Exhibit 10.4

 

Execution Copy

 

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REORGANIZATION AGREEMENT

 

by and among

 

CONOCOPHILLIPS,

 

DUKE CAPITAL LLC

 

and

 

DUKE ENERGY FIELD SERVICES, LLC

 

Dated as of May 26, 2005

 

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TABLE OF CONTENTS

 

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    ARTICLE I          CERTAIN DEFINITIONS          ARTICLE II         
TRANSACTIONS      Section 2.1   Initial Sale    17 Section 2.2   Second Closing
Date Transfers, Contribution and Distributions; Restatement of LLC Agreement   
17 Section 2.3   Empress Closing Date    17 Section 2.4   Authorization of
Company Action    18     ARTICLE III          THE CLOSING      Section 3.1  
Closing Place and Date    18 Section 3.2   Closing Date Deliveries    18 Section
3.3   Company Distributions    21     ARTICLE IV          REPRESENTATIONS AND
WARRANTIES OF COP      Section 4.1   Corporate Organization    22 Section 4.2  
Authority; Title; No Violation    23 Section 4.3   Consents and Approvals    24
Section 4.4   Permits; Compliance with Applicable Law    24 Section 4.5  
Financial Statements and Information; Undisclosed Liabilities    25 Section 4.6
  Broker’s Fees    25 Section 4.7   Absence of Certain Changes or Events    25
Section 4.8   Legal Proceedings    26 Section 4.9   Contracts    26 Section 4.10
  Real Property    28 Section 4.11   Environmental Matters    29 Section 4.12  
Intellectual Property    29 Section 4.13   Employee Benefit Plans    30 Section
4.14   Labor Relations    31 Section 4.15   Transactions with Affiliates    32
Section 4.16   Personal Property    32 Section 4.17   Insurance    32 Section
4.18   Public Utility Holding Company Act    32 Section 4.19   Sufficiency of
Contribution    32 Section 4.20   Operatorship    33 Section 4.21   Residency   
33 Section 4.22   Registration    33

 

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    ARTICLE V          REPRESENTATIONS AND WARRANTIES OF COMPANY     
Section 5.1   Corporate Organization    33 Section 5.2   Authority; Title; No
Violation    33 Section 5.3   Consents and Approvals    34 Section 5.4  
Broker’s Fees    34 Section 5.5   Legal Proceedings    34     ARTICLE VI       
  REPRESENTATIONS AND WARRANTIES OF DUKE      Section 6.1   Corporate
Organization    35 Section 6.2   Authority; Title; No Violation    35 Section
6.3   Consents and Approvals    36 Section 6.4   Broker’s Fees    36 Section 6.5
  Legal Proceedings    36     ARTICLE VII          COVENANTS      Section 7.1  
Investigation of Business; Access to Properties and Records    36 Section 7.2  
Consents and Approvals    37 Section 7.3   Further Assurances    40 Section 7.4
  Conduct of Business; Restriction on Dividends    41 Section 7.5   Preservation
of Business    42 Section 7.6   Public Announcements    42 Section 7.7  
Assignment of Contracts, Leases, Permits, etc    42 Section 7.8   Corporate
Names    44 Section 7.9   D&O Indemnification    44 Section 7.10   Expenses   
44 Section 7.11   Insurance    44 Section 7.12   Guaranties    45 Section 7.13  
Actions by Affiliates of the Parties    45 Section 7.14   Radio Licences; Radio
Towers    46 Section 7.15   Post-Closing TEPPCO Adjustment    47 Section 7.16  
Empress System Business Covenants    47 Section 7.17   Company Conduct    48
Section 7.18   Preparation of Financials    49 Section 7.19   Additional
Covenant of Duke    49     ARTICLE VIII          CONDITIONS TO CLOSING     
Section 8.1   Conditions to Duke’s Obligation to Close    50 Section 8.2  
Conditions to COP’s Obligation to Close    50 Section 8.3   Conditions to
Company’s Obligation to Close    51

 

 

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    ARTICLE IX          TERMINATION          ARTICLE X          SURVIVAL;
INDEMNIFICATION      Section 10.1   Indemnification by Company    52 Section
10.2   Indemnification by Duke and COP    52 Section 10.3   Indemnification
Procedure    53 Section 10.4   Survival    54 Section 10.5   Indemnification
Limitation    55 Section 10.6   Materiality Qualifiers    56     ARTICLE XI     
    EMPLOYEE MATTERS      Section 11.1   Empress System Employees    56 Section
11.2   Canadian Assets Employees    60 Section 11.3   No Third-Party
Beneficiaries    61     ARTICLE XII          TAX MATTERS      Section 12.1  
Indemnification by COP with respect to Empress System    61 Section 12.2  
[Intentionally Blank]    62 Section 12.3   Indemnification by Duke with respect
to Empress System    62 Section 12.4   Indemnification by Duke with respect to
Canadian Assets Business    62 Section 12.5   No Basket and Cap on Tax
Indemnities    62 Section 12.6   Procedures for Tax Proceedings    62 Section
12.7   Filing Responsibility.    63 Section 12.8   Cooperation and Exchange of
Information    64 Section 12.9   COP Refunds with respect to Empress System   
65 Section 12.10   [Intentionally Blank]    65 Section 12.11   Duke Refunds with
respect to Empress System    65 Section 12.12   Prompt Payment    65 Section
12.13   Survival    65 Section 12.14   Treatment of Indemnity Payments    66
Section 12.15   Tax Sharing Agreements    66 Section 12.16   Allocation of
Certain Taxes.    66 Section 12.17   Predecessors and Successors    67 Section
12.18   COP Tax Representations with respect to Empress System    67 Section
12.19   Company Tax Representations with respect to Canadian Assets Business   
68 Section 12.20   Tax Characterization of Transactions.    68 Section 12.21  
Intentionally Omitted    71 Section 12.22   Canadian Tax Matters.    71 Section
12.23   Covenant of Duke.    71

