk Solutions Ltd., and Westcoast Indemnity Company Limited.

 

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(17) “ Captive Power Policies ” shall mean all Policies, whether or not in force at the Effective Time, issued by the Captive Insurers, which cover risks pertaining solely to Duke Energy and/or any other member of the Duke Energy Group.

(18) “ Claims Administration ” shall mean the administration of claims made under the Third Party Shared Policies, including the reporting of claims to the unaffiliated, third-party insurance carriers that issued the Third Party Shared Policies, management and defense of such claims, negotiating the resolution of such claims, and providing for appropriate releases upon settlement of such claims.

(19) “ Code ” shall have the meaning set forth in the recitals hereto.

(20) “ Commission ” shall mean the United States Securities and Exchange Commission or any successor agency thereto.

(21) “ Confidential Business Information ” shall mean all information, data or material other than Confidential Operational Information, including (i) earnings reports and forecasts, (ii) macro-economic reports and forecasts, (iii) business and strategic plans, (iv) general market evaluations and surveys, (v) litigation presentations and risk assessments, (vi) budgets, and (vii) financing and credit-related information.

(22) “ Confidential Information ” shall mean Confidential Business Information and Confidential Operational Information concerning a Party and/or its Subsidiaries which, prior to or following the Effective Time, has been disclosed by a Party or its Subsidiaries to the other Party or its Subsidiaries, in written, oral (including by recording), electronic, or visual form to, or otherwise has come into the possession of, the other, including pursuant to the access provisions of Section 8.1 or Section 8.2 or any other provision of this Agreement or any Ancillary Agreement (except to the extent that such information can be shown to have been (i) in the public domain through no action of such Party or its Subsidiaries or (ii) lawfully acquired from other sources by such Party or its Subsidiaries to which it was furnished; provided , however , in the case of clause (ii) that, to the furnished Party’s knowledge, such sources did not provide such information in breach of any confidentiality obligations).

(23) “ Confidential Operational Information ” shall mean all operational information, data or material including (i) specifications, ideas and concepts for products and services, (ii) quality assurance policies, procedures and specifications, (iii) customer information, (iv) Software, (v) training materials and information, and (vi) all other know-how, methodology, procedures, techniques and trade secrets related to design, development and operational processes.

(24) “ Consents ” shall mean any consents, waivers or approvals from, or notification requirements to, any Person other than a Governmental Entity.

(25) “ Contingent Claim Committee ” means a committee that shall be established in accordance with Section 6.4 .

(26) “ Contingent Gain ” means any claim or other right, other than claims or rights related to Taxes (which are governed by the Tax Matters Agreement), of Duke Energy, Spectra

 

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Energy or any of their respective Affiliates, whenever arising, against any Person other than Duke Energy or Spectra Energy, or any of their respective Affiliates, if and to the extent that:

(i) such claim or other right has accrued as of the Effective Time (based on then existing Law); and

(ii) the existence or scope of the obligation of such other Person as of the Effective Time with respect to such claim or other right was not acknowledged, fixed or determined due to a dispute or other uncertainty as of the Effective Time or as a result of the failure of such claim or other right to have been discovered or asserted as of the Effective Time (it being understood that the existence of any pending, threatened or contemplated Action (or any contingent asset reflected in the consolidated financial statements in accordance with generally accepted accounting principles as applied in the U.S.) as of the Effective Time with respect to any claim or other right shall not be sufficient for such claim or other right to be considered acknowledged, fixed or determined).

For purposes of this definition and Section 1.1(27) , “accrued” shall mean that all of the elements necessary for the assertion of a claim with respect to such matter shall have occurred on or prior to the Effective Time, such that the claim, had it been asserted in an Action on or prior to the Effective Time, would not be dismissed by a court for lack of ripeness or similar grounds.

The Parties agree that no claim or other right relating to, arising out of or resulting from any obligation of any Person to perform the executory portion of any Contract existing as of the Effective Time shall be deemed to be a Contingent Gain.

Notwithstanding the foregoing, none of

(A) any Insurance Proceeds, or

(B) any reversal of any litigation or other reserve for accounting purposes

shall be deemed to be a Contingent Gain.

(27) “ Contingent Liability ” means any Liability, other than Liabilities for Taxes (which are governed by the Tax Matters Agreement), of Duke Energy, Spectra Energy or any of their respective Affiliates, whenever arising, to any Person other than Duke Energy, Spectra Energy, or any of their respective Affiliates, if and to the extent that:

(i) such Liability has accrued as of the Effective Time (based on then existing Law); and

(ii) the existence or scope of the obligation of Duke Energy, Spectra Energy, or any of their respective Affiliates as of the Effective Time with respect to such Liability was not acknowledged, fixed or determined due to a dispute or other uncertainty as of the Effective Time or as a result of the failure of such Liability to have been

 

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discovered or asserted as of the Effective Time (it being understood that the existence of any Action pending, threatened or contemplated or other reserve for accounting purposes as of the Effective Time with respect to any Liability shall not be sufficient for such Liability to be considered acknowledged, fixed or determined).

The Parties agree that no Liability relating to, arising out of or resulting from any obligation of any Person:

(A) to perform the executory portion of any Contract existing as of the Effective Time, or

(B) to satisfy any obligation under any Plan as of the Effective Time,

shall be deemed to be a Contingent Liability.

(28) “ Contract ” shall mean any agreement, contract, obligation, indenture, instrument, lease, license, promise, arrangement, commitment or undertaking (whether written or oral and whether express or implied).

(29) “ Contribution ” shall have the meaning set forth in Section 3.1 .

(30) “ Conversion ” shall have the meaning set forth in Section 3.1 .

(31) “ Conveyancing and Assumption Instruments ” shall mean, collectively, the various Contracts and other documents entered into and to be entered into to effect the transfer of Assets and the assumption of Liabilities in the manner contemplated by this Agreement or otherwise relating to, arising out of or resulting from the transactions contemplated by this Agreement (other than the Tax Matters Agreement, the Transition Services Agreement, the Employee Matters Agreement, and the 100% Quota Share Reinsurance Agreements), each of which shall be in such form and dated as of such date as the Parties shall reasonably agree.

(32) “ CPR ” shall have the meaning set forth in Section 9.3 .

(33) “ D&O Tail Policies ” shall have the meaning set forth in Section 10.2(a).

(34) “ Disclosure Documents ” shall mean any registration statement (including any registration statement on Form 10) filed with the Commission prior to the Effective Time by or on behalf of any Party or any of its Affiliates, and also includes any information statement, prospectus, offering memorandum, offering circular or similar disclosure document, whether or not filed with the Commission or any other Governmental Entity, which offers for sale or registers the transfer or distribution of any security of such Party or any of its Affiliates in connection with the Separation.

(35) “ Dispute Notice ” shall have the meaning set forth in Section 9.1 .

(36) “ Distribution ” shall mean the distribution by Duke Energy of all of the issued and outstanding shares of Spectra Energy Common Stock to holders of record of shares of Duke Energy Common Stock as of the Record Date on the basis of one-half (0.5) share of Spectra Energy Common Stock for each issued and outstanding share of Duke Energy Common Stock.

 

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(37) “ Distribution Date ” shall mean January 2, 2007, or such later date as shall be determined by the Board of Directors of Duke Energy to be the date on which the Distribution shall occur.

(38) “ Drop Down 1 ” shall have the meaning set forth in Section 3.1 .

(39) “ Drop Down 2 ” shall have the meaning set forth in Section 3.1 .

(40) “ Drop Down 3 ” shall have the meaning set forth in Section 3.1 .

(41) “ Drop Down 4 ” shall have the meaning set forth in Section 3.1 .

(42) “ Duke Capital Distribution ” shall have the meaning set forth in Section 3.1 .

(43) “ Duke Energy ” shall have the meaning set forth in the preamble hereof.

(44) “ Duke Energy Accounts ” shall have the meaning set forth in Section 2.5(a) .

(45) “ Duke Energy Common Stock ” shall mean the issued and outstanding shares of common stock, par value $0.001 per share, of Duke Energy.

(46) “Duke Energy Disclosure ” shall mean any form, statement, schedule or other material (other than the Disclosure Documents) filed with or furnished to

(A) the Commission,

(B) any other Governmental Entity, or

(C) holders of any securities of any member of the Duke Energy Group,

on or after the Effective Time by or on behalf of any member of the Duke Energy Group in connection with the registration, sale, or distribution of securities or disclosure related thereto (including periodic disclosure obligations).

(47) “ Duke Energy Employee ” shall have the meaning set forth in the Employee Matters Agreement.

(48) “ Duke Energy Group ” shall mean Duke Energy and each Person identified on Schedule 1.1(48) , and each Person that is or becomes a Subsidiary of Duke Energy at or after the Effective Time.

(49) “ Duke Energy Indemnitees ” shall mean each member of the Duke Energy Group, and each of their respective directors, officers, employees and agents and each of the heirs, executors, successors and assigns of any of the foregoing.

 

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(50) “ Duke Energy Percentage ” means 66-2/3% or, with respect to those matters listed or described on Schedule 1.1(146)(iii) , the percentage allocated to Duke Energy therein with respect to each specific item (if so allocated).

(51) “ Effective Time ” shall mean 12:30 a.m., New York City, New York time, on January 1, 2007.

