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Exhibit 10.2
EXECUTION COPY
TRANSITION SERVICES AGREEMENT
by and between
DUKE ENERGY CORPORATION
and
SPECTRA ENERGY CORP
Dated as of December 13, 2006
TRANSITION SERVICES
AGREEMENT
THIS TRANSITION SERVICES 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, to effect this separation the Parties entered into that
certain Separation and Distribution Agreement dated as of even date
hereof (as amended or otherwise modified from time to time, the "
Separation Agreement ");
WHEREAS, Duke Energy and Spectra Energy desire that if (but only
if) the Distribution occurs, Duke Energy will provide to Spectra
Energy and its subsidiaries during the relevant Services Term,
directly or through Duke Energy’s Affiliates or
subcontractors, the Duke Energy Services, all in accordance with
the terms and subject to the conditions set forth in this
Agreement; and
WHEREAS, Duke Energy and Spectra Energy desire that if (but only
if) the Distribution occurs, Spectra Energy will provide to Duke
Energy and its subsidiaries during the relevant Services Term,
directly or through Spectra Energy’s Affiliates or
subcontractors, the Spectra Energy Services, all in accordance with
the terms and subject to the conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the foregoing premises, the
mutual promises and covenants hereinafter set forth, and other good
and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Parties, intending to be legally
bound, agree as follows:
As used in this Agreement, the following
capitalized terms shall have the following meanings:
" Action " shall have the meaning set forth in the
Separation Agreement.
" Additional Service " shall have the meaning set forth
in Section 2.8(b).
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" Affiliate " shall have the meaning set
forth in the Separation Agreement.
" Agreement " shall have the meaning set forth in the
preamble hereof.
" Agreement Dispute " shall have the meaning set forth in
Section 12.
" Ancillary Agreement " shall have the meaning set forth
in the Separation Agreement.
" Auditing Entity " shall have the meaning set forth in
Section 9.3.
" Business " shall mean the Gas Business or the Power
Business, as applicable.
" Business Day " shall have the meaning set forth in the
Separation Agreement.
" Confidential Information " shall have the meaning set
forth in the Separation Agreement.
" Contract " shall have the meaning set forth in the
Separation Agreement.
" Default Interest Rate " shall have the meaning set
forth in Section 3.1(c).
" Distribution " shall have the meaning set forth in the
Separation Agreement.
" Distribution Date " shall have the meaning set forth in
the Separation Agreement.
" Due Date " shall have the meaning set forth in
Section 3.1(b).
" Duke Energy " shall have the meaning set forth in the
preamble hereof.
" Duke Energy Group " shall have the meaning set forth in
the Separation Agreement.
" Duke Energy Project Manager " shall have the meaning
set forth in Section 2.10.
" Duke Energy Services " shall mean the limited
enumerated services described on Schedule A-1 , Schedule
A-2 , Schedule A-3 of the Schedules to Transition
Services Agreement document attached hereto and each next
consecutive Schedule A through and including Schedule
A-46 included therein.
" Duke Energy Trademarks " shall have the meaning set
forth in Section 13.2(a).
" Effective Time " shall have the meaning set forth in
the Separation Agreement.
" FERC " shall mean the U.S. Federal Energy Regulatory
Commission, or its successor agency.
" Fee " or " Fees " shall have the meaning set
forth in Section 3.1(a).
" Force Majeure " shall have the meaning set forth in the
Separation Agreement.
" Gas Business " shall have the meaning set forth in the
Separation Agreement.
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" Governmental Approvals " shall have the
meaning set forth in the Separation Agreement.
" Governmental Entity " shall have the meaning set forth
in the Separation Agreement.
" Group " shall mean either the Duke Energy Group or the
Spectra Energy Group, as applicable.
" Law " shall have the meaning set forth in the
Separation Agreement.
" Liabilities " shall have the meaning set forth in the
Separation Agreement.
" New York Courts " shall have the meaning set forth in
Section 15.16.
" Omitted Service " shall have the meaning set forth in
Section 2.8(a).
" Party " shall have the meaning set forth in the
preamble hereof.
" Person " shall have the meaning set forth in the
Separation Agreement.
" Power Business " shall have the meaning set forth in
the Separation Agreement.
" Prime Rate " shall have the meaning set forth in the
Separation Agreement.
" Separation Agreement " shall have the meaning set forth
in the recitals hereto.
