Exhibit 10.1

EXECUTION COPY

TAX MATTERS AGREEMENT

by and among

DUKE ENERGY CORPORATION,

SPECTRA ENERGY CORP,

and

THE OTHER SPECTRA ENERGY PARTIES

 

Dated as of

December 13, 2006

--------------------------------------------------------------------------------

TAX MATTERS AGREEMENT

THIS TAX MATTERS AGREEMENT is entered into as of December 13, 2006, by and among
Duke Energy Corporation, a Delaware corporation (“Duke Energy”), Spectra Energy
Corp (f/k/a Gas SpinCo, Inc.), a Delaware corporation (“Spectra Energy”), and
each of the Other Spectra Energy Parties; each a “Party” and collectively, 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, as of the date hereof, Duke Energy and its direct and indirect domestic
subsidiaries are members of an Affiliated Group, of which Duke Energy is the
common parent;

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 (the “Separation”);

WHEREAS, in order to effect the Separation, (i) Duke Energy Services Inc.
intends to transfer certain Gas Assets and Gas Liabilities to Duke Energy
Enterprises Corp. (“Internal Contribution 1”) and distribute the stock of Duke
Energy Enterprises Corp. to PanEnergy Corp. (“Internal Distribution 1”);
(ii) PanEnergy Corp. intends to transfer certain Gas Assets and Gas Liabilities
to Duke Energy Enterprises Corp. (“Internal Contribution 2”) and distribute the
stock of Duke Energy Enterprises Corp. to Duke Energy Registration Services,
Inc. (“Internal Distribution 2”); (iii) Duke Energy Registration Services, Inc.
intends to transfer certain Gas Assets and Gas Liabilities to Duke Energy
Enterprises Corp. (“Internal Contribution 3” and together with Internal
Contribution 1 and Internal Contribution 2, the “Internal Contributions”) and
distribute the stock of Duke Energy Enterprises Corp. to Duke Capital, LLC
(“Internal Distribution 3,” and together with Internal Distribution 1 and
Internal Distribution 2, the “Internal Distributions”); and (iv) Duke Energy
intends to transfer the membership interests of Duke Capital LLC to Spectra
Energy (the “Contribution”) and distribute all of the issued and outstanding
shares of common stock of Spectra Energy, on a pro rata basis (the
“Distribution,” and together with the Internal Contributions, Internal
Distributions and the Contribution, the “Spin-Off”) to the holders of the
outstanding common stock of Duke Energy.

WHEREAS, Duke Energy and Spectra Energy have determined that it is necessary and
desirable, as part of the Separation, to allocate, transfer, retain or assign to
the Spectra Energy Group, the Gas Assets and Gas Liabilities, and to allocate,
transfer, retain or assign to the Duke Energy Group, the Power Assets and Power
Liabilities;

WHEREAS, to effect this separation Duke Energy and Spectra Energy 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”);

 

1

--------------------------------------------------------------------------------

WHEREAS, it is the intention of the Parties that Internal Contribution 1 and
Internal Distribution 1 together qualify as a reorganization within the meaning
of sections 368(a)(1)(D) and 355 of the Code;

WHEREAS, it is the intention of the Parties that Internal Contribution 2 and
Internal Distribution 2 together qualify as a reorganization within the meaning
of sections 368(a)(1)(D) and 355 of the Code;

WHEREAS, it is the intention of the Parties that Internal Contribution 3 and
Internal Distribution 3 together qualify as a reorganization within the meaning
of sections 368(a)(1)(D) and 355 of the Code;

WHEREAS, it is the intention of the Parties that the Contribution, and the
Distribution together qualify as a reorganization within the meaning of sections
368(a)(1)(D) and 355 of the Code;

WHEREAS, in contemplation of the Separation, pursuant to which the Spectra
Energy Group will cease to be members of the Affiliated Group of which Duke
Energy is the parent, if (but only if) the Distribution occurs, the Parties have
determined to enter into this Agreement, setting forth their agreement with
respect to certain tax matters; and

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:

Section 1. Definitions.

Capitalized terms used in this Agreement and not otherwise defined in this
Section 1 shall have the meanings set forth in the Separation Agreement. As used
in this Agreement, the following capitalized terms shall have the following
meanings:

“Affiliated Group” means an affiliated group of corporations within the meaning
of section 1504(a)(1) of the Code that files a consolidated return for United
States federal Income Tax purposes.

“After Tax Amount” means any additional amount necessary to reflect the
hypothetical Tax consequences of the receipt or accrual of any payment required
to be made under this Agreement (including payment of an additional amount or
amounts hereunder and the effect of the deductions available for interest paid
or accrued and for Taxes such as state and local Income Taxes), determined by
using the highest applicable statutory corporate Income Tax rate (or rates, in
the case of an item that affects more than one Tax) for the relevant taxable
period (or portion thereof).

“Agreement” shall have the meaning set forth in the preamble hereto.

 

2

--------------------------------------------------------------------------------

“Audit” means any audit, assessment of Taxes, other examination by any Taxing
Authority, proceeding, or appeal of such a proceeding relating to Taxes, whether
administrative or judicial, including proceedings relating to competent
authority determinations.

“Business Day” shall have the meaning set forth in the Separation Agreement.

“Carryback Period” shall have the meaning set forth in Section 4.02.

“Code” means the Internal Revenue Code of 1986, as amended.

“Combined Return” means any Tax Return, other than with respect to United States
federal Income Taxes, filed on a consolidated, combined (including nexus
combination, worldwide combination, domestic combination, line of business
combination or any other form of combination) or unitary basis wherein Spectra
Energy or one or more Spectra Energy Affiliates join in the filing of such Tax
Return (for any taxable period or portion thereof) with Duke Energy or one or
more Duke Energy Affiliates.

“Consolidated Return” means any Tax Return with respect to United States federal
Income Taxes filed on a consolidated basis wherein Spectra Energy or one or more
Spectra Energy Affiliates join in the filing of such Tax Return (for any taxable
period or portion thereof) with Duke Energy or one or more Duke Energy
Affiliates.

“Contribution” shall have the meaning set forth in the recitals hereto.

“Deferred Intercompany Item” shall mean any income, gain, deduction or loss from
transactions between members of the same Affiliated Group that is deferred for
U.S. federal income tax purposes under the principles in Treasury Regulations §
1.1502-13, or any similar provision under state, local or foreign law.

“Distribution” shall have the meaning set forth in the recitals hereto.

“Distribution Date” shall have the meaning set forth in the Separation
Agreement.

“Distribution Taxes” means any Taxes imposed on, or increase in Taxes incurred
by, Duke Energy or any Duke Energy Affiliate, and any Taxes of a Duke Energy
shareholder (or former Duke Energy shareholder) that are required to be paid or
reimbursed by Duke Energy or any Duke Energy Affiliate pursuant to a Final
Determination, provided that Duke Energy shall have vigorously defended itself
in any legal proceeding involving Taxes of a Duke Energy shareholder, (without
regard to whether such Taxes are offset or reduced by any Tax Asset, Tax Item,
or otherwise) resulting from, or arising in connection with, the failure of
Internal Contribution 1, Internal Distribution 1, Internal Contribution 2,
Internal Distribution 2, Internal Contribution 3, Internal Distribution 3, the
Contribution or the Distribution to qualify as a transaction in which no income,
gain or loss is recognized pursuant to sections 355 and 368(a)(1)(D) of the Code
(including any Tax resulting from the application of section 355(d) or section
355(e) of the Code to Internal Distribution 1, Internal Distribution 2, Internal
Distribution 3 or the Distribution) or corresponding provisions of the laws of
any other jurisdictions. Any

 

3

--------------------------------------------------------------------------------

Income Tax referred to in the immediately preceding sentence shall be determined
using the highest applicable statutory corporate Income Tax rate for the
relevant taxable period (or portion thereof).

“Duke Energy” shall have the meaning set forth in the preamble hereto.

“Duke Energy Affiliate” means any Person included in the Duke Energy Group.

“Duke Energy Business Records” shall have the meaning set forth in
Section 9.01(c).

“Duke Energy Group” shall have the meaning set forth in the Separation
Agreement.

“Duke Energy Separate Tax Liability” means an amount equal to the Tax liability
that Duke Energy and each Duke Energy Affiliate would have incurred if they had
filed a consolidated return, combined return or a separate return, as the case
may be, separate from the members of the Spectra Energy Group, for the relevant
Tax period, and such amount shall be computed by Duke Energy in a manner
consistent with (i) general Tax accounting principles, (ii) the Code and the
Treasury Regulations promulgated thereunder, and (iii) past practice, if any.
For the avoidance of doubt, the Duke Energy Separate Tax Liability shall in no
event be less than zero.

“Duke Energy Stock Options” means options to acquire Duke Energy common stock.

“Duke Energy Tax Acts” shall have the meaning set forth in Section 4.01(a).

“Effective Time” shall have the meaning set forth in the Separation Agreement.