(52) “ Employee Matters Agreement ” shall mean the Employee Matters Agreement by and between Duke Energy and Spectra Energy, dated as of the date hereof and substantially in the form attached as Exhibit A hereto.

(53) “ Exchangeable Share Reorganization ” shall have the meaning set forth in Section 2.12 .

(54) “ Exchangeable Shares ” shall have the meaning set forth in Section 2.12 .

(55) “ Exchangeco ” shall have the meaning set forth in Section 2.12 .

(56) “ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time that reference is made thereto.

(57) “ Exclusive Duke Energy Contingent Gain ” means any Contingent Gain if such Contingent Gain primarily relates to the Power Business, including the matters listed or described on Schedule 1.1(57) , or if such Contingent Gain is expressly assigned to Duke Energy pursuant to this Agreement or any Ancillary Agreement.

(58) “ Exclusive Duke Energy Contingent Liability ” means any Contingent Liability if such Contingent Liability primarily relates to the Power Business, including the matters listed or described on Schedule 1.1(58) , or if such Contingent Liability is expressly assigned to Duke Energy pursuant to this Agreement or any Ancillary Agreement.

(59) “ Exclusive Spectra Energy Contingent Gain ” means any Contingent Gain if such Contingent Gain primarily relates to the Gas Business, including the matters listed or described on Schedule 1.1(59) , or if such Contingent Gain is expressly assigned to Spectra Energy pursuant to this Agreement or any Ancillary Agreement.

(60) “ Exclusive Spectra Energy Contingent Liability ” means any Contingent Liability if such Contingent Liability primarily relates to the Gas Business, including the matters listed or described on Schedule 1.1(60) , or if such Contingent Liability is expressly assigned to Spectra Energy pursuant to this Agreement or any Ancillary Agreement.

(61) “ Fiduciary Tail Policies ” shall have the meaning set forth in Section 10.2(b) .

(62) “ Force Majeure ” shall mean, with respect to a Party, an event beyond the reasonable control of such Party (or any Person acting on its behalf), which by its nature could not have been foreseen by such Party (or such Person), or, if it could have been foreseen, was unavoidable, and includes acts of God, storms, floods, earthquakes, hurricanes, riots, pandemics,

 

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fires, sabotage, strikes, lockouts, civil commotion or civil unrest, interference by civil or military authorities, acts of war (declared or undeclared) or armed hostilities or other national or international calamity or one or more acts of terrorism.

(63) “ Form 10 ” shall mean the registration statement on Form 10 filed by Spectra Energy with the Commission in connection with the Distribution and all amendments thereto.

(64) “ Former Duke Energy Employee ” shall have the meaning set forth in the Employee Matters Agreement.

(65) “ Former Spectra Energy Employee ” shall have the meaning set forth in the Employee Matters Agreement.

(66) “ Gas Assets ” shall mean:

(i) the ownership interests (to the extent held by Duke Energy, Spectra Energy or any of their respective Affiliates immediately prior to the Effective Time) in each member of the Spectra Energy Group;

(ii) all Gas Contracts, any rights or claims of Duke Energy, Spectra Energy, or any of their respective Affiliates, arising thereunder, and any other rights or claims or contingent rights or claims of Duke Energy, Spectra Energy, or any of their respective Affiliates, primarily relating to or arising from any other Gas Asset or the Gas Business;

(iii) all Assets owned, leased or held by Duke Energy, Spectra Energy, or any of their respective Affiliates immediately prior to the Effective Time that are used primarily in the Gas Business, including inventory, accounts receivable, goodwill, and natural gas collection, transmission, storage and field services plants, pipelines, facilities and equipment;

(iv) subject to ARTICLE X , any rights of any member of the Spectra Energy Group under any Captive Gas Policies, any Third Party Gas Policies, and any Third Party Shared Policies to the extent related to the Gas Business;

(v) the Assets listed or described on Schedule 1.1(66)(v) and any and all Assets that are expressly contemplated by this Agreement or any Ancillary Agreement as Assets to be retained by, or assigned or transferred to, any member of the Spectra Energy Group;

(vi) any Exclusive Spectra Energy Contingent Gain;

(vii) all Spectra Energy Accounts, and, subject to the provisions of Section 2.5 , all cash, cash equivalents, and securities on deposit in such accounts immediately prior to the Effective Time; and

(viii) any collateral securing any Spectra Energy Liability immediately prior to the Effective Time.

 

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Notwithstanding the foregoing, the Gas Assets shall not in any event include:

(A) the Assets listed or described on Schedule 1.1(66)(viii)(A) ; or

(B) any Assets that are expressly contemplated by this Agreement or any Ancillary Agreement as Assets to be retained by, transferred or assigned to, any member of the Duke Energy Group, including any Exclusive Duke Energy Contingent Gain.

(67) “ Gas Business ” shall mean:

(i) the Natural Gas Transmission business unit of Duke Energy, which does business primarily through Duke Energy Gas Transmission, LLC, and includes businesses that provide transportation and storage of natural gas for customers in the Eastern and Southeast United States and in Canada that provide natural gas sales and distribution service to retail customers in Ontario, Canada through Union Gas Limited, and that provide natural gas gathering and processing services to customers in Western Canada;

(ii) the Field Services business unit of Duke Energy, which does business primarily through Duke Energy Field Services, LLC, a joint venture with ConocoPhillips Inc. (in which Duke Energy indirectly owns a 50% ownership interest), and includes businesses that gather, compress, treat, process, transport, trade and market, and store natural gas, and fractionate, transport, trade and market and store natural gas liquids;

(iii) any other business, operations, or assets where such business was conducted primarily through the use of the Gas Assets or the PanEnergy Companies prior to the Effective Time, and

(iv) the businesses and operations of Business Entities acquired or established by or for any member of the Spectra Energy Group after the Effective Time;

provided , however , the Gas Business shall not include (a) the retail distribution gas services business conducted by Duke Energy Ohio, Inc. (f/k/a The Cincinnati Gas & Electric Company) in southwestern Ohio and Duke Energy Kentucky, Inc. (f/k/a The Union Light, Heat and Power Company) in adjacent areas in Kentucky, (b) any operation, business or asset expressly included in the Power Business pursuant to this Agreement, or (c) the Campeche Companies.

(68) “ Gas Contracts ” shall mean the following Contracts to which Duke Energy or any of its Affiliates is a party or by which it or any of its Affiliates or any of their respective Assets is bound, except for any such Contract or part thereof (i) that is expressly contemplated not to be transferred or assigned by any member of the Duke Energy Group to Spectra Energy, or (ii) that is expressly contemplated to be transferred or assigned to (or remain with) any member of the Duke Energy Group, in each case, pursuant to any provision of this Agreement or any Ancillary Agreement:

 

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(i) any Contract entered into in the name of, or expressly on behalf of, any division, business unit or member of the Spectra Energy Group;

(ii) any Contract that relates primarily to the Gas Business;

(iii) any Contract representing capital or operating equipment lease obligations of facilities or equipment primarily used by any member of the Spectra Energy Group;

(iv) any Contract or part thereof that is otherwise expressly contemplated pursuant to this Agreement or any of the Ancillary Agreements to be retained by, transferred or assigned to, any member of the Spectra Energy Group;

(v) any guarantee, indemnity, representation or warranty of any member of the Spectra Energy Group; and

(vi) the Contracts listed or described on Schedule 1.1(68)(vi) .

(69) “ Gas Liabilities ” shall mean:

(i) the Liabilities listed or described on Schedule 1.1(69)(i) and any and all Liabilities that are expressly contemplated by this Agreement or any Ancillary Agreement as Liabilities to be retained, assumed or retired by any member of the Spectra Energy Group;

(ii) any and all Liabilities of Duke Energy, Spectra Energy, or any of their respective Affiliates, primarily relating to, arising out of or resulting from:

(A) the operation or conduct of the Gas Business, as conducted at any time prior to, on or after the Effective Time (including any Liability relating to, arising out of or resulting from any act or failure to act by any director, officer, employee, agent or representative of Duke Energy, Spectra Energy, or any of their respective Affiliates (whether or not such act or failure to act is or was within such Person’s authority));

(B) the operation or conduct of any business conducted by any member of the Spectra Energy Group at any time after the Effective Time (including any Liability relating to, arising out of or resulting from any act or failure to act by any director, officer, employee, agent or representative of Spectra Energy, or any of its Affiliates after the Effective Time (whether or not such act or failure to act is or was within such Person’s authority)); or

(C) the Gas Business or any Gas Assets, whether arising before, on or after the Effective Time;

(iii) any and all Liabilities to the extent relating to, arising out of or resulting from any terminated, discontinued or divested Business Entity, business, real property, Asset or operation formerly and primarily owned or managed by, or associated

 

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with, any of the PanEnergy Companies, any other member of the Spectra Energy Group or any of the Gas Businesses;

(iv) any and all Liabilities (including under applicable federal and state securities Laws) relating to, arising out of or resulting from:

(A) the Disclosure Documents (including the Form 10 and the Information Statement), except to the extent specifically enumerated as a Power Liability in Section 1.1(112)(iv)(A) ;

(B) any Pre-Separation Disclosure, but only to the extent such Liabilities arise out of or result from matters related to businesses, operations, assets or liabilities allocated to Spectra Energy in the Separation pursuant to this Agreement; and

(C) any Spectra Energy Disclosure;

(v) any and all Liabilities, including those Liabilities listed on Schedule 1.1(69)(v) , relating to, arising out of or resulting from any Indebtedness (including debt securities and asset-backed debt) of any member of the Spectra Energy Group (whether incurred prior to, on or after the Effective Time);

(vi) any Exclusive Spectra Energy Contingent Liability;

(vii) any and all Liabilities of the guarantor under the guarantees listed or described on Schedule 1.1(69)(vii) ;

(viii) any and all Liabilities relating to, resulting from, or arising out of any Action listed or described on Schedule 1.1(69)(viii) ; and

(ix) any and all obligations of an insured Person under each Third Party Gas Policy, each Third Party Shared Policy to the extent related to or arising out of the Gas Business, and each Captive Gas Policy.