 

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Section 12.24   Coordination    72     ARTICLE XIII          MISCELLANEOUS     
Section 13.1   Counterparts    72 Section 13.2   Governing Law; Jurisdiction and
Forum; Waiver of Jury Trial    72 Section 13.3   Entire Agreement    73 Section
13.4   Expenses    73 Section 13.5   Notices    74 Section 13.6   Successors and
Assigns    75 Section 13.7   Headings; Definitions    75 Section 13.8  
Amendments and Waivers    75 Section 13.9   Schedules    75 Section 13.10  
Severability    76 Section 13.11   Interpretation    76 Section 13.12   Specific
Performance    76

 

Exhibits         Exhibit A   Termination Agreement     Exhibit B   Second
Amended and Restated LLC Agreement     Exhibit C-1   Assignment of Subject
Company Equity Interests     Exhibit C-2   Transfer of Equity Interests in
Canadian Holding Company     Exhibit D   Empress Financial Statements    
Exhibit E   Form of Transition Services Agreement     Exhibit F   Excluded
Secondees     Exhibit G   Empress System Business Assignment     Exhibit H  
Form of Condensate Crude Oil Purchase Agreement     Exhibit I   Form of
Iso-Butanes Purchase Agreement     Exhibit J   Form of Normal Butanes Purchase
Agreement     Exhibit K   Form of Extraction Agreement     Exhibit L   Form of
Gas Supply Agreement COP Disclosure Schedule     Schedule 1.1(a)   Required
Empress Consents     Schedule 4.1(b)   Organizational Structure of ES Transferor
and Jurisdiction and Capitalization of PTC     Schedule 4.2(b)   Exceptions to
Title and Liens     Schedule 4.3   Consents and Approvals     Schedule 4.5(b)  
Liabilities of the Empress System Business     Schedule 4.7(b)   Changes in
Compensation     Schedule 4.8   Legal Proceedings     Schedule 4.9(a)   Material
Contracts     Schedule 4.9(b)   Defaults under Material Contracts

 

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              Schedule 4.10(a)   COP-Owned Fee Properties     Schedule 4.10(b)  
COP Leases     Schedule 4.11   Environmental Liabilities     Schedule 4.13(a)  
Employee Benefit Plans     Schedule 4.14   Labor Relations         (a) Empress
System Employees         (b) Collective Bargaining Agreements, etc.     Schedule
7.2(e)   Empress Licenses     Schedule 7.4   Conduct of the Empress System
Business         (f) Capital Expenditures Schedule     Schedule 7.12  
Guaranties     Schedule 7.14(a)   Radio Licences     Schedule 11.1(a)   Multiple
Offer Employees     Schedule 11.1(d)(ii)   DB Transfer Amount Methodology    
Schedule 12.18   Empress System Tax Representations     Schedule 13.11  
Knowledge Company Disclosure Schedule     Schedule 7.12   Guaranties    
Schedule 7.14(d)   Radio Licences     Schedule 12.19   Canadian Assets Tax
Representations     Schedule 13.11   Knowledge Duke Disclosure Schedule    
Schedule 13.11   Knowledge

 

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

 

RECITALS

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

ARTICLE I

CERTAIN DEFINITIONS

 

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

 

“$” shall mean United States Dollars.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“C$” shall mean Canadian Dollars.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“COP Transferee” shall mean CPGC.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Empress Commercial Agreements” shall mean:

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Empress System Amount” shall mean $233 million.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“EUB” means the Alberta Energy and Utilities Board.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“NEB” means the National Energy Board of Canada.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

15

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

ARTICLE II

TRANSACTIONS

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

ARTICLE III

THE CLOSING

 

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

 

Section 3.2 Closing Date Deliveries.

 

(a) First Closing.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(b) Other Closings.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF COP

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(vi) any collective bargaining agreement;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

27

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Section 4.17 Insurance. Each of ES Transferor and PTC is, and has been
continuously since January 1, 2003 (or, if later, the date such Person became a
Subsidiary of COP or Phillips), insured with COP-affiliated insurance companies
or with third-party insurers in such amounts and against such risks and losses
as are customary in all material respects for companies conducting the business
as conducted by such Person during such time period. As of the date of this
Agreement, neither ES Transferor nor PTC has received any notice of cancellation
or termination with respect to any insurance policy of such Person which would
reasonably be expected to have a COP Sale-Related Material Adverse Effect. COP
has made available to Duke accurate and complete copies of all such insurance
policies in effect as of the date of this Agreement.

