EXHIBIT 10.3

EXECUTION COPY

EMPLOYEE MATTERS AGREEMENT

by and between

DUKE ENERGY CORPORATION

AND

SPECTRA ENERGY CORP

Dated as of December 13, 2006

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EMPLOYEE MATTERS AGREEMENT

This EMPLOYEE MATTERS AGREEMENT (the “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”); and

WHEREAS, pursuant to the Separation Agreement, Duke Energy and Spectra Energy
have agreed to enter into this Agreement for the purpose of allocating Assets,
Liabilities and responsibilities with respect to certain employee compensation
and benefit plans and programs between and among them.

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:

ARTICLE I

DEFINITIONS AND INTERPRETATION

Section 1.1 Definitions. Capitalized terms used, but not defined herein shall
have the meanings assigned to such terms in the Separation Agreement and the
following terms shall have the following meanings:

“Agreement” shall have the meaning ascribed thereto in the preamble to this
Agreement.

“Benefit Plan” shall mean, with respect to an entity, each plan, program,
arrangement, agreement or commitment that is an employment, consulting,
non-competition or deferred compensation agreement, or an executive
compensation, incentive bonus or other bonus,

 

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employee pension, profit-sharing, savings, retirement, supplemental retirement,
stock option, stock purchase, stock appreciation rights, restricted stock, other
equity-based compensation, severance pay, salary continuation, life, health,
hospitalization, sick leave, vacation pay, disability or accident insurance
plan, corporate-owned or key-man life insurance or other employee benefit plan,
program, arrangement, agreement or commitment, including any “employee benefit
plan” (as defined in Section 3(3) of ERISA), sponsored or maintained by such
entity (or to which such entity contributes or is required to contribute).

“COBRA” shall mean the continuation coverage requirements for “group health
plans” under Title X of the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended, and as codified in Code Section 4980B and Sections 601 through
608 of ERISA, together with all regulations and proposed regulations promulgated
thereunder.

“Detrimental Conduct Provisions” shall mean any provisions that proscribe
conduct of Duke Energy Employees, Spectra Energy Employees, Former Duke Energy
Employees or Former Spectra Energy Employees in their capacity as such, whether
set forth in outstanding Duke Energy long-term incentive awards issued under the
Duke Energy Stock Plans or otherwise, in each case as in effect from time to
time.

“DOL” shall mean the U.S. Department of Labor.

“Duke Energy” shall have the meaning ascribed thereto in the preamble to this
Agreement.

“Duke Energy 401(k) Plan” shall mean the Duke Energy Retirement Savings Plan.

“Duke Energy Actuary” shall mean an independent actuary selected by Duke Energy.

“Duke Energy Benefit Plan” shall mean any Benefit Plan sponsored, maintained or
contributed to by any member of the Duke Energy Group or any ERISA Affiliate
thereof immediately following the Distribution Date.

“Duke Energy Employee” shall mean any individual who, immediately following the
Distribution Date, remains employed by or will be employed by Duke Energy or any
member of the Duke Energy Group, including active employees and employees on
vacation and approved leave of absence (including maternity, paternity, family,
sick leave, qualified military service under the Uniformed Services Employment
and Reemployment Rights Act of 1994, and leave under the Family Medical Leave
Act and other approved leaves).

“Duke Energy Option” shall mean an option to purchase shares of Duke Energy
Common Stock granted pursuant to one of the Duke Energy Stock Plans.

“Duke Energy Participant” shall mean any individual who, immediately following
the Distribution Date, is a Duke Energy Employee, a Former Duke Energy Employee
or a beneficiary, dependent or alternate payee of any of the foregoing.

 

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“Duke Energy Performance Share” shall mean a unit granted by Duke Energy or one
of its Affiliates pursuant to one of the Duke Energy Stock Plans representing a
general unsecured promise by Duke Energy or one of its Affiliates to deliver a
share of Duke Energy Common Stock or dividend equivalents, if applicable (or the
cash equivalent of either), upon the satisfaction of a performance based vesting
requirement.

“Duke Energy Phantom Stock Unit” shall mean a unit granted by Duke Energy or one
of its Affiliates pursuant to one of the Duke Energy Stock Plans representing a
general unsecured promise by Duke Energy or one of its Affiliates to deliver a
share of Duke Energy Common Stock or dividend equivalents, if applicable (or the
cash equivalent of either), upon the satisfaction of a vesting requirement
(other than performance based vesting requirements).

“Duke Energy Reimbursement Account Plan” shall have the meaning ascribed thereto
in Section 5.1(c) of this Agreement.

“Duke Energy Restricted Share” shall mean a share of Duke Energy Common Stock
granted by Duke Energy or one of its Affiliates pursuant to one of the Duke
Energy Stock Plans that is subject to forfeiture based on the extent of
attainment of a vesting requirement.

“Duke Energy Retained Claim” shall have the meaning ascribed thereto in
Section 8.4(a) of this Agreement.

“Duke Energy Retirement Plan” shall mean the Duke Energy Retirement Cash Balance
Plan.

“Duke Energy RLR” means the retired lives reserve described in that certain
Qualified Asset Account Agreement by and between Duke Power Company and Pilot
Life Insurance Company and executed by Duke Power Company on December 8, 1986
and Pilot Life Insurance Company on December 12, 1986, as it may have been
amended from time to time.

“Duke Energy Service Plans” shall mean, collectively, the Duke Energy Retirement
Plan, the Duke Energy 401(k) Plan, the Duke Energy Severance Plans and welfare
benefit plans maintained by a member of the Duke Energy Group to the extent
eligibility for or level of benefits thereunder is dependent upon length of
service, including the Duke Energy vacation, sick and retiree medical, dental
and life programs.

“Duke Energy Severance Plans” shall mean, collectively, the plans listed on
Schedule A attached hereto.

“Duke Energy SRP” shall mean, collectively, the plans listed on Schedule B
attached hereto.

“Duke Energy Stock Plans” shall mean, collectively, the Duke Energy Corporation
2006 Long-Term Incentive Plan, the Duke Energy Corporation 1998 Long-Term
Incentive Plan, the Duke Energy Stock Incentive Option, the 1989 Westcoast
Energy Inc. Long-Term Incentive Share Option Plan, the Cinergy Corp. 1996
Long-Term Incentive Compensation Plan, the Cinergy Corp. Stock Option Plan, the
Panhandle Eastern Corporation 1994 Long Term Incentive Plan and any

 

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other stock option or stock incentive compensation plan or arrangement
maintained before the Distribution Date for employees, officers, non-employee
directors or other independent contractors of Duke Energy or its Affiliates, as
amended (exclusive of the Spectra Energy Stock Plan and the 2006 Westcoast
Energy, Inc. Long-Term Incentive Plan).

“Duke Energy Welfare Plans” shall have the meaning ascribed thereto in
Section 5.1(a) of this Agreement.

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

“ERISA Affiliate” shall mean with respect to any Person, each business or entity
which is a member of a “controlled group of corporations,” under “common
control” or a member of an “affiliated service group” with such Person within
the meaning of Sections 414(b), (c) or (m) of the Code, or required to be
aggregated with such Person under Section 414(o) of the Code, or under “common
control” with such Person within the meaning of Section 4001(a)(14) of ERISA.

“Estimated Retirement Plan Transfer Amount” shall have the meaning ascribed
thereto in Section 3.2(b)(ii) of this Agreement.

“Final Retirement Plan Transfer Amount” shall have the meaning ascribed thereto
in Section 3.2(b)(iv) of this Agreement.

“Final Transfer Date” shall have the meaning ascribed thereto in
Section 3.2(b)(v) of this Agreement.

“Financed Nonqualified Plans” shall mean the plans listed on Schedule C attached
hereto.

“Former Duke Energy Employee” shall mean, as of the Distribution Date, any
individual listed on Exhibit A attached hereto or otherwise described pursuant
to the rules contained on Exhibit A attached hereto.

“Former Spectra Energy Employee” shall mean, as of the Distribution Date, any
individual listed on Exhibit B attached hereto or otherwise described pursuant
to the rules contained on Exhibit B attached hereto.

“HIPAA” shall mean the Health Insurance Portability and Accountability Act of
1996, as amended.

“Initial Transfer Amount” shall have the meaning ascribed thereto in
Section 3.2(b)(iii) of this Agreement.

“IRS” shall mean the U.S. Internal Revenue Service.

“New York Courts” shall have the meaning ascribed thereto in Section 12.11 of
this Agreement.

 

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“Participating Company” shall mean Duke Energy or any Person (other than an
individual) participating in a Duke Energy Benefit Plan.

“Parties” shall have the meaning ascribed thereto in the preamble to this
Agreement.

“Post-Distribution Duke Energy Option” shall have the meaning ascribed thereto
in Section 7.1(a) of this Agreement.

“Post-Distribution Duke Energy Stock Price” shall mean the price of one share of
Duke Energy Common Stock, as determined based on the methodology set out in
Schedule I attached hereto.

“Post-Distribution Spectra Energy Stock Price” shall mean the price of one share
of Spectra Energy Common Stock, as determined based on the methodology set out
in Schedule I attached hereto.

“Pre-Distribution Duke Energy Option Price” shall have the meaning ascribed
thereto in Section 7.1(b) of this Agreement.

“Rabbi Trust” shall, when immediately preceded by “Duke Energy,” mean,
collectively, the trusts established in connection with the nonqualified
deferred compensation plans maintained by the Duke Energy Group and the Spectra
Energy Group immediately before the Distribution (including the trusts
established in connection with the Duke Energy SRP and the Spectra Energy
Retained SRP) and, when immediately preceded by “Spectra Energy,” means the
trust or trusts to be established by Spectra Energy pursuant to Section 6.2(a)
of this Agreement.

“Revised Retirement Plan Transfer Amount” shall have the meaning ascribed
thereto in Section 3.2(b)(iv) hereof.

“Section 401(h) Amount” shall have the meaning ascribed thereto in
Section 3.2(e) of this Agreement.

“Separation Agreement” shall have the meaning ascribed thereto in the recitals
to this Agreement.

“Service Crediting Date” shall have the meaning ascribed thereto in
Section 2.4(b)(i) of this Agreement.

“Spectra Energy” shall have the meaning ascribed thereto in the preamble to this
Agreement.

“Spectra Energy 401(k) Plan” shall have the meaning ascribed thereto in
Section 4.1(a) of this Agreement.

“Spectra Energy Actuary” shall mean an independent actuary selected by Spectra
Energy.

 

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“Spectra Energy Benefit Plan” shall mean any Benefit Plan sponsored, maintained
or contributed to by any member of the Spectra Energy Group or any ERISA
Affiliate thereof immediately following the Distribution Date, including the
Spectra Energy Retirement Plan, the Spectra Energy 401(k) Plan, the Spectra
Energy Reimbursement Account Plan, the Spectra Energy Nonqualified Plans, the
Spectra Energy Severance Plans and the Spectra Energy Welfare Plans.

“Spectra Energy Employee” shall mean an active employee or an employee on
vacation or on approved leave of absence (including maternity, paternity,
family, sick leave, qualified military service under the Uniformed Services
Employment and Reemployment Rights Act of 1994, and leave under the Family
Medical Leave Act and other approved leaves) who, immediately following the
Distribution Date, is employed by or will be employed by Spectra Energy or any
member of the Spectra Energy Group.

“Spectra Energy Nonqualified Plans” shall have the meaning ascribed thereto in
Section 6.1(b) of this Agreement.

“Spectra Energy Option” shall mean an option to purchase shares of Spectra
Energy Common Stock as of the Distribution, which shall be issued pursuant to
the Spectra Energy Stock Plan as part of the adjustment to Duke Energy Options
in connection with the Distribution.

“Spectra Energy Participant” shall mean any individual who, immediately
following the Distribution Date, is a Spectra Energy Employee, a Former Spectra
Energy Employee, or a beneficiary, dependent or alternate payee of any of the
foregoing.

“Spectra Energy Performance Share” shall mean a unit issued by Spectra Energy or
one of its Affiliates representing a general unsecured promise by Spectra Energy
or one of its Affiliates to deliver a share of Spectra Energy Common Stock or
dividend equivalents, if applicable (or the cash equivalent of either), upon the
satisfaction of a performance based vesting requirement, which unit is issued
pursuant to the Spectra Energy Stock Plan as part of the adjustment to Duke
Energy Performance Shares in connection with the Distribution.

“Spectra Energy Phantom Stock Unit” shall mean a unit issued by Spectra Energy
or one of its Affiliates representing a general unsecured promise by Spectra
Energy or one of its Affiliates to deliver a share of Spectra Energy Common
Stock or dividend equivalents, if applicable (or the cash equivalent of either),
upon the satisfaction of a vesting requirement, which unit is issued pursuant to
the Spectra Energy Stock Plan as part of the adjustment to Duke Energy Phantom
Stock Units in connection with the Distribution.

“Spectra Energy Ratio” shall have the meaning ascribed thereto in Section 7.1(b)
of this Agreement.

“Spectra Energy Reimbursement Account Plan” shall have the meaning ascribed
thereto in Section 5.1(c) of this Agreement.

“Spectra Energy Restricted Share” shall mean a share of Spectra Energy Common
Stock that is subject to forfeiture based on the extent of attainment of a
vesting requirement, which share is issued pursuant to the Spectra Energy Stock
Plan as part of the adjustment to Duke Energy Restricted Shares in connection
with the Distribution.

 

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“Spectra Energy Retirement Plan” shall have the meaning ascribed thereto in
Section 3.1 of this Agreement.

“Spectra Energy Retirement Plan Participants” shall have the meaning ascribed
thereto in Section 3.1 of this Agreement.

“Spectra Energy Service Plans” shall mean, collectively, the Spectra Energy
Retirement Plan, the Spectra Energy 401(k) Plan, the Spectra Energy Severance
Plans and welfare benefit plans maintained by a member of the Spectra Energy
Group to the extent eligibility for or level of benefits thereunder is dependent
upon length of service, including the Spectra Energy vacation, sick and retiree
medical, dental and life programs.

“Spectra Energy Severance Plans” shall have the meaning ascribed thereto in
Section 8.3(a) of this Agreement.

“Spectra Energy Stock Plan” shall have the meaning ascribed thereto in
Section 2.5 of this Agreement.

“Spectra Energy Welfare Plans” shall have the meaning ascribed thereto in
Section 5.1(a) of this Agreement.

“True-Up Amount” shall have the meaning ascribed thereto in Section 3.2(b)(v) of
this Agreement.

“U.S.” shall mean the United States of America.

“VEBA” shall, when immediately preceded by “Duke Energy,” mean, collectively,
the Trust Agreement For Duke Energy Corporation Welfare Benefits Trust VEBA I
and the Trust Agreement for Duke Energy Corporation Post-Retirement Medical
Benefits Trust VEBA II, which are intended to be voluntary employees’
beneficiary associations under Section 501(c)(9) of the Code and, when
immediately preceded by “Spectra Energy,” means the voluntary employees’
beneficiary association trust or trusts to be established by Spectra Energy
pursuant to Section 5.2(a) of this Agreement.

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. Unless the context otherwise requires,
the words “include”, “includes” and “including” when used in this Agreement
shall be deemed to be followed by the phrase “without limitation”. Unless the
context otherwise requires, 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. Unless the
context otherwise requires, 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.

 

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ARTICLE II

GENERAL PRINCIPLES

Section 2.1 Assumption and Retention of Liabilities; Related Assets.

(a) As of the Effective Time, except as otherwise expressly provided for in this
Agreement, Duke Energy shall, or shall cause one or more members of the Duke
Energy Group to, assume or retain and Duke Energy hereby agrees to pay, perform,
fulfill and discharge, in due course in full (i) all Liabilities under all Duke
Energy Benefit Plans, (ii) all Liabilities (excluding Liabilities incurred under
a Benefit Plan except as otherwise provided in this Agreement) with respect to
the employment, service, termination of employment or termination of service of
all Duke Energy Employees and Former Duke Energy Employees and their dependents
and beneficiaries (and any alternate payees in respect thereof) and other
service providers (including any individual who is, or was, an independent
contractor, temporary employee, temporary service worker, consultant,
freelancer, agency employee, leased employee, on-call worker, incidental worker,
or non-payroll worker of any member of the Duke Energy Group or in any other
employment, non-employment, or retainer arrangement, or relationship with any
member of the Duke Energy Group or whose employment or service is or was
otherwise primarily associated with the Power Business), in each case to the
extent arising in connection with or as a result of employment with or the
performance of services for any member of the Duke Energy Group or Spectra
Energy Group, and (iii) any other Liabilities or obligations expressly assigned
to Duke Energy or any of its Affiliates under this Agreement. For purposes of
clarification, the Liabilities assumed or retained by the Duke Energy Group as
provided for in this Section 2.1(a) are intended to be Power Liabilities as such
term is defined in the Separation Agreement.