Notwithstanding the foregoing, the Gas Liabilities shall in any event not include:

(A) any Liabilities that are expressly contemplated by this Agreement or any Ancillary Agreement as Liabilities to be retained or assumed by any member of the Duke Energy Group, including any Liabilities set forth on Schedule 1.1(69)(ii)(A) ; and

(B) any Liabilities related or attributable to, or arising in connection with, the employment, service, termination of employment or termination of service of Spectra Energy Employees, which shall be exclusively governed by the Employee Matters Agreement;

 

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(C) any Liabilities related or attributable to, or arising in connection with, Taxes or Tax Returns, which shall be exclusively governed by the Tax Matters Agreement; and

(D) any Liabilities of the guarantor under the guarantees listed or described on Schedule 1.1(112)(ix) .

FOR THE AVOIDANCE OF DOUBT, NO LIABILITY SHALL BE A GAS LIABILITY SOLELY AS A RESULT OF SPECTRA ENERGY OR ANY OTHER MEMBER OF THE SPECTRA ENERGY GROUP BEING NAMED AS PARTY TO, OR IN, ANY ACTION.

(70) “ Governmental Approvals ” shall mean any notices or reports to be submitted to, or other filings to be made with, or any consents, registrations, approvals, permits or authorizations to be obtained from, any Governmental Entity.

(71) “ Governmental Entity ” shall mean any nation or government, any state, municipality or other political subdivision thereof and any entity, body, agency, commission, department, board, bureau or court, whether domestic, foreign or multinational, exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government and any official thereof.

(72) “ Group ” shall mean either the Spectra Energy Group or the Duke Energy Group.

(73) “ Guaranty Release ” shall have the meaning set forth in Section 2.11(b) .

(74) “ Indebtedness ” shall mean (i) any indebtedness for borrowed money or the deferred purchase price of property as evidenced by a note, bonds or other instruments, (ii) obligations as lessee under capital leases, (iii) obligations secured by any mortgage, pledge, security interest, encumbrance, lien or charge of any kind existing on any asset owned or held by any Person, whether or not such Person has assumed or become liable for the obligations secured thereby, (iv) any obligation under any interest rate swap agreement, (v) accounts payable, (vi) reimbursement obligations with respect to surety and performance bonds or letters of credit, and (vii) obligations under direct or indirect guarantees of (including obligations, contingent or otherwise, to assure a creditor against loss in respect of) indebtedness or obligations of the kinds referred to in clauses (i), (ii), (iii), (iv), (v) and (vi) above.

(75) “ Indemnifiable Loss ” and “ Indemnifiable Losses ” shall mean any and all damages, losses, deficiencies, Liabilities, obligations, penalties, judgments, settlements, claims, payments, fines, interest, costs and expenses (including internal costs provided for in Section 11.5(c) and the costs and expenses of any and all Actions and demands, assessments, judgments, settlements and compromises relating thereto and the reasonable costs and expenses of attorneys’, accountants’, consultants’ and other professionals’ fees and expenses incurred in the investigation or defense thereof or the enforcement of rights hereunder), excluding special, consequential, indirect, punitive damages (other than special, consequential, indirect and/or punitive damages awarded to any third party against an indemnified party).

(76) “ Indemnifying Party ” shall have the meaning set forth in Section 7.4(b) .

 

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(77) “ Indemnitee ” shall have the meaning set forth in Section 7.4(b) .

(78) “ Indemnity Payment ” shall have the meaning set forth in Section 7.6(a) .

(79) “ Information ” shall mean information, whether or not patentable or copyrightable, in written, oral, electronic or other tangible or intangible forms, stored in any medium, including studies, reports, records, books, contracts, instruments, surveys, discoveries, ideas, concepts, know-how, techniques, designs, specifications, drawings, blueprints, diagrams, models, prototypes, samples, flow charts, data, computer data, disks, diskettes, tapes, computer programs or other software, marketing plans, customer names, communications by or to attorneys (including attorney-client privileged communications), memos and other materials prepared by attorneys or under their direction (including attorney work product), communications and materials otherwise related to or made or prepared in connection with or in preparation for any legal proceeding, and other technical, financial, employee or business information or data.

(80) “ Information Statement ” shall mean the Information Statement attached as an exhibit to the Form 10 sent to the holders of shares of Duke Energy Common Stock in connection with the Distribution, including any amendment or supplement thereto.

(81) “Insurance Administration” shall mean, with respect to each Third Party Shared Policy: (i) the accounting for premiums, retrospectively-rated premiums, defense costs, indemnity payments, deductibles and retentions, as appropriate, under the terms and conditions of such Third Party Shared Policy; (ii) the reporting to the relevant unaffiliated, third-party insurer that issues such Third Party Shared Policy of any losses or claims which may be covered by such Third Party Shared Policy; and (iii) the distribution of Insurance Proceeds related to such Third Party Shared Policy, subject to the terms of ARTICLE X .

(82) “Insurance Proceeds” shall mean those monies (i) received by an insured from an unaffiliated third-party insurer under any Third Party Shared Policy, or (ii) paid by such third-party insurer on behalf of an insured under any Third Party Shared Policy, in either case net of any applicable premium adjustment, retrospectively-rated premium, deductible, retention, or cost of reserve paid or held by or for the benefit of such insured.

(83) “Insured Claims” shall mean those Liabilities that, individually or in the aggregate, are covered within the terms and conditions of any of the Third Party Shared Policies, whether or not subject to deductibles, co-insurance, uncollectibility or retrospectively-rated premium adjustments.

(84) “ Intellectual Property ” shall mean all intellectual property and industrial property rights of any kind or nature, including all United States and foreign (i) patents, patent applications, patent disclosures, and all related continuations, continuations-in-part, divisionals, reissues, re-examinations, substitutions and extensions thereof, (ii) Trademarks, (iii) copyrights, whether statutory or common law, registered or unregistered and published or unpublished, (iv) rights of publicity, (v) moral rights and rights of attribution and integrity, (vi) rights in Software, (vii) trade secrets and all other confidential information, know-how, inventions, improvements, proprietary processes, formulae, models and methodologies, (viii) rights to personal information, (ix) telephone numbers and internet protocol addresses, (x) rights, priorities and privileges

 

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arising under applicable law in the foregoing and in other similar intangible assets, (xi) applications and registrations for the foregoing, and (xii) rights and remedies against past, present, and future infringement, misappropriation, or other violation of the foregoing.

(85) “ Intercompany Accounts ” shall mean any receivable, payable or loan between any member of the Duke Energy Group, on the one hand, and any member of the Spectra Energy Group, on the other hand that exists prior to the Effective Time and is reflected in the Records of the relevant members of the Duke Energy Group and the Spectra Energy Group, except for any such receivable, payable or loan that arise pursuant to this Agreement or any other Ancillary Agreement.

(86) “ Internal Contribution 1 ” shall have the meaning set forth in Section 3.1 .

(87) “ Internal Contribution 2 ” shall have the meaning set forth in Section 3.1 .

(88) “ Internal Contribution 3 ” shall have the meaning set forth in Section 3.1 .

(89) “ Internal Contributions ” shall have the meaning set forth in Section 3.1 .

(90) “ Internal Distribution 1 ” shall have the meaning set forth in Section 3.1 .

(91) “ Internal Distribution 2 ” shall have the meaning set forth in Section 3.1 .

(92) “ Internal Distribution 3 ” shall have the meaning set forth in Section 3.1 .

(93) “ Internal Distributions ” shall have the meaning set forth in Section 3.1 .

(94) “ Law ” shall mean any United States or non-United States federal, national, supranational, state, provincial, local or similar statute, law, ordinance, regulation, rule, code, order, requirement or rule of law (including common law).

(95) “ Liabilities ” shall mean any and all debts, liabilities, and obligations, whether accrued or fixed, absolute or contingent, matured or unmatured, reserved or unreserved, or determined or determinable of any kind or nature whatsoever, including those arising under any Law or Action, whether asserted or unasserted, or order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Entity, and those arising under any Contract or any fines, damages or equitable relief which may be imposed in connection with any of the foregoing and including all costs and expenses related thereto.

(96) “ Liable Party ” shall have the meaning set forth in Section 2.10(b) .

(97) “ Licensed Marks ” shall have the meaning set forth in Section 5.2(d) .

(98) “ New York Courts ” shall have the meaning set forth in Section 11.20 .

(99) “ NYSE ” shall mean the New York Stock Exchange.

(100) “ Other Parties’ Auditors ” shall have the meaning set forth in Section 5.3(a)(2) .