“Estimated Tax Installment Date” means, with respect to United States federal
Income Taxes, the estimated Tax installment due dates prescribed in section
6655(c) of the Code and, in the case of any other Tax, means any other date on
which an installment payment of an estimated amount of such Tax is required to
be made.

“Exchangeco Tax” means any Tax imposed on Spectra Energy or any Spectra Energy
Affiliate in connection with (i) the transfer of shares of Duke Energy stock to
Spectra Energy or any Spectra Energy Affiliate during any Post-Distribution
Period in connection with a transfer of such stock to holders of Duke Energy
Canada Exchangeco Inc. exchangeable shares; (ii) the transfer of cash by Duke
Energy to Spectra Energy or any Spectra Energy Affiliate in connection with any
Duke Energy dividend; or (iii) the transfer of shares of Duke Energy stock to
holders of Duke Energy Canada Exchangeco Inc. exchangeable shares.

“Excluded Spectra Energy Affiliates” means Duke Energy Early Grove Company and
Duke Energy Virginia Pipeline Company.

“Filing Party” shall have the meaning set forth in Section 8.01.

 

4

--------------------------------------------------------------------------------

“Final Determination” means the final resolution of liability for any Tax for
any taxable period, by or as a result of (i) a final and unappealable decision,
judgment, decree or other order by any court of competent jurisdiction; (ii) a
final settlement with the IRS, a closing agreement or accepted offer in
compromise under section 7121 or section 7122 of the Code, or a comparable
agreement under the laws of other jurisdictions, which resolves the entire Tax
liability for any taxable period; (iii) any allowance of a refund or credit in
respect of an overpayment of Tax, but only after the expiration of all periods
during which such refund may be recovered by the jurisdiction imposing the Tax;
or (iv) any other final disposition, including by reason of the expiration of
the applicable statute of limitations.

“Force Majeure” shall have the meaning set forth in the Separation Agreement.

“Gas Assets” shall have the meaning set forth in the Separation Agreement.

“Gas Business” shall have the meaning set forth in the Separation Agreement.

“Gas Liabilities” shall have the meaning set forth in the Separation Agreement.

“Income Tax” means any federal, state, local or foreign Tax determined (in whole
or in part) by reference to net income, net worth, gross receipts or capital, or
any such Taxes imposed in lieu of such a Tax. For the avoidance of doubt, the
term “Income Tax” includes any franchise Tax, net worth, gross receipts, capital
or any such Taxes imposed in lieu of such a Tax.

“Income Tax Return” means any Tax Return relating to any Income Tax.

“Internal Contribution 1” shall have the meaning set forth in the recitals
hereto.

“Internal Contribution 2” shall have the meaning set forth in the recitals
hereto.

“Internal Contribution 3” shall have the meaning set forth in the recitals
hereto.

“Internal Contributions” shall have the meaning set forth in the recitals
hereto.

“Internal Distribution 1” shall have the meaning set forth in the recitals
hereto.

“Internal Distribution 2” shall have the meaning set forth in the recitals
hereto.

“Internal Distribution 3” shall have the meaning set forth in the recitals
hereto.

“Internal Distributions” shall have the meaning set forth in the recitals
hereto.

“IRS” means the United States Internal Revenue Service or any successor thereto,
including its agents, representatives, and attorneys.

“IRS Ruling” means the private letter ruling issued by the IRS in connection
with the Spin-Off, which is a condition to the Distribution under the Separation
Agreement.

 

5

--------------------------------------------------------------------------------

“IRS Ruling Documents” means the request for the IRS Ruling filed with the IRS,
together with all supplemental filings or other materials subsequently submitted
on behalf of Duke Energy, the Duke Energy Affiliates and Duke Energy’s
shareholders to the IRS, the appendices and exhibits thereto, and the IRS Ruling
itself.

“Joint Responsibility Item” means any Tax Item, including Distribution Taxes,
for which the non-Filing Party’s responsibility under this Agreement could
exceed one million dollars ($1,000,000), but not a Sole Responsibility Item.

“Non-Income Tax Return” means any Tax Return relating to any Tax other than an
Income Tax.

“Officer’s Certificate” means a letter executed by an officer of Duke Energy or
Spectra Energy and provided to Spin-Off Tax Counsel or Tax Counsel as a
condition for the completion of the Spin-Off Tax Opinion, a Supplemental Tax
Spin-Off Opinion or Supplemental Tax Opinion.

“Other Spectra Energy Parties” means the entities listed in Schedule 1.1(129) of
the Separation Agreement other than Spectra Energy and the Excluded Spectra
Energy Affiliates.

“Owed Party” shall have the meaning set forth in Section 7.05.

“Owing Party” shall have the meaning set forth in Section 7.05.

“Parties” shall have the meaning set forth in the preamble hereto.

“Payment Period” shall have the meaning set forth in Section 7.05(e).

“Post-Distribution Period” means any taxable period beginning after the
Distribution Date.

“Power Assets” shall have the meaning set forth in the Separation Agreement.

“Power Business” shall have the meaning set forth in the Separation Agreement.

“Power Liabilities” shall have the meaning set forth in the Separation
Agreement.

“Pre-Distribution Period” means any taxable period beginning on or before the
Distribution Date.

“Separation” shall have the meaning set forth in the preamble hereto.

“Separation Agreement” shall have the meaning set forth in the recitals hereto.

 

6

--------------------------------------------------------------------------------

“Sole Responsibility Item” means any Tax Item for which the non-Filing Party has
the entire economic liability under this Agreement.

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

“Spectra Energy Affiliate” means any Person included in the Spectra Energy
Group.

“Spectra Energy Business Records” shall have the meaning set forth in
Section 9.01(c).

“Spectra Energy Group” shall have the meaning set forth in the Separation
Agreement.

“Spectra Energy Separate Tax Liability” means an amount equal to the Tax
liability that Spectra Energy and each Spectra Energy Affiliate would have
incurred if they had filed a consolidated return, combined return or a separate
return, as the case may be, separate from the members of the Duke Energy Group,
for the relevant Tax period, and such amount shall be computed by Duke Energy in
a manner consistent with (i) general Tax accounting principles, (ii) the Code
and the Treasury Regulations promulgated thereunder, and (iii) past practice, if
any. For the avoidance of doubt, the Spectra Energy Separate Tax Liability shall
in no event be less than zero, and nothing in this Agreement shall be construed
to require compensation by Duke Energy for any losses of Spectra Energy or any
Spectra Energy Affiliate.

“Spectra Energy Stock Options” means options to acquire Spectra Energy common
stock.

“Spectra Energy Tax Acts” shall have the meaning set forth in Section 4.01(b).

“Spin-Off” shall have the meaning set forth in the recitals hereto.

“Spin-Off Tax Counsel” means Skadden, Arps, Slate, Meagher & Flom LLP.

“Spin-Off Tax Opinion” means the opinion to be issued by Spin-Off Tax Counsel,
as one of the conditions to completing the Spin-Off, addressing certain United
States federal Income Tax consequences of the Spin-Off under section 355 of the
Code.

“Supplemental Ruling” means any ruling (other than the IRS Ruling) issued by any
Taxing Authority in connection with the Spin-Off.

“Supplemental Ruling Documents” means any request for a Supplemental Ruling,
together with any supplemental filings or other materials subsequently
submitted, the appendices and exhibits thereto, and any Supplemental Rulings
issued.

“Supplemental Spin-Off Tax Opinion” means any opinion (other than the Spin-Off
Tax Opinion) issued by any tax counsel in connection with the Spin-Off.

“Supplemental Tax Opinion” shall have the meaning set forth in Section 4.04(d).

 

7

--------------------------------------------------------------------------------

“Tax Asset” means any Tax Item that has accrued for Tax purposes, but has not
been realized during the taxable period in which it has accrued, and that could
reduce a Tax in another taxable period, including a net operating loss, net
capital loss, investment tax credit, foreign tax credit, charitable deduction or
credit related to alternative minimum tax or any other Tax credit.

“Tax Benefit” means a reduction in the Tax liability (or increase in refund or
credit or any item of deduction or expense) of a taxpayer (or of the Affiliated
Group, or similar group of entities as defined under corresponding provisions of
the laws of any other jurisdiction, of which it is a member) for any taxable
period. Except as otherwise provided in this Agreement, a Tax Benefit shall be
deemed to have been realized or received from a Tax Item in a taxable period
only if and to the extent that the Tax liability of the taxpayer (or of the
Affiliated Group, or similar group of entities as defined under corresponding
provisions of the laws of any other jurisdiction, of which it is a member) for
such period, after taking into account the effect of the Tax Item on the Tax
liability of such taxpayer (or of the Affiliated Group, or similar group of
entities as defined under corresponding provisions of the laws of any other
jurisdiction, of which it is a member) in the current period and all prior
periods, is less than it would have been had such Tax liability been determined
without regard to such Tax Item.

“Tax Counsel” means a nationally recognized law firm mutually agreed upon by
Duke Energy and Spectra Energy to provide a Supplemental Tax Opinion.