(b) As of the Effective Time, except as otherwise expressly provided for in this
Agreement, Spectra Energy shall, or shall cause one or more members of the
Spectra Energy Group to, assume or retain, as applicable, and Spectra Energy
hereby agrees to pay, perform, fulfill and discharge, in due course in full
(i) all Liabilities under all Spectra Energy Benefit Plans, (ii) all Liabilities
(excluding Liabilities incurred under a Benefit Plan except as otherwise
provided in this Agreement) with respect to the employment, service, termination
of employment or termination of service of all Spectra Energy Employees and
Former Spectra Energy Employees and their dependents and beneficiaries (and any
alternate payees in respect thereof) and other service providers (including any
individual who is, or was, an independent contractor, temporary employee,
temporary service worker, consultant, freelancer, agency employee, leased
employee, on-call worker, incidental worker, or non-payroll worker of any member
of the Spectra Energy Group or in any other employment, non-employment, or
retainer arrangement, or relationship with any member of the Spectra Energy
Group or whose employment or service is or was otherwise primarily associated
with the Gas Business), in each case to the extent arising in connection with or
as a result of employment with or the performance of services for any member of
the Duke Energy Group or Spectra Energy Group, and (iii) any other Liabilities
or obligations expressly assigned to Spectra Energy or any of its Affiliates
under this Agreement. For purposes of clarification, the Liabilities assumed or
retained by the Spectra Energy Group as provided for in this Section 2.1(b) are
intended to be Gas Liabilities as such term is defined in the Separation
Agreement.

 

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(c) From time to time after the Distribution, Spectra Energy shall promptly
reimburse Duke Energy, upon Duke Energy’s reasonable request and the
presentation by Duke Energy of such substantiating documentation as Spectra
Energy shall reasonably request, for the cost of any obligations or Liabilities
satisfied or assumed by Duke Energy or its Affiliates that are, or that have
been made pursuant to this Agreement, the responsibility of Spectra Energy or
any of its Affiliates. Except as otherwise provided in Section 5.1(f)(ii) of
this Agreement, any such request for reimbursement must be made by Duke Energy
not later than the first anniversary of the Distribution.

(d) From time to time after the Distribution, Duke Energy shall promptly
reimburse Spectra Energy, upon Spectra Energy’s reasonable request and the
presentation by Spectra Energy of such substantiating documentation as Duke
Energy shall reasonably request, for the cost of any obligations or Liabilities
satisfied or assumed by Spectra Energy or its Affiliates that are, or that have
been made pursuant to this Agreement, the responsibility of Duke Energy or its
Affiliates. Any such request for reimbursement must be made by Spectra Energy
not later than the first anniversary of the Distribution.

(e) All Liabilities under all Duke Energy Benefit Plans and Spectra Energy
Benefit Plans and all Liabilities (excluding Liabilities incurred under a
Benefit Plan except as otherwise provided in this Agreement) with respect to the
employment, service, termination of employment or termination of service of all
Duke Energy Employees, Former Duke Energy Employees, Spectra Energy Employees
and Former Spectra Energy Employees and their dependents and beneficiaries (and
any alternate payees in respect thereof) and other service providers (including
any individual who is, or was, an independent contractor, temporary employee,
temporary service worker, consultant, freelancer, agency employee, leased
employee, on-call worker, incidental worker, or non-payroll worker of any member
of the Duke Energy Group or Spectra Energy Group or in any other employment,
non-employment, or retainer arrangement, or relationship with any member of the
Duke Energy Group or Spectra Energy Group), in each case to the extent arising
in connection with or as a result of employment with or the performance of
services for any member of the Duke Energy Group or Spectra Energy Group, that
are not allocated pursuant to the terms of this Agreement shall be treated as
Unallocated Liabilities under the Separation Agreement.

Section 2.2 Spectra Energy Participation in Duke Energy Benefit Plans. Except as
otherwise expressly provided for in this Agreement or as otherwise expressly
agreed to in writing between the Parties, (i) effective as of the Distribution
Date, Spectra Energy and each member of the Spectra Energy Group shall cease to
be a Participating Company in any Duke Energy Benefit Plan, and (ii) each
Spectra Energy Participant and any other service providers (including any
individual who is, or was, an independent contractor, temporary employee,
temporary service worker, consultant, freelancer, agency employee, leased
employee, on-call worker, incidental worker, or nonpayroll worker of any member
of the Duke Energy Group or the Spectra Energy Group or in any other employment,
non-employment, or retainer arrangement, or relationship with any member of the
Duke Energy Group or the Spectra Energy Group), effective as of the

 

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Distribution Date, shall cease to participate in, be covered by, accrue benefits
under, be eligible to contribute to or have any rights under any Duke Energy
Benefit Plan, and Duke Energy and Spectra Energy shall take all necessary action
to effectuate each such cessation.

Section 2.3 Comparable Compensation and Benefits. Except as otherwise agreed to
by Duke Energy, Spectra Energy (acting directly or through its Affiliates)
initially intends to provide Spectra Energy Employees with compensation
opportunities (including salary, wages, commissions and bonus opportunities) and
employee benefits that are generally comparable, in the aggregate, to the
compensation opportunities and employee benefits to which such Spectra Energy
Employees were entitled to immediately prior to the Distribution Date.

Section 2.4 Service Recognition.

(a) Pre-Distribution Service Credit. Spectra Energy shall give each Spectra
Energy Participant full credit for purposes of eligibility, vesting,
determination of level of benefits, and, to the extent applicable, benefit
accruals under any Spectra Energy Benefit Plan for such Spectra Energy
Participant’s service with any member of the Duke Energy Group prior to the
Distribution Date to the same extent such service was recognized by the
applicable Duke Energy Benefit Plans immediately prior to the Distribution Date;
provided, that, such service shall not be recognized to the extent that such
recognition would result in the duplication of benefits.

(b) Post-Distribution Reciprocal Service Crediting. Each of Duke Energy and
Spectra Energy (acting directly or through their respective Affiliates) shall
cause each of the Duke Energy Service Plans and the Spectra Energy Service
Plans, respectively, to provide the following service crediting rules effective
as of the Distribution Date:

(i) If a Duke Energy Employee who participates in any of the Duke Energy Service
Plans becomes employed by a member of the Spectra Energy Group prior to the
first anniversary of the Distribution Date (or such later date as mutually
agreed to by the Parties) (the “Service Crediting Date”) and such Duke Energy
Employee is continuously employed by the Duke Energy Group from the Distribution
Date through the date such Duke Energy Employee commences active employment with
a member of the Spectra Energy Group, then such Duke Energy Employee’s service
with the Duke Energy Group following the Distribution Date shall be recognized
for purposes of eligibility, vesting and level of benefits under the appropriate
Spectra Energy Service Plans, in each case to the same extent as such Duke
Energy Employee’s service with the Duke Energy Group was recognized under the
corresponding Duke Energy Service Plans.

(ii) If a Duke Energy Employee who participates in any of the Duke Energy
Service Plans becomes employed by a member of the Spectra Energy Group either
(A) on or after the Service Crediting Date or (B) without having been
continuously employed by the Duke Energy Group from the Distribution Date
through the date such Duke Energy Employee commences active employment with a
member of the Spectra Energy Group, then, except to the extent required by
applicable Law, such individual’s service with the Duke Energy Group following
the Distribution Date will not be recognized for any purpose under any Spectra
Energy Service Plan.

 

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(iii) If a Spectra Energy Employee who participates in any of the Spectra Energy
Service Plans becomes employed by a member of the Duke Energy Group prior to the
Service Crediting Date and such Spectra Energy Employee is continuously employed
by the Spectra Energy Group from the Distribution Date through the date such
Spectra Energy Employee commences active employment with a member of the Duke
Energy Group, then such Spectra Energy Employee’s service with the Spectra
Energy Group following the Distribution Date shall be recognized for purposes of
eligibility, vesting and level of benefits under the appropriate Duke Energy
Service Plans, in each case to the same extent as such Spectra Energy Employee’s
service with the Spectra Energy Group was recognized under the corresponding
Spectra Energy Service Plans.

(iv) If a Spectra Energy Employee who participates in any of the Spectra Energy
Service Plans becomes employed by a member of the Duke Energy Group either
(A) on or after the Service Crediting Date or (B) without having been
continuously employed by the Spectra Energy Group from the Distribution Date
through the date such Spectra Energy Employee commences active employment with a
member of the Duke Energy Group, then the corresponding Duke Energy Service
Plans will only take into consideration such individual’s service with the Duke
Energy Group and the Spectra Energy Group, in each case, prior to the
Distribution Date and, thus, except to the extent required by applicable Law,
such Spectra Energy Employee’s service with the Spectra Energy Group following
the Distribution Date will not be recognized for any purpose under any Duke
Energy Service Plan.

(v) Nothing herein shall limit Duke Energy or Spectra Energy or their respective
Affiliates from recognizing service in addition to the recognition of service
required hereunder.

Section 2.5 Approval by Duke Energy As Sole Stockholder. Effective as of the
Distribution Date, Spectra Energy shall have adopted the Spectra Energy 2007
Long-Term Incentive Plan (the “Spectra Energy Stock Plan”) which shall permit
the issuance of long-term incentive awards that have material terms and
conditions substantially similar to those long-term incentive awards issued
under the relevant Duke Energy Stock Plans that are to be substituted with
Spectra Energy long-term incentive awards in connection with the Distribution.
The Spectra Energy Stock Plan and the annual incentive plan adopted by Spectra
Energy in accordance with Section 8.1(c) of this Agreement shall be approved
prior to the Distribution by Duke Energy as Spectra Energy’s sole shareholder.

Section 2.6 Transfer of Assets. Assets, if any, attributable to the Liabilities
referenced in the preceding provisions of this Article II shall be allocated (if
applicable) as provided in the remaining provisions of this Agreement.

 

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ARTICLE III

U.S. QUALIFIED DEFINED BENEFIT PLAN

Section 3.1 Establishment of Spectra Energy Plan. Effective as of the
Distribution Date, Spectra Energy shall, or shall have caused one or more
members of the Spectra Energy Group to, establish a defined benefit pension plan
and related trust to provide retirement benefits to Spectra Energy Participants
who immediately prior to the Distribution Date were participants in, or entitled
to present or future benefits (except as provided in Section 3.2(d) of this
Agreement, whether or not vested) under, the Duke Energy Retirement Plan (such
defined benefit pension plan, the “Spectra Energy Retirement Plan” and such
Spectra Energy Participants, the “Spectra Energy Retirement Plan Participants”).
Spectra Energy shall be responsible for taking all necessary, reasonable, and
appropriate action to establish, maintain and administer the Spectra Energy
Retirement Plan so that it is qualified under Section 401(a) of the Code and
that the related trust thereunder is exempt under Section 501(a) of the Code.
Spectra Energy (acting directly or through its Affiliates) shall be responsible
for any and all Liabilities (including Liability for funding) and other
obligations with respect to the Spectra Energy Retirement Plan.

Section 3.2 Spectra Energy Participants.

(a) Assumption of Duke Energy Retirement Plan Liabilities. Effective as of the
Distribution Date, Spectra Energy (acting directly or through its Affiliates)
hereby agrees to cause the Spectra Energy Retirement Plan to assume, fully
perform, pay and discharge, all Liabilities under the Duke Energy Retirement
Plan relating to all Spectra Energy Retirement Plan Participants as of the
Distribution Date.

(b) Transfer of Duke Energy Retirement Plan Assets.

(i) The Parties intend that the portion of the Duke Energy Retirement Plan
covering Spectra Energy Retirement Plan Participants shall be transferred to the
Spectra Energy Retirement Plan in accordance with Section 414(l) of the Code,
Treasury Regulation Section 1.414(l)-1, and Section 208 of ERISA. Any surplus
Assets under the Duke Energy Retirement Plan (i.e., any Assets held under the
Duke Energy Retirement Plan that are in excess of the Assets required to be
allocated to the Duke Energy Retirement Plan and the Spectra Energy Retirement
Plan in accordance with the preceding sentence) shall be transferred to the
Spectra Energy Retirement Plan in the same proportion as the other Assets of the
Duke Energy Retirement Plan are transferred to the Spectra Energy Retirement
Plan in accordance with the succeeding provisions of this subsection (b)). No
later than thirty (30) days prior to the Distribution Date, Duke Energy and
Spectra Energy (acting directly or through their respective Affiliates) shall,
to the extent necessary, file an IRS Form 5310-A regarding the transfer of
Assets and Liabilities from the Duke Energy Retirement Plan to the Spectra
Energy Retirement Plan.

(ii) Prior to the Distribution Date (or such later time as mutually agreed by
the Parties), Duke Energy shall cause the Duke Energy Actuary to determine the
estimated value, as of the Distribution Date, of the Assets to be transferred to
the Spectra Energy Retirement Plan in accordance with the assumptions and
valuation methodology set forth on Schedule D attached hereto (the “Estimated
Retirement Plan Transfer Amount”).

 

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(iii) Not later than ten (10) Business Days following the Distribution Date (or
such later time as mutually agreed by the Parties), Duke Energy and Spectra
Energy (each acting directly or through their respective Affiliates) shall
cooperate in good faith to cause an initial transfer of Assets from the Duke
Energy Retirement Plan to the Spectra Energy Retirement Plan in an amount equal
(as determined in the discretion of Duke Energy) to not less than eighty-five
percent (85%) and not more than ninety-five percent (95%) of the Estimated
Retirement Plan Transfer Amount (such amount, the “Initial Transfer Amount”).
Duke Energy shall satisfy its obligation pursuant to this Section 3.2(b)(iii) by
causing the Duke Energy Retirement Plan to transfer Assets, in kind, equal to
the Initial Transfer Amount.

(iv) Within one hundred eighty (180) days (or such later time as mutually agreed
by the Parties) following the Distribution Date, Duke Energy shall cause the
Duke Energy Actuary to provide Spectra Energy with a revised calculation of the
value, as of the Distribution Date, of the Assets to be transferred to the
Spectra Energy Retirement Plan determined in accordance with the assumptions and
valuation methodology set forth on Schedule D attached hereto (the “Revised
Retirement Plan Transfer Amount”). Spectra Energy may submit, at its sole cost
and expense, the Revised Retirement Plan Transfer Amount to the Spectra Energy
Actuary for verification; provided, that, such verification process and any
calculation performed by the Spectra Energy Actuary in connection therewith
shall be performed solely on the basis of the assumptions and valuation
methodology set forth on Schedule D attached hereto. In order to perform such
verification, upon request from Spectra Energy, the Spectra Energy Actuary will
receive the data and additional detailed methodology used to calculate the
Initial Transfer Amount and the Final Retirement Plan Transfer Amount (if
reasonably needed) from the Duke Energy Actuary. Spectra Energy will be
responsible for the cost and expense of the Spectra Energy Actuary and Duke
Energy will be responsible for the cost and expense for the Duke Energy Actuary
for such data transfer. In the event the Spectra Energy Actuary so determines
that the value, as of the Distribution Date, of the Assets to be transferred to
the Spectra Energy Retirement Plan differs from the Revised Retirement Plan
Transfer Amount, the Spectra Energy Actuary shall identify in writing to the
Duke Energy Actuary all objections to the determination within sixty (60) days
following provision of the revised value calculation to Spectra Energy pursuant
to the first sentence of this paragraph (iv), and the Spectra Energy Actuary and
Duke Energy Actuary shall use good faith efforts to reconcile any such
difference. If the Spectra Energy Actuary and the Duke Energy Actuary fail to
reconcile such difference, the Spectra Energy Actuary and the Duke Energy
Actuary shall jointly designate a third, independent actuary whose calculation
of the value, as of the Distribution Date, of the Assets to be transferred to
the Spectra Energy Retirement Plan shall be final and binding; provided, that,
such calculation must be performed within sixty (60) days following designation
of such third actuary and in accordance with the assumptions and valuation
methodology set forth on Schedule D attached hereto; and provided, further, that
such value shall be between the value determined by the Spectra Energy Actuary
and the Revised Retirement Plan Transfer Amount or equal to either such value.
Duke Energy and Spectra Energy shall each pay one-half of the costs incurred in
connection with the retention of such independent actuary. The final, verified
value, as of the Distribution Date, of the Assets to be transferred to the
Spectra Energy Retirement Plan as determined in accordance with this
Section 3.2(b)(iv) shall be referred to herein as the “Final Retirement Plan
Transfer Amount.”