 

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(101) “ Other Party ” shall have the meaning set forth in Section 2.10(a) .

(102) “ Other Party Marks ” shall have the meaning set forth in Section 5.2(a) .

(103) “ Party ” shall have the meaning set forth in the preamble hereof.

(104) “ PanEnergy Companies ” shall mean the Person which were part of the business, operations or assets of PanEnergy Corp (f/k/a Panhandle Eastern Corporation) as conducted at any time prior to the merger of PanEnergy Corp and Duke Power Company on June 17, 1997, including those set forth on Schedule 1.1(104)(a) ; provided , however , that the term PanEnergy Companies shall not include Duke Energy Services, Inc., Bison Insurance Company Limited and its Subsidiaries to the extent claims relate to occurrences after June 17, 1997, or the Business Entities (or any of their predecessors) engaged in (i) international operations; (ii) merchant generation; or (iii) trading and marketing businesses, including the companies listed on Schedule 1.1(104)(b) .

(105) “ Person ” shall mean any natural person, firm, individual, corporation, business trust, joint venture, association, company, limited liability company, partnership or other organization or entity, whether incorporated or unincorporated, or any Governmental Entity.

(106) “ Plan ” shall have the meaning set forth in the Employee Matters Agreement.

(107) “ Plan of Arrangement ” shall have the meaning set forth in Section 2.12 .

(108) “ Policies ” shall mean insurance policies and insurance Contracts of any kind (other than life and benefits policies or Contracts), including primary, excess and umbrella policies, comprehensive general liability policies, director and officer liability, fiduciary liability, automobile, aircraft, property and casualty, business interruption, workers’ compensation and employee dishonesty insurance policies, bonds and self-insurance and captive insurance company arrangements, together with the rights, benefits and privileges thereunder.

(109) “ Power Assets ” shall mean:

(i) the ownership interests (to the extent held by Duke Energy, Spectra Energy or any of their respective Affiliates immediately prior to the Effective Time) in each member of the Duke Energy Group;

(ii) all Power Contracts, any rights or claims of Duke Energy, Spectra Energy, or any of their respective Affiliates, arising thereunder, and any other rights or claims or contingent rights or claims of Duke Energy, Spectra Energy, or any of their respective Affiliates, primarily relating to or arising from any other Power Asset or the Power Business;

(iii) all Assets owned, leased or held by Duke Energy, Spectra Energy, or any of their respective Affiliates immediately prior to the Effective Time that are used primarily in the Power Business, including inventory, accounts receivable, goodwill, and electrical generation, transmission and distribution plants, facilities, transmission lines and equipment;

 

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(iv) the Assets associated with the retail distribution gas services business conducted by Duke Energy Ohio, LLC (f/k/a The Cincinnati Gas & Electric Company) in southwestern Ohio and Duke Energy Kentucky, LLC (f/k/a The Union Light, Heat and Power Company) in adjacent areas in Kentucky;

(v) subject to ARTICLE X , any rights of any member of the Duke Energy Group under any Captive Power Policies, any Third Party Power Policies, and any Third Party Shared Policies, to the extent related to the Power Business;

(vi) any Exclusive Duke Energy Contingent Gain;

(vii) the Assets listed or described on Schedule 1.1(109)(vii) and any and all Assets that are expressly contemplated by this Agreement or any Ancillary Agreement as Assets to be retained by, or assigned or transferred to, any member of the Duke Energy Group;

(viii) all Duke Energy Accounts, and, subject to the provisions of Section 2.5 , all cash, cash equivalents, and securities on deposit in such accounts immediately prior to the Effective Time;

(ix) the ownership interest held by Duke Energy or any of its Affiliates, immediately prior to the Effective Time, in Duke Project Services, Inc., Duke/Fluor Daniel, Duke/Fluor Daniel International, Duke/Fluor Daniel International Services, and all other Subsidiaries of Duke Project Services, Inc. (including those listed on Annex B to Schedule 1.1(48) , and all Assets of such entities;

(x) any collateral securing any Power Liability immediately prior to the Effective Time; and

(xi) the Campeche Companies.

Notwithstanding the foregoing, the Power Assets shall not in any event include:

(A) the Assets listed or described on Schedule 1.1(109)(xi)(A) ; or

(B) any Assets that are expressly contemplated by this Agreement or any Ancillary Agreement as Assets to be retained by, or assigned or transferred to, any member of the Spectra Energy Group, including any Exclusive Spectra Energy Contingent Gain.

(110) “ Power Business ” shall mean:

(i) the United States Franchised Electric & Gas business unit of Duke Energy (which includes Duke Energy Carolinas, LLC (f/k/a Duke Power Company LLC), Duke Energy Ohio, Inc. (f/k/a The Cincinnati Gas & Electric Company), Duke Energy Indiana, Inc. (f/k/a PSI Energy, Inc.), and Duke Energy Kentucky, Inc. (f/k/a The Union Light, Heat and Power Company));

 

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(ii) the Commercial Power business unit of Duke Energy (which includes the non-regulated power generation business of The Cincinnati Gas & Electric Company and the Midwestern merchant power generating plants previously operated by Duke Energy North America, LLC, and the business of Duke Energy Generation Services (f/k/a Cinergy Solutions);

(iii) the International business unit of Duke Energy, which does business primarily through Duke Energy International, LLC, and includes businesses that operate and manage power generation facilities, and engage in sales and marketing of electric power and natural gas outside the United States and Canada (its activities target power generation in Latin America), and an equity investment in National Methanol Company, a leading regional producer of methanol and methyl tertiary butyl ether, located in Saudi Arabia;

(iv) the Crescent business unit of Duke Energy, which does business primarily through Crescent Resources, LLC, which is owned by a joint venture among Duke Ventures, LLC (holding a 49% ownership interest), Morgan Stanley Real Estate Fund V U.S., L.P. and other affiliated funds controlled by Morgan Stanley (collectively holding a 49% ownership interest), and the President and Chief Executive Officer of Crescent Resources, LLC (holding a 2% ownership interest), and includes businesses that develop and manage commercial, residential and multi-family real estate projects and manage “legacy” land holdings in North and South Carolina;

(v) the fiber optic communications network and telecommunications businesses, including DukeNet Communications, LLC, serving wireless, local and long-distance communications companies, internet service providers and other businesses and organizations;

(vi) any other business, operations, or assets where such business was conducted primarily through the use of the Power Assets prior to the Effective Time; and

(vii) the businesses and operations of Business Entities acquired or established by or for any member of the Duke Energy Group after the Effective Time;

provided , however , the Power Business shall not include (a) any business conducted by any of the PanEnergy Companies at any time prior to the Effective Time, or (b) any operation, business or asset expressly included in the Gas Business pursuant to this Agreement.

(111) “ Power Contracts ” shall mean the following Contracts to which Duke Energy or any of its Affiliates is a party or by which it or any of its Affiliates or any of their respective Assets is bound, except for any such Contract or part thereof that is expressly contemplated to be transferred or assigned to (or remain with) any member of the Spectra Energy Group pursuant to any provision of this Agreement or any Ancillary Agreement:

(i) any Contract entered into in the name of, or expressly on behalf of, any division, business unit or member of the Duke Energy Group;

 

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(ii) any Contract that relates primarily to the Power Business;

(iii) any Contract representing capital or operating equipment lease obligations of facilities or equipment primarily used by any member of the Duke Energy Group;

(iv) any Contract or part thereof that is otherwise expressly contemplated pursuant to this Agreement or any of the Ancillary Agreements to be retained by, or assigned or transferred to, any member of the Duke Energy Group;

(v) any guarantee, indemnity, representation or warranty of any member of the Duke Energy Group; and

(vi) the Contracts listed or described on Schedule 1.1(111)(vi) .

(112) “ Power Liabilities ” shall mean:

(i) the Liabilities listed or described on Schedule 1.1(112)(i) and any and all Liabilities that are expressly contemplated by this Agreement or any Ancillary Agreement as Liabilities to be retained, assumed or retired by any member of the Duke Energy Group;

(ii) any and all Liabilities of Duke Energy, Spectra Energy, or any of their respective Affiliates, primarily relating to, arising out of or resulting from:

(A) the operation or conduct of the Power Business, as conducted at any time prior to, on or after the Effective Time (including any Liability relating to, arising out of or resulting from any act or failure to act by any director, officer, employee, agent or representative of Duke Energy, Spectra Energy, or any of their respective Affiliates (whether or not such act or failure to act is or was within such Person’s authority));

(B) the operation or conduct of any business conducted by any member of the Duke Energy Group at any time after the Effective Time (including any Liability relating to, arising out of or resulting from any act or failure to act by any director, officer, employee, agent or representative of Duke Energy or any of its Affiliates after the Effective Time (whether or not such act or failure to act is or was within such Person’s authority)); or

(C) the Power Business or any Power Assets, whether arising before, on or after the Effective Time;

(iii) any and all Liabilities to the extent relating to, arising out of or resulting from any terminated, discontinued or divested Business Entity, business, real property, Asset or operation formerly and primarily owned or managed by, or associated with, any member of the Duke Energy Group or any Power Business;

 

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(iv) any and all Liabilities (including under applicable federal and state securities Laws) relating to, arising out of or resulting from:

(A) the Disclosure Documents (including the Form 10 and the Information Statement), but only to the extent such Liability derives from a misstatement or omission contained in the sections of the Form 10 entitled “Letter to Duke Energy Shareholders”, “The Separation” and “Certain Relationships and Related Party Transactions – Agreements with Duke Energy” and the section entitled “Summary,” to the extent such section summarizes the other sections set forth in this paragraph;

(B) any Pre-Separation Disclosure, but only to the extent such Liabilities arise out of, or result from, matters related to businesses, operations, assets or liabilities allocated to Duke Energy in the Separation pursuant to this Agreement; and

(C) any Duke Energy Disclosure;

(v) any and all Liabilities, including those Liabilities listed on Schedule 1.1(112)(v) , relating to, arising out of or resulting from any Indebtedness (including debt securities and asset-backed debt) of any member of the Duke Energy Group (whether incurred prior to, on or after the Effective Time);

(vi) any and all Liabilities relating to, arising out of or resulting from any Action listed or described on Schedule 1.1(112)(vi) ;

(vii) any Exclusive Duke Energy Contingent Liability;

(viii) any and all Liabilities relating to, arising out of or resulting from Duke Project Services, Inc., Duke/Fluor Daniel, Duke/Fluor Daniel International, Duke/Fluor Daniel International Services, or any other Subsidiary of Duke Project Services, Inc. (including those listed on Annex B to Schedule 1.1(48) , or any Assets of such entities;

(ix) any and all Liabilities of the guarantor under the guarantees listed or described on Schedule 1.1(112)(ix) ; and

(x) any and all obligations of an insured Person under each Third Party Power Policy, each Third Party Shared Policy to the extent related to or arising out of the Power Business, and each Captive Power Policy

Notwithstanding the foregoing, the Power Liabilities shall not in any event include:

(A) any Liabilities that are expressly contemplated by this Agreement or any Ancillary Agreement as Liabilities to be retained or assumed by any member of the Spectra Energy Group, including any Liabilities set forth on Schedule 1.1(112)(x)(A) ;

 

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(B) any Liabilities related or attributable to, or arising in connection with, the employment, service, termination of employment or termination of service Duke Energy Employees, which shall be exclusively governed by the Employee Matters Agreement;

(C) any Liabilities related or attributable to, or arising in connection with, Taxes or Tax Returns, which shall be exclusively governed by the Tax Matters Agreement;

(D) any Liabilities of the guarantor under the guarantees listed or described on Schedule 1.1(69)(vii) ; and

(E) any Liabilities related or attributable to, or arising in connection with, any PanEnergy Company.

FOR THE AVOIDANCE OF DOUBT, NO LIABILITY SHALL BE A POWER LIABILITY SOLELY AS A RESULT OF DUKE ENERGY OR ANY OTHER MEMBER OF THE DUKE ENERGY GROUP BEING NAMED AS PARTY TO, OR IN, ANY ACTION.

(113) “ PowerCo Exchangeable Shares ” shall have the meaning set forth in Section 2.12 .

(114) “ Pre-Separation Disclosure ” shall mean any form, statement, schedule or other material (other than the Disclosure Documents) filed with or furnished to

(A) the Commission,

(B) any other Governmental Entity, or

(C) holders of any securities of Duke Energy or any of its Affiliates,

prior to the Effective Time by Duke Energy, Spectra Energy, or any of their respective Affiliates, in connection with the registration, sale, or distribution of securities or disclosure related thereto (including periodic disclosure obligations).

(115) “ Prime Rate ” shall mean the prime rate of interest (the base rate on corporate loans) as published under “Money Rates” in The Wall Street Journal .

(116) “ Record Date ” shall mean the date to be determined by the Board of Directors of Duke Energy as the record date for the Distribution.

(117) “ Records ” shall mean any Contracts, documents, books, records or files.

(118) “ Rules ” shall have the meaning set forth in Section 9.2 .

(119) “ Securities Act ” shall mean the Securities Act of 1933, as amended, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time that reference is made thereto.

 

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(120) “ Security Interest ” shall mean any mortgage, security interest, pledge, lien, charge, claim, option, right to acquire, voting or other restriction, right-of-way, condition, easement, encroachment, restriction on transfer, or other encumbrance of any nature whatsoever, excluding restrictions on transfer under securities Laws.

(121) “ Separation ” shall have the meaning set forth in the recitals hereto.

(122) “ Spectra Energy ” shall have the meaning set forth in the preamble hereto.

(123) “ Spectra Energy Accounts ” shall have the meaning set forth in Section 2.5(a) .

(124) “ Spectra Energy Captive ” shall mean Alpha Insurance Company Limited, the captive insurance company formed by Spectra Energy in contemplation of the Separation.

(125) “ Spectra Energy Common Stock ” shall have the meaning set forth in the recitals hereto.

(126) “ Spectra Energy Disclosure ” shall mean any form, statement, schedule or other material (other than the Disclosure Documents) filed with or furnished to

(A) the Commission,

(B) any other Governmental Entity, or

(C) holders of any securities of any member of the Spectra Energy Group,

on or after the Effective Time by or on behalf of any member of the Spectra Energy Group in connection with the registration, sale, or distribution of securities or disclosure related thereto (including periodic disclosure obligations).

(127) “ Spectra Energy Employee ” shall have the meaning set forth in the Employee Matters Agreement.

(128) “ Spectra Energy Exchangeable Shares ” shall have the meaning set forth in Section 2.12 .

(129) “ Spectra Energy Group ” shall mean Spectra Energy and each Person identified on Schedule 1.1(129) , and each Person that is or becomes a Subsidiary of Spectra Energy at or after the Effective Time.

(130) “ Spectra Energy Indemnitees ” shall mean each member of the Spectra Energy Group, their respective Affiliates’ respective directors, officers, employees and agents and each of the heirs, executors, successors and assigns of any of the foregoing.

(131) “ Spectra Energy Percentage ” shall mean 33-1/3% or, with respect to those matters listed or described on Schedule 1.1(146)(iii) , the percentage allocated to Spectra Energy therein with respect to each specific item (if so allocated).

 

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(132) “ Spectra Energy Target Cash Amount ” shall have the meaning set forth in Section 2.5(e) .

(133) “ Software ” shall mean all computer programs (whether in source code, object code, or other form), algorithms, databases, compilations and data, and technology supporting the foregoing, and all documentation, including flowcharts and other logic and design diagrams, technical, functional and other specifications, and user and training materials related to any of the foregoing.

(134) “ Subsidiary ” shall mean with respect to any Person (i) a corporation, fifty percent (50%) or more of the voting capital stock of which is, as of the time in question, directly or indirectly owned by such Person and (ii) any other limited liability company, partnership, joint venture, association, joint stock company, trust, unincorporated organization or other entity in which such Person, directly or indirectly, owns fifty percent (50%) or more of the equity economic interest thereof or has the power to elect or direct the election of fifty percent (50%) or more of the members of the governing body of such entity or otherwise has control over such entity (e.g., as the managing partner of a partnership).

(135) “ Tax ” shall have the meaning set forth in the Tax Matters Agreement.

(136) “ Tax Matters Agreement ” shall mean the Tax Matters Agreement by and between Duke Energy, Spectra Energy, and certain members of the Spectra Energy Group, dated as of the date hereof, and substantially in the form attached as Exhibit B hereto.

(137) “ Tax Return ” shall have the meaning set forth in the Tax Matters Agreement.

(138) “ Third Party Claim ” shall have the meaning set forth in Section 7.4(b) .

(139) “ Third Party Gas Policies ” shall mean all Policies, whether or not in force on the Effective Time, issued by unaffiliated third-party insurers to Duke Energy, Spectra Energy, or any of their respective Affiliates, including the Captive Insurers, which cover risks that relate exclusively to the Gas Business.

(140) “ Third Party Power Policies ” shall mean all Policies, whether or not in force on the Effective Time, issued by unaffiliated third-party insurers to Duke Energy, Spectra Energy, or any of their respective Affiliates, including the Captive Insurers, which cover risks that relate exclusively to the Power Business.

(141) “ Third Party Proceeds ” shall have the meaning set forth in Section 7.6(a) .

(142) “ Third Party Shared Policies ” shall mean all Policies, whether or not in force on the Effective Time, issued by unaffiliated third-party insurers to Duke Energy, Spectra Energy, or any of their respective Affiliates, including the Captive Insurers, which cover risks that relate to both the Power Business and the Gas Business. For the avoidance of doubt, Third Party Shared Policies shall not include any Third Party Gas Policies or Third Party Power Policies.

(143) “ Trademarks ” shall mean all United States and foreign trademarks, service marks, corporate names, trade names, domain names, logos, slogans, designs, trade dress and other

 

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similar identifiers of source or origin, whether registered or unregistered, together with the goodwill connected with the use of and symbolized by any of the foregoing.

(144) “ Transition Services Agreement ” shall mean the Transition Services Agreement by and between Duke Energy and Spectra Energy, dated as of even date hereof, and substantially in the form attached as Exhibit C hereto.

(145) “ Unallocated Asset ” shall mean, without duplication:

(i) any Asset that accrues prior to the Distribution that is not a Gas Asset or a Power Asset; or

(ii) with respect to Contingent Gains, any Contingent Gain that is not an Exclusive Duke Energy Contingent Gain or an Exclusive Spectra Energy Contingent Gain.