" Service " shall mean any of the Spectra Energy Services
and the Duke Energy Services, as applicable.
" Service Provider " shall mean Duke Energy with respect
to the Duke Energy Services, and Spectra Energy with respect to the
Spectra Energy Services.
" Service Recipient " shall mean Spectra Energy with
respect to the Duke Energy Services, and Duke Energy with respect
to the Spectra Energy Services.
" Services Group " shall mean any Services or group of
Services identified on one Schedule attached to this Agreement and
for which Service or group of Services a single, separate Fee is
specified on such Schedule.
" Services Term " shall have the meaning set forth in
Section 4.1.
" Spectra Energy " shall have the meaning set forth in
the preamble hereof.
" Spectra Energy Group " shall have the meaning set forth
in the Separation Agreement.
" Spectra Energy Project Manager " shall have the meaning
set forth in Section 2.10.
" Spectra Energy Services " shall mean the limited
enumerated services described on Schedule B-1 , Schedule
B-2 , Schedule B-3 of the Schedules to Transition
Services Agreement
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document attached hereto and each next
consecutive Schedule B through and including Schedule
B-14 included therein.
" Subsidiary " shall have the meaning set forth in the
Separation Agreement.
" TM License Period " shall have the meaning set forth in
Section 13.2(a).
2.1 Scope of
Services .
(a) Spectra Energy hereby retains Duke
Energy to provide, and Duke Energy hereby agrees to provide, the
Duke Energy Services to Spectra Energy or any of its subsidiaries,
as designated by Spectra Energy, during the relevant Services
Term.
(b) Duke Energy hereby retains Spectra
Energy to provide, and Spectra Energy hereby agrees to provide, the
Spectra Energy Services to Duke Energy or any of its subsidiaries,
as designated by Duke Energy, during the relevant Services
Term.
(c) Notwithstanding anything to the
contrary in this Agreement, (i) the Duke Energy Services shall
be available to Spectra Energy or any of its subsidiaries only for
the purposes of conducting the Gas Business substantially in the
same manner and places as it was conducted immediately prior to the
Effective Time; and (ii) the Spectra Energy Services shall be
available to Duke Energy or any of its subsidiaries only for the
purposes of conducting the Power Business substantially in the same
manner and places as it was conducted immediately prior to the
Effective Time.
2.2 Provision of Services . The
Duke Energy Services may be directly provided by Duke Energy or may
be provided through any of its Affiliates or subcontractors, and
the Spectra Energy Services may be directly provided by Spectra
Energy or may be provided through any of its Affiliates or
subcontractors.
2.3 No Financing to Services
Recipient . In no event shall a Service Provider or its
Affiliates be required to (i) lend any funds to a Service
Recipient or its Affiliates, (ii) expend funds for any
additional equipment or material or property (real or personal) on
behalf of Service Recipient, or (iii) make any payments or
disbursements on behalf of Service Recipient, except to the extent
Service Recipient has previously delivered to Service Provider
sufficient funds to make any such expenditures, payment or
disbursement.
2.4 No Assumption or Modification of
Obligations . Nothing herein shall be deemed to
(i) constitute the assumption by Service Provider or any of
its Affiliates, or the agreement to assume, any duties, obligations
or liabilities of Service Recipient or its Affiliates whatsoever;
or (ii) alter, amend or otherwise modify any obligation of
Duke Energy or Spectra Energy under the Separation Agreement.
2.5 Application of Resources .
Unless otherwise expressly required under the terms of any relevant
Schedule hereto or the Separation Agreement, or otherwise agreed to
by the Parties in writing, in providing the Services, Service
Provider or its Affiliates shall not be obligated to:
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(i) expend funds and other resources beyond
levels that would be customary and reasonable for any other
nationally recognized service provider to perform services that are
similar to the relevant Services; (ii) maintain the employment
of any specific employee or subcontractor; (iii) purchase,
lease or license any additional (measured as of the even date
hereof) equipment or materials (expressly excluding any renewal or
extension of any leases or licenses required for Service Provider
to perform the relevant Services during the relevant Services
Term); or (iv) pay any of Service Recipient’s costs
related to its or any of its Affiliates’ receipt of the
Services.