(v) Within forty-five (45) days (or such later time as mutually agreed by the
Parties) of the determination of the Final Retirement Plan Transfer Amount, Duke
Energy shall cause the Duke Energy Retirement Plan to transfer to the Spectra
Energy Retirement Plan (the date

 

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of such transfer, the “Final Transfer Date”) an amount (as determined by Duke
Energy in its discretion, in kind, in cash, cash-like securities or other cash
equivalents), equal to (A) the Final Retirement Plan Transfer Amount minus
(B) the Initial Transfer Amount (such difference, as adjusted to reflect
earnings or losses as described below, the “True-Up Amount”); provided, that, in
the event the True-Up Amount is negative, Duke Energy shall not be required to
cause any such additional transfer and instead Spectra Energy shall be required
to cause a transfer of cash, cash-like securities or other cash equivalents (or,
if determined by Duke Energy in its discretion, assets in kind) from the Spectra
Energy Retirement Plan to the Duke Energy Retirement Plan in amount equal to the
True-Up Amount. The Parties acknowledge that the Duke Energy Retirement Plan’s
transfer of the True-Up Amount to the Spectra Energy Retirement Plan shall be in
full settlement and satisfaction of the obligations of Duke Energy to cause the
transfer of, and the Duke Energy Retirement Plan to transfer, Assets to the
Spectra Energy Retirement Plan pursuant to this Section 3.2(b)(v).

The True-Up Amount shall be paid from the Duke Energy Retirement Plan to the
Spectra Energy Retirement Plan, as determined by Duke Energy in its discretion
in kind, in cash, cash-like securities or other cash equivalents, and shall be
adjusted to reflect earnings or losses during the period from the Distribution
Date to the Final Transfer Date. Such earnings or losses shall be determined
based on the actual rate of return of the Duke Energy Retirement Plan for the
period commencing on the first day of the calendar month in which the
Distribution Date occurs and ending on the last calendar day of the month ending
immediately prior to the Final Transfer Date. Earnings or losses for the period
from such last day of the month to the Final Transfer Date shall be based on the
actual rate of return of the Duke Energy Retirement Plan during the last
calendar month ending immediately prior to the Final Transfer Date determined as
of the date that is as close as administratively practicable to the Final
Transfer Date. In the event that Spectra Energy is obligated to cause the
Spectra Energy Retirement Plan to reimburse the Duke Energy Retirement Plan
pursuant to this Section 3.2(b)(v), such reimbursement shall be performed in
accordance with the same principles set forth herein with respect to the payment
of the True-Up Amount. The Parties acknowledge that the Spectra Energy
Retirement Plan’s transfer of such reimbursement amount to the Duke Energy
Retirement Plan shall be in full settlement and satisfaction of the obligations
of Spectra Energy to cause the transfer of, and the Spectra Energy Retirement
Plan to transfer, Assets to the Duke Energy Retirement Plan pursuant to this
Section 3.2(b)(v).

(c) Continuation of Elections. As of the Distribution Date, Spectra Energy
(acting directly or through its Affiliates) shall cause the Spectra Energy
Retirement Plan to recognize and maintain all existing elections, including, but
not limited to, beneficiary designations, payment form elections and rights of
alternate payees under qualified domestic relations orders with respect to
Spectra Energy Retirement Plan Participants under the Duke Energy Retirement
Plan.

(d) Terminated Non-Vested Employees. Notwithstanding anything herein to the
contrary, the Duke Energy Retirement Plan will retain all Liabilities (if any)
earned under the Duke Energy Retirement Plan in respect of any individual who
becomes employed by any member of the Spectra Energy Group following the
Distribution Date and whose employment with the Duke Energy Group terminated on
or before the Distribution Date with no vested benefit under the Duke Energy
Retirement Plan.

 

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(e) 401(h) Accounts. The calculations of the Estimated Retirement Plan Transfer
Amount and the Final Retirement Plan Transfer Amount described above shall be
determined without regard to the value of retiree health benefit Liabilities
that are funded in whole or in part through the account maintained under the
Duke Energy Retirement Plan pursuant to Section 401(h) of the Code. Within one
hundred eighty (180) days (or such later time as mutually agreed by the Parties)
following the Distribution Date, Duke Energy shall cause the present value of
such amount (the “Section 401(h) Amount”) to be determined as of the
Distribution Date by the Duke Energy Actuary using the actuarial assumptions set
forth in Schedule E attached hereto (subject to the same dispute resolution
procedures that apply in respect of the Final Retirement Plan Transfer Amount
pursuant to Section 3.2 (b)(iv) above). On or before the Final Transfer Date
(and subject to the same provisions regarding transfer of the True-Up Amount),
Duke Energy shall cause the Duke Energy Retirement Plan to transfer to the
Spectra Energy Retirement Plan a portion of the Assets in the account maintained
in the Duke Energy Retirement Plan pursuant to Section 401(h) of the Code, which
portion shall be determined as provided in Schedule E attached hereto.

Section 3.3 Certain Annuities. Effective as of the Distribution Date, Duke
Energy shall assign to Spectra Energy, and Spectra Energy shall assume, all
rights and obligations under the annuity contracts set forth on Schedule F
attached hereto.

ARTICLE IV

U.S. QUALIFIED DEFINED CONTRIBUTION PLAN

Section 4.1 Duke Energy 401(k) Plan; Spectra Energy 401(k) Plan.

(a) Establishment of the Spectra Energy 401(k) Plan. Effective as of the
Distribution Date, Spectra Energy shall, or shall have caused one of its
Affiliates to, establish a defined contribution plan and trust for the benefit
of Spectra Energy Participants (the “Spectra Energy 401(k) Plan”). Spectra
Energy shall be responsible for taking all necessary, reasonable and appropriate
action to establish, maintain and administer the Spectra Energy 401(k) Plan so
that it is qualified under Section 401(a) of the Code and that the related trust
thereunder is exempt under Section 501(a) of the Code. Spectra Energy (acting
directly or through its Affiliates) shall be responsible for any and all
Liabilities and other obligations with respect to the Spectra Energy 401(k)
Plan.

(b) Transfer of Duke Energy 401(k) Plan Assets. Not later than thirty (30) days
following the Distribution Date (or such later time as mutually agreed by the
Parties), Duke Energy shall cause the accounts (including any outstanding loan
balances) in the Duke Energy 401(k) Plan attributable to Spectra Energy
Participants and all of the Assets in the Duke Energy 401(k) Plan related
thereto to be transferred in-kind to the Spectra Energy 401(k) Plan, and Spectra
Energy shall cause the Spectra Energy 401(k) Plan to accept such transfer of
accounts and underlying Assets and, effective as of the date of such transfer,
to assume and to fully perform, pay and discharge, all obligations of the Duke
Energy 401(k) Plan relating to the accounts of Spectra Energy Participants (to
the extent the Assets related to those accounts are actually transferred from
the Duke Energy 401(k) Plan to the Spectra Energy 401(k) Plan) as of the
Distribution Date. The transfer of Assets shall be conducted in accordance with
Section 414(l) of the Code, Treasury Regulation Section 1.414(1)-1, and
Section 208 of ERISA.

 

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(c) Continuation of Elections. As of the Distribution Date, Spectra Energy
(acting directly or through its Affiliates) shall cause the Spectra Energy
401(k) Plan to recognize and maintain all Duke Energy 401(k) Plan elections,
including, but not limited to, deferral, investment, and payment form elections,
ESOP dividend elections, beneficiary designations, and the rights of alternate
payees under qualified domestic relations orders with respect to Spectra Energy
Participants, to the extent such election or designation is available under the
Spectra Energy 401(k) Plan.

(d) Employer Securities. To the extent not already required by applicable Law,
Duke Energy and Spectra Energy each presently intend to preserve the right of
Duke Energy Participants and Spectra Energy Participants, respectively, to
receive distributions in kind from, respectively, the Duke Energy 401(k) Plan
and the Spectra Energy 401(k) Plan, if, and to the extent, of investments under
such plans in investment funds comprised of Duke Energy Common Stock or Spectra
Energy Common Stock.

(e) Form 5310-A. No later than thirty (30) days prior to the Distribution Date,
Duke Energy and Spectra Energy (each acting directly or through their respective
Affiliates) shall, to the extent necessary, file IRS Form 5310-A regarding the
transfer of Assets and Liabilities from the Duke Energy 401(k) Plan to the
Spectra Energy 401(k) Plan as discussed in this Article IV.

Section 4.2 Contributions as of the Distribution Date. All contributions payable
to the Duke Energy 401(k) Plan with respect to employee deferrals and
contributions, matching contributions and other contributions for Spectra Energy
Participants through the Distribution Date, determined in accordance with the
terms and provisions of the Duke Energy 401(k) Plan, ERISA and the Code, shall
be paid by Duke Energy to the Duke Energy 401(k) Plan prior to the date of the
Asset transfer described in Sections 4.1(b) of this Agreement.

ARTICLE V

U.S. HEALTH AND WELFARE PLANS

Section 5.1 Health And Welfare Plans Maintained By Duke Energy Prior To The
Distribution Date.

(a) Establishment of the Spectra Energy Welfare Plans. Duke Energy or one or
more of its Affiliates maintain each of the health and welfare plans set forth
on Schedule G attached hereto (the “Duke Energy Welfare Plans”) for the benefit
of eligible Duke Energy Participants and Spectra Energy Participants. Effective
as of the Distribution Date, Spectra Energy shall, or shall cause a Spectra
Energy Affiliate to, adopt, for the benefit of eligible Spectra Energy
Participants, health and welfare plans, the terms of which are substantially
comparable, in the aggregate, to the applicable terms of the Duke Energy Welfare
Plans as in effect immediately prior to the Distribution Date (collectively, the
“Spectra Energy Welfare Plans”).

 

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(b) Terms of Participation in Spectra Energy Welfare Plans. Spectra Energy
(acting directly or through its Affiliates) shall cause all Spectra Energy
Welfare Plans to (i) waive all limitations as to preexisting conditions,
exclusions, and service conditions with respect to participation and coverage
requirements applicable to Spectra Energy Participants, other than limitations
that were in effect with respect to Spectra Energy Participants as of the
Distribution Date under the Duke Energy Welfare Plans, and (ii) waive any
waiting period limitation or evidence of insurability requirement that would
otherwise be applicable to a Spectra Energy Participant following the
Distribution Date to the extent such Spectra Energy Participant had satisfied
any similar limitation under the analogous Duke Energy Welfare Plan. Spectra
Energy intends to provide that Spectra Energy Participants shall initially be
eligible for participation in and benefits under Spectra Energy retiree welfare
plans on the same basis under which they were eligible for participation in and
benefits under the Duke Energy retiree welfare plans immediately before the
Distribution.

(c) Reimbursement Account Plan. Effective as of the Distribution Date, Spectra
Energy (acting directly or through its Affiliates) shall have established a
health and dependent care reimbursement account plan (the “Spectra Energy
Reimbursement Account Plan”) with features that are comparable to those
contained in the health and dependent care reimbursement account plan maintained
by Duke Energy for the benefit of Spectra Energy Participants immediately prior
to the Distribution Date (the “Duke Energy Reimbursement Account Plan”). Duke
Energy shall retain the Liability for administering under the Duke Energy
Reimbursement Account Plan all reimbursement claims of Duke Energy Participants
and Spectra Energy Participants with respect to calendar year 2006, whether
arising before, on, or after the Distribution Date. With respect to Spectra
Energy Participants, Spectra Energy (acting directly or through its Affiliates)
shall assume responsibility for administering under the Spectra Energy
Reimbursement Account Plan all reimbursement claims of Spectra Energy
Participants with respect to calendar year 2007, whether arising before, on, or
after the Distribution Date. No more than 45 days following the Distribution
Date (or such later time as mutually agreed by the Parties), Duke Energy shall
cause to be transferred to Spectra Energy an amount in cash, cash-like
securities or other cash equivalents equal to the sum of all contributions (if
any) to the Duke Energy Reimbursement Account Plan made with respect to calendar
year 2007 by or on behalf of any Spectra Energy Participant prior to the
Distribution Date.

(d) Continuation of Elections. As of the Distribution Date, Spectra Energy
(acting directly or through its Affiliates) shall cause the Spectra Energy
Welfare Plans to recognize and maintain all elections and designations
(including all coverage and contribution elections and beneficiary designations)
made by Spectra Energy Participants under, or with respect to, the Duke Energy
Welfare Plans and apply such elections and designations under the Spectra Energy
Welfare Plans for the remainder of the period or periods for which such
elections or designations are by their original terms applicable, to the extent
such election or designation is available under the corresponding Spectra Energy
Welfare Plan.

(e) COBRA and HIPAA. Effective as of the Distribution Date, Spectra Energy
(acting directly or through its Affiliates) shall assume, or shall have caused
the Spectra Energy Welfare Plans to assume, responsibility for compliance with
the health care continuation coverage requirements of COBRA with respect to
Spectra Energy Participants who, as of the day prior to the

 

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Distribution Date, were covered under a Duke Energy Welfare Plan pursuant to
COBRA. Duke Energy (acting directly or through its Affiliates) shall be
responsible for administering compliance with any certificate of creditable
coverage requirements of HIPAA or Medicare applicable to the Duke Energy Welfare
Plans with respect to Spectra Energy Participants. The Parties hereto agree that
neither the Distribution nor any transfers of employment that occur as of the
Distribution Date shall constitute a COBRA qualifying event for purposes of
COBRA; provided, that, in all events, Spectra Energy (acting directly or through
its Affiliates) shall assume, or shall have caused the Spectra Energy Welfare
Plans to assume, responsibility for compliance with the health care continuation
coverage requirements of COBRA with respect to those Duke Energy Employees whose
employment is transferred directly from the Duke Energy Group to the Spectra
Energy Group as of the Distribution Date to the extent such individual was, as
of the day prior to such transfer of employment, covered under a Duke Energy
Welfare Plan.

(f) Liabilities.

(i) Insured Benefits. With respect to employee welfare and fringe benefits that
are provided through the purchase of insurance, Duke Energy shall cause the Duke
Energy Welfare Plans to fully perform, pay and discharge all claims of Spectra
Energy Participants that are incurred prior to the Distribution Date and Spectra
Energy shall cause the Spectra Energy Welfare Plans to fully perform, pay and
discharge all claims of Spectra Energy Participants that are incurred on or
after the Distribution Date.

(ii) Self-Insured Benefits. With respect to employee welfare and fringe benefits
that are provided on a self-insured basis, (A) Duke Energy (acting directly or
through its Affiliates) shall fully perform, pay and discharge, under the Duke
Energy Welfare Plans, all claims of Spectra Energy Participants who are Spectra
Energy Employees that are incurred but not paid prior to the Distribution Date,
and (B) Spectra Energy (acting directly or through its Affiliates) shall fully
perform, pay and discharge, under the Spectra Energy Welfare Plans, from and
after the Distribution Date, all claims of Spectra Energy Participants who are
Spectra Energy Employees that are incurred on or after the Distribution Date.
Duke Energy shall submit a monthly written invoice to Spectra Energy detailing
Spectra Energy’s portion of retiree medical and dental claims incurred prior to
the Distribution Date but paid by Blue Cross and Blue Shield of North Carolina
and Fiserv Health (formerly Wausau Benefits, Inc.) after the Distribution Date,
and Spectra Energy shall be liable for such portion and pay such invoices.
Spectra Energy shall have the right, at its own expense, to audit, or to cause
an inspection body selected by Spectra Energy and composed of members with
appropriate professional qualifications to audit, such invoices in a
commercially reasonable manner during normal Duke Energy business hours.

(iii) Incurred Claim Definition. For purposes of this Section 5.1(f), a claim or
Liability is deemed to be incurred (A) with respect to medical, dental, vision
and/or prescription drug benefits, upon the rendering of health services giving
rise to such claim or Liability; (B) with respect to life insurance, accidental
death and dismemberment and business travel accident insurance, upon the
occurrence of the event giving rise to such claim or Liability; (C) with respect
to disability benefits, upon the date of an individual’s disability, as
determined by the disability benefit insurance carrier or claim administrator,
giving rise to such claim or Liability; and (D) with respect to a period of
continuous hospitalization, upon the date of admission to the hospital.

 

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(iv) Treatment of Other Liabilities, Recoveries and Adjustments. For purposes of
applying the claim Liability provisions of clause (ii) above as it relates to
retiree medical and dental claims: (A) recoveries made by the Duke Energy
Welfare Plans or Duke Energy with respect to claims incurred prior to the
Distribution Date, including subrogation/reimbursement recoveries, claim
adjustment recoveries and demutualization proceeds, shall be taken into account
as positive claim adjustments; and (B) other non-routine claim Liabilities paid
by the Duke Energy Welfare Plans or Duke Energy with respect to claims incurred
prior to the Distribution Date, including Medicare Secondary Payer Liability,
shall be taken into account as claim Liabilities.

(v) Claim Experience. Notwithstanding the foregoing, the Parties (acting
directly or through their Affiliates) shall take any action necessary to ensure
that any claims experience under the Duke Energy Welfare Plans attributable to
Spectra Energy Participants shall be allocated to the Spectra Energy Welfare
Plans.

Section 5.2 Disposition of VEBA Assets.

(a) Establishment of Spectra Energy VEBA. Effective not later than the
Distribution Date (or such later time as mutually agreed by the Parties),
Spectra Energy shall adopt the Spectra Energy VEBA in a form that is
substantially comparable to the Duke Energy VEBA as in effect immediately before
the Distribution Date and shall cause the Spectra Energy VEBA to qualify under
Section 501(c)(9) of the Code.