(146) “ Unallocated Liability ” shall mean, without duplication:

(i) any and all Liabilities of Duke Energy, Spectra Energy, or any of their respective Affiliates, that accrue prior to the Effective Time that are neither a Gas Liability nor a Power Liability;

(ii) any and all Contingent Liabilities that are neither an Exclusive Duke Energy Contingent Liability nor an Exclusive Spectra Energy Contingent Liability; or

(ii) any and all Liabilities of Duke Energy, Spectra Energy, or any of their respective Affiliates, relating to, arising out of, or resulting from, the matters listed or described on Schedule 1.1(146)(iii) .

(147) “ 100% Quota Share Reinsurance Agreements ” shall have the meaning set forth in Section 10.9(b) .

Section 1.2 References; Interpretation. References in this Agreement to any gender include references to all genders, and references to the singular include references to the plural and vice versa. Any action to be taken by the Board of Directors of a Party may be taken by a committee of the Board of Directors of such Party if properly delegated by the Board of Directors of a Party to such committee. Unless the context otherwise requires:

(i) the words “include”, “includes” and “including” when used in this Agreement shall be deemed to be followed by the phrase “without limitation”;

(ii) references in this Agreement to Articles, Sections, Annexes, Exhibits and Schedules shall be deemed references to Articles and Sections of, and Annexes, Exhibits and Schedules to, this Agreement;

 

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(iii) the words “hereof”, “hereby” and “herein” and words of similar meaning when used in this Agreement refer to this Agreement in its entirety and not to any particular Article, Section or provision of this Agreement; and

(iv) references in this Agreement to any time shall be to New York City, New York time unless otherwise expressly provided herein.

Section 1.3. Effective Time. This Agreement shall be effective as of the Effective Time.

Section 1.4. Tax Matters . The Tax Matters Agreement will govern Duke Energy’s and Spectra Energy’s respective rights, responsibilities and obligations after the distribution with respect to Taxes, including ordinary course of business Taxes and Taxes, if any, incurred as a result of any failure of the distribution to qualify as a tax-free distribution for U.S. federal income tax purposes. The Tax Matters Agreement sets forth the respective obligations of Duke Energy and Spectra Energy with respect to the filing of Tax returns, the administration of Tax contests, cooperation and other matters, and imposes certain restrictions on Duke Energy’s and Spectra Energy’s ability to engage in certain actions following the distribution. Except as expressly set forth in this Agreement or any Ancillary Agreement, all matters relating to Taxes in connection with the transactions contemplated by this Agreement shall be governed exclusively by the Tax Matters Agreement.

Section 1.5. Employee Matters . The Employee Matters Agreement will govern Duke Energy’s and Spectra Energy’s respective rights, responsibilities and obligations after the distribution relating to, arising out of, or resulting from the employment, service, termination of employment or termination of service of Spectra Energy Employees and Duke Energy Employees. Except as expressly set forth in this Agreement or any Ancillary Agreement, all matters relating to the above in connection with the transactions contemplated by this Agreement shall be governed exclusively by the Employee Matters Agreement.

ARTICLE II

THE SEPARATION

Section 2.1. General. Subject to the terms and conditions of this Agreement, including Section 4.4 , the Parties shall use, and shall cause their respective Affiliates to use, their respective commercially reasonable efforts to consummate the transactions contemplated hereby, a portion of which have already been implemented prior to the date hereof. It is the intent of the Parties that prior to consummation of the Distribution, Duke Energy, Spectra Energy and their respective Affiliates shall be reorganized, to the extent necessary, such that immediately following the consummation of such reorganization, subject to Section 2.7 , (i) all of Duke Energy’s and its Subsidiaries’ right, title and interest in and to the Gas Assets will be owned or held by a member of the Spectra Energy

 

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Group, the Gas Business will be conducted by the members of the Spectra Energy Group and the Gas Liabilities will be assumed directly or indirectly by (or retained by) a member of the Spectra Energy Group; and (ii) all of Duke Energy’s and its Subsidiaries’ right, title and interest in and to the Power Assets will be owned or held by a member of the Duke Energy Group, the Power Business will be conducted by the members of the Duke Energy Group and the Power Liabilities will be assumed directly or indirectly by (or retained by) a member of the Duke Energy Group.

Section 2.2. Transfer of Assets .

(a) On or prior to the Effective Time and to the extent not already completed:

(i) Duke Energy shall, on behalf of itself and the other members of the Duke Energy Group, as applicable, transfer, contribute, assign, distribute, and convey, or cause to be transferred, contributed, assigned, distributed and conveyed, to Spectra Energy or another member of the Spectra Energy Group all of Duke Energy’s and the other members’ of the Duke Energy Group’s right, title and interest in and to the Gas Assets;

(ii) Spectra Energy shall, on behalf of itself and the other members of the Spectra Energy Group, as applicable, transfer, contribute, assign, distribute, and convey, or cause to be transferred, contributed, assigned, distributed and conveyed, to Duke Energy or another member of the Duke Energy Group all of Spectra Energy’s and the other members’ of the Spectra Energy Group’s right, title and interest in and to the Power Assets; and

(b) Unless otherwise agreed to by the Parties, each of Duke Energy and Spectra Energy, as applicable, shall be entitled to designate the Business Entity within such Party’s respective Group to which any Assets are to be transferred pursuant to this Section 2.2 or Section 2.7 .

Section 2.3. Assumption and Satisfaction of Liabilities . EXCEPT AS OTHERWISE SPECIFICALLY SET FORTH IN ANY ANCILLARY AGREEMENT, FROM AND AFTER THE EFFECTIVE TIME, (A) DUKE ENERGY SHALL, OR SHALL CAUSE ANOTHER MEMBER OF THE DUKE ENERGY GROUP TO, ACCEPT, ASSUME (OR, AS APPLICABLE, RETAIN) AND PERFORM, DISCHARGE AND FULFILL, IN ACCORDANCE WITH THEIR RESPECTIVE TERMS, ALL OF THE POWER LIABILITIES AND THE DUKE ENERGY PERCENTAGE OF ANY UNALLOCATED LIABILITY AND (B) SPECTRA ENERGY SHALL, OR SHALL CAUSE ANOTHER MEMBER OF THE SPECTRA ENERGY GROUP TO, ACCEPT, ASSUME (OR, AS APPLICABLE, RETAIN) AND PERFORM, DISCHARGE AND FULFILL, IN ACCORDANCE WITH THEIR RESPECTIVE TERMS, ALL THE GAS LIABILITIES AND THE SPECTRA ENERGY PERCENTAGE OF ANY UNALLOCATED LIABILITY, IN EACH CASE REGARDLESS OF (I) WHEN OR WHERE SUCH LIABILITIES AROSE OR ARISE, (II) WHERE OR AGAINST WHOM SUCH LIABILITIES ARE ASSERTED OR DETERMINED AND (III) REGARDLESS OF WHETHER ARISING FROM OR ALLEGED TO ARISE FROM NEGLIGENCE, GROSS NEGLIGENCE, RECKLESSNESS, VIOLATION

 

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OF LAW, WILLFUL MISCONDUCT, BAD FAITH, FRAUD OR MISREPRESENTATION BY ANY MEMBER OF THE DUKE ENERGY GROUP OR THE SPECTRA ENERGY GROUP, AS THE CASE MAY BE, OR ANY OF THEIR PAST OR PRESENT RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, OR AGENTS, AND (IV) REGARDLESS OF WHICH ENTITY IS NAMED IN ANY ACTION ASSOCIATED WITH ANY LIABILITY.

Section 2.4. Intercompany Accounts.

(a) Each Intercompany Account outstanding immediately prior to the Effective Time, in any general ledger account of Duke Energy, Spectra Energy or any of their respective Affiliates, other than those set forth on Schedule 2.4(b), shall be satisfied and/or settled by the relevant members of the Duke Energy Group and the Spectra Energy Group no later than the Effective Time by (i) forgiveness by the relevant obligor, (ii) one or a related series of distributions of and/or contributions to capital, or (iii) cash payment by the relevant obligor to the relevant obligee, in each case as agreed to by the Parties.

(b) Each Intercompany Account outstanding immediately prior to the Effective Time under any of the general ledger accounts of Duke Energy, Spectra Energy or any of their respective Affiliates set forth on Schedule 2.4(b) shall continue to be outstanding after the Effective Time (unless previously satisfied in accordance with its terms) and thereafter (i) shall be an obligation of the relevant Party (or the relevant member of such Party’s Group), each responsible for fulfilling its (or a member of such Party’s Group’s) obligations in accordance with the terms and conditions applicable to such obligation, and (ii) shall be for each relevant Party (or the relevant member of such Party’s Group) an obligation to a third-party and shall no longer be an Intercompany Account.

Section 2.5. Bank Accounts; Cash Balances .

(a) The Parties agree to take, or cause the respective members of their respective Groups to take, at the Effective Time (or such earlier time as the Parties may agree), all actions necessary to amend all Contracts governing each bank and brokerage account owned by Spectra Energy or any other member of the Spectra Energy Group (the “ Spectra Energy Accounts ”), including all Spectra Energy Accounts listed or described on Schedule 2.5(a) , so that such Spectra Energy Accounts, if currently linked (whether by automatic withdrawal, automatic deposit, or any other authorization to transfer funds from or to, hereinafter “ linked ”) to any bank or brokerage account owned by Duke Energy or any other member of the Duke Energy Group (the “ Duke Energy Accounts ”), including all Duke Energy Accounts owned by any member of the Duke Energy Group that is as of the date hereof a direct or an indirect Subsidiary of Duke Capital LLC, which subset of Duke Energy Accounts are listed or described on Schedule 2.5(b) , are de-linked from the Duke Energy Accounts. From and after the Effective Time, no Duke Energy Employee or Former Duke Energy Employee shall have any authority to access or control any Spectra Energy Account, except as provided for through the Transition Services Agreement.