2.6 Performance of Services .
Subject to the other terms (i) in this Agreement setting forth
and circumscribing Service Provider’s performance obligations
hereunder (including in Sections 2.1, 2.2, 2.3, 2.5, 2.7, 2.8, 2.9
and 6, and (ii) in the relevant Schedules hereto, each Service
Provider shall perform, or cause the applicable members of its
Group to perform, the Services required to be provided by it
hereunder in a manner specifically described in the relevant
Schedules hereto, or, to the extent not so described in such
Schedules, in a manner that is substantially the same in nature,
accuracy, quality, completeness, timeliness, responsiveness and
efficiency with how such relevant Services have been rendered to
the Gas Business by Duke Energy (or any of its subsidiaries) prior
to the Effective Time, or to the Power Business by Spectra Energy
(or any of its subsidiaries) prior to the Effective Time.
2.7 Transitional Nature of Services;
Changes . The Parties acknowledge the transitional nature of
the Services and agree that notwithstanding anything to the
contrary herein, each Service Provider may make changes from
time-to-time in the manner of performing the Services if such
Service Provider is making similar changes in performing similar
services for itself and/or its Affiliates; provided that
Service Provider must provide Service Recipient with at least
thirty (30) days prior written notice of such changes.
2.8 Omitted Services; Additional
Services; Extension of Services Terms .
(a) Omitted Services . If, after
the Distribution Date and prior to December 31, 2007, a Party
identifies a service that the other Party (or a member of such
other Party’s Group) previously provided to such first Party
(or any of its subsidiaries) prior to the Distribution Date, but
such service was inadvertently omitted from inclusion in the
Services to be received by such first Party under this Agreement
(an " Omitted Service "), then, upon the prior written
consent of the Party that would be Service Provider of such Omitted
Service (which consent shall not be unreasonably withheld), such
Omitted Service shall be added and considered as part of the
Services to be provided by such Service Provider. The Parties shall
cooperate and act in good faith to reach agreement on the fees and
other specific terms and conditions applicable to such Omitted
Service, provided that if such Omitted Service is
substantially similar to any other Service provided by Services
Provider under this Agreement, such fees and other specific terms
and conditions shall be substantially similar to the fees and other
specific terms and conditions applicable to such other Services,
and provided , further , that a 15% surcharge
shall be added to any fees applicable to an Omitted Service. Upon
the Parties agreement on the fees and other specific terms and
conditions applicable to an Omitted Service, the Parties shall
execute an amendment to this Agreement that provides for the
substitution of the relevant Schedule, or additions of supplements
to the relevant Schedule, in order to describe such Omitted Service
and the agreement upon the related fees and other specific terms
and conditions applicable thereto.
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(b) Additional
Services; Extension of Services Terms . In the event that the
Parties identify and agree upon (i) an additional service to
be provided under this Agreement, as well as the related fees and
other specific terms and conditions applicable thereto (an "
Additional Service "), or (ii) an extension of any
particular Service Term for any Services Group, as well as the
related fees and other specific terms and conditions applicable
thereto, the Parties shall execute an amendment to this Agreement
that provides for the substitution of the relevant Schedule, or
additions of supplements to the relevant Schedule, in order to
describe such Additional Service or extension, and the agreed upon
related fees and other specific terms and conditions applicable
thereto.
2.9 Impracticability . Subject to
the provisions of Section 2.11, Service Provider shall not be
required to provide any Service to the extent: (A) that the
performance of the Services would (i) require Service Provider
or any of its Affiliates to violate any applicable Laws (including
any applicable codes or standards of conduct established by FERC or
any other Governmental Entity with respect to their activities
subject to the jurisdiction of FERC or such other Governmental
Entity) or any internal policy reasonably adopted in order to
comply with any applicable Laws; (ii) result in the breach of
any software license, lease, or other Contract; or
(iii) require prior approval of a Governmental Entity (except
to the extent such approval has already been obtained); or
(B) provided under Section 15.20.
2.10 Project Managers . Duke
Energy shall designate to Spectra Energy at least one individual to
whom all of Spectra Energy’s communications may be addressed
with respect to the Duke Energy Services and who has authority to
act for and bind Duke Energy in all aspects with respect to the
Duke Energy Services (the " Duke Energy Project Manager ").