(b) Determination of VEBA Assets. As soon as reasonably practicable after the
Distribution Date, Duke Energy shall cause the Duke Energy Actuary to determine
for the Duke Energy VEBA the total benefit Liabilities as of the Distribution
Date for all participants in plans covered by the Duke Energy VEBA using the
actuarial assumptions set forth in Schedule E attached hereto.

(c) VEBA Asset Allocations and Transfers. The portion of the Duke Energy VEBA
assets that shall be allocated to the Spectra Energy VEBA shall be determined as
provided in Schedule E attached hereto. As soon as reasonably practicable after
such determination, the amount of the Duke Energy VEBA assets allocated to the
Spectra Energy VEBA in accordance with the preceding sentence shall be
transferred (in cash or in-kind, as determined by Duke Energy in its discretion)
to the Spectra Energy VEBA.

Section 5.3 Disposition of Retired Lives Reserve.

(a) Establishment of Spectra Energy RLR. Effective not later than the
Distribution Date (or such later time as mutually agreed by the Parties),
Spectra Energy shall establish an insurance policy in such form that permits it
to accept a transfer of assets from the Duke Energy RLR.

 

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(b) Determination of Duke Energy RLR Liabilities. As soon as reasonably
practicable after the Distribution Date, Duke Energy shall cause the Duke Energy
Actuary to determine for the Duke Energy RLR the total benefit Liabilities as of
the Distribution Date that are subject to funding under the Duke Energy RLR
using the actuarial assumptions set forth in Schedule E attached hereto.

(c) Transfer of Duke Energy RLR Assets. The portion of the Duke Energy RLR that
shall be allocated to Spectra Energy shall be determined as provided in Schedule
E attached hereto. As soon as reasonably practicable after such determination,
Duke Energy shall cause the insurance company holding the Duke Energy RLR to
transfer from the Duke Energy RLR to the insurance policy established pursuant
to subsection (a) above, an amount in cash or in kind (as determined by Duke
Energy in its discretion) equal to the portion of the Duke Energy RLR allocated
to Spectra Energy in accordance with the preceding sentence.

Section 5.4 Time-Off Benefits. Spectra Energy shall credit each Spectra Energy
Participant with the amount of accrued but unused vacation time, sick time and
other time-off benefits as such Spectra Energy Participant had with the Duke
Energy Group as of the Distribution Date. Notwithstanding the above, Spectra
Energy shall not be required to credit any Spectra Energy Participant with any
accrual to the extent that a benefit attributable to such accrual is provided by
the Duke Energy Group.

ARTICLE VI

NONQUALIFIED RETIREMENT PLANS

Section 6.1 Spectra Energy Supplemental Retirement Plan.

(a) Spectra Energy Retained Nonqualified Plans. Following the Distribution Date,
Spectra Energy (acting directly or through its Affiliates) shall retain, and
Duke Energy shall have no obligation whatsoever with regard to, all obligations
and Liabilities under, or with respect to, the supplemental retirement plans
that are listed on Schedule H attached hereto (collectively, the “Spectra Energy
Retained SRP”).

(b) Establishment of Spectra Energy Nonqualified Plans. Effective as of the
Distribution Date, Spectra Energy shall, or shall cause one of its Affiliates
to, establish a non-qualified deferred compensation plan or plans to benefit
Spectra Energy Participants or directors of Spectra Energy who have accrued, or
were eligible to accrue, benefits under the Duke Energy SRP immediately prior to
the Distribution Date, the terms of which are substantially comparable, in the
aggregate, to the terms of the Duke Energy SRP as in effect immediately prior to
the Distribution Date (the “Spectra Energy Nonqualified Plans”). Effective as of
the Distribution Date, Spectra Energy hereby agrees to cause the Spectra Energy
Nonqualified Plans to assume responsibility for all Liabilities and fully
perform, pay and discharge all obligations, when such obligations become due, of
the Duke Energy SRP with respect to all Spectra Energy Participants therein and
Spectra Energy directors covered thereby. Spectra Energy (acting directly or
through its Affiliates) shall be responsible for any and all Liabilities
(including Liability for funding) and other obligations with respect to the
Spectra Energy Nonqualified Plans.

 

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(c) Continuation of Elections. As of the Distribution Date, Spectra Energy
(acting directly or through an Affiliate) shall cause the Spectra Energy
Nonqualified Plans to recognize and maintain all elections (including deferral,
distribution and investment elections) and beneficiary designations with respect
to Spectra Energy Participants and Spectra Energy directors under the Duke
Energy SRP to the extent such elections or designations are available under the
Spectra Energy Nonqualified Plans until a new election that by its terms
supersedes such original election is made by the Spectra Energy Participant or
Spectra Energy director in accordance with applicable Law and the terms and
conditions of the Spectra Energy Nonqualified Plans.

Section 6.2 Transfer Of Assets Attributable To Duke Energy Nonqualified Plans.

(a) Establishment of Spectra Energy Rabbi Trust. Effective not later than the
Distribution Date (or such later time as mutually agreed by the Parties),
Spectra Energy shall adopt (or, to the extent applicable, assume in its
entirety) the Spectra Energy Rabbi Trust in a form that is substantially
comparable to the Duke Energy Rabbi Trust as in effect immediately before the
Distribution Date.

(b) Determination of Rabbi Trust Liabilities. As soon as reasonably practicable
after the Distribution Date, Duke Energy shall cause the Duke Energy Actuary to
determine the total benefit Liabilities as of the Distribution Date under the
Financed Nonqualified Plans using the actuarial assumptions set forth in
Schedule E attached hereto.

(c) Transfer of Rabbi Trust Assets. The portion of the Duke Energy Rabbi Trust
that shall be allocated to Spectra Energy shall be equal to, as of the
Distribution Date and as determined under subsection (b) above, the proportion
that the benefit Liabilities in respect of Spectra Energy Participants under the
Financed Nonqualified Plans bears to the total benefit Liabilities of all of the
Duke Energy Participants and Spectra Energy Participants under the Financed
Nonqualified Plans. As soon as reasonably practicable after such determination,
Duke Energy shall transfer, or shall cause the trustee of the Duke Energy Rabbi
Trust to transfer from the Duke Energy Rabbi Trust, to the Spectra Energy Rabbi
Trust an amount in cash or in kind (any such assets to be determined by Duke
Energy in its discretion) equal to the portion of the Duke Energy Rabbi Trust
allocated to Spectra Energy in accordance with the preceding sentence.

ARTICLE VII

LONG-TERM INCENTIVE AWARDS

Section 7.1 Treatment of Outstanding Duke Energy Options.

(a) Each Duke Energy Option that is outstanding immediately prior to the
Distribution Date shall, as of the Distribution Date (or, in the case of Duke
Energy Options held by individuals who are subject to income taxation in Canada,
as of immediately before the Distribution Date), be converted into a Spectra
Energy Option and an adjusted Duke Energy Option (each a “Post-Distribution Duke
Energy Option”) in accordance with the succeeding paragraphs of this
Section 7.1; provided, that, if after such conversion in respect of an
individual

 

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who is subject to income taxation in Canada, the Board of Directors of Duke
Energy shall determine that the Distribution shall not occur, each Spectra
Energy Option and Post-Distribution Duke Energy Option held by such individual
on account of such conversion shall thereupon collectively be converted back
into a Duke Energy Option on the same terms and conditions as were applicable
immediately before such conversion into a Spectra Energy Option and
Post-Distribution Duke Energy Option.

(b) The number of shares subject to the Spectra Energy Option shall be equal to
the number of shares of Spectra Energy Common Stock to which the option holder
would be entitled in the Distribution had the shares subject to the Duke Energy
Option represented outstanding shares of Duke Energy Common Stock as of the
Record Date, the resulting number of shares subject to the Spectra Energy Option
being rounded down to the nearest whole share. The per share exercise price of
the Post-Distribution Duke Energy Option shall be equal to the product of
(1) the per share exercise price of the Duke Energy Option immediately prior to
the Distribution Date (the “Pre-Distribution Duke Energy Option Price”)
multiplied by (2) a fraction, the numerator of which shall be the
Post-Distribution Duke Energy Stock Price and the denominator of which shall be
the sum of (i) the Post-Distribution Duke Energy Stock Price and (ii) the
quotient determined by dividing the Post-Distribution Spectra Energy Stock Price
by the Spectra Energy Ratio (as defined below), which product shall be rounded
up to the nearest whole cent. The per share exercise price of the Spectra Energy
Option shall be equal to the product of (1) the Pre-Distribution Duke Energy
Option Price multiplied by (2) a fraction, the numerator of which shall be the
Post-Distribution Spectra Energy Stock Price and the denominator of which shall
be the sum of (i) the Post-Distribution Duke Energy Stock Price and (ii) the
quotient determined by dividing the Post-Distribution Spectra Energy Stock Price
by the Spectra Energy Ratio, which product shall be rounded up to the nearest
whole cent. For purposes of this paragraph (b), “Spectra Energy Ratio” shall
mean the amount determined by dividing (x) the number one (1) by (y) the number
of shares of Spectra Energy Common Stock distributed in respect of each share of
Duke Energy Common Stock in the Distribution. For the avoidance of doubt, the
methodology described in the preceding provisions of this subsection (b) for
determining the exercise price under the Post-Distribution Duke Energy Option
and Spectra Energy Option shall likewise apply in determining the base price of
any stock appreciation right issued in tandem with a Duke Energy Option that is
outstanding immediately prior to the Distribution Date.

(c) Prior to the Distribution Date, Duke Energy shall amend the applicable Duke
Energy Stock Plans as necessary, effective as of the Distribution Date, to
provide that for purposes of the Post-Distribution Duke Energy Options
(including in determining exercisability and the post-termination exercise
period), a Spectra Energy Employee’s continued service with the Spectra Energy
Group following the Distribution Date shall be deemed continued service with
Duke Energy. Spectra Energy shall issue each Spectra Energy Option under the
Spectra Energy Stock Plan, which shall provide that, except as otherwise
provided herein, the terms and conditions applicable to the Spectra Energy
Options shall be substantially similar to the terms and conditions applicable to
the corresponding Duke Energy Option, including the terms and conditions
relating to vesting and the post-termination exercise period (as set forth in
the applicable plan, award agreement or in the option holder’s then applicable
employment agreement with Duke Energy or its Affiliates, which terms shall
remain in effect even after the expiration or termination of such employment
agreement) and including a provision to the effect that, for purposes of the
Spectra Energy Options, continued service with the Duke Energy Group from and
after the Distribution Date shall be deemed to constitute service with Spectra
Energy.

 

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(d) The Spectra Energy Options and the Post-Distribution Duke Energy Options
shall remain subject to the terms and conditions of the underlying Duke Energy
Option as in effect immediately prior to the Distribution Date, including any
Detrimental Conduct Provisions and terms relating to post-termination exercise
periods provided for in any option holder’s employment agreement.

(e) Upon the exercise of a Spectra Energy Option, regardless of the holder
thereof, the exercise price shall be paid to (or otherwise satisfied to the
satisfaction of) Spectra Energy in accordance with the terms of the Spectra
Energy Option, and Spectra Energy shall be solely responsible for the issuance
of Spectra Energy Common Stock, for ensuring the withholding of all applicable
tax on behalf of the employing entity of such holder, and for ensuring the
remittance of such withholding taxes to the employing entity of such holder.
Upon the exercise of a Duke Energy Option, regardless of the holder thereof, the
exercise price shall be paid to (or otherwise satisfied to the satisfaction of
Duke Energy) in accordance with the terms of the Duke Energy Option, and Duke
Energy shall be solely responsible for the issuance of Duke Energy Common Stock,
for ensuring the withholding of all applicable tax on behalf of the employing
entity of such holder and for ensuring the remittance of such withholding taxes
to the employing entity of such holder.

Section 7.2 Treatment of Outstanding Duke Energy Restricted Stock.

(a) Each holder as of the Record Date of Duke Energy Restricted Shares that
remain outstanding immediately prior to the Distribution Date shall receive,
upon the Distribution being made, such number of Spectra Energy Restricted
Shares as equals the number of shares of Spectra Energy Common Stock to which
all other holders of shares of Duke Energy Common Stock shall be entitled to
receive upon the Distribution being made. The Duke Energy Restricted Shares
outstanding following the Distribution having been made are hereinafter referred
to as “adjusted Duke Energy Restricted Shares.” The Spectra Energy Restricted
Shares and the adjusted Duke Energy Restricted Shares shall be subject to the
succeeding paragraphs of this Section 7.2.

(b) All Spectra Energy Restricted Shares and adjusted Duke Energy Restricted
Shares shall become vested upon the date the Duke Energy Restricted Shares would
have otherwise vested in accordance with the existing vesting schedule.

(c) Prior to the Distribution Date, Duke Energy shall amend the applicable Duke
Energy Stock Plans as necessary, effective as of the Distribution Date, to
provide that for purposes of continued vesting of the adjusted Duke Energy
Restricted Shares, a Spectra Energy Employee’s continued service with the
Spectra Energy Group following the Distribution Date shall be deemed continued
service with Duke Energy. The issuance of each Spectra Energy Restricted Share
shall be subject to the terms of the Spectra Energy Stock Plan, which shall
provide that, except as otherwise provided herein, the terms and conditions
applicable to the Spectra Energy Restricted Shares shall be substantially
similar to the terms and conditions applicable to the corresponding Duke Energy
Restricted Shares (as set forth in the applicable plan, award

 

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agreement or in the holder’s then applicable employment agreement with Duke
Energy or its Affiliates, which terms shall remain in effect even after the
expiration or termination of such employment agreement), including any
Detrimental Conduct Provisions, and including a provision to the effect that,
for purposes of the Spectra Energy Restricted Shares, continued service with the
Duke Energy Group from and after the Distribution Date shall be deemed to
constitute service with Spectra Energy.

(d) Upon the vesting of the Spectra Energy Restricted Shares, Spectra Energy
shall be solely responsible for the settlement of all Spectra Energy Restricted
Shares, regardless of the holder thereof, and for ensuring the satisfaction of
all applicable tax withholding requirements on behalf of the employing entity of
such holder and for ensuring the remittance of such withholding taxes to the
employing entity of such holder. Upon the vesting of the Duke Energy Restricted
Shares, Duke Energy shall be solely responsible for the settlement of all Duke
Energy Restricted Shares, regardless of the holder thereof, and for ensuring the
satisfaction of all applicable tax withholding requirements on behalf of the
employing entity of such holder and for ensuring the remittance of such
withholding taxes to the employing entity of such holder.

Section 7.3 Treatment of Outstanding Duke Energy Phantom Stock.

(a) Each Duke Energy Phantom Stock Unit that is outstanding immediately prior to
the Distribution Date shall be converted, as of the Distribution Date, into a
Spectra Energy Phantom Stock Unit and an adjusted Duke Energy Phantom Stock Unit
(including a ratable portion of any accumulated dividend equivalents) in
accordance with the succeeding paragraphs of this Section 7.3.

(b) The number of Spectra Energy Phantom Stock Units shall be equal to the
number of shares of Spectra Energy Common Stock to which the holder of Duke
Energy Phantom Stock Units would be entitled in the Distribution had the Duke
Energy Phantom Stock Units represented actual shares of Duke Energy Common Stock
as of the Record Date, the resulting number of Spectra Energy Phantom Stock
Units being rounded down to the nearest whole unit. All Spectra Energy Phantom
Stock Units and adjusted Duke Energy Phantom Stock Units shall become vested
upon the date the Duke Energy Phantom Stock Units would have otherwise vested in
accordance with the existing vesting schedule.

(c) Prior to the Distribution Date, Duke Energy shall amend the applicable Duke
Energy Stock Plans as necessary, effective as of the Distribution Date, to
provide that for purposes of continued vesting of the adjusted Duke Energy
Phantom Stock Units, a Spectra Energy Employee’s continued service with the
Spectra Energy Group following the Distribution Date shall be deemed continued
service with Duke Energy. Spectra Energy shall issue each Spectra Energy Phantom
Stock Unit under the Spectra Energy Stock Plan, which shall provide that, except
as otherwise provided herein, the terms and conditions applicable to the Spectra
Energy Phantom Stock Units shall be substantially similar to the terms and
conditions applicable to the corresponding Duke Energy Phantom Stock Unit (as
set forth in the applicable plan, award agreement or in the holder’s then
applicable employment agreement with Duke Energy or its Affiliates, which terms
shall remain in effect even after the expiration or termination of such
employment agreement), including any Detrimental Conduct Provisions, and
including a provision to the effect that, for purposes of the Spectra Energy
Phantom Stock Units, continued service with the Duke Energy Group from and after
the Distribution Date shall be deemed to constitute service with Spectra Energy.