 

Section 4.18 Public Utility Holding Company Act. No member of the COP
Sale-Related Group is a “public utility company” or a “holding company” or a
“subsidiary company” of a “holding company” within the meaning of the Public
Utility Holding Company Act of 1935, as amended.

 

Section 4.19 Sufficiency of Contribution. The Empress System Business to be
conveyed to Duke Transferee on the Applicable Closing Date by the Asset

 

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Conveyance Documents delivered at that time will constitute all property, rights
and assets that are necessary for Duke Transferee to continue the operation of
the Empress System Business after the Applicable Closing Date on substantially
the same basis as the Empress System Business is presently being operated by
COP, ES Transferor, PTC and their respective Affiliates.

 

Section 4.20 Operatorship. CPCL is the duly appointed operator of the Empress
System.

 

Section 4.21 Residency. Each of CPCL and CFC is not a non-resident within the
meaning of that term in the Income Tax Act (Canada).

 

Section 4.22 Registration. Each of CPCL and CFC is registered under Part IX of
the Excise Tax Act (Canada) with registration numbers 10109 6576 RT0001 and
88448 7711 RT0001, respectively.

 

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF COMPANY

 

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

 

Section 5.1 Corporate Organization. Company is duly organized, validly existing
and in good standing under the laws of their respective jurisdictions of
organization. Company has the organizational power and authority to own or lease
all of its properties and assets and to carry on its business as it is now being
conducted, and is duly licensed or qualified to do business in each jurisdiction
(whether federal, state, provincial, territorial, local or foreign) in which the
nature of the business conducted by it or the character or location of the
properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed or
qualified, individually or in the aggregate, would not have a Material Adverse
Effect on Company.

 

Section 5.2 Authority; Title; No Violation. (a) Company has full organizational
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated by this
Agreement have been duly and validly approved by all organizational action on
the part of Company. No other organizational proceedings on the part of Company
are necessary to approve this Agreement and to consummate the transactions
contemplated by this Agreement. This Agreement has been duly and validly
executed and delivered by Company and, assuming due authorization, execution and
delivery by Duke and COP, constitutes a valid and binding obligation of Company,
enforceable against Company in accordance with its terms.

 

(b) At the Second Closing, (i) Company shall own all of the issued and
outstanding Equity Interests in Canadian Holding Company, and (ii) Canadian
Holding Company or a Canadian Assets Subsidiary shall own all of the issued and
outstanding Equity Interests in each Canadian Assets Subsidiary, in each case
free and clear of any Liens, restrictions on transfer or voting or preemptive
rights. Company has the full organizational power, right and authority to
transfer and convey, or cause to be transferred and conveyed, to DEFS Holding at
the Second Closing the Equity Interests in Canadian Holding Company.

 

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(c) The execution, delivery and performance of this Agreement by Company do not,
and the consummation by Company of the transactions contemplated by this
Agreement will not, (i) constitute a breach or violation of, or a default under,
the certificate of incorporation or by-laws or other organizational documents of
Company, (ii) constitute a breach or violation of, or a default under, or
trigger any “change of control” rights or remedies under, or give rise to any
Lien, any acceleration of remedies, any buy-out right or any right of first
offer or refusal or of termination under, any indenture, license, contract,
agreement or other instrument to which Company or any of its Subsidiaries is a
party or by which Company or any of its properties or assets may be bound, or
(iii) assuming receipt of the Required Governmental Consents, violate any law,
rule, regulation, judgment, decree or order applicable to Company, Canadian
Holding Company or any of the Canadian Assets Subsidiaries or any of their
respective properties or assets, except in the case of (ii) and (iii) above for
such breaches, violations, defaults, liens, accelerations or rights as would not
reasonably be expected, individually or in the aggregate, to result in a
Canadian Asset Material Adverse Effect or to adversely affect the ability of
Company to consummate the transactions contemplated by this Agreement.

 

Section 5.3 Consents and Approvals. Except for the Required Governmental
Consents, no notice to, filing with, authorization of, exemption by, or consent
or approval of, or the taking of any other action in respect of any Governmental
Entity or any other Person on the part of Company, Canadian Holding Company or
any of the Canadian Assets Subsidiaries is necessary for the consummation by
Company of the transactions contemplated by this Agreement, except where the
failure to provide such notice, make such filing, or obtain such authorization,
exemption, consent or approval would not, individually or in the aggregate,
reasonably be expected to result in a Canadian Asset Material Adverse Effect, or
to adversely affect the ability of Company to consummate the transactions
contemplated by this Agreement.

 

Section 5.4 Broker’s Fees. Neither Company nor any of its Subsidiaries
(including Canadian Holding Company and the Canadian Assets Subsidiaries) nor
any of their respective officers or directors has employed any broker or finder
or incurred any liability for any broker’s fees, commissions or finder’s fees in
connection with the transactions contemplated by this Agreement which would be
payable by Duke or its Subsidiaries (other than Company and its Subsidiaries),
COP or its Subsidiaries, Canadian Holding Company or the Canadian Assets
Subsidiaries.