Spectra Energy shall designate to Duke Energy at least one
individual to whom all of Duke Energy’s communications may be
addressed with respect to the Spectra Energy Services and who has
authority to act for and bind Spectra Energy in all aspects with
respect to the Spectra Energy Services (the " Spectra Energy
Project Manager "). The initial Duke Energy Project Manager
designated by Duke Energy shall be Sean Trauschke and the initial
Spectra Energy Project Manager designated by Spectra Energy shall
be Greg Harper. Notwithstanding the foregoing in this
Section 2.10, the Parties acknowledge and agree that with
respect to ordinary course of business communications between the
Parties regarding any relevant Service falling within any Services
Group, such communications shall take place between each
Party’s representative (or his or her designee) identified
under the caption "CONTACTS" on the Schedule hereto that includes
such Services Group.
2.11 Cooperation . In the event
that there is nonperformance of any Service as a result of
(i) a Force Majeure event described in Section 15.20, or
(ii) impracticability pursuant to Section 2.9, the
Parties agree to work together in good faith to arrange for an
alternative means by which the applicable Service Recipient may
obtain, at its sole cost and expense, the Service so affected. The
Parties and the members of their respective Groups shall cooperate
with each other in connection with the performance of the Services,
including producing on a timely basis all Contracts, documents and
other information that is reasonably requested with respect to the
performance of Services; provided , however , that
such cooperation shall not unreasonably disrupt the normal
operations of the Parties and the members of their respective
Groups; and provided , further , however the
Party requesting cooperation shall pay all reasonable out-of-pocket
costs and expenses incurred by the Party or any members of its
Group furnishing such
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requested cooperation, unless otherwise expressly
provided in this Agreement or the Separation Agreement.
3.1 Fees
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(a) Fees . In consideration of
Service Provider’s performance of the relevant Services,
Service Recipient shall pay to Service Provider the fees prescribed
on the relevant Schedules hereto (individually a " Fee " and
collectively the " Fees "); provided that , in
the event Service Recipient has not caused itself or its
Affiliates, as applicable, to obtain such relevant Service from an
alternative third party service provider and/or otherwise
terminated the provision of such relevant Service by the date that
is 180 days after the Distribution Date, then the Fee applicable to
such Service shall be increased by 10% for the remainder of the
applicable Services Term.
(b) Invoices; Payment Procedures
. Service Provider shall invoice Service Recipient on a monthly
basis for all Fees accrued with respect to the prior month. Fees
shall be payable by Service Recipient within thirty (30) days
after Service Recipient’s receipt of an invoice (the " Due
Date "). All amounts (i) payable pursuant to the terms of
this Agreement shall be paid to Service Provider as directed by
Service Provider, and (ii) due and payable hereunder shall be
invoiced and paid in U.S. dollars, except as may be expressly
provided in any relevant Schedule hereto. A Service
Recipient’s obligation to make any required payments under
this Agreement shall not be subject to any unilateral right of
offset, set-off, deduction or counterclaim, however arising.
(c) Interest . In the absence of
a timely notice of billing dispute in accordance with the
provisions of Section 3.2, amounts not paid on or before the
Due Date shall be payable with interest, accrued at the then
effective Prime Rate plus 2% (the " Default Interest Rate ")
(or the maximum legal rate whichever is lower), calculated for the
actual number of days elapsed, accrued from the Due Date until the
date of the actual receipt of payment.
(d) Taxes . If any Governmental
Entity shall impose a tax on the Services rendered to a Service
Recipient or its subsidiaries by Service Provider hereunder,
Service Recipient agrees to pay, or remit to Service Provider so
that Service Provider may pay, the amount of such tax imposed on
the Services rendered to Service Recipient or its subsidiaries by
Service Provider under this Agreement. Notwithstanding anything to
the contrary contained in this Agreement, Service Recipient shall
have no liability for, and shall not be obligated to pay for, any
property taxes of any kind or type applicable to the property of
Service Provider or any of its subsidiaries or any income taxes of
any kind or type applicable to the income of Service Provider or
any of its subsidiaries, except as may be expressly provided in any
relevant Schedule hereto.
3.2 Payment Disputes . In the
event that Service Recipient disputes any invoice or portion
thereof, Service Recipient shall provide Service Provider prior to
the Due Date written notice of the disputed amounts, together with
a statement of the particulars of the dispute, including the
calculations with respect to any errors or inaccuracies claimed.