 

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(d) Upon the vesting of the Spectra Energy Phantom Stock Units, Spectra Energy
shall be solely responsible for the settlement of all Spectra Energy Phantom
Stock Units (including any attributable dividend equivalents), regardless of the
holder thereof, and for ensuring the satisfaction of all applicable tax
withholding requirements on behalf of the employing entity of such holder and
for ensuring the remittance of such withholding taxes to the employing entity of
such holder. Upon the vesting of the Duke Energy Phantom Stock Units, Duke
Energy shall be solely responsible for the settlement of all Duke Energy Phantom
Stock Units (including any attributable dividend equivalents), regardless of the
holder thereof, and for ensuring the satisfaction of all applicable tax
withholding requirements on behalf of the employing entity of such holder and
for ensuring the remittance of such withholding taxes to the employing entity of
such holder. Notwithstanding the foregoing provisions of this subsection (d), to
the extent a Duke Energy Phantom Stock Unit or Spectra Energy Phantom Stock Unit
is deferred under a deferral plan (including the Duke Energy SRP or Spectra
Energy Nonqualified Plan), payment in respect of such Duke Energy Phantom Stock
Unit or Spectra Energy Phantom Stock Unit shall be made pursuant to the terms of
such deferral plan.

Section 7.4 Treatment of Outstanding Duke Energy Performance Shares.

(a) Each Duke Energy Performance Share that is outstanding immediately prior to
the Distribution Date shall be converted, as of the Distribution Date, into a
Spectra Energy Performance Share and an adjusted Duke Energy Performance Share
(including a ratable portion of any accumulated dividend equivalents) in
accordance with the succeeding paragraphs of this Section 7.4.

(b) The number of Spectra Energy Performance Shares shall be equal to the number
of shares of Spectra Energy Common Stock to which the holder of Duke Energy
Performance Shares would be entitled in the Distribution had the Duke Energy
Performance Shares represented actual shares of Duke Energy Common Stock as of
the Record Date, the resulting number of Spectra Energy Performance Shares being
rounded down to the nearest whole unit. For purposes of determining the extent
to which Spectra Energy Performance Shares and adjusted Duke Energy Performance
Shares shall become vested, (i) to the extent necessary Duke Energy shall
recommend such actions to be taken such that, for any portion of the applicable
performance period that occurs after the Distribution Date, measurement of total
shareholder return shall be based upon two equity components, weighted 50% each,
consisting respectively of Duke Energy Common Stock and Spectra Energy Common
Stock, using the Post-Distribution Duke Energy Stock Price and the
Post-Distribution Spectra Energy Stock Price, respectively, as the basis of
measurement, and (ii) Duke Energy (or, as applicable, the Board of Directors of
Duke Energy or a committee thereof) shall establish the performance metrics
under any Duke Energy Performance Share and Spectra Energy Performance Share
held by a Duke Energy Employee in respect of which the performance metrics are
not yet established as of the Distribution Date, and (iii) Spectra Energy (or,
as applicable, the Board of Directors of Spectra Energy or a committee thereof)
shall establish the performance metrics under any Duke Energy Performance Share
and Spectra Energy Performance Share held by a Spectra Energy Employee in
respect of which the performance metrics are not yet established as of the
Distribution Date.

 

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(c) Prior to the Distribution Date, Duke Energy shall amend the applicable Duke
Energy Stock Plans as necessary, effective as of the Distribution Date, to
provide that for purposes of continued vesting of the adjusted Duke Energy
Performance Shares, a Spectra Energy Employee’s continued service with the
Spectra Energy Group following the Distribution Date shall be deemed continued
service with Duke Energy. Spectra Energy shall issue each Spectra Energy
Performance Share under the Spectra Energy Stock Plan, which shall provide that,
except as otherwise provided herein, the terms and conditions applicable to the
Spectra Energy Performance Shares shall be substantially similar to the terms
and conditions applicable to the corresponding Duke Energy Performance Share (as
set forth in the applicable plan, award agreement or in the holder’s then
applicable employment agreement with Duke Energy or its Affiliates, which terms
shall remain in effect even after the expiration or termination of such
employment agreement), including any Detrimental Conduct Provisions, and
including a provision to the effect that, for purposes of the Spectra Energy
Performance Shares, continued service with the Duke Energy Group from and after
the Distribution Date shall be deemed to constitute service with Spectra Energy.

(d) Upon the vesting of the Spectra Energy Performance Shares, Spectra Energy
shall be solely responsible for the settlement of all Spectra Energy Performance
Shares (including any attributable dividend equivalents), regardless of the
holder thereof, and for ensuring the satisfaction of all applicable tax
withholding requirements on behalf of the employing entity of such holder and
for ensuring the remittance of such withholding taxes to the employing entity of
such holder. Upon the vesting of the Duke Energy Performance Shares, Duke Energy
shall be solely responsible for the settlement of all Duke Energy Performance
Shares (including any attributable dividend equivalents), regardless of the
holder thereof, and for ensuring the satisfaction of all applicable tax
withholding requirements on behalf of the employing entity of such holder and
for ensuring the remittance of such withholding taxes to the employing entity of
such holder. Notwithstanding the foregoing provisions of this subsection (d), to
the extent a Duke Energy Performance Share or Spectra Energy Performance Share
is deferred under a deferral plan (including the Duke Energy SRP or Spectra
Energy Nonqualified Plan), payment in respect of such Duke Energy Performance
Share or Spectra Energy Performance Share shall be made pursuant to the terms of
such deferral plan.

Section 7.5 Cooperation. Each of the Parties shall establish an appropriate
administration system in order to handle in an orderly manner exercises of Duke
Energy Options and Spectra Energy Options and the settlement of Duke Energy
Restricted Shares, Duke Energy Phantom Stock Units, Duke Energy Performance
Shares, Spectra Energy Restricted Shares, Spectra Energy Phantom Stock Units and
Spectra Energy Performance Shares. Each of the Parties will work together to
unify and consolidate all indicative data and payroll and employment information
on regular timetables and make certain that each applicable entity’s data and
records in respect of such awards are correct and updated on a timely basis. The
foregoing shall include employment status and information required for tax
withholding/remittance, compliance with trading windows and compliance with the
requirements of the Exchange Act and other applicable Laws.

 

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Section 7.6 SEC Registration. The Parties mutually agree to use commercially
reasonable efforts to maintain effective registration statements with the SEC
with respect to the long-term incentive awards described in this Article VII, to
the extent any such registration statement is required by applicable Law.

Section 7.7 Savings Clause. The Parties hereby acknowledge that the provisions
of this Article VII are intended to achieve certain tax, legal and accounting
objectives and, in the event such objectives are not achieved, the Parties agree
to negotiate in good faith regarding such other actions that may be necessary or
appropriate to achieve such objectives.

ARTICLE VIII

ADDITIONAL COMPENSATION MATTERS; SEVERANCE

Section 8.1 Annual Incentive Awards.

(a) Spectra Energy Assumption of Annual Incentive Liability. Effective as of the
Distribution Date, Spectra Energy shall assume or retain, as applicable,
responsibility for all Liabilities and fully perform, pay and discharge all
obligations, when such obligations become due, relating to any annual incentive
awards that any Spectra Energy Participant is eligible to receive with respect
to calendar year 2006 and, effective as of the Effective Time, Duke Energy shall
have no obligation with respect to any such annual incentive award.

(b) Duke Energy Assumption of Annual Incentive Liability. Effective as of the
Distribution Date, Duke Energy shall assume or retain, as applicable,
responsibility for all Liabilities and fully perform, pay and discharge all
obligations relating to any annual incentive awards that any Duke Energy
Participant is eligible to receive with respect to calendar year 2006 and,
effective as of the Distribution Date, Spectra Energy shall have no obligation
with respect thereto.

(c) Establishment of Spectra Energy Annual Incentive Plan. Effective as of the
Distribution Date, Spectra Energy shall have adopted an annual incentive plan
which shall permit the issuance of annual incentive awards on terms and
conditions substantially comparable to those under the Duke Energy Executive
Short-Term Incentive Plan (provided that the payment amounts and individual
performance criteria shall be established in the discretion of the Spectra
Energy Board of Directors or the Compensation Committee thereof).

(d) Special 2006 Bonus Provision. Duke Energy and Spectra Energy shall cooperate
in amending to the extent permitted the terms of annual incentive awards
otherwise payable with respect to 2006 to certain Duke Energy Participants or
Spectra Energy Participants to provide that such annual incentive award shall
not be payable unless and until such Duke Energy Participant or Spectra Energy
Participant completes a predetermined period of service.

 

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Section 8.2 Individual Arrangements.

(a) Duke Energy Individual Arrangements. Duke Energy acknowledges and agrees
that, except as otherwise provided herein, it shall have full responsibility
with respect to any Liabilities and the payment or performance of any
obligations arising out of or relating to any employment, consulting,
non-competition, retention or other compensatory arrangement (including any EPS
Units Agreement or Severance and Retention Compensation Agreement) previously
provided by any member of the Duke Energy Group or Spectra Energy Group to any
Duke Energy Participant, including life insurance policies not held in any trust
and covering any Duke Energy Participant.

(b) Spectra Energy Individual Arrangements. Spectra Energy acknowledges and
agrees that, except as otherwise provided herein, it shall have full
responsibility with respect to any Liabilities and the payment or performance of
any obligations arising out of or relating to any employment, consulting,
non-competition, retention or other compensatory arrangement (including any EPS
Units Agreement or Severance and Retention Compensation Agreement) previously
provided by any member of the Duke Energy Group or Spectra Energy Group to any
Spectra Energy Participant, including life insurance policies not held in any
trust and covering any Spectra Energy Participant.

Section 8.3 Severance Plans.

(a) Establishment of Spectra Energy Severance Plans. Effective as of the
Distribution Date, Spectra Energy shall take all steps necessary to establish
for Spectra Energy employees of its United States subsidiaries severance plans
which, for the one-year period following the Distribution Date, provide
severance benefits comparable to those provided under the Duke Energy
Reorganization Severance Benefits Plan (PN: 564) (such Spectra Energy severance
plans referred to herein collectively as the “Spectra Energy Severance Plans”).

(b) Assumption of Severance Liabilities. Effective as of the Effective Time,
Spectra Energy shall assume or retain, as applicable, responsibility for all
Liabilities and fully perform, pay and discharge all obligations, when such
obligations become due, relating to any severance benefit to which a Spectra
Energy Participant is entitled under a Duke Energy Severance Plan as of the
Distribution Date. Likewise, Duke Energy shall assume or retain, as applicable,
responsibility for all Liabilities and fully perform, pay and discharge all
obligations, when such obligations become due, relating to any severance benefit
to which a Duke Energy Participant is entitled under a Duke Energy Severance
Plan as of the Distribution Date.

(c) Effect of the Separation on Severance. Duke Energy and Spectra Energy
acknowledge and agree that the transactions contemplated by the Separation
Agreement will not constitute a termination of employment of any Spectra Energy
Participant for purposes of any policy, plan, program or agreement of Duke
Energy or Spectra Energy or any member of the Duke Energy Group or Spectra
Energy Group that provides for the payment of severance, separation pay, salary
continuation or similar benefits in the event of a termination of employment.

 

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Section 8.4 Workers’ Compensation Liabilities.

(a) Pre-Distribution Date Claims. Except as set forth below, all workers’
compensation Liabilities relating to, arising out of, or resulting from any
claim by a Spectra Energy Employee or Former Spectra Energy Employee that
results from an accident, incident or event occurring, or from an occupational
disease which becomes manifest, before the Distribution Date shall be retained
by Spectra Energy. Notwithstanding the foregoing, Spectra Energy shall not
assume or retain any workers’ compensation Liability relating to, arising out
of, or resulting from any claim by a Spectra Energy Employee that results from
an accident, incident or event occurring, or from an occupational disease which
becomes manifest, while such Spectra Energy Employee was employed by any member
of the Duke Energy Group (such a claim, a “Duke Energy Retained Claim”). All
workers’ compensation Liabilities relating to, arising out of, or resulting from
(i) any Duke Energy Retained Claim or (ii) any claim by a Duke Energy Employee
or Former Duke Energy Employee that results from an accident, incident, or event
occurring, or from an occupational disease which becomes manifest before the
Distribution Date shall be retained by Duke Energy.

(b) Post-Distribution Date Claims. All workers’ compensation Liabilities
relating to, arising out of, or resulting from any claim by a Spectra Energy
Employee or Former Spectra Energy Employee that results from an accident,
incident or event occurring, or from an occupational disease which becomes
manifest, on or after the Distribution Date shall be retained by Spectra Energy.
All workers’ compensation Liabilities relating to, arising out of, or resulting
from any claim by a Duke Energy Employee or Former Duke Energy Employee that
results from an accident, incident or event occurring, or from an occupational
disease which becomes manifest, on or after the Distribution Date shall be
retained by Duke Energy.

(c) General. For purposes of this Section 8.4, a compensable injury shall be
deemed to be sustained upon the occurrence of the event giving rise to
eligibility for workers’ compensation benefits or an occupation disease becomes
manifest, as the case may be. Duke Energy and Spectra Energy shall cooperate in
good faith with respect to the notification to appropriate governmental agencies
of the Distribution and the issuance of new, or the transfer of existing,
workers’ compensation insurance policies and claims handling contracts.

Section 8.5 Sections 162(m)/409A. Notwithstanding anything in this Agreement to
the contrary (including the treatment of supplemental and deferred compensation
plans, outstanding long-term incentive awards and annual incentive awards as
described herein), the Parties agree to negotiate in good faith regarding the
need for any treatment different from that otherwise provided herein to ensure
that (i) a federal income Tax deduction for the payment of such supplemental or
deferred compensation or long-term incentive award, annual incentive award or
other compensation is not limited by reason of Section 162(m) of the Code, and
(ii) the treatment of such supplemental or deferred compensation or long-term
incentive award, annual incentive award or other compensation does not cause the
imposition of a tax under Section 409A of the Code.

Section 8.6 Director Programs.

(a) Certain Director Plans. Effective as of the Distribution Date, Spectra
Energy shall, or shall cause one of its Affiliates to, establish a plan with
terms and conditions substantially comparable to the Duke Energy Directors
Charitable Giving Program. Effective as of the Distribution Date, Spectra Energy
hereby agrees to cause such plan to assume responsibility

 

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for all Liabilities and fully perform, pay and discharge all obligations, when
such obligations come due, of the Duke Energy Directors Charitable Giving
Program with respect to all individuals who are members of the Spectra Energy
Board of Directors as of the Effective Time or are a Former Spectra Energy
Employee or director and, effective as of the Distribution Date, Duke Energy
shall have no obligation in respect of any such individual under such Spectra
Energy plan. Any Assets related to the Spectra Energy Participants in the Duke
Energy Directors Charitable Giving Program shall be transferred by Duke Energy
to Spectra Energy as soon as practicable following the Distribution Date.

(b) Certain Director Fees. Except as provided in subsection (a), above, Duke
Energy shall retain responsibility for the payment of any fees payable in
respect of service on the Duke Energy Board of Directors that are payable but
not yet paid as of the Distribution Date, and Spectra Energy shall have no
responsibility for any such payments (to an individual who is a member of the
Spectra Energy Board of Directors as of the Effective Time or otherwise).

ARTICLE IX

SPECIAL CINERGY AND WESTCOAST PROVISIONS

Section 9.1. Cinergy Corp. Employees. Except as otherwise expressly provided in
this Agreement, all Liabilities with respect to the employment, service,
termination of employment or termination of service of all employees and former
employees of Cinergy Corp. and its Subsidiaries, to the extent previously
assumed by Duke Energy or its Affiliates or otherwise arising in connection with
or as a result of employment with or the performance of services for Duke Energy
or its Affiliates, shall be treated as Power Liabilities for purposes of the
Separation Agreement, including those Liabilities set forth in Schedule J
attached hereto.

Section 9.2 Westcoast Energy, Inc. Employees. Except as otherwise expressly
provided in this Agreement, all Liabilities with respect to the employment,
service, termination of employment or termination of service of all employees or
former employees of Westcoast Energy Inc. or its Subsidiaries shall be treated
as Gas Liabilities for purposes of the Separation Agreement, including those
Liabilities set forth in Schedule K attached hereto.

ARTICLE X

INDEMNIFICATION

Section 10.1 General Indemnification. Any claim for indemnification under this
Agreement shall be governed by, and be subject to, the provisions of Article VII
of the Separation Agreement, which provisions are hereby incorporated by
reference into this Agreement and any references to “Agreement” in such Article
VII as incorporated herein shall be deemed to be references to this Agreement.