 

Section 5.5 Legal Proceedings. As of the date of this Agreement, neither Company
nor any of its Subsidiaries is a party to any, and there are no pending or, to
Company’s knowledge, threatened, legal, administrative, arbitral or other
proceedings, claims, actions or governmental or regulatory investigations of any
nature against or otherwise affecting Company or any of its Subsidiaries which
(a) would reasonably be expected to have a Canadian Asset Material Adverse
Effect or (b) would adversely affect the ability of Company to consummate the
transactions contemplated by this Agreement.

 

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ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF DUKE

 

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

 

Section 6.1 Corporate Organization. Duke and DEFS Holding are duly organized,
validly existing and in good standing under the laws of their respective
jurisdictions of incorporation. Each of Duke and DEFS Holding has the corporate
power and authority to own or lease all of its properties and assets and to
carry on its business as it is now being conducted, and is duly licensed or
qualified to do business in each jurisdiction (whether federal, state,
provincial, territorial, local or foreign) in which the nature of the business
conducted by it or the character or location of the properties and assets owned
or leased by it makes such licensing or qualification necessary, except where
the failure to be so licensed or qualified, individually or in the aggregate,
would not have a Material Adverse Effect on either Duke or DEFS Holding, as
applicable.

 

Section 6.2 Authority; Title; No Violation. (a) Duke has full corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated by this
Agreement have been duly and validly approved by all corporate action on the
part of Duke. No other corporate proceedings on the part of Duke or DEFS Holding
is necessary to approve this Agreement and to consummate the transactions
contemplated by this Agreement. This Agreement has been duly and validly
executed and delivered by Duke and, assuming due authorization, execution and
delivery by COP and Company, constitutes a valid and binding obligation of Duke,
enforceable against Duke in accordance with its terms.

 

(b) At the First Closing, DEFS Holding shall own the Subject Company Equity
Interest, free and clear of any Liens, restrictions on transfer or voting or
preemptive rights, other than those expressly contained in the Amended and
Restated LLC Agreement. Duke and DEFS Holding have the full corporate power,
right and authority to transfer and convey, or cause to be transferred and
conveyed, to COP at the First Closing the Subject Company Equity Interest.

 

(c) The execution, delivery and performance of this Agreement by Duke do not,
and the consummation by Duke of the transactions contemplated by this Agreement
will not, (i) constitute a breach or violation of, or a default under, the
certificate of incorporation or by-laws or other organizational documents of
Duke or DEFS Holding, (ii) constitute a breach or violation of, or a default
under, or trigger any “change of control” rights or remedies under, or give rise
to any Lien, any acceleration of remedies, any buy-out right or any right of
first offer or refusal or of termination under, any indenture, license,
contract, agreement or other instrument to which DEFS Holding or any of its
respective Subsidiaries is a party or by which any of them or their respective
properties or assets may be bound, or (iii) assuming receipt of the Required
Governmental Consents, violate any law, rule, regulation, judgment, decree or
order applicable to Duke or DEFS Holding or any of their respective properties
or assets, except in the case of (ii) and (iii) above for such breaches,
violations, defaults, liens, accelerations or rights as would not

 

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reasonably be expected, individually or in the aggregate, to result in a
Material Adverse Effect on Company or to adversely affect the ability of Duke to
consummate the transactions contemplated by this Agreement.

 

Section 6.3 Consents and Approvals. Except for the Required Governmental
Consents, no notice to, filing with, authorization of, exemption by, or consent
or approval of, or the taking of any other action in respect of any Governmental
Entity or any other Person on the part of Duke or DEFS Holding is necessary for
the consummation by Duke and DEFS Holding of the transactions contemplated by
this Agreement, except (a) where the failure to provide such notice, make such
filing, or obtain such authorization, exemption, consent or approval would not,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect on Company or to adversely affect the ability of Duke to
consummate the transactions contemplated by this Agreement and (b) any notices,
consents or approvals required by the Amended and Restated LLC Agreement.

 

Section 6.4 Broker’s Fees. Neither Duke nor any of its Subsidiaries (excluding
Company and its Subsidiaries) nor any of their respective officers or directors
has employed any broker or finder or incurred any liability for any broker’s
fees, commissions or finder’s fees in connection with the transactions
contemplated by this Agreement which would be payable by Company or its
Subsidiaries or COP or its Subsidiaries.

 

Section 6.5 Legal Proceedings. As of the date of this Agreement, neither Duke
nor DEFS Holding nor any of their respective Subsidiaries (except for Company
and its Subsidiaries) is a party to any, and there are no pending or, to Duke’s
knowledge, threatened, legal, administrative, arbitral or other proceedings,
claims, actions or governmental or regulatory investigations of any nature
against or otherwise affecting DEFS Holding or any of its Subsidiaries (except
for Company and its Subsidiaries) which would adversely affect the ability of
Duke to consummate the transactions contemplated by this Agreement.