“Tax Detriment” means an increase in the Tax liability (or reduction in refund
or credit or any item of deduction or expense) of a taxpayer (or of the
Affiliated Group, or similar group of entities as defined under corresponding
provisions of the laws of any other jurisdiction, of which it is a member) for
any taxable period. Except as otherwise provided in this Agreement, a Tax
Detriment shall be deemed to have been realized or incurred from a Tax Item in a
taxable period only if and to the extent that the Tax liability of the taxpayer
(or of the Affiliated Group, or similar group of entities as defined under
corresponding provisions of the laws of any other jurisdiction, of which it is a
member) for such period, after taking into account the effect of the Tax Item on
the Tax liability of such taxpayer (or of the Affiliated Group, or similar group
of entities as defined under corresponding provisions of the laws of any other
jurisdiction, of which it is a member) in the current period and all prior
periods, is more than it would have been had such Tax liability been determined
without regard to such Tax Item.

“Tax Item” means any item of income, gain, loss, deduction, expense or credit,
or other attribute that may have the effect of increasing or decreasing any Tax.

“Tax Return” means any return, report, certificate, form or similar statement or
document (including any related or supporting information or schedule attached
thereto and any information return, amended tax return, claim for refund or
declaration of estimated Tax) required to be supplied to, or filed with, a
Taxing Authority in connection with the determination, assessment or collection
of any Tax or the administration of any laws, regulations or administrative
requirements relating to any Tax.

“Tax Material” shall have the meaning set forth in Section 9.01(a).

 

8

--------------------------------------------------------------------------------

“Taxes” means all federal, state, local or foreign taxes, charges, fees, duties,
levies, imposts, rates or other assessments, including income, gross receipts,
excise, property, sales, use, license, capital stock, transfer, franchise,
payroll, withholding, social security, value added or other taxes, (including
any interest, penalties or additions attributable thereto) and a “Tax” shall
mean any one of such Taxes.

“Taxing Authority” means any governmental authority or any subdivision, agency,
commission or authority thereof or any quasi-governmental or private body having
jurisdiction over the assessment, determination, collection or imposition of any
Tax (including the IRS).

“U.S. Gas Transmission Business” means the U.S. Gas Transmission Business as
defined in the IRS Ruling Documents.

Section 2. Preparation and Filing of Tax Returns.

2.01. Duke Energy’s Responsibility. Subject to the other applicable provisions
of this Agreement, Duke Energy shall have sole and exclusive responsibility for
the preparation and filing of:

(a) all Consolidated Returns and all Combined Returns for any taxable period;

(b) all Income Tax Returns (other than Consolidated Returns and Combined
Returns) with respect to Duke Energy and/or any Duke Energy Affiliate for any
taxable period;

(c) all Non-Income Tax Returns with respect to Duke Energy, any Duke Energy
Affiliate, or the Power Business or any part thereof for any taxable period; and

(d) all Non-Income Tax Returns with respect to Spectra Energy, any Spectra
Energy Affiliate, or the Gas Business or any part thereof, that are required to
be filed (taking into account any extension of time which has been requested or
received) on or prior to the Distribution Date.

2.02. Spectra Energy’s Responsibility. Spectra Energy shall have sole and
exclusive responsibility for the preparation and filing of:

(a) all Income Tax Returns (other than Consolidated Returns and Combined
Returns) with respect to Spectra Energy and/or any Spectra Energy Affiliate for
any taxable period; and

(b) all Non-Income Tax Returns with respect to Spectra Energy, any Spectra
Energy Affiliate, or the Gas Business or any part thereof, that are required to
be filed (taking into account any extension of time which has been requested or
received) after the Distribution Date.

2.03. RESERVED.

 

9

--------------------------------------------------------------------------------

2.04. Agent. Subject to the other applicable provisions of this Agreement,
Spectra Energy hereby irrevocably designates, and agrees to cause each Spectra
Energy Affiliate to so designate, Duke Energy as its sole and exclusive agent
and attorney-in-fact to take such action (including execution of documents) as
Duke Energy, in its sole discretion, may deem appropriate in any and all matters
(including Audits) relating to any Tax Return described in Section 2.01.

2.05. Manner of Tax Return Preparation.

(a) Unless otherwise required by a Taxing Authority, the Parties hereby agree to
prepare and file all Tax Returns, and to take all other actions, in a manner
consistent with (1) this Agreement, (2) the Spin-Off Tax Opinion, (3) any
Supplemental Spin-Off Tax Opinion, (4) any Supplemental Tax Opinion, (5) the IRS
Ruling Documents, and (6) any Supplemental Ruling Documents. All Tax Returns
shall be filed on a timely basis (taking into account applicable extensions) by
the Party responsible for filing such returns under this Agreement.

(b) Subject to the other applicable provisions of this Agreement, Duke Energy
shall have the exclusive right, in its sole discretion, with respect to any Tax
Return described in Section 2.01, to determine (1) the manner in which such Tax
Return shall be prepared and filed, including the elections, method of
accounting, positions, conventions and principles of taxation to be used and the
manner in which any Tax Item shall be reported, (2) whether any extensions shall
be requested, (3) the elections that will be made by Duke Energy, any Duke
Energy Affiliate, Spectra Energy, and/or any Spectra Energy Affiliate on such
Tax Return, (4) whether any amended Tax Returns shall be filed, (5) whether any
claims for refund shall be made, (6) whether any refunds shall be paid by way of
refund or credited against any liability for the related Tax, and (7) whether to
retain outside firms to prepare and/or review such Tax Returns.

(c) With respect to any Consolidated Return or Combined Return including or
reporting a Spectra Energy Separate Tax Liability: (1) Spectra Energy shall
provide Duke Energy with a pro forma draft of the portion of such Tax Return
that reflects Spectra Energy and/or any Spectra Energy Affiliate at least
seventy-five (75) days prior to the due date (with applicable extensions) for
the filing of such Tax Return; (2) Duke Energy shall provide to Spectra Energy a
pro forma draft of the portion of such Tax Return that reflects the Spectra
Energy Separate Tax Liability and a statement showing in reasonable detail Duke
Energy’s calculation of the Spectra Energy Separate Tax Liability (including
copies of all worksheets and other materials used in preparation thereof) at
least forty-five (45) days prior to the due date (with applicable extensions)
for the filing of such Tax Return for Spectra Energy’s review and comment; and
(3) Spectra Energy shall provide its comments to Duke Energy at least thirty
(30) days prior to the due date (with applicable extensions) for the filing of
such Tax Return. For the avoidance of doubt, nothing in this Section 2.05(c)
shall alter the sole and exclusive responsibility for the preparation and filing
of Tax Returns under Sections 2.01 and 2.02. Any dispute regarding the reporting
of any Tax Item on any Tax Return covered by this section shall be resolved
pursuant to Section 9.02. If Spectra Energy has not provided its comments on the
pro forma draft of the portion of the Tax Return, or in the case of a dispute
regarding the reporting of any Tax Item, such dispute has not been resolved by
the due date (with applicable extensions) for the filing of any Tax Return, Duke
Energy shall file such Tax Return reporting all Tax Items in the manner as
originally set forth on the pro forma draft of the portion of the Tax

 

10

--------------------------------------------------------------------------------

Return provided to Spectra Energy; provided, however, that Duke Energy agrees
that it will thereafter file an amended Tax Return, if necessary, reporting any
disputed Tax Item in the manner determined under Section 9.02, and any other Tax
Item as agreed upon by Duke Energy and Spectra Energy.

2.06. Tax Services. The Transition Services Agreement shall control the
provision of any other Tax related services by Duke Energy for Spectra Energy
and/or any Tax related services by Spectra Energy for Duke Energy.

Section 3. Liability for Taxes.

3.01. Spectra Energy’s Liability for Taxes. Spectra Energy and each Spectra
Energy Affiliate (other than the Excluded Spectra Energy Affiliates) shall be
jointly and severally liable for the following Taxes, and shall be entitled to
receive and retain all refunds and credits of Taxes previously incurred by
Spectra Energy, any Spectra Energy Affiliate, or the Gas Business with respect
to such Taxes:

(a) all Taxes with respect to Tax Returns described in Section 2.01(a) to the
extent that such Taxes are related to (i) the Spectra Energy Separate Tax
Liability, or (ii) the Gas Business, for any taxable period;

(b) all Taxes with respect to Tax Returns described in Section 2.01(d);

(c) all Taxes with respect to Tax Returns described in Section 2.02;

(d) all Taxes imposed by any Taxing Authority with respect to Spectra Energy,
any Spectra Energy Affiliate, or the Gas Business (other than in connection with
the required filing of a Tax Return described in Sections 2.01(a), 2.01(d) or
2.02) for any taxable period;

(e) notwithstanding any other provision in Sections 3.01 or 3.02, Spectra Energy
and any Spectra Energy Affiliates (other than the Excluded Spectra Energy
Affiliates) shall be jointly and severally liable for the portion of any
Exchangeco Tax as determined based on the formula for the allocation of
Unallocated Liabilities described in Article VI of the Separation Agreement;

(f) notwithstanding any other provision in Sections 3.01 or 3.02, Spectra Energy
and any Spectra Energy Affiliates (other than the Excluded Spectra Energy
Affiliates) shall be jointly and severally liable for any Taxes resulting from
any Deferred Intercompany Item, whenever created, that is caused to be
recognized after the Distribution, by any action or omission of Spectra Energy
or any Spectra Energy Affiliate (Duke Energy shall have no liability for any
such Taxes); and

(g) notwithstanding any other provision in this Agreement, all Taxes with
respect to the matters or items described on Schedule 3.01(g) attached hereto.