 

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ARTICLE XI

GENERAL AND ADMINISTRATIVE

Section 11.1 Sharing Of Information. Duke Energy and Spectra Energy (acting
directly or through their respective Affiliates) shall provide to the other and
their respective agents and vendors all Information as the other may reasonably
request to enable the requesting Party to administer efficiently and accurately
each of its Benefit Plans and to determine the scope of, as well as fulfill, its
obligations under this Agreement. Such information shall, to the extent
reasonably practicable, be provided in the format and at the times and places
requested, but in no event shall the Party providing such information be
obligated to incur any out-of-pocket expenses not reimbursed by the Party making
such request or make such information available outside of its normal business
hours and premises. Any information shared or exchanged pursuant to this
Agreement shall be subject to the confidentiality requirements set forth in the
Separation Agreement. The Parties also hereby agree to enter into any business
associate agreements that may be required for the sharing of any Information
pursuant to this Agreement to comply with the requirements of HIPAA.

Section 11.2 Reasonable Efforts/Cooperation. Each of the Parties hereto will use
its commercially reasonable efforts to promptly take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable under applicable Laws and regulations to consummate the transactions
contemplated by this Agreement, including adopting plans or plan amendments.
Each of the Parties hereto shall cooperate fully on any issue relating to the
transactions contemplated by this Agreement for which the other Party seeks a
determination letter or private letter ruling from the IRS, an advisory opinion
from the DOL or any other filing, consent or approval with respect to or by a
Governmental Entity.

Section 11.3 Employer Rights. Nothing in this Agreement shall prohibit Spectra
Energy or any Spectra Energy Affiliate from amending, modifying or terminating
any Spectra Energy Benefit Plan at any time within its sole discretion. In
addition, nothing in this Agreement shall prohibit Duke Energy or any Duke
Energy Affiliate from amending, modifying or terminating any Duke Energy Benefit
Plan at any time within its sole discretion.

Section 11.4 Effect on Employment. Except as expressly provided in this
Agreement, the occurrence of the Distribution alone shall not cause any employee
to be deemed to have incurred a termination of employment which entitles such
individual to the commencement of benefits under any of the Duke Energy Benefit
Plans. Furthermore, nothing in this Agreement is intended to confer upon any
employee or former employee of Duke Energy, Spectra Energy or either of their
respective Affiliates any right to continued employment, or any recall or
similar rights to an individual on layoff or any type of approved leave.

Section 11.5 Consent Of Third Parties. If any provision of this Agreement is
dependent on the Consent of any third party and such consent is withheld, the
Parties hereto shall use their reasonable best efforts to implement the
applicable provisions of this Agreement to the fullest extent practicable. If
any provision of this Agreement cannot be implemented due to the failure of such
third party to consent, the Parties hereto shall negotiate in good faith to
implement the provision in a mutually satisfactory manner.

 

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Section 11.6 Access To Employees. Following the Distribution Date, Duke Energy
and Spectra Energy shall, or shall cause each of their respective Affiliates to,
make available to each other those of their employees who may reasonably be
needed in order to defend or prosecute any legal or administrative action (other
than a legal action between Duke Energy and Spectra Energy) to which any
employee, director or Benefit Plan of the Duke Energy Group or Spectra Energy
Group is a party and which relates to their respective Benefit Plans prior to
the Distribution Date. The Party to whom an employee is made available in
accordance with this Section 11.6 shall pay or reimburse the other Party for all
reasonable expenses which may be incurred by such employee in connection
therewith, including all reasonable travel, lodging, and meal expenses, but
excluding any amount for such employee’s time spent in connection herewith.

Section 11.7 Beneficiary Designation/Release Of Information/Right To
Reimbursement. To the extent permitted by applicable Law and except as otherwise
provided for in this Agreement, all beneficiary designations, authorizations for
the release of Information and rights to reimbursement made by or relating to
Spectra Energy Participants under Duke Energy Benefit Plans shall be transferred
to and be in full force and effect under the corresponding Spectra Energy
Benefit Plans until such beneficiary designations, authorizations or rights are
replaced or revoked by, or no longer apply, to the relevant Spectra Energy
Participant.

Section 11.8 Not A Change In Control. The Parties hereto acknowledge and agree
that the transactions contemplated by the Separation Agreement and this
Agreement do not constitute a “change in control” for purposes of any Duke
Energy Benefit Plan or Spectra Energy Benefit Plan.

ARTICLE XII

MISCELLANEOUS

Section 12.1 Effect If Distribution Does Not Occur. Notwithstanding anything in
this Agreement to the contrary, if the Separation Agreement is terminated prior
to the Effective Time, then all actions and events that are, under this
Agreement, to be taken or occur effective prior to, as of or following the
Distribution Date, or otherwise in connection with the Separation, shall not be
taken or occur except to the extent specifically agreed to in writing by Duke
Energy and Spectra Energy and neither Party shall have any Liability or further
obligation to the other Party under this Agreement.

Section 12.2 Relationship Of Parties. Nothing in this Agreement shall be deemed
or construed by the Parties or any third party as creating the relationship of
principal and agent, partnership or joint venture between the Parties, it being
understood and agreed that no provision contained herein, and no act of the
Parties, shall be deemed to create any relationship between the Parties other
than the relationship set forth herein.

Section 12.3 Affiliates. Each of Duke Energy and Spectra Energy shall cause to
be performed, and hereby guarantees the performance of, all actions, agreements
and obligations set forth in this Agreement to be performed by each of their
Affiliates, respectively.

 

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Section 12.4 Notices. All notices, requests, claims, demands and other
communications under this Agreement, as between the Parties, shall be in writing
and shall be given or made (and shall be deemed to have been duly given or made
upon receipt unless the day of receipt is not a Business Day, in which case it
shall be deemed to have been duly given or made on the next following Business
Day) by delivery in person, by overnight courier service, by facsimile with
receipt confirmed (followed by delivery of an original via overnight courier
service) or by registered or certified mail (postage prepaid, return receipt
requested) to the respective Parties at the following addresses (or at such
other address for a Party as shall be specified in a notice given in accordance
with this Section 12.3):

To Duke Energy:

Duke Energy Corporation

526 South Church Street

Charlotte, North Carolina 28202

Attn: Chief Legal Officer

Facsimile: 704-382-8137

To Spectra Energy:

Spectra Energy Corp

5400 Westheimer Court

Houston, Texas 77056

Attn: General Counsel

Facsimile: 713-627-5536

Section 12.5 Entire Agreement. This Agreement, the Separation Agreement, and
each other Ancillary Agreement, including any annexes, schedules and exhibits
hereto and thereto, as well as any other agreements and documents referred to
herein and therein, shall constitute the entire agreement between the Parties
with respect to the subject matter hereof and shall supersede all previous
negotiations, commitments and writings with respect to such subject matter. In
the event of any inconsistency between this Agreement and any Schedule hereto,
the Schedule shall prevail.

Section 12.6 Waivers. The failure of any Party to require strict performance by
any other Party of any provision in this Agreement will not waive or diminish
that Party’s right to demand strict performance thereafter of that or any other
provision hereof.

Section 12.7 Amendments. Subject to the terms of Section 12.8 of this Agreement,
this Agreement may not be modified or amended except by an agreement in writing
signed by each of the Parties.

 

34

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Section 12.8 Termination, Etc. This Agreement (including Article X hereof
(Indemnification) hereof) may be terminated and abandoned at any time prior to
the Distribution Date by and in the sole discretion of Duke Energy without the
approval of Spectra Energy or the stockholders of Duke Energy and it shall be
deemed terminated if and when the Separation Agreement is terminated. In the
event of such termination, no Party shall have any liability of any kind to any
other Party or any other Person. After the Distribution Date, this Agreement may
not be terminated except by an agreement in writing signed by each of the
Parties.

Section 12.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal Laws, and not the Laws governing conflicts of Laws
(other than Sections 5-1401 and 5-1402 of the New York General Obligations Law),
of the State of New York.

Section 12.10 Dispute Resolution. Any controversy, dispute or claim arising out
of, in connection with, or in relation to the interpretation, performance,
nonperformance, validity, termination or breach of this Agreement or otherwise
arising out of, or in any way related to this Agreement or the transactions
contemplated hereby, including any claim based on contract, tort, statute or
constitution (but excluding any controversy, dispute or claim arising out of any
Contract relating to the use or lease of real property if any third party is a
necessary party to such controversy, dispute or claim) (collectively, “Agreement
Dispute”), shall be governed by, and be subject to, the provisions of Article IX
of the Separation Agreement, which provisions (and related defined terms) are
hereby incorporated by reference into this Agreement and any references to
“Agreement” in such Article IX as incorporated herein shall be deemed to be
references to this Agreement; provided, however, any references to “Agreement”
or “Agreement Disputes” in such Article IX as incorporated herein shall be
deemed to be references to this Agreement and Agreement Disputes as defined in
this Agreement. Notwithstanding the foregoing provisions of this Section 12.10,
(i) disputes regarding the amount of the Final Retirement Plan Transfer Amount
or True-Up Amount shall be determined exclusively pursuant to the dispute
resolution procedures set out in Section 3.2 of this Agreement, (ii) no Dispute
Notice relating to the characterization of an individual as a Duke Energy
Employee, Spectra Energy Employee, Former Duke Energy Employee or Former Spectra
Energy Employee may be provided under this Section 12.10 more than one hundred
eighty (180) days after the Distribution, and (iii) no Dispute Notice may be
provided under this Section 12.10 after the second anniversary of the
Distribution Date.

Section 12.11 Consent to Jurisdiction. Subject to the provisions of Article IX
of the Separation Agreement, each of the Parties irrevocably submits to the
exclusive jurisdiction of (a) the Supreme Court of the State of New York, New
York County, and (b) the United States District Court for the Southern District
of New York (the “New York Courts”), for the purposes of any suit, action or
other proceeding to compel arbitration or for provisional relief in aid of
arbitration in accordance with Article IX of the Separation Agreement or for
provisional relief to prevent irreparable harm, and to the non-exclusive
jurisdiction of the New York Courts for the enforcement of any award issued
thereunder. Each of the Parties further agrees that service of any process,
summons, notice or document by U.S. registered mail to such Party’s respective
address set forth in Section 12.4 of this Agreement shall be effective service
of process for any action, suit or proceeding in the New York Courts with
respect to any matters to which it has submitted to jurisdiction in this
Section 12.11. Each of the Parties irrevocably and unconditionally waives any
objection to the laying of venue of any action, suit or proceeding arising out
of this Agreement or the transactions contemplated hereby in the New York
Courts, and hereby further irrevocably and unconditionally waives and agrees not
to plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum.

 

35

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Section 12.12 Titles and Headings. Titles and headings to sections herein are
inserted for the convenience of reference only and are not intended to be a part
of or to affect the meaning or interpretation of this Agreement.

Section 12.13 Counterparts. This Agreement may be executed in more than one
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more such counterparts have been signed by
each of the Parties and delivered to the other Parties.

Section 12.14 Assignment. Except as otherwise provided for in this Agreement,
this Agreement shall not be assignable, in whole or in part, directly or
indirectly, by any Party without the prior written Consent of the other Party,
and any attempt to assign any rights or obligations arising under this Agreement
without such consent shall be void; provided, that, a Party may assign this
Agreement in connection with a merger transaction in which such Party is not the
surviving entity or the sale by such Party of all or substantially all of its
Assets; and provided, further, that the surviving entity of such merger or the
transferee of such Assets shall agree in writing, reasonably satisfactory to the
other Parties, to be bound by the terms of this Agreement as if named as a
“Party” hereto.

Section 12.15 Severability. In the event any one or more of the provisions
contained in this Agreement should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein and therein shall not in any way be affected or
impaired thereby. The Parties shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions,
the economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.

Section 12.16 Successors and Assigns. The provisions of this Agreement and the
obligations and rights hereunder shall be binding upon, inure to the benefit of
and be enforceable by (and against) the Parties and their respective successors
and permitted transferees and assigns.

Section 12.17 Exhibits and Schedules. The Exhibits and Schedules shall be
construed with and as an integral part of this Agreement to the same extent as
if the same had been set forth verbatim herein.

Section 12.18 Specific Performance. The Parties agree that irreparable damage
would occur in the event that the provisions of this Agreement were not
performed in accordance with their specific terms. Accordingly, it is hereby
agreed that the Parties shall be entitled to (i) an injunction or injunctions to
enforce specifically the terms and provisions hereof in any arbitration in
accordance with Section 12.10 of this Agreement, (ii) provisional or temporary
injunctive relief in accordance therewith in any New York Court, and
(iii) enforcement of any such award of an arbitral tribunal or a New York Court
in any court of the United States, or any other any court or tribunal sitting in
any state of the United States or in any foreign country that has jurisdiction,
this being in addition to any other remedy or relief to which they may be
entitled.

 

36

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Section 12.19 Waiver of Jury Trial. SUBJECT TO SECTIONS 12.10, 12.11 AND 12.18
OF THIS AGREEMENT, EACH OF THE PARTIES HEREBY WAIVES TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH
RESPECT TO ANY COURT PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF AND
PERMITTED UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT. EACH OF THE PARTIES HEREBY (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO
ENTER INTO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT,
AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS SECTION 12.19.

Section 12.20 Force Majeure. No Party (or any Person acting on its behalf) shall
have any liability or responsibility for failure to fulfill any obligation
(other than a payment obligation) under this Agreement so long as and to the
extent to which the fulfillment of such obligation is prevented, frustrated,
hindered or delayed as a consequence of circumstances of Force Majeure. A Party
claiming the benefit of this provision shall, as soon as reasonably practicable
after the occurrence of any such event: (a) notify the other Party of the nature
and extent of any such Force Majeure condition and (b) use due diligence to
remove any such causes and resume performance under this Agreement as soon as
reasonably practicable.

Section 12.21 Authorization. Each of the Parties hereby represents and warrants
that it has the power and authority to execute, deliver and perform this
Agreement, that this Agreement has been duly authorized by all necessary
corporate action on the part of such Party, that this Agreement constitutes a
legal, valid and binding obligation of each such Party and that the execution,
delivery and performance of this Agreement by such Party does not contravene or
conflict with any provision of law or of its charter or bylaws or any material
agreement, instrument or order binding on such Party.

Section 12.22 No Third-Party Beneficiaries. Except as otherwise expressly
provided in this Agreement, this Agreement is solely for the benefit of the
Parties and should not be deemed to confer upon third parties any remedy, claim,
liability, reimbursement, cause of action or other right in excess of those
existing without reference to this Agreement.

Section 12.23 Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. This Agreement shall be construed
without regard to any presumption or rule requiring construction or
interpretation against the party drafting or causing any instrument to be
drafted.

[Remainder of this page intentionally left blank.]

 

37

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CONFIDENTIAL

 

IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed
as of the day and year first above written.

 

  DUKE ENERGY CORPORATION By:   /s/ James E. Rogers Name:   James E. Rogers
Title:   President and Chief Executive Officer   SPECTRA ENERGY CORP By:   /s/
Fred J. Fowler Name:   Fred J. Fowler Title:   President and Chief Executive
Officer

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CONFIDENTIAL

 

EXHIBIT A

FORMER DUKE ENERGY EMPLOYEES

“Former Duke Energy Employee” shall include, as of the Distribution Date, any
individual listed below on this Exhibit A (which, in certain circumstances,
includes surviving beneficiaries of employees). Any individual who is a Former
Duke Energy Employee or Former Spectra Energy Employee who is not listed on this
Exhibit A or Exhibit B to this Agreement shall be treated as a Former Duke
Energy Employee or Former Spectra Energy Employee, as the case may be, pursuant
to the protocol described on Appendix A-1 to this Exhibit A.

Former Duke Energy Employees:

See attached list

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CONFIDENTIAL

 

Appendix A-1

Otherwise unallocated former employees shall be based on their payroll company
of last affiliation, as shown in Duke Energy benefit plan records, with the
following refinements:

 

  •  

If the participant has an employment status of Retired, Termed, Disabled, Bene,
or QDRO and has a retiree conversion indicator (RCI) that indicates
grandfathered coverage in PanEnergy (RCIs of P1 through P4), Duke Power (RCIs of
D1 through D4), or Nantahala P&L (RCIs of N1 through N4) predecessor retiree
coverage then the participant would be assigned to Duke Energy or Spectra Energy
based on the RCI without regard to the payroll company of last affiliation.

 

  •  

If the participant has an employment status of Survivor and the retiree
conversion indicator (RCI) is S1 then the participant is assigned to Spectra
Energy.

 

  •  

If the participant has an employment status of Retired, Termed, Disabled, Bene,
or QDRO and has a retiree conversion indicator (RCI) that indicates Duke Energy
(RCIs of D5, S2, or Blank) and a payroll company indicating Spectra Energy (as
shown on the list below) and a Business Unit indicating Spectra Energy (as shown
on the listing below) or a Business Unit of Discontinued Operations (10044) then
the participant is assigned to Spectra Energy.

 

  •  

If the participant has an employment status of Retired, Termed, Disabled, Bene,
or QDRO and has a retiree conversion indicator (RCI) that indicates Duke Energy
(RCIs of D5, S2, or Blank) and a payroll company of 950 and a Business Unit
indicating Spectra Energy (as shown on the list below) then the participant is
assigned to Spectra Energy.