(b) The Parties agree to take, or cause the respective members of their respective Groups to take, at the Effective Time (or such earlier time as the Parties may agree), all actions necessary to amend all Contracts governing the Duke Energy Accounts so that such

 

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Duke Energy Accounts, if currently linked to a Spectra Energy Account, are de-linked from the Spectra Energy Accounts. From and after the Effective Time, no Spectra Energy Employee or Former Spectra Energy Employee shall have any authority to access or control any Duke Energy Account.

(c) It is intended that, following consummation of the actions contemplated by sections (a) and (b) above, there will continue to be in place a centralized cash management system pursuant to which the Spectra Energy Accounts will be managed centrally and funds collected will be transferred into one or more centralized accounts maintained by Spectra Energy.

(d) It is intended that, following consummation of the actions contemplated by sections (a) and (c) above, there will continue to be in place a centralized cash management system pursuant to which the Duke Energy Accounts will be managed centrally and funds collected will be transferred into one or more centralized accounts maintained by Duke Energy.

(e) The Parties shall, and shall cause the respective members of their Groups to, cooperate and use commercially reasonable efforts to have the Spectra Energy Accounts contain an aggregate amount in cash and cash equivalents at the Effective Time equal to $200 million (the “ Spectra Energy Target Cash Amount ”), provided that for purposes of achieving that result no cash or cash equivalents in any Spectra Energy Account owned by (i) Duke Energy Field Services, LLC, Gulfstream Natural Gas System, L.L.C., Gulfstream Management & Operating Services, L.L.C., Maritimes & Northeast Pipeline, L.L.C., Maritimes & Northeast Pipeline Limited Partnership, Maritimes & Northeast Pipeline Management Ltd., or Islander East Pipeline Company, L.L.C., or any of their respective Subsidiaries, or (ii) Spectra Energy Captive, but with respect to this item (ii) only to the extent of cash or cash equivalents transferred pursuant to Section 10.9(b) , and provided , further , that (x) subject to and in accordance with Section 4.07 of the Tax Matters Agreement (including the repayment obligation), the Spectra Energy Target Cash Amount shall be increased by $44 million if the conditions specified in such section of the Tax Matters Agreement are met, and (y) in the event Duke Energy, Spectra Energy, or any of their respective Affiliates settles any material matter set forth on Schedule 1.1(69)(viii) after the date of this Agreement and prior to the Effective Time and such settlement results in the receipt or payment of cash prior to the Effective Time, Duke Energy may increase or decrease, respectively, the Spectra Energy Target Cash Amount by the amount of such receipt or payment. Notwithstanding anything to the contrary in this Section 2.5(e) , neither Party nor any member of their respective Group shall have any recourse, including any right to assert any claim or course of action, if, after the Effective Time, it is determined that the aggregate amount of cash and cash equivalents in the Spectra Energy Accounts at the Effective Time (subject to the exclusions referenced in the foregoing sentence) was more or less than the Spectra Energy Target Cash Amount.

(f) With respect to any outstanding checks issued by Duke Energy, Spectra Energy, or any of their respective Subsidiaries prior to the Effective Time, such outstanding checks shall be honored following the Effective Time by the entity or Group owning the account on which the check is drawn.

(g) As between the two Parties (and the members of their respective Groups) all payments and reimbursements received after the Effective Time by any Party (or member of

 

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its Group) that relate to a Business, Asset or Liability of another Party (or member of its Group), shall be held by such Party in trust for the use and benefit of the Party entitled thereto (at the expense of the Party entitled thereto) and, promptly upon receipt by such Party of any such payment or reimbursement, such Party shall pay over, or shall cause the applicable member of its Group to pay over to the other Party the amount of such payment or reimbursement without right of set-off.

Section 2.6. Limitation of Liability .

(a) Except as otherwise expressly provided in this Agreement, no Party or any member of such Party’s Group shall have any Liability to any other Party or any member of each other Party’s Group in the event that any Information exchanged or provided pursuant to this Agreement (but excluding any such information included in a Disclosure Document) which is an estimate or forecast, or which is based on an estimate or forecast, is found to be inaccurate.

(b) Except as provided in Section 2.4 , Section 2.11 or as set forth in subsection (c) below, no Party or any member of such Party’s Group shall have any Liability to any other Party or any member of such other Party’s Group based upon, arising out of or resulting from any Contract, arrangement, course of dealing or understanding existing on or prior to the Effective Time (other than this Agreement or any Ancillary Agreement or any Contract entered into in connection herewith or in order to consummate the transactions contemplated hereby or thereby), and each Party hereby terminates, and shall cause all members in its Group to terminate, any and all Contracts, arrangements, course of dealings or understandings between it or any members in its Group and the other Party, or any members of its Group, effective as of the Effective Time (other than this Agreement or any Ancillary Agreement or any Contract entered into in connection herewith or in order to consummate the transactions contemplated hereby or thereby), unless such Contract, arrangement, course of dealing or understanding is set forth in any Ancillary Agreement or on Schedule 2.6(b) , and any such Liability, whether or not in writing, which is not reflected in any Ancillary Agreement or on such Schedule, is hereby irrevocably cancelled, released and waived effective as of the Effective Time. No such terminated Contract, arrangement, course of dealing or understanding (including any provision thereof which purports to survive termination) shall be of any further force or effect after the Effective Time.

(c) The provisions of Section 2.6(b) shall not apply to any of the following Contracts, arrangements, course of dealings or understandings (or to any of the provisions thereof):

(i) any Contracts to which any Person other than the Parties and their respective Affiliates is a Party (it being understood that to the extent that the rights and obligations of the Parties and the members of their respective Groups under any such Contracts constitute Power Assets or Gas Assets, Power Liabilities, or Gas Liabilities, such Contracts shall be assigned or retained pursuant to ARTICLE II ); and

(ii) any Contract, agreements, arrangements, commitments or understandings to which any non-wholly-owned Subsidiary or non-wholly-owned Affiliate of Duke Energy or Spectra Energy is a Party.

 

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Section 2.7. Transfers Not Effected On or Prior to the Effective Time; Transfers Deemed Effective as of the Effective Time .

(a) To the extent that any transfers contemplated by this ARTICLE II shall not have been consummated on or prior to the Effective Time, the Parties shall cooperate to affect such transfers as promptly following the Effective Time as shall be practicable. Nothing herein shall be deemed to require the transfer of any Assets or the assumption of any Liabilities which by their terms or operation of Law cannot be transferred; provided , however , that the Parties shall, and shall cause the respective members of their Groups to, cooperate and use commercially reasonable efforts to seek to obtain any necessary Consents or Governmental Approvals for the transfer of all Assets and Liabilities contemplated to be transferred or assumed pursuant to this ARTICLE II . In the event that any such transfer or assumption of Assets or Liabilities has not been consummated from and after the Effective Time (i) the Party (or relevant member in its Group) retaining such Asset shall thereafter hold (or shall cause such member in its Group to hold) such Asset for the use and benefit of the Party (or relevant member in its Group) entitled thereto (at the expense of the Person entitled thereto) and (ii) the Party intended to assume such Liability shall, or shall cause the applicable member of its Group to, pay or reimburse the Party (or the relevant member of its Group) retaining such Liability for all amounts paid or incurred in connection with the retention of such Liability. In addition, the Party retaining such Asset or Liability (or relevant member of its Group) shall (or shall cause such member in its Group to) treat, insofar as reasonably possible and to the extent permitted by applicable Law, such Asset or Liability in the ordinary course of business in accordance with past practice and take such other actions as may be reasonably requested by the Party to which such Asset or Liability is to be transferred or assumed in order to place such Party, insofar as reasonably possible, in the same position as if such Asset or Liability had been transferred or assumed as contemplated hereby and so that all the benefits and burdens relating to such Asset or Liability, including possession, use, risk of loss, potential for gain, and dominion, control and command over such Asset or Liability, are to inure from and after the Effective Time to the relevant member of the Duke Energy Group or the Spectra Energy Group, as the case may be, entitled to the receipt of such Asset or Liability.

(b) If and when the Consents, Governmental Approvals and/or conditions, the absence or non-satisfaction of which caused the deferral of transfer of any Asset or assumption of any Liability pursuant to Section 2.7(a) , are obtained or satisfied, the transfer, assignment or novation of the applicable Asset or Liability shall be effected in accordance with and subject to the terms of this Agreement and/or the applicable Ancillary Agreement as promptly as practical after the receipt of such Consents, Governmental Approvals and/or absence or satisfaction of conditions.

(c) The Party (or relevant member of its Group) retaining any Asset or Liability due to the deferral of the transfer or assignment of such Asset or the deferral of the assumption of such Liability pursuant to Section 2.7(a) shall not be obligated, in connection with the foregoing, to expend any money unless the necessary funds are advanced, or agreed in advance to be reimbursed by the Party (or relevant member of its Group) entitled to such Asset, other than reasonable attorneys’ fees and recording or similar fees, all of which shall be promptly reimbursed by the Party entitled to such Asset (or relevant member of its Group).