 

ARTICLE VII

COVENANTS

 

 

Section 7.1 Investigation of Business; Access to Properties and Records. (a)
From the date of this Agreement through the Applicable Closing, Company shall
cause the Canadian Holding Company and the Canadian Assets Subsidiaries to
afford to representatives of Duke, and COP shall cause the COP Sale-Related
Group to afford to representatives of Duke (with respect to the Empress System
Business) reasonable access to their offices, properties, books and records
during normal business hours, in order that the party being afforded access may
have a full opportunity to make such investigations as it desires of their
affairs (including Phase I environmental testing) (each party granting access
pursuant to this Section 7.1(a), a “Granting Party”); provided, however, that
such investigation shall be at reasonable times and upon reasonable notice and
shall not unreasonably disrupt the personnel and operations of Company, Canadian
Holding Company, the Canadian Assets Subsidiaries, COP, or the COP Sale-Related
Group, as applicable. All requests for access to the offices, properties, books
and records relating to Canadian Holding Company, the Canadian Assets
Subsidiaries or the Empress System Business shall be made to such
representatives designated in writing by Company or COP, as appropriate (the
“Designated Representatives”), which

 

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Designated Representatives shall be solely responsible for coordinating all such
requests and all access permitted hereunder. Neither Duke nor Company nor their
respective representatives shall contact any of the employees, customers or
suppliers of the Granting Party and its Subsidiaries, in connection with the
transactions contemplated by this Agreement, whether in person or by telephone,
mail or other means of communication, without the specific prior written
authorization of the Granting Party’s Designated Representatives, which consent
shall not be unreasonably withheld.

 

(b) As of the Second Closing, the Parties agree that Section 4.3 of the Amended
and Restated LLC Agreement (or the analogous provisions of the Second Amended
and Restated LLC Agreement) shall no longer apply to Duke and its Affiliates
with respect to information relating to Canadian Holding Company or the Canadian
Assets Subsidiaries.

 

(c) Except as contemplated by this Agreement and the Amended and Restated LLC
Agreement, each Applicable Transferor agrees not to, and agrees to cause its
representatives not to, until the earlier of the Applicable Closing Date or
termination of this Agreement in accordance with its terms, (i) enter into any
agreement with any third-party, or engage in any discussions with attorneys,
investment bankers, other advisors or representatives of any third-party,
regarding a transaction involving the sale or a public offering of, or creation
of a joint venture involving, all or any material portion of the operations of
Canadian Holding Company, the Canadian Assets Subsidiaries, the Empress System
Business or PTC, as applicable, or (ii) solicit, initiate or encourage offers in
respect thereof or otherwise prepare for or take any actions intended to prepare
for an initial public offering of all or any material portion of such business.

 

(d) Each Applicable Transferee agrees to (i) hold all of the books and records
of each of Canadian Holding Company, the Canadian Assets Subsidiaries and the
Empress System Business, as applicable, existing on the Applicable Closing Date
and not to destroy or dispose of any thereof for a period of four years from the
Applicable Closing Date or such longer time as may be required by law, and
thereafter, if it desires to destroy or dispose of such books and records, to
offer first in writing at least 60 days prior to such destruction or disposition
to surrender them to, the Applicable Transferor, and (ii) following the
Applicable Closing Date to afford the Applicable Transferor, their respective
accountants and counsel, during normal business hours, upon reasonable notice,
full access to such books and records to the extent that such access may be
requested for any legitimate purpose at no cost to the Applicable Transferee
(other than for reasonable out-of-pocket expenses); provided, however, that
nothing herein shall limit any of the Applicable Transferor’s respective rights
of discovery pursuant to any legal proceeding. Each Applicable Transferee shall
have the same rights, and each Applicable Transferor, respectively, the same
obligations, as are set forth above in this Section 7.1(d) with respect to any
books, non-privileged records and employees of the Applicable Transferor or its
Affiliates pertaining to the Applicable Transferee or assets transferred,
contributed or distributed pursuant to the transactions contemplated hereby,
with the exception of Tax Returns. Each Applicable Transferor will provide
additional information to the extent reasonably requested and required by any
Applicable Transferee for a legitimate purpose.

 

Section 7.2 Consents and Approvals. (a) Subject to the terms and conditions of
this Agreement, each of the Parties agrees to use its reasonable best efforts to

 

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promptly (i) 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 and make effective the transactions contemplated by
this Agreement, (ii) obtain and maintain all approvals, consents, registrations,
permits, authorizations and other confirmations required to be obtained from any
third-party (including any Governmental Entity), that are necessary, proper or
advisable to consummate the transactions contemplated by this Agreement, (iii)
lift or rescind any injunction or restraining order or other order adversely
affecting its ability to consummate the transactions contemplated by this
Agreement and (iv) fulfill all conditions to this Agreement.