 

  •  

If the participant has an employment status of Retired, Termed, Disabled, Bene,
or QDRO and a retiree conversion indicator (RCI) indicating Duke Energy (RCIs of
D5, S2, or Blank) and any payroll company in the 900 range (excluding payroll
company 950) with a Business Unit number indicating Discontinued Operations
(10044) and the PanEnergy Company Name field is not blank then the participant
is assigned to Spectra Energy.

 

  •  

If the participant has an employment status of Retired, Termed, Disabled, Bene,
or QDRO and a retiree conversion indicator (RCI) indicating Duke Energy (RCIs of
D5, S2, or Blank) and a Business Unit indicating Corporate Governance (20013) or
Shared Services (20044) then the participant must be reviewed manually and
assigned to Duke Energy or Spectra Energy based on the alignment with a
respective business unit.

 

  •  

If an individual who is a Former Duke Energy Employee or Former Spectra Energy
Employee does not appear in the Duke Energy benefit plan records, such
individual will be allocated based on his or her payroll company of last
affiliation in a manner consistent with the refinements described in the
preceding bullets and the method otherwise applicable for determining
inconsistencies as described in the following provisions of this Appendix A-1.

Hewitt Associates will provide a report of inactive participants based on the
criteria above. Duke Energy’s Strategic Business Support Group will review the
report to identify inconsistencies. The Strategic Business Support Group will
have the responsibility for reviewing and reconciling the differences with
Hewitt and Spectra Energy. The following company numbers and business unit
numbers will be considered as affiliated with Duke Energy and Spectra Energy
respectively for the purpose of determining inconsistencies:

 

  •  

Spectra Energy company numbers include:

 

  •  

97 – Duke Energy Westcoast

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CONFIDENTIAL

 

  •  

700 – PanEnergy Services Limited Partnership

 

  •  

701 – Pan Service Company

 

  •  

705 – Duke Energy Operating Company

 

  •  

710 – Panhandle Eastern Pipeline Co.

 

  •  

715 – Texas Eastern Products Pipeline

 

  •  

720 – Texas Eastern Transmission LP

 

  •  

725 – Duke Energy Northeast Transmission Company

 

  •  

730 – Duke Energy Field Services LP

 

  •  

750 – Trunkline Gas Company

 

  •  

751 – Trunkline LNG Company

 

  •  

752 – Pan National Gas Sales Inc.

 

  •  

753 – Algonquin Gas Transmission LLC

 

  •  

Spectra Energy business unit numbers include:

 

  •  

10004 – Algonquin Gas Transmission LLC

 

  •  

10005 – Algonquin LNG, LP

 

  •  

10032 – M&N Operating Company LLC

 

  •  

10043 – Pan Service Company

 

  •  

TBD – Spectra Energy Discontinued Operations (when combined with a Spectra
Energy payroll company or a known PanEnergy predecessor company)

 

  •  

10045 – Duke Energy Field Services, Inc.

 

  •  

10051 – Panenergy Services LP

 

  •  

10053 – Panhandle Eastern Pipe Line Company

 

  •  

10061 – Texas Eastern Products Pipeline

 

  •  

10076 – Texas Eastern Transmission, LP

 

  •  

10079 –Trunkline Gas Company

 

  •  

10089 –Trunkline LNG Company

 

  •  

10092 – DETTCO

 

  •  

10155 – DE Southeast Pipeline

 

  •  

10266 – East Tennessee Natural Gas LLC

 

  •  

10419 – Moss Bluff Hub Partners, LP

 

  •  

10420 – Egan Hub Storage, LLC

 

  •  

10493 – Saltville Gas Storage Co., LLC

 

  •  

10495 – Duke Energy Early Grove Co.

 

  •  

10496 – DE Virginia Gas Pipeline Co.

 

  •  

20013 – Corporate Governance (when the executive is aligned with a Spectra
Energy business unit)

 

  •  

20044 – Shared Services (when combined with a Spectra Energy payroll company or
a known PanEnergy predecessor company)

 

  •  

Duke Energy company numbers include

 

  •  

30 – Nantahala Power & Light

 

  •  

100 – Duke Energy Carolinas, LLC

 

  •  

110 – Duke Energy Business Services, LLC

 

  •  

120 – Duke Capital Partners, LLC

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CONFIDENTIAL

 

  •  

130 – Duke Energy Generation Services, LLC

 

  •  

300 – Crescent Resources, LLC

 

  •  

400 – Duke Engineering & Services, Inc.

 

  •  

410 – Duke Project Services, Inc.

 

  •  

420 – Intera, Inc.

 

  •  

430 – DE&S Resources LLC

 

  •  

440 – DE&S Northwest, Inc.

 

  •  

450 – DukeSolutions, Inc.

 

  •  

460 – Energy Delivery Services Inc.

 

  •  

600 – Duke Energy Global Markets Inc.

 

  •  

610 – DENA Asset Partners LP

 

  •  

735 – DETMI Management, Inc.

 

  •  

740 – DEM Management Partners LP

 

  •  

Duke Energy business unit numbers include:

 

  •  

20045 – Duke Energy Parent

 

  •  

10010 – Crescent Resources Inc.

 

  •  

10012 – Duke Project Services, Inc.

 

  •  

10015 – Duke Engineering & Services, Inc.

 

  •  

10020 – Dukenet Communications, Inc.

 

  •  

10044 – Discontinued Operations (when combined with a Duke Energy payroll
company or as a known Duke Energy predecessor company)

 

  •  

10058 – DE Trading & Marketing, LLC

 

  •  

10133 – Duke Energy International

 

  •  

10276 – Duke Energy Merchants

 

  •  

10284 – Fossil Hydro Generation Services

 

  •  

10445 – DETM Contracts

 

  •  

20013 – Corporate Governance

 

  •  

20017 – Power Delivery

 

  •  

20018 – Duke Power Company

 

  •  

20028 – DEBS IT Services

 

  •  

20038 – Oconee Station

 

  •  

20044 – Shared Services (when combined with a Spectra Energy payroll company or
a known PanEnergy predecessor company)

 

  •  

20096 – Procurement & Construction Management

 

  •  

30024 – Duke Energy North America, LLC

 

  •  

30287 – Duke Energy Royal, LLC

 

  •  

40002 – DukeSolutions - US

 

  •  

40003 – Techtrol

If the company number or business unit is blank, the Strategic Business Support
Group will work with Hewitt to assign the individual to either Duke Energy or
Spectra Energy. All inactive participants in the Hewitt TBA system will either
be coded as Duke Energy or Spectra Energy as of January 1, 2007, with an
indicator on the TBA record. No history will be changed as a result of an
individual’s identification as either a Duke Energy Former Employee or Spectra
Energy Former Employee.

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CONFIDENTIAL

 

EXHIBIT B

FORMER SPECTRA ENERGY EMPLOYEES

“Former Spectra Energy Employee” shall include, as of the Distribution Date, any
individual listed below on this Exhibit B (which, in certain circumstances,
includes surviving beneficiaries of employees). Any individual who is a Former
Duke Energy Employee or Former Spectra Energy Employee who is not listed on this
Exhibit B or Exhibit A to this Agreement shall be treated as a Former Duke
Energy Employee or Former Spectra Energy Employee, as the case may be, pursuant
to the protocol described on Appendix A-1 to Exhibit A to this Agreement.

Former Spectra Energy Employees:

See attached list

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CONFIDENTIAL

 

SCHEDULE A

DUKE ENERGY SEVERANCE PLANS

Duke Power Company Voluntary Separation Opportunity Plan for Employees
Represented by IBEW Local Union 962 (PN 562)

Duke Power Company Voluntary Separation Opportunity Plan for Employees
Represented by IBEW Local Union 962 (Transportation) (PN 563)

Duke/Cinergy Merger Integration Severance Benefits Plan (PN 561)

DENA Asset Partners, L.P. 2005-2008 Severance Benefits Plan (PN 551)

Cinergy Corp. Merger Severance Plan for Non-Union Employees

Duke Energy Corporation Merger Severance Plan for Employees Represented by the
International Brotherhood of Electrical Workers Union, Local #1347

The Duke Energy Corporation 2003-2005 Severance Benefits Plan (PN 545)

The Duke Energy Gas Transmission 2003-2005 Severance Benefits Plan (PN 553)

The PanEnergy Services Limited 2003-2005 Severance Benefits Plan (PN 552)

The DETMI Management, Inc. 2003-2005 Severance Benefits Plan (PN 554)

The Duke Energy Global Markets, Inc. 2003-2005 Severance Benefits Plan (PN 550)

The Duke Energy Business Services LLC 2003-2005 Severance Benefits Plan (PN 546)

The Duke Project Services, Inc. 2003-2005 Severance Benefits Plan (PN 548)

Duke Energy Corporation Merger Severance Plan for Employees Represented by the
Utility Workers Union of America, Local Union #600

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CONFIDENTIAL

 

SCHEDULE B

DUKE ENERGY SRP

Duke Energy Corporation Executive Savings Plan I and II

Duke Energy Corporation Executive Cash Balance Plan I and II

Duke Energy Corporation Directors’ Savings Plan I and II

Supplemental Retirement Plan for Employees of Duke Power Company

Duke Power Company Supplemental Security Plan

Duke Energy Corporation Retirement Benefit Equalization Plan.

Duke Power Company Supplemental Retirement Plan

Crescent Resources Incentive Deferral Plan

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CONFIDENTIAL

 

SCHEDULE C

FINANCED NONQUALIFIED PLANS

Duke Energy Corporation Executive Savings Plan I and II

Duke Energy Corporation Executive Cash Balance Plan I and II

Duke Energy Corporation Directors’ Savings Plan I and II

Supplemental Retirement Plan for Employees of Duke Power Company

Duke Power Company Supplemental Security Plan

Duke Energy Corporation Retirement Benefit Equalization Plan.

Duke Power Company Supplemental Retirement Plan

Crescent Resources Incentive Deferral Plan

Panhandle Eastern Corporation Executive Deferred Compensation Plan

Panhandle Eastern Corporation Key Executive Deferred Compensation Plan

Panhandle Eastern Corporation Nonemployee Directors Retirement Plan

Panhandle Eastern Corporation 1982 Director’s Deferred Compensation Plan

Panhandle Eastern Corporation Director’s Deferred Compensation Plan

Panhandle Eastern Corporation Retirement Benefit Equalization Plan

Panhandle Eastern Corporation Key Executive Retirement Benefit Equalization Plan

Texas Eastern Deferred Income Program

Texas Eastern Supplemental Pension Plan

Texas Eastern Supplemental Retirement Plan

Texas Eastern Executive Service Supplemental Plan

Panhandle Eastern Corporation Executive Benefit Equalization Plan

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CONFIDENTIAL

 

Deferral Arrangement established under Agreement and Acknowledgment dated as of
September 7, 2006, by and among Arthur William Fields, Crescent Resources, LLC
and Duke Energy Corporation.

For the avoidance of doubt, and notwithstanding any provision of Section 6.2 of
this Agreement to the contrary, (i) nonqualified deferred compensation plans of
Cinergy Corp. and its Subsidiaries shall not be taken into account as Financed
Nonqualified Plans for purposes of this Schedule C and all assets held in a
trust maintained in respect of such plans shall remain in a trust sponsored by a
member of the Duke Energy Group, and (ii) nonqualified deferred compensation
plans of Westcoast Energy Inc. and its Subsidiaries shall not be taken into
account as Financed Nonqualified Plans for purposes of this Schedule C and all
assets held in a trust maintained in respect of such plans shall be transferred
to the Spectra Energy Rabbi Trust.

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CONFIDENTIAL

 

SCHEDULE D

RETIREMENT PLAN ASSET TRANSFER AMOUNT

ASSUMPTIONS AND VALUATION METHODOLOGY

The assumptions below represent safe harbor assumptions under Section 414(l) of
the Code.

 

Determination Date    January 1, 2007. Data Source    January 1, 2007 census. No
terminated non-vested participants shall be taken into account. Mortality Rates
  

Healthy Participants

   1994 Group Annuity Mortality Table projected to year 2017 using Scale AA
(published on the PBGC website).

Disabled Participants

   Table used for healthy participants set forward three years (published on the
PBGC website). Withdrawal Rates    None assumed. Disability Rates    None
assumed. Retirement Rates    100% at the PBGC expected retirement age. Interest
(Discount) Rate    PBGC plan termination rates for January 2007. These rates
will be published in early/mid December 2006. Interest Crediting Rate on Cash
Balance Accounts    RCBP interest crediting rate for first quarter of 2007.
Interest Rate to Convert Cash Balance Account to Normal Form    RCBP rate for
conversions during 2007. Married Percentage    85%. Forms of Payment    Note
that the elected form of payment is used for participants currently receiving
benefits.

Retirement Benefits

   Single Life Annuity for single participants and 50% Joint and Survivor
Annuity for married participants.

Pre-retirement Death Benefits

   Immediate Lump Sum. Spouse Ages    Wives are assumed to be three years
younger than their husbands.

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CONFIDENTIAL

 

Benefit Limits    Benefits limited according to IRC §415 without projection.
(The maximum single plan annuity at age 65 is $180,000 in 2007.) Compensation
Limit    $225,000 without projection. Asset Valuation Method    Market value.
Actuarial Cost Method    Unit Credit. Expense Load   

The sum of:

(a)    $10,000

(b)    $200 per participant

(c)    a percentage of liability in excess of $200,000. The percentage is 1% +
[(P% – 7.50%)/10] where P is the initial interest rate used for the valuation of
benefits.

Miscellaneous    Plan liabilities determined without regard to additional
opening balance credit that is subject to favorable IRS determination letter
(and no assets shall be transferred to the Spectra Energy Retirement Plan or
otherwise to any member of the Spectra Energy Group in regard to liabilities
attributable to such opening balance credit regardless whether it is the subject
of a favorable IRS determination letter)

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CONFIDENTIAL

 

SCHEDULE E

OPEB/NONQUALIFIED PLAN ACTUARIAL ASSUMPTIONS

 

(a) 401(h) Accounts (Section 3.2(e))

Liabilities shall be calculated on an accumulated post-retirement benefit
obligation basis as of January 1, 2007, in accordance with the actuarial
assumptions that will be used by Duke Energy to determine such value for
purposes of satisfying Duke Energy’s reporting obligations under Statement of
Financial Accounting Standard 106 as of January 1, 2007. It is presently
expected that these assumptions are those set out in the attached Appendix E-1
to this Schedule E.

Duke Energy shall cause the Duke Energy Retirement Plan to transfer to the
Spectra Energy Retirement Plan a portion of the Assets in the account maintained
in the Duke Energy Retirement Plan pursuant to Section 401(h) of the Code that,
as determined under the first paragraph of this subsection (a), is equal to the
proportion that the retiree medical benefit Liabilities in respect of Spectra
Energy Participants bears to the total retiree medical benefit Liabilities of
Duke Energy Participants and Spectra Energy Participants.

 

(b) VEBAs (Section 5.2)

Liabilities shall be calculated on an accumulated post-retirement benefit
obligation basis as of January 1, 2007, in accordance with the actuarial
assumptions that will be used by Duke Energy to determine such value for
purposes of satisfying Duke Energy’s reporting obligations under Statement of
Financial Accounting Standard 106 as of January 1, 2007. It is presently
expected that these assumptions are those set out in the attached Appendix E-1
to this Schedule E.

The portion of the assets held pursuant to the Trust Agreement for Duke Energy
Corporation Welfare Benefits Trust VEBA I that shall be allocated to the Spectra
Energy VEBA shall be equal to, as of the Distribution Date and as determined
under the first paragraph of this subsection (b), (i) in the case of subaccount
1 thereunder (relating to retiree life Liabilities), the percentage that the
retiree life benefit Liabilities in respect of Spectra Energy Participants bears
to the total retiree life benefit Liabilities of Duke Energy Participants and
Spectra Energy Participants, (ii) in the case of subaccounts 2 and 3 thereunder
(relating to active medical and dental Liabilities), the percentage that the
active medical and dental benefit Liabilities that are incurred in respect of
Spectra Energy Participants and allocated to Spectra Energy as of the
Distribution Date bears to the total active medical and dental benefit
Liabilities of Duke Energy Participants and Spectra Energy Participants (i.e.,
such that no portion of such subaccounts 2 and 3 shall be transferred to the
Spectra Energy VEBA), (iii) in the case of subaccount 4 thereunder (relating to
long term disability Liabilities), the percentage that the long term disability
benefit Liabilities in respect of Spectra Energy Participants bears to the total
long term disability benefit Liabilities of Duke Energy Participants and Spectra
Energy Participants (i.e., such that the assets attributable to such subaccount
4 shall be transferred to the Spectra Energy VEBA in their entirety), and (v) in
the case of subaccount 5 therunder (relating to supplemental life insurance
Liabilities), zero percent (0%) since no assets are attributable to such
subaccount 5.