Should Service Recipient fail to provide timely evidence of the
invoice errors claimed on or before the Due
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Date, the disputed amounts shall be owed with
interest at the Default Interest Rate from the Due Date until
payment is received. Should Service Recipient provide the required
information on or before the Due Date, Service Provider shall make
a determination on the dispute no later than thirty (30) days
from the Due Date. If Service Recipient has (i) underpaid the
amount actually due, Service Recipient shall remit any amount due
plus interest at the Default Interest Rate from the Due Date until
paid within five (5) Business Days after receipt of the
determination from Service Provider, or (ii) overpaid the
amount actually due, Service Provider shall remit to Service
Recipient any refund within five (5) Business Days after
determination of such overpayment plus interest at the Default
Interest Rate on such refund from the date Service Provider
received the overpayment until refunded. Notwithstanding any
disputed invoice or portion thereof, Service Recipient shall
nevertheless pay when due any undisputed amount of such invoice to
Service Provider.
3.3 Expenses . In addition to the
payment of all Fees, Service Recipient shall reimburse Service
Provider for all reasonable out-of-pocket costs and expenses
incurred by Service Provider or its Affiliates in connection with
providing the Services (including all travel-related expenses) to
the extent that such costs and expenses are not reflected in the
Fees for such Services; provided , however , any such
expenses exceeding $10,000 per month for any Services Group (other
than routine business travel and related expenses) shall require
advance approval of Service Recipient. Any travel-related expenses
incurred in performing the Services shall be incurred and charged
to Service Recipient in accordance with Service Provider’s
then applicable business travel policies.
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4.
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Services Term; Termination .
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4.1 Services Term
. The performance of the Services shall commence on the
Distribution Date and, unless earlier terminated pursuant to
Section 4.2 or 4.3, shall terminate on the earlier of
(i) December 31, 2007, or (ii) such earlier date as
may be expressly provided for in the relevant Schedule hereto (the
" Services Term ").
4.2 Termination . This Agreement
or any specific Services Group, as specified below in this
Section 4.2, may be terminated prior to the expiration of the
relevant Services Term only as follows:
(a) with respect to all Duke Energy
Services in any Services Group, by Spectra Energy by giving a
termination notice to Duke Energy, provided that
(i) the termination will be effective as of the last day of
the calendar month immediately following the calendar month in
which Duke Energy receives such termination notice, and
(ii) Spectra Energy shall reimburse Duke Energy for any and
all costs and expenses incurred by Duke Energy or any of its
subsidiaries as a result of such early termination by Spectra
Energy, including internal demobilization or incremental, unplanned
severance costs, and early termination fees and other costs
incurred in order to terminate or reduce the level of services
provided by third parties under Contracts with Duke Energy or any
of its subsidiaries, which services are affected by such early
termination, such reimbursement to be due and payable on the Due
Date following Spectra Energy’s receipt of any invoice from
Duke Energy with respect to such costs and expenses, or, if there
are no more Due Dates, within thirty (30) days of Spectra
Energy’s receipt of such invoice;
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(b) with respect to all
Spectra Energy Services in any Services Group, by Duke Energy by
giving a termination notice to Spectra Energy, provided
that (i) the termination will be effective as of the
last day of the calendar month immediately following the calendar
month in which Spectra Energy receives such termination notice, and
(ii) Duke Energy shall reimburse Spectra Energy for any and
all costs and expenses incurred by Spectra Energy or any of its
subsidiaries as a result of such early termination by Duke Energy,
including internal demobilization or incremental, unplanned
severance costs, and early termination fees and other costs
incurred in order to terminate or reduce the level of services
provided by third parties under Contracts with Spectra Energy or
any of its subsidiaries, which services are affected by such early
termination, such reimbursement to be due and payable on the Due
Date following Duke Energy’s receipt of any invoice from
Spectra Energy with respect to such costs and expenses, or, if
there are no more Due Dates, within thirty (30) days of Duke
Energy’s receipt of such invoice;
(c) with respect to all Services included
in any Services Group that is adversely affected by a breach, by
the non-breaching Party if the other Party fails to observe or
perform in any material respect any term, obligation, or condition
of this Agreement and the defaulting Party does not cure such
failure within fifteen (15) days after written demand by the
first Party, provided that if the defaulting Party
begins promptly and diligently to cure such breach in accordance
with this provision and such breach is not capable of being cured
within such 15-day period, the defaulting Party sh
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