 

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(d) On and prior to the twenty-four (24) month anniversary of the Effective Time, as applicable, if any Party determines that it owns (or any member of its Group) any Asset that was allocated by the terms of this Agreement to the other Party or that is agreed by such Party and the other Party in their good faith judgment to be an Asset that more properly belongs to the other Party (other than (for the avoidance of doubt), as between any two Parties, for any Asset acquired from an unaffiliated third party by a Party or member of such Party’s Group following the Effective Time), then the Party owning such Asset shall transfer, contribute, assign, distribute, and convey, or shall cause any such Asset to be transferred, contributed, assigned, distributed and conveyed, to the Party (or relevant member of its Group) identified as the appropriate transferee and following such transfer, contribution, assignment, distribution or conveyance, such Asset shall be a Gas Asset or Power Asset, as the case may be. In connection with such transfer, contribution, assignment, distribution or conveyance, the receiving party shall assume all Liabilities related to such asset. Following the twenty-four (24) month anniversary of the Effective Time, no Party (or relevant member of its Group) shall be obligated to transfer any newly recognized Asset that would, had such Asset been recognized at the Effective Time, have been transferred to the other Party (or relevant member of its Group).

(e) After the Effective Time, each Party (or any member of its Group) may receive mail, telegrams, packages and other communications properly belonging to the other Party (or any member of its Group). Accordingly, at all times after the Effective Time, each Party authorizes the other Party (or any member of its Group) to receive and open all mail, telegrams, packages and other communications received by such Party (or any member of its Group) and not unambiguously intended for such first Party, any member of such first Party’s Group or any of their respective officers, directors, employees or other agents, and to the extent that they do not relate to the business of the receiving Party, the receiving party shall promptly deliver such mail, telegrams, packages or other communications (or, in case the same relate to both businesses, copies thereof) to the other Party as provided for in Section 11.6 . The provisions of this Section 2.7(e) are not intended to, and shall not, be deemed to constitute an authorization by any Party (or any member of its Group) to permit the other to accept service of process on its (or its members’) behalf and no Party (or any member of its Group) is or shall be deemed to be the agent of the other Party (or any member of its Group) for service of process purposes.

Section 2.8. Conveyancing and Assumption Instruments . In connection with, and in furtherance of, the assignments, distributions, transfers and conveyances of Assets and the acceptance and assumptions of Liabilities contemplated by this Agreement, the Parties shall execute or cause to be executed, on or prior to the Effective Time, by the appropriate entities, the Conveyancing and Assumption Instruments necessary to evidence the valid and effective assumption by the applicable Party (or any member of its Group) of its assumed Liabilities, and the valid transfer, contribution, assignment, distribution and conveyance to the applicable Party (or member of such Party’s Group) of all right, title and interest in and to its accepted Assets, including the transfer of real property with quit claim deeds, as may be appropriate.

Section 2.9. Further Assurances.

(a) In addition to and without limiting the actions specifically provided for elsewhere in this Agreement, including Section 2.7 , each of the Parties shall cooperate with each

 

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other and use (and will cause the relevant member of its Group to use) commercially reasonable efforts, prior to, on and after the Effective Time, to take, or to cause to be taken, all actions, and to do, or to cause to be done, all things reasonably necessary on its part under applicable Law or contractual obligations to consummate and make effective the transactions contemplated by this Agreement and the Ancillary Agreements.

(b) Without limiting the foregoing, each Party shall cooperate with the other Party, from and after the Effective Time, to execute and deliver, or use commercially reasonable efforts to cause to be executed and delivered, all instruments, including instruments of conveyance, assignment and transfer, and to make all filings with, and to obtain all Consents and/or Governmental Approvals, any permit, license, Contract, indenture or other instrument (including any Consents or Governmental Approvals), and to take all such other actions as such Party may reasonably be requested to take by any other Party from time to time, consistent with the terms of this Agreement and the Ancillary Agreements, in order to effectuate the provisions and purposes of this Agreement and the Ancillary Agreements and the conveyances, assignments and transfers of the applicable Assets and the assignment and assumption of the applicable Liabilities and the other transactions contemplated hereby and thereby. Without limiting the foregoing, each Party will, at the reasonable request, of the other Party, take such other actions as may be reasonably necessary to vest in such other Party good and marketable title to the Assets allocated to such Party under this Agreement or any of the Ancillary Agreements, free and clear of any Security Interest, if and to the extent it is practicable to do so.

Section 2.10. Novation of Liabilities; Consents .

(a) Each Party, at the request of the other Party, shall use commercially reasonable efforts to obtain, or to cause to be obtained, any Consent, release, substitution or amendment required to novate or assign all obligations under Contracts, licenses and other obligations or Liabilities for which a member of such Party’s Group and a member of the Party’s Group are jointly or severally liable and that do not constitute Liabilities of such other Party as provided in this Agreement (such other Party, the “ Other Party ”), or to obtain in writing the unconditional release of all parties to such arrangements (other than any member of the Group who assumed or retained such Liability as set forth in this Agreement), so that, in any such case, the members of the applicable Group will be solely responsible for such Liabilities; provided , however , that no Party shall be obligated to pay any consideration therefor to any third party from whom any such Consent, substitution or amendment is requested (unless such Party is fully reimbursed by the requesting Party).

(b) If the Parties are unable to obtain, or to cause to be obtained, any such required Consent, release, substitution or amendment, the Other Party or a member of such Other Party’s Group shall continue to be bound by such Contract, license or other obligation that does not constitute a Liability of such Other Party and, unless not permitted by Law or the terms thereof, as agent or subcontractor for such Party, the Party or member of such Party’s Group who assumed or retained such Liability as set forth in this Agreement (the “ Liable Party ”) shall, or shall cause a member of its Group to, pay, perform and discharge fully all the obligations or other Liabilities of such Other Party or member of such Other Party’s Group thereunder from and after the Effective Time; provided , however , that the Other Party shall not be obligated to extend, renew or otherwise cause such Contract, license or other obligation to remain in effect beyond

 

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the term in effect as of the Effective Time. The Liable Party shall indemnify each Other Party and the members of such Other Party’s Group and hold each of them harmless against any and all Liabilities arising in connection therewith; provided , that the Liable Party shall have no obligation to indemnify the Other Party or any member of such Other Party’s Group with respect to any matter to the extent that such Other Party has engaged in any knowing violation of Law, fraud or misrepresentation in connection therewith. The Other Party shall, without further consideration, promptly pay and remit, or cause to be promptly paid or remitted, to the Liable Party or to another member of the Liable Party’s Group, all money, rights and other consideration received by it or any member of its Group in respect of such performance by the Liable Party (unless any such consideration is an Asset of such Other Party pursuant to this Agreement). If and when any such Consent, release, substitution or amendment shall be obtained or such agreement, lease, license or other rights or obligations shall otherwise become assignable or able to be novated, the Other Party shall promptly assign, or cause to be assigned, all rights, obligations and other Liabilities thereunder of any member of such Other Party’s Group to the Liable Party or to another member of the Liable Party’s Group without payment of any further consideration and the Liable Party, or another member of such Liable Party’s Group, without the payment of any further consideration, shall assume such rights and Liabilities.

Section 2.11. Guarantees .

(a) Duke Energy shall (with the commercially reasonable cooperation of Spectra Energy and the other members of the Spectra Energy Group) use its commercially reasonable efforts, if so requested by Spectra Energy, to have any member of the Spectra Energy Group removed as guarantor of, or obligor for, any Power Liability, with respect to those guarantees listed or described on Schedule 2.11(a).

(b) Spectra Energy shall (with the commercially reasonable cooperation of Duke Energy and the other members of the Duke Energy Group) use its commercially reasonable efforts, if so requested by Duke Energy, to have any member of the Duke Energy Group removed as guarantor of, or obligor for, any Gas Liability, with respect to those guarantees listed or described on Schedule 2.11(b) (each of the releases referred to in paragraphs (a) and (b) of this subsection, a “ Guaranty Release ”).

(c) Until Duke Energy or Spectra Energy is able to obtain, or to cause to be obtained, any such required removal as set forth in clauses (a) and (b) of this Section 2.11 , each of Duke Energy and Spectra Energy agree to use their commercially reasonable efforts to not renew or extend the term of, increase its obligations under, or transfer to a third party, any loan, guarantee, lease, contract or other obligation for which another Party is or may be liable unless (i) all obligations of such other Party and the other members of such Party’s Group with respect thereto are thereupon terminated by documentation reasonably satisfactory in form and substance to such other Party or (ii) in the event a Guaranty Release is not obtained and such first Party wishes to extend the term of such guaranteed loan, guarantee, lease, contract or other obligation then such first Party shall have the option of extending the term if it provides such security as is reasonably satisfactory to the guarantor under such guarantee.

 

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(d) For the avoidance of doubt, each of the items listed or described on Schedule 2.11(a) are Power Liabilities and, notwithstanding whether the guarantees are removed pursuant to Section 2.11(a) , such guarantees shall continue to be Power Liabilities and Duke Energy shall indemnify and hold harmless all Spectra Energy Indemn