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CONFIDENTIAL

 

The portion of the assets held pursuant to the Trust Agreement for Duke Energy
Corporation Post-Retirement Medical Benefits Trust VEBA II that shall be
allocated to the Spectra Energy VEBA shall be equal to, as of the Distribution
Date and as determined under the first paragraph of this subsection (b), the
percentage that the retiree medical benefit Liabilities in respect of Spectra
Energy Participants bears to the total retiree medical benefit Liabilities of
Duke Energy Participants and Spectra Energy Participants.

 

(c) Retired Lives Reserve (Section 5.3)

Liabilities shall be calculated on an accumulated post-retirement benefit
obligation basis as of January 1, 2007, in accordance with the actuarial
assumptions that will be used by Duke Energy to determine such value for
purposes of satisfying Duke Energy’s reporting obligations under Statement of
Financial Accounting Standard 106 as of January 1, 2007. It is presently
expected that these assumptions are those set out in the attached Appendix E-1
to this Schedule E.

The portion of the Duke Energy RLR that shall be allocated to Spectra Energy
shall be equal to, as of the Distribution Date and as determined under the first
paragraph of this subsection (c), the proportion that the retiree life benefit
Liabilities in respect of Spectra Energy Participants bears to the total retiree
life benefit Liabilities of Duke Energy Participants and Spectra Energy
Participants.

 

(d) Financed Nonqualified Plans (Section 6.2)

Liabilities shall be calculated on a projected benefit obligation basis as of
January 1, 2007, in accordance with the actuarial assumptions that will be used
by Duke Energy to determine such value for purposes of satisfying Duke Energy’s
reporting obligations under Statement of Financial Accounting Standard 87 as of
January 1, 2007. It is presently expected that these assumptions are those set
out in the attached Appendix E-2 to this Schedule E.

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CONFIDENTIAL

 

Appendix E-1

 

Determination Date    January 1, 2007. Data Source    January 1, 2007 census.
Mortality Rates   

Healthy Lives

   RP-2000 Combined Healthy Table projected to 2015 by scale AA.

Disabled Lives

   RP-2000 Combined Healthy Table projected to 2015 by scale AA. Withdrawal
Rates    Rates by age and service as follows:

 

     Length of Service   Age    0     1     2     3     4     5+   20–24    33 %
  20 %   19 %   17 %   16 %   15 % 25–29    25 %   19 %   18 %   15 %   14 %  
10 % 30–34    22 %   18 %   17 %   14 %   12 %   5.5 % 35–39    20 %   17 %   16
%   13 %   11 %   3.5 % 40–44    17 %   16 %   15 %   12 %   10 %   2.5 % 45–49
   16 %   15 %   14 %   11 %   8 %   2 % 50–54    15 %   14 %   13 %   10 %   7
%   2 %

 

Disability Rates    None assumed. Retirement Rates    Schedule by age.

 

Age    Rate   55    15.0 % 56    5.0 % 57    7.0 % 58    9.0 % 59    11.0 % 60
   13.0 % 61    15.0 % 62    40.0 % 63    20.0 % 64    20.0 % 65    75.0 % 66   
20.0 % 67    100.0 %

 

Interest (Discount) Rate

   Discount rate used to determine fiscal 2007 expense. This rate will be based
on the 12/31/2006 interest rate environment and will not be finalized until
early 2007.

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CONFIDENTIAL

 

Married Percentage    75%. Retiree Medical Plan Participation Rates (Future
Retirees)    95%. Spouse Ages    Wives are assumed to be three years younger
than their husbands. Actuarial Cost Method    Projected Unit Credit. Expense
Load    Included in per capita amounts.

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CONFIDENTIAL

 

Per Capita Claims Costs

 

2007 Claims Total Cost Age    Duke Power
Pre-1992
Retirees    PanEnergy
Pre-1993
Retirees <55    $ 9,885      N/A 55–59    $ 6,380      N/A 60–64    $ 6,288     
N/A 65–69    $ 2,747    $ 2,435 70–74    $ 3,236    $ 2,705 75–79    $ 3,636   
$ 3,008 80–84    $ 4,078    $ 3,289 > 84    $ 4,443    $ 3,411

 

Medicare Prescription Drug Reimbursements   

None for retirees with defined dollar subsidies.

 

27% of post-65 prescription drug plan claims for other retirees.

 

2007 Prescription Drug Claims Cost Age    Duke Power    Pan Energy <55    $
2,867      N/A 55–59    $ 1,850      N/A 60–64    $ 1,823      N/A 65–69    $
1,487    $ 1,477 70–74    $ 1,762    $ 1,668 75–79    $ 1,982    $ 1,869 80–84
   $ 2,227    $ 2,042 >84    $ 2,433    $ 2,104

 

Net Per Capita Annual Medical Trend Rates  

•        Medical

  

 

— Initial Rate (2007)

   8.50%

— Ultimate Rate

   5.00%

— Year Ultimate Rate Reached

   2014

      (drops 0.50% per year)

  

•        Prescription Drug

  

— Initial Rate (2007)

   13.00%

— Ultimate Rate

   5.00%

— Year Ultimate Rate Reached

   2023

 

       (drops 0.75% per year until 2022,

       then 0.25% per year in 2022)

 

Net Per Capita Annual Company-Paid Dental Claims    Fiscal 2007 per capita costs
were estimated to be $369. (Grandfathered Duke Plans Only)    Net Per Capita
Annual Dental Trend Rates    Equals the discount rate.

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CONFIDENTIAL

 

Appendix E-2

 

Determination Date    January 1, 2007. Data Source    January 1, 2007 census.
Mortality Rates   

Healthy Lives

   RP-2000 Combined Healthy Table projected to 2015 by scale AA.

Disabled Lives

   RP-2000 Combined Healthy Table projected to 2015 by scale AA. Withdrawal
Rates    Rates by age and service as follows:

 

     Length of Service   Age    0     1     2     3     4     5+   20–24    33 %
  20 %   19 %   17 %   16 %   15 % 25–29    25 %   19 %   18 %   15 %   14 %  
10 % 30–34    22 %   18 %   17 %   14 %   12 %   5.5 % 35–39    20 %   17 %   16
%   13 %   11 %   3.5 % 40–44    17 %   16 %   15 %   12 %   10 %   2.5 % 45–49
   16 %   15 %   14 %   11 %   8 %   2 % 50–54    15 %   14 %   13 %   10 %   7
%   2 %

 

Disability Rates    Rates by age. Sample rates include:

 

Age

   Rate  

<=29

   0.08 %

30

   0.10 %

31

   0.11 %

32

   0.11 %

33

   0.12 %

34

   0.12 %

35

   0.13 %

36

   0.14 %

37

   0.15 %

38

   0.15 %

39

   0.16 %

40

   0.17 %

41

   0.19 %

42

   0.20 %

43

   0.22 %

44

   0.23 %

45

   0.25 %

46

   0.28 %

47

   0.32 %

48

   0.35 %

49

   0.39 %

50

   0.42 %

51

   0.49 %

52

   0.56 %

53

   0.62 %

54

   0.69 %

55

   0.76 %

56

   0.91 %

57

   1.06 %

58

   1.20 %

59

   1.35 %

>=60

   1.50 %

 

Retirement Rates    Rates by age as follows:

 

Age    Rate   55    15 % 56    5 % 57    7 % 58    9 % 59    11 % 60    13 % 61
   15 % 62    40 % 63    20 % 64    20 % 65    75 % 66    20 % 67    100 %

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CONFIDENTIAL

 

Interest (Discount) Rate    Discount rate used to determine fiscal 2007 expense.
This rate will be based on the 12/31/2006 interest rate environment and will not
be finalized until early 2007. Interest Crediting Rate on Cash Balance Accounts
   Discount rate less 1.00%. Inflation Interest    Rate used to determine fiscal
2007 expense. This rate will be based on the 12/31/2006 economic environment and
will not be finalized until early 2007. Salary Increases    Sample rates are as
follows:

 

Age    Annual
Increase   <=25    12.0 % 26    11.6 % 27    11.2 % 28    10.8 % 29    10.4 % 30
   10.0 % 31    9.6 % 32    9.2 % 33    8.8 % 34    8.4 % 35    8.0 % 36    7.6
% 37    7.2 % 38    6.8 % 39    6.4 % 40    6.0 % 41    5.9 % 42    5.8 % 43   
5.7 % 44    5.6 % 45    5.5 % 46    5.4 % 47    5.3 % 48    5.2 % 49    5.1 % 50
   5.0 % 51    4.9 % 52    4.8 % 53    4.7 % 54    4.6 % 55    4.5 % 56    4.3 %
57    4.1 % 58    3.9 % 59    3.7 % >=60    3.5 %

 

     Weighted Average is 5.00% Social Security    Future wage bases are assumed
to increase at a rate of inflation plus 1.00% per year. Election of Lump Sums   
100% of participants are assumed to elect a lump sum payment upon retirement.
(The elected form of payment is used for participants currently receiving
benefits.)

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CONFIDENTIAL

 

Married Percentage    85%. Spouse Ages    Wives are assumed to be 3 years
younger than their husbands. Benefit Limits   

Benefits limited according to IRC §415 projected to increase with inflation.

(The maximum single plan annuity at age 65 is $180,000 in 2007.)

Compensation Limit    $225,000 projected to increase with inflation. Actuarial
Cost Method    Projected Unit Credit. Administrative Expenses    None assumed.

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CONFIDENTIAL

 

SCHEDULE F

CERTAIN ANNUITY CONTRACTS

Prudential Group Annuity Contracts (GA-5875, GA-252 and GA-973)

American General Life Insurance Company (Case #GA 010)

The Variable Annuity Life Insurance Company

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CONFIDENTIAL

 

SCHEDULE G

DUKE ENERGY WELFARE PLANS

Duke Energy Health and Welfare Benefit Plans (as last amended and restated
effective January 1, 2006, and as subsequently amended), including the following
components:

Duke Energy Medical Plan {PN 502}

Duke Energy Dental Plan {PN 506}

Duke Energy Basic Life Insurance Plan {PN 505}

Duke Energy Long-Term Disability Insurance Plan {PN 524}

Duke Energy Business Travel Accident Insurance Plan {PN 513}

Duke Energy Basic, Supplemental & Dependent Accidental Death & Dismemberment
Insurance Plan {PN 523}

Duke Energy Long-Term Care Insurance Plan {PN 510}

Duke Energy Cafeteria Plan – Medical Spending Account {PN 512}

Duke Energy Cafeteria Plan – Dependent Care Spending Account

Employee Assistance Program {PN 514}

Duke Energy Supplemental & Dependent Life Insurance Plan {PN 525}

Tuition Refund Program {PN 508}

Executive Physicals Program

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CONFIDENTIAL

 

SCHEDULE H

SPECTRA ENERGY RETAINED SRP

Panhandle Eastern Corporation Executive Deferred Compensation Plan

Panhandle Eastern Corporation Key Executive Deferred Compensation Plan

Panhandle Eastern Corporation Nonemployee Directors Retirement Plan

Panhandle Eastern Corporation 1982 Director’s Deferred Compensation Plan

Panhandle Eastern Corporation Director’s Deferred Compensation Plan

Panhandle Eastern Corporation Retirement Benefit Equalization Plan

Panhandle Eastern Corporation Key Executive Retirement Benefit Equalization Plan

Texas Eastern Deferred Income Program

Texas Eastern Supplemental Pension Plan

Texas Eastern Supplemental Retirement Plan

Texas Eastern Executive Service Supplemental Plan

Panhandle Eastern Corporation Executive Benefit Equalization Plan

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CONFIDENTIAL

 

SCHEDULE I

STOCK VALUATION METHODOLOGY

FOR OPTION CONVERSION PURPOSES

Post-Distribution Duke Energy Stock Price

The Post-Distribution Duke Energy Stock Price shall be the volume-weighted price
per share of Duke Energy Common Stock on the first four days of trading on the
NYSE beginning with the Distribution Date (or, if there is no such trading of
Duke Energy Common Stock on the Distribution Date, beginning with the first day
of such trading after the Distribution Date).

Post-Distribution Spectra Energy Stock Price

The Post-Distribution Spectra Energy Stock Price shall be the volume-weighted
price per share of Spectra Energy Common Stock on the first four days of trading
on the NYSE beginning with the Distribution Date (or, if there is no such
trading of Spectra Energy Common Stock on the Distribution Date, beginning with
the first day of such trading after the Distribution Date).

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CONFIDENTIAL

 

SCHEDULE J

LEGACY CINERGY ARRANGEMENTS RETAINED BY DUKE ENERGY

Qualified Retirement Plans

 

1. Cinergy Corp. Non-Union Employees’ Pension Plan

 

2. Cinergy Corp. Union Employees’ Pension Plan

 

3. Cinergy Corp. Union Employees’ Retirement Income Plan

 

4. Cinergy Corp. Non-Union Employees’ 401(k) Plan

 

5. Cinergy Corp. Union Employees’ 401(k) Plan

 

6. Cinergy Corp. Union Employees’ Savings Incentive Plan

Nonqualified Retirement Plans

 

1. Cinergy Corp. Supplemental Executive Retirement Plan

 

2. Cinergy Corp. Excess Pension Plan

 

3. Cinergy Corp. 401(k) Excess Plan

 

4. Cinergy Corp. Nonqualified Deferred Incentive Compensation Plan

 

5. Cinergy Corp. Excess Profit Sharing Plan

 

6. Cinergy Corp. Directors’ Deferred Compensation Plan

Welfare Plans

 

1. Cinergy Corp. Welfare Benefit Program

 

2. Cinergy Corp. Employees’ Flexible Benefits Plan

 

3. Cinergy Corp. Post-Retirement Health Reimbursement Account Program

 

4. Cinergy Corp. Merger Severance Plan for Non-Union Employees

 

5. Duke Energy Corporation Merger Severance Plan for Employees Represented by
the Utility Workers Union of America, Local Union #600

 

6. Duke Energy Corporation Merger Severance Plan for members of the
International Brotherhood of Electrical Workers Union, Local #1347

Incentive Plans

 

1. Cinergy Corp. Non-Management Annual Incentive Plan (AIP 2004)

 

2. Cinergy Corp. Commercial Business Unit Annual Incentive Plan

 

3. Cinergy Corp. Call Center East Incentive Plan

 

4. Cinergy Corp. Call Center West Incentive Plan

 

5. Cinergy Corp. 1996 Long-Term Incentive Compensation Plan

 

6. Cinergy Corp. Union Employees Incentive Plan

 

7. Trigen-Cinergy Solutions of Ashtabula Incentive Plan

 

8. Cinergy Solutions Incentive Plan (CSIP)

 

9. Cinergy Solutions Green Power (Texas City Plant) Incentive Plan

 

10. St. Bernard Cinergy Solutions Incentive Plan

 

11. Trigen-Cinergy Solutions of Rochester LLC Incentive Plan

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CONFIDENTIAL

 

12. Trigen-Cinergy Solutions of Rochester LLC Team Lead Discretionary Annual
Incentive Plan

 

13. Trigen-Cinergy Solutions of Rochester LLC Management Annual Incentive Plan

 

14. Tuscola Plant Incentive Plan

 

15. Cinergy Solutions of San Diego Incentive Plan

 

16. Cinergy Solutions of Texas City Incentive Plan

 

17. Trigen-Cinergy Solutions of Green Power Incentive Plan

 

18. Cinergy Solutions of Tuscola Incentive Plan

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CONFIDENTIAL

 

SCHEDULE K

LEGACY WESTCOAST ARRANGEMENTS RETAINED BY SPECTRA ENERGY

Qualified Retirement Plans

 

1. Pension Choices Plan for Employees of Westcoast Energy Inc. and Affiliated
Companies

 

2. Westcoast Energy Inc. Employees’ Retirement Plan

 

3. Union Gas Management & Supervisory Pension Plan

 

4. Union Gas Pension Plan for Salaried Employees Formerly Employed by Centra Gas
Inc.

 

5. Union Gas Bargaining Unit Pension Plan

 

6. Union Gas Pension Plan – Group One

 

7. Union Gas Pension Plan – Group Three

 

8. Westcoast Energy Group 401(k) Plan

 

9. Engage Energy America LLC 401(k) Plan

Nonqualified Retirement Plans

 

1. Duke Energy Maximum Pension Limits Plan

 

2. Duke Energy Supplemental Executive Retirement Plan

Welfare Plans

 

1. DEGT Canada Choices Actives’ Benefits Plan

 

2. DEGT Canada Traditional Actives’ Benefits Plan

 

3. DEGT Canada New (2004) Benefits Plan

 

4. DEGT Canada Traditional Retirees’ Benefits Plan

Equity Compensation Plans

 

1. Westcoast Energy Inc. 2006 Long-Term Incentive Plan

 

2. Westcoast Energy Inc. Employee Savings Plan

 

3. DEGT Canada Employee Savings Plan

 

4. Westcoast Energy Inc. Executive Share Purchase Plan

 

5. Duke Energy Income Fund Commercial Trust (Independent Trustees’ Compensation)