 

11

--------------------------------------------------------------------------------

3.02. Duke Energy’s Liability for Taxes. Duke Energy shall be liable for the
following Taxes, and shall be entitled to receive and retain all refunds and
credits of Taxes previously incurred by Duke Energy, any Duke Energy Affiliate,
or the Power Business with respect to such Taxes:

(a) all Taxes with respect to Tax Returns described in Section 2.01(a) to the
extent that such Taxes are related to (i) the Duke Energy Separate Tax
Liability, or (ii) the Power Business, for any taxable period;

(b) all Taxes with respect to Tax Returns described in Section 2.01(b) or
Section 2.01(c);

(c) all Taxes imposed by any Taxing Authority with respect to Duke Energy, any
Duke Energy Affiliate, or the Power Business (other than in connection with the
required filing of a Tax Return described in Sections 2.01(a), 2.01(b) or
2.01(c)) for any taxable period;

(d) notwithstanding any other provision in Sections 3.01 or 3.02, Duke Energy
shall be liable for the portion of any Exchangeco Tax as determined based on the
formula for the allocation of Unallocated Liabilities described in Article VI of
the Separation Agreement;

(e) notwithstanding any other provision in Sections 3.01 or 3.02, Duke Energy
shall be liable for any Taxes resulting from any Deferred Intercompany Item,
whenever created, that is caused to be recognized after the Distribution, by any
action or omission of Duke Energy or any Duke Energy Affiliate (Spectra Energy
shall have no liability for any such Taxes); and

(f) notwithstanding any other provision in this Agreement, all Taxes with
respect to the matters or items described on Schedule 3.02(f) attached hereto.

3.03. Joint Liability for Certain Unallocated Taxes.

(a) In the event that any Taxes with respect to Tax Returns described in
Section 2.01(a) are not otherwise allocated by Sections 3.01 or 3.02, then the
liability for such Taxes shall be allocated in the manner consistent with the
allocation of Unallocated Liabilities described in Article VI of the Separation
Agreement.

(b) Except for Distribution Taxes, any Tax resulting from any transactions
undertaken to effectuate the Separation shall be allocated in the manner
consistent with the allocation of Unallocated Liabilities described in Article
VI of the Separation Agreement, and for the avoidance of doubt, such Taxes shall
not be allocated under the provisions in Section 3.01 or 3.02.

3.04. Refunds and Credits. Nothing in this Agreement shall be construed as to
require compensation, by payment, credit, offset or otherwise, by Duke Energy
(or any Duke Energy Affiliate) to Spectra Energy (or any Spectra Energy
Affiliate) for any loss, deduction, credit or other Tax attribute arising in
connection with, or related to, Spectra Energy or any Spectra Energy Affiliate,
that is shown on, or otherwise reflected with respect to, any Tax Return

 

12

--------------------------------------------------------------------------------

described in Section 2.01. Nothing in this Agreement shall be construed as to
require compensation, by payment, credit, offset or otherwise, by Spectra Energy
(or any Spectra Energy Affiliate) to Duke Energy (or any Duke Energy Affiliate)
for any loss, deduction, credit or other Tax attribute arising in connection
with, or related to, Duke Energy or any Duke Energy Affiliate, that is shown on,
or otherwise reflected with respect to, any Tax Return described in
Section 2.02.

3.05. Payment of Tax Liability. If one Party is liable or responsible for Taxes,
under Sections 3.01 through 3.04, with respect to Tax Returns for which another
party is responsible for preparing and/or filing, or with respect to Taxes that
are paid by another Party, then the liable or responsible Party shall pay the
Taxes (or a reimbursement of such Taxes) to the other Party pursuant to
Section 7.05; provided, however, Spectra Energy’s liability to pay Duke Energy
under Section 7.05 shall be reduced by the amount Duke Energy accrued for Income
Taxes of Spectra Energy for the 2006 calendar year; provided further, however,
that if the amount that Spectra Energy owes Duke Energy is negative as a result
of such reduction, Duke Energy shall pay the absolute value of such negative
amount to Spectra Energy.

3.06. Computation. Duke Energy shall provide Spectra Energy with a written
calculation in reasonable detail (including copies of all work sheets and other
materials used in preparation thereof) setting forth the amount of any Spectra
Energy Separate Tax Liability or estimated Spectra Energy Separate Tax Liability
(for purposes of Section 7.01) and any Taxes for which Spectra Energy is liable
under Section 3.01. Spectra Energy shall have the right to review and comment on
such calculation. Any dispute with respect to such calculation shall be resolved
pursuant to Section 9.02; provided, however, that, notwithstanding any dispute
with respect to any such calculation, in no event shall any payment attributable
to the amount of any Spectra Energy Separate Tax Liability or estimated Spectra
Energy Separate Tax Liability be paid later than the date provided in Section 7.

Section 4. Distribution Taxes and Deconsolidation.

4.01. Distribution Taxes.

(a) Duke Energy’s Liability for Distribution Taxes. Notwithstanding Sections
3.01 through 3.04, Duke Energy shall be liable for any Distribution Taxes, to
the extent that such Distribution Taxes are attributable to, caused by, or
result from, one or more of the following (collectively, “Duke Energy Tax
Acts”):

(i) any action or omission by Duke Energy or any Duke Energy Affiliate, at any
time, that is inconsistent with any material, information, covenant or
representation in an Officer’s Certificate, Spin-Off Tax Opinion, Supplemental
Spin-Off Tax Opinion, Supplemental Tax Opinion, IRS Ruling Documents or
Supplemental Ruling Documents (for the avoidance of doubt, disclosure by Duke
Energy (or any Duke Energy Affiliate) to Spectra Energy (or any Spectra Energy
Affiliate) of any action or fact that is inconsistent with any material,
information, covenant or representation submitted to Spin-Off Tax Counsel, Tax
Counsel, the IRS, or other Taxing Authority, as applicable, in connection with
an Officer’s Certificate, Spin-Off Tax Opinion, Supplemental Spin-Off Tax
Opinion, Supplemental Tax Opinion, IRS Ruling Documents or Supplemental Ruling
Documents, shall not relieve Duke Energy (or any Duke Energy Affiliate) of
liability under this Agreement);

 

13

--------------------------------------------------------------------------------

(ii) any action or omission by Duke Energy or any Duke Energy Affiliate, after
the Distribution (including any act or omission that is in furtherance of,
connected to, or part of a plan or series of related transactions (within the
meaning of section 355(e) of the Code) occurring on or prior to the
Distribution), including a cessation, transfer to affiliates, or disposition of
the active trades or businesses, stock buyback or payment of an extraordinary
dividend;

(iii) any acquisition of any stock or assets of Duke Energy or any Duke Energy
Affiliate, by one or more other Persons (other than Spectra Energy or a Spectra
Energy Affiliate) prior to or following the Distribution;

(iv) any issuance of stock by Duke Energy or any Duke Energy Affiliate, after
the Distribution, including any issuance pursuant to the exercise of employee
stock options or other employment related arrangements, or the exercise of
warrants; or

(v) any change in ownership of stock in Duke Energy or any Duke Energy Affiliate
after the Distribution.

(b) Spectra Energy’s Liability for Distribution Taxes. Notwithstanding Sections
3.01 through 3.04, Spectra Energy, and each Spectra Energy Affiliate (other than
the Excluded Spectra Energy Affiliates), shall be jointly and severally liable
for any Distribution Taxes, to the extent that such Distribution Taxes are
attributable to, caused by, or result from, one or more of the following
(collectively, “Spectra Energy Tax Acts”):

(i) any action or omission by Spectra Energy or any Spectra Energy Affiliate, at
any time, that is inconsistent with any material, information, covenant or
representation in an Officer’s Certificate, Spin-Off Tax Opinion, Supplemental
Spin-Off Tax Opinion, Supplemental Tax Opinion, IRS Ruling Documents or
Supplemental Ruling Documents, (for the avoidance of doubt, disclosure by
Spectra Energy (or any Spectra Energy Affiliate) to Duke Energy (or any Duke
Energy Affiliate) of any action or fact that is inconsistent with any material,
information, covenant or representation submitted to Spin-Off Tax Counsel, Tax
Counsel, the IRS, or other Taxing Authority, as applicable, in connection with
an Officer’s Certificate, Spin-Off Tax Opinion, Supplemental Spin-Off Tax
Opinion, Supplemental Tax Opinion, IRS Ruling Documents, Supplemental Ruling
Documents, shall not relieve Spectra Energy (or any Spectra Energy Affiliate) of
liability under this Agreement);

(ii) any action or omission by Spectra Energy or any Spectra Energy Affiliate,
after the Distribution (including any act or omission that is in furtherance of,
connected to, or part of a plan or series of related transactions (within the
meaning of section 355(e) of the Code) occurring on or prior to the
Distribution), including a cessation, transfer to affiliates, or disposition of
the active trades or businesses, stock buyback or payment of an extraordinary
dividend;

 

14

--------------------------------------------------------------------------------

(iii) any acquisition of any stock or assets of Spectra Energy or any Spectra
Energy Affiliate, by one or more other Persons (other than Duke Energy or any
Duke Energy Affiliate) prior to or following the Distribution;

(iv) any issuance of stock by Spectra Energy or any Spectra Energy Affiliate,
after the Distribution, including any issuance pursuant to the exercise of
employee stock options or other employment related arrangements, or the exercise
of warrants; or

(v) any change in ownership of stock in Spectra Energy or any Spectra Energy
Affiliate after the Distribution.