 

(b) In furtherance of and not in limitation of the foregoing, the Parties
further agree to each take any and all steps and to make any and all
undertakings necessary to avoid or eliminate each and every impediment under any
United States antitrust, competition or trade regulation law that may be
asserted by the FTC, the Antitrust Division, any State Attorney General or any
other United States governmental entity, in each case in a manner that is in the
best interests of the Company, so as to enable the Closing to occur as soon as
reasonably possible and shall defend through litigation on the merits any claim
asserted in any court by any party, including appeals. Without limiting the
foregoing, each of the Parties shall propose, negotiate, commit to and effect,
by consent decree, hold separate order or otherwise, the sale, divestiture or
disposition of such assets or businesses of itself or any of its respective
subsidiaries, parents or otherwise take or commit to take any action that limits
its own freedom of action with respect to, or its ability to retain, any of the
businesses, product lines or assets of itself or its respective subsidiaries, in
each case in a manner that is in the best interests of the Company, as may be
required in order to avoid the entry of, or to effect the dissolution of, any
injunction, temporary restraining order or other order in any suit or proceeding
under United States antitrust, competition or trade regulation law, which would
otherwise have the effect of preventing or delaying the Closing. Each Party
shall cooperate with the other to minimize the aggregate amount of any such
actions required by the immediately foregoing sentence.

 

(c) Subject to applicable laws relating to the exchange of information, each
Party shall reasonably cooperate with and inform each other Party as to all
submissions and communications relating to the Canadian Assets Business, the
Empress System Business, or the Subject Company Equity Interest, as the case may
be, made with any third-party and/or any Governmental Entity in connection with
the transactions contemplated by this Agreement. During the period from the date
of this Agreement to the latest Closing, each Party shall furnish to the other
Parties such necessary information and reasonable assistance as the other
Parties may request in connection with their preparation of any filing,
registration or declaration which is or may be necessary in respect of the
Required Governmental Consents. Each Party shall keep the other Parties apprised
of the status of any communications with, and any inquiries or requests for
additional information from, any Governmental Entity (or other Person regarding
any of the transactions contemplated by this Agreement) in respect of any such
filing. Except in relation to any Required Governmental Consent under the
Investment Canada Act, each Party shall, subject to applicable law, consult with
counsel for the other Parties to review, in advance, and consider in good faith
the views of the other Parties in connection with, any proposed communication to
any Governmental Entity in connection with the transactions contemplated hereby.
Except in relation to any Required Governmental Consent under the Investment
Canada Act, each Party agrees not to participate in any substantive meeting or
discussion, either in person or by telephone, with any Governmental Entity in
connection with the transactions contemplated

 

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hereby unless it consults with the other Parties in advance and, to the extent
not prohibited by such Governmental Entity, gives the other Parties the
opportunity to attend and participate in those meetings or discussions.
Notwithstanding anything to the contrary in this Agreement, in no event shall
any Party be obligated to pay any money to any Person or to offer or grant other
financial or other accommodations to any person in connection with its
obligations under this Section 7.2.

 

(d) In furtherance and not in limitation of the foregoing, each of COP, Duke and
Company (if applicable) (i) has made an appropriate filing of a Notification and
Report Form pursuant to the HSR Act with respect to the transactions
contemplated by this Agreement, (ii) with respect to any appropriate filing
under the HSR Act, agrees to furnish the other party with copies of all
correspondence, filings and communications (and memoranda setting forth the
substance thereof) between them and their affiliates and their respective
representatives on the one hand, and any Governmental Entity or members of their
staffs on the other hand; provided, however, that (x) the parties shall be under
no obligation of any kind to provide any other party documents, material or
other information relating to (A) the valuation of the businesses being sold or
transferred, or financial models prepared, in connection with the transactions
contemplated hereby or (B) the financial condition of such party or its
Affiliates, (y) any party may reasonably designate any sensitive material
provided to the other as for “outside counsel only” (materials designated as
“outside counsel only” and the information contained therein shall be given only
to the outside legal counsel of the recipient and will not be disclosed by such
outside counsel to employees, officers, or directors of the recipient unless
express permission is obtained in advance from the source of the materials
(i.e., the applicable party hereto) or its legal counsel), and (z) materials may
be redacted as necessary to comply with contractual arrangements; (iii) if the
Federal Trade Commission or the Department of Justice, as applicable, issues a
request for additional documentary material and information pursuant to the HSR
Act (a “Second Request”) in connection with the transaction contemplated by this
Agreement, agrees to respond to the Second Request as promptly as possible, (iv)
agrees to complete the review process under the HSR Act to permit the
consummation of the transactions contemplated by this Agreement including
causing the expiration or termination of the applicable waiting periods under
the HSR Act as soon as possible, (v) will make an appropriate filing under Part
IX of the Competition Act (Canada) with respect to the transactions contemplated
by this Agreement and endeavor to complete the applicable review process under
the Competition Act (Canada) to permit the consummation of the transactions
contemplated by this Agreement as soon as possible, and (vi) will file an
application for review under the Investment Canada Act and endeavor to complete
the applicable review process under the Investment Canada Act to permit the
consummation of the transactions contemplated by this Agreement as soon as
possible.