(c) Joint Liability for Remaining Distribution Taxes. In the event that
Distribution Taxes are not otherwise allocated by Sections 4.01(a) or (b), then
the liability for such Distribution Taxes shall be allocated in the manner
consistent with the allocation of Unallocated Liabilities described in Article
VI of the Separation Agreement. In the event that one or more Duke Energy Tax
Acts occur simultaneously with one or more Spectra Energy Tax Acts and these
result in Distribution Taxes, then the allocation of the liability for such
Distribution Taxes shall be allocated in the manner consistent with the
allocation of Unallocated Liabilities described in Article VI of the Separation
Agreement, and, for the avoidance of doubt, Sections 4.01(a) or (b) shall not
control the allocation of such Distribution Taxes.

(d) Representation. Each of Duke Energy and Spectra Energy represents that, as
of the date of this Agreement, neither it nor its Affiliates know of any fact
that may cause Internal Contribution 1, Internal Distribution 1, Internal
Contribution 2, Internal Distribution 2, Internal Contribution 3, Internal
Distribution 3, the Contribution or the Distribution to fail to qualify as
transactions in which no income, gain, or loss is recognized pursuant to section
355 of the Code.

(e) Representative Examples. For the avoidance of doubt, Appendix A to this
Agreement sets forth examples illustrating the intended application of this
Section 4.01.

4.02. Carrybacks.

(a) In General. Duke Energy agrees to pay to Spectra Energy the United States
federal Income Tax Benefit from the use in any Pre-Distribution Period (the
“Carryback Period”) of a carryback of any Tax Asset of the Spectra Energy Group
from a Post-Distribution Period (other than a carryback of any Tax Asset
attributable to Distribution Taxes for which the liability is borne by Duke
Energy or any Duke Energy Affiliate). If subsequent to the payment by Duke
Energy to Spectra Energy of the United States federal Income Tax Benefit of a
carryback of a Tax Asset of the Spectra Energy Group, there shall be a Final
Determination which results in a (1) change to the amount of the Tax Asset so
carried back or (2) change to the amount of such United States federal Income
Tax Benefit, Spectra Energy shall repay to Duke Energy, or Duke Energy shall
repay to Spectra Energy, as the case may be, any amount which would not have
been payable to such other Party pursuant to this Section 4.02(a) had the amount
of the Tax Benefit been determined in light of these events. Nothing in this
Section 4.02(a) shall require Duke Energy to file an amended Tax Return or claim
for refund of United States federal Income Taxes; provided, however, that Duke
Energy shall use its reasonable efforts to use any carryback of a Tax Asset of
the Spectra Energy Group that is carried back under this Section 4.02(a).

 

15

--------------------------------------------------------------------------------

(b) Net Operating Losses. Notwithstanding any other provision of this Agreement,
Spectra Energy hereby expressly agrees to elect (under section 172(b)(3) of the
Code and, to the extent feasible, any similar provision of any state, local or
foreign Tax law) to relinquish any right to carryback net operating losses to
any Pre-Distribution Periods of Duke Energy (in which event no payment shall be
due from Duke Energy to Spectra Energy in respect of such net operating losses).

4.03. Allocation of Tax Items. All Tax computations for (1) any Pre-Distribution
Periods ending on the Distribution Date and (2) the immediately following
taxable period of Spectra Energy or any Spectra Energy Affiliate, shall be made
pursuant to the principles of section 1.1502-76(b) of the Treasury Regulations
or of a corresponding provision under the laws of other jurisdictions, as agreed
upon by Duke Energy and Spectra Energy.

4.04. Continuing Covenants.

(a) In General. Each of Duke Energy and Spectra Energy agrees (1) not to take
any action (or cause its Affiliates to take any action) reasonably expected to
result in an increased Tax liability to the other, a reduction in a Tax Asset of
the other or an increased liability to the other under this Agreement, and
(2) to take any action (and cause its Affiliates to take any action) reasonably
requested by the other that would reasonably be expected to result in a Tax
Benefit or avoid a Tax Detriment to the other, provided, in either such case,
that the taking or refraining to take such action does not result in any
additional cost not fully compensated for by the other Party or any other
adverse effect to such Party. The Parties hereby acknowledge that the preceding
sentence is not intended to limit, and therefore shall not apply to, the rights
of the Parties with respect to matters otherwise covered by this Agreement.

(b) Spectra Energy Restrictions. Spectra Energy agrees that it will not
knowingly take or fail to take, or permit any Spectra Energy Affiliate to
knowingly take or fail to take, any action where such action or failure to act
would be inconsistent with any material, information, covenant or representation
that relates to facts or matters related to Spectra Energy (or any Spectra
Energy Affiliate) or within the control of Spectra Energy and is contained in an
Officer’s Certificate, Spin-Off Tax Opinion, Supplemental Tax Opinion,
Supplemental Spin-Off Tax Opinion, IRS Ruling Documents or Supplemental Ruling
Documents, (except where such material, information, covenant or representation
was not previously disclosed to Spectra Energy) other than as permitted by this
Section 4.04. For this purpose an action is considered inconsistent with a
representation if the representation states that there is no plan or intention
to take such action. Spectra Energy agrees that it will not take (and it will
cause the Spectra Energy Affiliates to refrain from taking) any position on a
Tax Return that is inconsistent with the treatment of Internal Contribution 1,
Internal Distribution 1, Internal Contribution 2, Internal Distribution 2,
Internal Contribution 3, Internal Distribution 3, the Contribution or the
Distribution as transactions in which no income, gain, or loss is recognized
pursuant to section 355 of the Code.

 

16

--------------------------------------------------------------------------------

(c) Duke Energy Restrictions. Duke Energy agrees that it will not knowingly take
or fail to take, or permit any Duke Energy Affiliate to knowingly take or fail
to take, any action where such action or failure to act would be inconsistent
with any material, information, covenant or representation that relates to facts
or matters related to Duke Energy (or any Duke Energy Affiliate) or within the
control of Duke Energy and is contained in a Spin-Off Tax Opinion, Supplemental
Tax Opinion, Supplemental Spin-Off Tax Opinion, IRS Ruling Documents or
Supplemental Ruling Documents, other than as permitted by this Section 4.04. For
this purpose an action is considered inconsistent with a representation if the
representation states that there is no plan or intention to take such action.
Duke Energy agrees that it will not take (and it will cause the Duke Energy
Affiliates to refrain from taking) any position on a Tax Return that is
inconsistent with the treatment of Internal Contribution 1, Internal
Distribution 1, Internal Contribution 2, Internal Distribution 2, Internal
Contribution 3, Internal Distribution 3, the Contribution or the Distribution as
transactions in which no income, gain, or loss is recognized pursuant to section
355 of the Code.

(d) Certain Spectra Energy Actions Following the Distribution. Spectra Energy
agrees that, during the two (2) year period following the Distribution, without
first obtaining, at Spectra Energy’s own expense, either a supplemental opinion
from Tax Counsel that such action will not result in Distribution Taxes (a
“Supplemental Tax Opinion”) or a Supplemental Ruling that such action will not
result in Distribution Taxes, unless in any such case Duke Energy and Spectra
Energy agree otherwise, in writing, Spectra Energy shall not (1) sell all or
substantially all of the assets of the U.S. Gas Transmission Business, (2) merge
any entity that is part of the U.S. Gas Transmission Business with another
entity, without regard to which party is the surviving entity, (3) transfer any
assets of the U.S. Gas Transmission Business in a transaction described in
section 351 (other than a transfer to a corporation which files a United States
federal consolidated Income Tax Return with Spectra Energy and which is
wholly-owned, directly or indirectly, by Spectra Energy), section 721 or
subparagraph (C) or (D) of section 368(a)(1) of the Code, (4) issue stock of
Spectra Energy or any Spectra Energy Affiliate (or any instrument that is
convertible or exchangeable into any such stock) in an acquisition or public or
private offering (excluding any issuance pursuant to the exercise of employee
stock options or other employment related arrangements having customary terms
and conditions and that satisfy the requirements of Treasury Regulations section
1.355-7(d)(8), or any successor provision thereto), or (5) facilitate or
otherwise participate in any acquisition of stock in Spectra Energy that would
result in any shareholder owning five percent (5%) or more of the outstanding
stock of Spectra Energy. Spectra Energy (or any Spectra Energy Affiliate) shall
only undertake any of such actions after Duke Energy’s receipt of such
Supplemental Tax Opinion or Supplemental Ruling and pursuant to the terms and
conditions of any such Supplemental Tax Opinion or Supplemental Ruling or as
otherwise consented to in writing in advance by Duke Energy. The Parties hereby
agree that they will act in good faith to take all reasonable steps necessary to
amend this Section 4.04(d), from time to time, by mutual agreement, to (i) add
certain actions to the list contained herein, or (ii) remove certain actions
from the list contained herein, in either case, in order to reflect any relevant
change in law, regulation or administrative interpretation occurring after the
date of this Agreement.

(e) Spectra Energy and Duke Energy Cooperation. Spectra Energy and Duke Energy
agree that, at the request of the other Party, the Parties shall cooperate fully
to seek to

 

17

--------------------------------------------------------------------------------

obtain, as expeditiously as possible, the Spin-Off Tax Opinion, any Supplemental
Spin-Off Tax Opinion, any Supplemental Tax Opinion, the IRS Ruling, and/or any
Supplemental Ruling. Such cooperation shall include the execution of any
documents that may be necessary or reasonably helpful in connection with
obtaining the Spin-Off Tax Opinion, Supplemental Spin-Off Tax Opinion,
Supplemental Tax Opinion, IRS Ruling, and/or Supplemental Ruling (including any
power of attorney, Officer’s Certificate, IRS Ruling Documents, Supplemental
Rulings Documents, and/or reasonably requested written representations
confirming that (i) Duke Energy or Spectra Energy, as the case may be, has read
the Officer’s Certificate, IRS Ruling Documents, and/or Supplemental Ruling
Documents, and (ii) all information and representations, if any, relating to
Duke Energy (or any Duke Energy Affiliate) or Spectra Energy (or any Spectra
Energy Affiliate), as the case may be, contained in the Officer’s Certificate,
IRS Ruling Documents, and/or Supplemental Ruling Documents are true, correct and
complete in all material respects).

4.05. Allocation of Tax Assets.

(a) In General. In connection with the Spin-Off, Duke Energy and Spectra Energy
shall cooperate in determining the allocation of any Tax Assets among Duke
Energy, each Duke Energy Affiliate, Spectra Energy, and each Spectra Energy
Affiliate. The Parties hereby agree that in the absence of controlling legal
authority or unless otherwise provided under this Agreement, Tax Assets shall be
allocated to the legal entity that created such Tax Assets.

(b) Earnings and Profits. Duke Energy will advise Spectra Energy in writing of
the decrease in Duke Energy earnings and profits attributable to the Spin-Off
under section 312(h) of the Code on or before the first anniversary of the
Distribution Date; provided, however, that Duke Energy shall provide Spectra
Energy with estimates of such amounts (determined in accordance with past
practice) prior to such anniversary as reasonably requested by Spectra Energy.
Any reasonable third party cost incurred after the Spin-Off in connection with
determining the earnings and profits attributable to the Spin-Off shall be
allocated among Duke Energy and Spectra Energy consistent with the allocation of
Unallocated Liabilities described in Article VI of the Separation Agreement.

4.06. DEFS Distribution. Notwithstanding anything to the contrary in Article
III, Spectra Energy agrees to pay Duke Energy no later than March 9, 2007 an
amount equal to the 2006 tax distribution paid or distributed by Duke Energy
Field Services LLC to Duke Energy Enterprises Corporation (which is expected to
be paid or distributed in January 2007). Spectra Energy shall notify Duke Energy
of the amount of such 2006 tax distribution within ten (10) days of Duke Energy
Enterprises Corporation’s receipt of such tax distribution from Duke Energy
Field Services.

4.07. Alternative Minimum Tax Audits. If the proposed settlement associated with
the Audit by the IRS of certain Duke Energy entities (including certain members
of the Spectra Energy Group) with respect primarily to alternative minimum tax
matters for the periods 1997-1998 is not finally agreed to by Duke Energy and
the IRS prior to the Effective Time, then Duke Energy will cause the Spectra
Energy Target Cash Amount set forth in the Separation Agreement to be increased
by $44 million. If such $44 million is required to be delivered to Spectra
Energy

 

18

--------------------------------------------------------------------------------

pursuant to this Section 4.07, promptly following effectiveness of the
settlement and receipt by Duke Energy of any amounts payable by the Service to
Duke Energy, Spectra Energy shall repay such $44 million to Duke Energy with
interest at the rate described in Section 7.05(e).

Section 5. Employee Wages.

At Duke Energy’s request, Spectra Energy shall assume the Form W-2 and Form W-3
reporting obligations (including the filing of all forms necessary to comply
with magnetic media reporting requirements) of Duke Energy with respect to any
employee of the Gas Business that Spectra Energy or any Spectra Energy Affiliate
employs during the calendar year which includes the Distribution Date consistent
with the procedures set forth in section 5 of Rev. Proc. 2004-53, 2004-34 I.R.B.
320.

Section 6. Indemnification.

6.01. In General. Duke Energy shall indemnify Spectra Energy, each Spectra
Energy Affiliate, and their respective directors, officers and employees, and
hold them harmless from and against any and all Taxes for which Duke Energy or
any Duke Energy Affiliate is liable under this Agreement and any loss, cost,
damage or expense, including reasonable attorneys’ fees and costs, that is
attributable to, or results from, the failure of Duke Energy, any Duke Energy
Affiliate or any director, officer or employee to make any payment required to
be made under this Agreement. Spectra Energy and each Spectra Energy Affiliate
(other than the Excluded Spectra Energy Affiliates) shall jointly and severally
indemnify Duke Energy, each Duke Energy Affiliate, and their respective
directors, officers and employees, and hold them harmless from and against any
and all Taxes for which Spectra Energy or any Spectra Energy Affiliate is liable
under this Agreement and any loss, cost, damage or expense, including reasonable
attorneys’ fees and costs, that is attributable to, or results from, the failure
of Spectra Energy, any Spectra Energy Affiliate or any director, officer or
employee to make any payment required to be made under this Agreement.

6.02. Inaccurate or Incomplete Information. Duke Energy shall indemnify Spectra
Energy, each Spectra Energy Affiliate, and their respective directors, officers
and employees, and hold them harmless from and against any cost, fine, penalty,
or other expenses of any kind attributable to the failure of Duke Energy or any
Duke Energy Affiliate to supply Spectra Energy or any Spectra Energy Affiliate
with accurate and complete information in connection with the preparation of any
Tax Return. Spectra Energy and each Spectra Energy Affiliate (other than the
Excluded Spectra Energy Affiliates) shall jointly and severally indemnify Duke
Energy, each Duke Energy Affiliate, and their respective directors, officers and
employees, and hold them harmless from and against any cost, fine, penalty, or
other expenses of any kind attributable to the failure of Spectra Energy or any
Spectra Energy Affiliate to supply Duke Energy or any Duke Energy Affiliate with
accurate and complete information in connection with the preparation of any Tax
Return.

6.03. No Indemnification for Tax Items. Nothing in this Agreement shall be
construed as a guarantee of the existence or amount of any loss, credit,
carryforward, basis or other Tax Item, whether past, present or future, of Duke
Energy, any Duke Energy Affiliate, Spectra Energy or any Spectra Energy
Affiliate.

 

19

--------------------------------------------------------------------------------

Section 7. Payments.

7.01. Estimated Tax Payments. Not later than five (5) Business Days prior to
each Estimated Tax Installment Date with respect to a taxable period for which a
Consolidated Return or a Combined Return will be filed, Spectra Energy shall pay
to Duke Energy on behalf of the Spectra Energy Group an amount equal to the
amount of any estimated Spectra Energy Separate Tax Liability for any
Post-Distribution Period that Spectra Energy otherwise would have been required
to pay to a Taxing Authority on such Estimated Tax Installment Date.

7.02. True-Up Payments. Not later than five (5) Business Days after completion
of a Tax Return, Spectra Energy shall pay to Duke Energy, or Duke Energy shall
pay to Spectra Energy, as appropriate, an amount equal to the difference, if
any, between the Spectra Energy Separate Tax Liability and the aggregate amount
paid by Spectra Energy with respect to such period under Section 7.01.