 

(e) In furtherance of and not in limitation of the foregoing, (v) COP will use
reasonable best efforts to (i) provide by May 11, 2005 the site specific
liability assessment for the Empress Plant and the Empress Plant netback
calculation (both in accordance with the EUB interim transfer process in respect
of large facilities as set out in EUB Interim Directive ID 2003-02 or any
replacement process) to Duke, together with such supporting information
reasonably requested by Duke, for review and comment by Duke prior to submitting
the same to the EUB, and (ii) submit by May 18, 2005 the site specific liability
assessment for the Empress Plant and the Empress Plant netback calculation (both
in accordance with the EUB interim transfer process in respect of large
facilities) to the EUB, together with such supporting information requested by

 

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the EUB, (w) Duke will use reasonable best efforts to submit by May 18, 2005
financial information (in accordance with the EUB interim transfer process in
respect of large facilities as set out in EUB Interim Directive ID 2003-02 or
any replacement process) to the EUB, together with such supporting information
requested by the EUB, (x) COP and Duke will use reasonable best efforts to
obtain (i) immediately prior to the Applicable Closing confirmation from the EUB
staff that the transfer of EUB Approval Number 6659 will be approved, (ii)
immediately after the Applicable Closing approval to transfer and the transfer
of EUB Approval Number 6659 to Duke Transferee, (iii) within a reasonable period
of time after the Applicable Closing Date, approval of the EUB for the transfer
of other licenses applicable to facilities contained in the Empress System as
listed in Schedule 7.2(e) hereto, (iv) prior to the Applicable Closing Date,
leave of the NEB in respect of the transfer to Duke Transferee of the
authorizations for the PTC Pipeline, and (v) within a reasonable period of time
following the Applicable Closing Date, any other applicable consents from the
NEB or from regulatory authorities in the Provinces of Alberta, Saskatchewan and
Manitoba regarding the transfers of the Empress System to Duke Transferee, (y)
if EUB Guide 71 is determined to be applicable to the Empress Plant, Duke will
use reasonable best efforts in accordance with EUB Guide 71 to conduct the
required public and local government consultations with respect to Emergency
Response Plan(s) and (z) Company will use reasonable best efforts to obtain
prior to the Applicable Closing Date any other applicable consents from
regulatory authorities in the Provinces of Alberta, Saskatchewan and Manitoba
regarding the transfers of the Equity Interests in Canadian Holding Company to
DEFS Holding. For the avoidance of doubt, the Parties agree that nothing in the
NEB application filed in connection with the request for the transfer to Duke
Transferee of the PTC Pipeline and authorizations for the PTC Pipeline
contemplated hereby shall affect the allocation of Liabilities between the
Parties set forth herein, in the Asset Conveyance Documents, or in any other
documents executed in connection herewith.

 

Section 7.3 Further Assurances. (a) Subject to Section 7.6, each Party hereto
agrees that, from time to time, whether before, at or after the Applicable
Closing Dates, each of them will execute and deliver, or cause to be executed
and delivered, such further instruments of conveyance and transfer and
assumptions and take such other actions as may be necessary to carry out the
purposes and intents of this Agreement.

 

(b) To the extent not already in the possession of the Applicable Transferee or
its Subsidiaries (other than, in the case of Duke, Company or its Subsidiaries),
on or as promptly as practicable after the Applicable Closing Date, the
Applicable Transferor shall cause to be delivered to the Applicable Transferee
all original agreements, documents, books, records and files, recorded or stored
by means of any device including in electronic form relating to the ownership or
operation of the Empress System Business or the Canadian Assets Business, as
applicable, or its respective properties or assets, including, all books of
account, journals and ledgers, correspondence, memoranda, maps, plats, customer
lists, information and account histories, supplier lists and information,
personnel records relating to, in the case of the Canadian Assets Business,
Canadian Assets Employees, or in the case of the Empress System Business,
Empress System Employees, engineering plans, property records, title insurance
policies, records relating to all Canadian Asset Easements and COP Easements
(regardless of the holder of record title thereof), as applicable, stock
certificates and stock transfer records, minute books and corporate seals.

 

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Section 7.4 Conduct of Business; Restriction on Dividends. From the date of this
Agreement through the Applicable Closing, except as disclosed in Schedule 7.4 of
the COP Disclosure Schedule or otherwise provided for in, or contemplated by,
this Agreement, and, except as consented to or approved by the Applicable
Transferee in writing, COP covenants and agrees with respect to the Empress
System Business and Company covenants and agrees (as to Section 7.4(h)) with
respect to the Canadian Holding Company and Canadian Assets Subsidiaries that:

 

(a) the Empress System Business shall be operated in the ordinary course in
substantially the same manner as conducted as of the date hereof;

 

(b) PTC shall not (i) amend its certificate or articles of incorporation or
by-laws or comparable organizational documents or (ii) make any change in its
authorized or issued capital stock, limited liability company interests or other
equity interests;

 

(c) PTC shall not (i) issue, sell or agree to issue or sell any shares of its
capital stock, limited liability company interests or any other securities
(including any securities convertible into, or options with respect to, or
warrants to purchase or rights to subscribe for, any shares of its capital
stock, limited liability company interests or other securities) or (ii) redeem,
purchase or otherwise acquire, directly or indirectly, any of its securities;

 