7.03. Redetermination Amounts. In the event of a redetermination of any Tax Item
reflected on any Consolidated Return or Combined Return (other than Tax Items
relating to Distribution Taxes), as a result of a refund or credit of Taxes
paid, a Final Determination or any settlement or compromise with any Taxing
Authority which in any such case would affect the Spectra Energy Separate Tax
Liability, Duke Energy shall prepare a revised pro forma Tax Return in
accordance with Section 2.01(a) for the relevant taxable period reflecting the
redetermination of such Tax Item as a result of such refund, Final
Determination, settlement or compromise. Spectra Energy shall pay to Duke
Energy, or Duke Energy shall pay to Spectra Energy, as appropriate, an amount
equal to the difference, if any, between the Spectra Energy Separate Tax
Liability reflected on such revised pro forma Tax Return and the Spectra Energy
Separate Tax Liability for such period as originally computed pursuant to this
Agreement.

7.04. Payments of Refunds and Credits. If one Party receives a refund or credit
of any Tax to which the other Party is entitled pursuant to Section 3.04, the
Party receiving such refund or credit shall pay to the other Party the amount of
such refund or credit pursuant to Section 7.05.

7.05. Payments Under This Agreement. In the event that one Party (the “Owing
Party”) is required to make a payment to another Party (the “Owed Party”)
pursuant to this Agreement, then such payments shall be made according to this
Section 7.05.

(a) In General. All payments shall be made to the Owed Party or to the
appropriate Taxing Authority as specified by the Owed Party within the time
prescribed for payment in this Agreement, or if no period is prescribed, within
ten (10) days after delivery of written notice of payment owing together with a
computation of the amounts due.

(b) Treatment of Payments. Unless otherwise required by any Final Determination,
the Parties agree that any payments made by one Party to another Party pursuant

 

20

--------------------------------------------------------------------------------

to this Agreement (other than (i) payments for tax services pursuant to the
Transition Services Agreement, (ii) payments of After Tax Amounts pursuant to
Section 7.05(d), and (iii) payments of interest pursuant to Section 7.05(e))
shall be treated for all Tax purposes as nontaxable payments (dividend
distributions or capital contributions, as the case may be) made immediately
prior to the Distribution and, accordingly, as not includible in the taxable
income of the recipient or as deductible by the payor.

(c) Prompt Performance. All actions required to be taken (including payments) by
any Party under this Agreement shall be performed within the time prescribed for
performance in this Agreement, or if no period is prescribed, such actions shall
be performed promptly.

(d) After Tax Amounts. If pursuant to a Final Determination it is determined
that the receipt or accrual of any payment made under this Agreement (other than
(i) payments for Tax Services pursuant to Section 2.06, and (ii) payments of
interest pursuant to Section 7.05(e)) is subject to any Tax, the Party making
such payment shall be liable for (a) the After Tax Amount with respect to such
payment and (b) interest at the rate described in Section 7.05(e) on the amount
of such Tax from the date such Tax accrues with respect to the receipt of such
payment through the date of payment of such After Tax Amount. A Party making a
demand for a payment pursuant to this Agreement and for a payment of an After
Tax Amount with respect to such payment shall separately specify and compute
such After Tax Amount. However, a Party may choose not to specify an After Tax
Amount in a demand for payment pursuant to this Agreement without thereby being
deemed to have waived its right subsequently to demand an After Tax Amount with
respect to such payment.

(e) Interest. Payments pursuant to this Agreement that are not made within the
period prescribed in this Agreement (the “Payment Period”) shall bear interest
for the period from and including the date immediately following the last date
of the Payment Period through and including the date of payment at a per annum
rate equal to the prime rate of interest (the base rate on corporate loans) as
published under “Money Rates” in The Wall Street Journal on the last day of such
Payment Period, plus two percent (2%). Such interest will be payable at the same
time as the payment to which it relates and shall be calculated on the basis of
a year of three hundred sixty-five (365) days and the actual number of days for
which due.

(f) Procedures. Any claim for indemnification under this Section 7 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.

Section 8. Tax Proceedings.

8.01. In General. Except as otherwise provided in this Agreement, the Party
responsible for preparing and filing a Tax Return pursuant to Section 2 (the
“Filing Party”) shall have the exclusive right, in its sole discretion, to
control, contest, and represent the interests of Duke

 

21

--------------------------------------------------------------------------------

Energy, any Duke Energy Affiliate, Spectra Energy, and/or any Spectra Energy
Affiliate in any Audit relating to such Tax Return and to resolve, settle or
agree to any deficiency, claim or adjustment proposed, asserted or assessed in
connection with or as a result of any such Audit. The Filing Party’s rights
shall extend to any matter pertaining to the management and control of an Audit,
including execution of waivers, choice of forum, scheduling of conferences and
the resolution of any Tax Item. Any costs incurred in handling, settling, or
contesting an Audit shall be borne by the Filing Party.

8.02. Participation of non-Filing Party. Except as provided in Section 8.04, the
non-Filing Party shall, at its own expense, have control over decisions to
resolve, settle or otherwise agree to any deficiency, claim or adjustment with
respect to any Sole Responsibility Item. Except as provided in Section 8.04, the
Filing Party, at its own expense, and the non-Filing Party, at its own expense,
shall have joint control over decisions to resolve, settle or otherwise agree to
any deficiency, claim or adjustment with respect to any Joint Responsibility
Item. Except as provided in Section 8.04, the Filing Party shall not settle any
Audit it controls concerning a Tax Item on a basis that would reasonably be
expected to adversely affect the non-Filing Party by at least one million
dollars ($1,000,000) without obtaining such non-Filing Party’s consent, which
consent shall not be unreasonably withheld, conditioned or delayed if failure to
consent would adversely affect the Filing Party.

8.03. Notice. Within ten (10) days after a Party becomes aware of the existence
of a Tax issue that may give rise to an indemnification obligation under this
Agreement, such Party shall give notice to the other Party of such issue (such
notice shall contain factual information, to the extent known, describing any
asserted tax liability in reasonable detail), and shall forward to the other
Party copies of all notices and material communications with any Taxing
Authority relating to such issue. Notwithstanding any provision in Section 9.06
to the contrary, if a Party to this Agreement fails to provide the other Party
notice as required by this Section 8.03, and the failure results in a detriment
to the other Party then any amount which the other Party is otherwise required
to pay pursuant to this Agreement shall be reduced by the amount of such
detriment.

8.04. Control of Distribution Tax Proceedings. Spectra Energy may assume sole
control of any Audits relating to Distribution Taxes if it acknowledges in
writing that it has sole liability for any Distribution Taxes under
Section 4.01(b) that might arise in such Audit and can demonstrate to the
reasonable satisfaction of Duke Energy that it can satisfy its liability for any
such Distribution Taxes.

Section 9. Miscellaneous.

9.01. Cooperation and Exchange of Information.

(a) Cooperation. Spectra Energy and Duke Energy shall each cooperate fully (and
each shall cause its respective Spectra Energy Affiliates and Duke Energy
Affiliates to cooperate fully) with all reasonable requests from another Party
for information, data files and materials not otherwise available to the
requesting Party in connection with the preparation and filing of Tax Returns,
claims for refund, and Audits concerning issues or other matters covered

 

22

--------------------------------------------------------------------------------

by this Agreement or in connection with the determination of a liability for
Taxes or a right to a refund of Taxes; provided, however, that nothing in this
Section 9.01 shall be construed to require Duke Energy to provide Spectra Energy
or any Spectra Energy Affiliate with any financial accounting or tax-related
software. Such cooperation shall include:

(i) the retention until the expiration of the applicable statute of limitations,
and the provision upon request, of copies of all Tax Returns, books, records
(including information regarding ownership and Tax basis of property),
documentation and other information relating to the Tax Returns, including
accompanying schedules, related work papers, and documents relating to rulings
or other determinations by Taxing Authorities (collectively, “Tax Material”),
provided, however, that no such retention obligation shall exist to the extent
such Tax Material has previously been provided from one Party to the other
Party;

(ii) the execution of any document that may be necessary or reasonably helpful
in connection with any Tax Proceeding, or the filing of a Tax Return or refund
claim by a member of the Duke Energy Group or the Spectra Energy Group,
including certification, to the best of a Party’s knowledge, of the accuracy and
completeness of the information it has supplied; and

(iii) the use of the Party’s reasonable best efforts to obtain any documentation
that may be necessary or reasonably helpful in connection with any of the
foregoing. Each Party shall make its employees and facilities available on a
reasonable and mutually convenient basis in connection with the foregoing
matters.

(b) Notices, Withholding, Reporting.

(i) Spectra Energy shall notify Duke Energy of any event after the Distribution
Date giving rise to income to any current and former employees of Duke Energy
(or any Duke Energy Affiliate) in connection with any Spectra Energy Stock
Options, Spectra Energy restricted stock, Spectra Energy performance shares or
Spectra Energy phantom stock units by 12:00 P.M. of the first business day after
such event, and, subject to any obligations under the Employee Matters
Agreement, Duke Energy shall remit applicable Taxes and satisfy applicable Tax
reporting obligations in connection therewith if required by law.

(ii) Duke Energy shall notify Spectra Energy of any event after the Distribution
Date giving rise to income to any current and former employees of Spectra Energy
(or any Spectra Energy Affiliate) in connection with any Duke Energy Stock
Options, Duke Energy restricted stock, Duke Energy performance shares or Duke
Energy phantom stock units by 12:00 P.M. of the first business day after such
event, and, subject to any obligations under the Employee Matters Agreement,
Spectra Energy shall remit applicable Taxes and satisfy applicable Tax reporting
obligations in connection therewith if required by law.

(c) Retention of Records. Duke Energy, or any Duke Energy Affiliate, that is in
possession of documentation relating to the Gas Business, including books,
records, Tax Returns and all supporting schedules and information relating
thereto that has not been previously provided to Spectra Energy by Duke Energy
(the “Spectra Energy Business Records”), and

 

23

--------------------------------------------------------------------------------

Spectra Energy, or any Spectra Energy Affiliate, that is in possession of
documentation relating to the Power Business, including books, records, Tax
Returns and all supporting schedules and information relating thereto that has
not been previously provided to Duke Energy by Spectra Energy (the “Duke Energy
Business Records”) shall each retain such Spectra Energy Business Records or
Duke Energy Business Records for a period of seven (7) years following the
Distribution Date. Thereafter, (i) if Duke Energy wishes to dispose of Spectra
Energy Business Records in its possession, shall provide written notice to
Spectra Energy describing the documentation proposed to be destroyed or disposed
of sixty (60) Business Days prior to taking such action, and Spectra Energy may
arrange to take delivery of any or all of the documentation described in the
notice at its expense during the succeeding sixty (60) day period; and (ii) if
Spectra Energy wishes to dispose of Duke Energy Business Records in its
possession, shall provide written notice to Duke Energy describing the
documentation proposed to be destroyed or disposed of sixty (60) Business Days
prior to taking such action, and Duke Energy may arrange to take delivery of any
or all of the documentation described in the notice at its expense during the
succeeding sixty (60) day period.

(d) Gain Recognition Agreement. Duke Energy and Spectra Energy mutually agree to
comply with all notification requirements pursuant to Treas. Reg. § 1.367(a)-8
with respect to the gain recognition agreement entered into with respect to
PanEnergy Corp’s April 1, 2003 transfer of shares of Westcoast Energy Inc.
(“WEI”) to Duke Energy Nova Scotia Holdings Company and to take all reasonable
steps necessary to preserve the nonrecognition treatment of such transfer. In
connection with such requirement, among other notifications, Spectra Energy
agrees to notify Duke Energy within twenty (20) days after any disposition of
stock or assets prior to January 1, 2009 that could reasonably be expected to
affect the gain recognition agreement or the notification requirements pursuant
to Treas. Reg. § 1.367(a)-8.

9.02. Dispute Resolution. In the event that Duke Energy and Spectra Energy
disagree as to the amount or calculation of any payment to be made under this
Agreement, or the interpretation or application of any provision under this
Agreement, the disagreement shall be resolved in accordance with Article IX of
the Separation Agreement provided however for the avoidance of doubt that the
provisions in section 9.12 of the Separation Agreement shall not apply.
Notwithstanding anything in this Agreement to the contrary, the dispute
resolution provisions set forth in this Section 9.02 shall not be applicable to
any disagreement between the Parties relating to Distribution Taxes and any such
dispute shall be settled in a court of law or as otherwise agreed to by the
Parties.

9.03. Complete Agreement; Construction. This Agreement, including the Appendix,
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. This Agreement supersedes any
prior tax matters agreements between Duke Energy (or any Duke Energy Affiliate)
and Spectra Energy (or any Spectra Energy Affiliate) and such prior tax matters
agreements shall have no further force and effect. In the event of any conflict
between the terms and conditions of the body of this Agreement and the terms and
conditions of the Appendix, the terms and conditions of such Appendix shall
control. In the event of any conflict between the terms and conditions of this
Agreement and the terms and conditions of the Separation Agreement or any other
Ancillary Agreement, the terms and conditions of this Agreement shall control.

 

24

--------------------------------------------------------------------------------

9.04. 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. Execution of this
Agreement or any other documents pursuant to this Agreement by facsimile or
other electronic copy of a signature shall be deemed to be, and shall have the
same effect as, execution by original signature.

9.05. Survival of Agreement. Except as otherwise contemplated by this Agreement,
all covenants and agreements of the Parties contained in this Agreement shall
survive the Effective Time and remain in full force and effect in accordance
with their applicable terms.

9.06. 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 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 9.06):

To Duke Energy:

Duke Energy Corporation

526 South Church Street

Charlotte, North Carolina 28202

Attn: Vice President of Corporate Tax

Facsimile: (704) 382-8137

To Spectra Energy:

Spectra Energy Corp

5400 Westheimer Court

Houston, Texas 77056

Attn: Vice President, Tax

Facsimile: (713) 989-3280

 

25

--------------------------------------------------------------------------------

9.07. Changes in Law.

(a) Any reference to a provision of the Code or a law of another jurisdiction
shall include a reference to any applicable successor provision or law.

(b) If, due to any change in applicable law or regulations or their
interpretation by any court of law or other governing body having jurisdiction
subsequent to the date of this Agreement, performance of any provision of this
Agreement or any transaction contemplated thereby shall become impracticable or
impossible, the Parties hereto shall use their commercially reasonable efforts
to find and employ an alternative means to achieve the same or substantially the
same result as that contemplated by such provision.

9.08. 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.

9.09. Amendments. Subject to the terms of Section 9.12, this Agreement may not
be modified or amended except by an agreement in writing signed by each of the
Parties.

9.10. Assignment. Except as otherwise expressly provided for in this Agreement,
this Agreement shall not be assignable, in whole or in part, 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 null and 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
upon the effectiveness of such assignment, the assigning Party shall be released
from all of its obligations under this Agreement, if the surviving entity of
such merger or the transferee of such Assets shall agree in writing in form and
substance reasonably satisfactory to the other Party, to be bound by the terms
of this Agreement as if named as a “Party” hereto.

9.11. 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.

9.12. Termination, Etc. Notwithstanding anything to the contrary herein, this
Agreement (including Section 6 (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. In the event of such termination, no Party shall
have any liability 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.

9.13. 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.

 

26

--------------------------------------------------------------------------------

9.14. Interpretations. 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.

9.15. Schedules and Appendix. The Schedules and Appendix attached hereto are
incorporated herein by reference and 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.

9.16. 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.

9.17. Consent to Jurisdiction. Subject to the provisions of this section 9.17,
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
Section 9 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 United States registered mail to such
Party’s respective address set forth above 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 9.17. 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.

9.18. 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 9.02 herein, (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 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.

9.19. Waiver of Jury Trial. SUBJECT TO SECTIONS 9.02, 9.17 AND 9.18 HEREIN, 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

 

27

--------------------------------------------------------------------------------

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 9.19.

9.20. 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 shall not in any way be affected or impaired thereby, and 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.

9.21. 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.

9.22. No Circumvention. The Parties agree not to directly or indirectly take any
actions, act in concert with any person who takes an action, or cause or allow
any member Affiliate to take any actions (including the failure to take a
reasonable action) such that the resulting effect is to materially undermine the
effectiveness of any of the provisions of this Agreement (including adversely
affecting the rights or ability of any Party to successfully pursue
indemnification, contribution or payment pursuant to Sections 6 and 7).

9.23. 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.

9.24. Setoff. All payments to be made by any Party under this Agreement may be
netted against payments due to such Party under this Agreement, but otherwise
shall be made without setoff, counterclaim or withholding, all of which are
hereby expressly waived.

9.25. Confidentiality. The Parties shall comply with the confidentiality
provisions in Article VIII of the Separation Agreement.

 

28

--------------------------------------------------------------------------------

9.26. Affiliates. Each of the Parties shall cause to be performed all actions,
agreements and obligations set forth herein to be performed by any Affiliate of
such Party or by any entity that becomes an Affiliate of such Party on and after
the Distribution Date; provided, however, that if a Spectra Energy Affiliate
ceases to be a Spectra Energy Affiliate as a result of a transfer of its stock
or other ownership interests to a third party in exchange for consideration in
an amount approximately equal to the fair market value of the stock or other
ownership interests transferred and such consideration is not distributed
outside of the Spectra Energy Group to the shareholders of Spectra Energy then
Duke Energy shall, upon request, execute a release of such Spectra Energy
Affiliate from its obligations under this Agreement upon such transfer provided
that such Spectra Energy Affiliate shall have executed a release of any rights
it may have against Duke Energy or any Duke Energy Affiliate by reason of this
Agreement.

9.27. 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.

9.28. Effective Time. This Agreement shall be effective as of the Effective
Time.

[Signature Pages Follow]

 

29

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the Parties caused this Tax Matters 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

on behalf of itself and each of the Other Spectra Energy Parties

By:  

/s/ Fred J. Fowler

Name:   Fred J. Fowler Title:   President and Chief Executive Officer

--------------------------------------------------------------------------------

Schedules and exhibits omitted pursuant to Item 601 of Reg. S-K. The Company
agrees to furnish supplementally a copy of any omitted schedule to the
Commission upon request.