(d) except in the ordinary course of business or as otherwise provided for in or
contemplated by this Agreement, no member of the COP Sale-Related Group shall
enter into any joint venture, partnership, operating or other similar
arrangement;

 

(e) except (i) in the ordinary course of business (including the purchase of
natural gas and supplies in the ordinary course of business) (ii) for
acquisitions involving expenditures of less than $1,000,000, or (iii) as
otherwise provided for in or contemplated by this Agreement, no member of the
COP Sale-Related Group shall (A) acquire any material assets or securities of
any Person or any interests therein or (B) sell, assign, license, transfer,
lease (as lessor) or otherwise dispose of any material assets or securities;

 

(f) except as contemplated by the 2005 capital expenditure schedule set forth in
Schedule 7.4(f) of the COP Disclosure Schedule, and except for acquisitions
permitted under Section 7.4(e), no member of the COP Sale-Related Group shall
make or authorize any capital expenditure or expenditures, and COP shall cause
the capital projects contemplated by such capital expenditure schedule to be
conducted (to the extent so contemplated to be conducted prior to the Applicable
Closing Date) and the associated capital expenditures therefor to be made in
accordance with such schedule;

 

(g) no member of the COP Sale-Related Group shall make any change in any of its
present financial accounting methods and practices, except as required by
changes in GAAP;

 

(h) none of PTC, Canadian Holding Company or any of the Canadian Assets
Subsidiaries shall declare or pay any dividend or make any similar distribution
or payment, directly or indirectly, with respect to securities of any such
Person;

 

 

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(i) except where the applicable member is in good faith contesting the same
(with appropriate reserves), no member of the COP Sale-Related Group shall fail
to pay when due (i) any trade accounts payable or (ii) any payments required by
any indentures, mortgages, financing arrangements, loan agreements or similar
arrangements;

 

(j) PTC shall not incur any indebtedness for borrowed money, issue any debt
securities or assume, guarantee, endorse or otherwise be responsible for the
obligations of any other Persons, and the Empress System shall not be mortgaged
or encumbered other than with Permitted Encumbrances;

 

(k) no member of the COP Sale-Related Group shall (i) amend any COP Material
Contract that has a term of greater than one year or (ii) enter into any
contract, agreement or commitment that both has a term of greater than one year
and would have been a COP Material Contract if it had been in effect on the date
hereof; and

 

(l) none of COP or its Affiliates (including the members of the COP Sale-Related
Group) shall agree to take any action prohibited by this Section 7.4.

 

Section 7.5 Preservation of Business. Subject to the terms and conditions of
this Agreement, COP shall, and shall cause the COP Sale-Related Group to, use
reasonable efforts to preserve the Empress System Business intact, to keep
available to the Empress System Business and the Applicable Transferee the
services of the Empress System Employees and to preserve the goodwill of and
maintain satisfactory relationships with customers and others having business
relations with the Empress System Business in all material respects.

 

Section 7.6 Public Announcements. Except as otherwise required by law or stock
exchange regulations, each Party will consult with the other Parties and obtain
the consent of the others (which consent shall not be unreasonably withheld or
delayed) before issuing, or permitting any agent or Affiliate to issue, any
press releases or otherwise making or permitting any agent or Affiliate to make,
any public statements with respect to this Agreement or the transactions
contemplated hereby.

 

Section 7.7 Assignment of Contracts, Leases, Permits, etc. (a) Anything in this
Agreement to the contrary notwithstanding, this Agreement shall not constitute
an agreement to assign any contract, lease or Permit or any claim, right or
benefit if an attempted assignment thereof, without the consent of a
third-party, would constitute a breach or other contravention thereof, be
ineffective with respect to any party thereto or in any way adversely affect the
rights of an Applicable Transferee or its Subsidiaries.

 

(b) With respect to any consent, confirmation, novation, approval, contract,
lease or Permit (in each case, including any from, with or otherwise relating to
any Governmental Entity) necessary to the conduct of the Empress System Business
or the Canadian Assets Business, as applicable, as presently conducted (and any
claim, right or benefit arising thereunder or resulting therefrom), other than
the matters addressed in Sections 7.14 and 7.16, the Applicable Transferor will
use its reasonable best efforts to obtain as expeditiously as possible the
written consent, confirmation, novation, approval, contract, lease or Permit of
the

 

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applicable parties (in each case, including any from, with or otherwise relating
to any Governmental Entity) for the assignment or, if required, novation,
thereof to the Applicable Transferee or its designee or, alternatively, written
confirmation from such parties reasonably satisfactory in form and substance to
the Applicable Transferee that such consent confirmation, novation, approval,
contract, lease or Permit is not required. In furtherance of the foregoing,
except with regard to the matters addressed in Section 7.14 as soon as
practicable following the date hereof, the Applicable Transferor shall submit to
the other party or parties thereto documentation seeking the written waiver or
approval of such other party or parties thereto of such consents, confirmations,
novations, approvals, contracts, leases or Permits (in each case, including any
from, with or otherwise relating to any Governmental Entity) relating to the
Empress System Business or any Company Retained Subsidiary in the case of such
consents, confirmations, novations, approvals, contracts, leases or Permits (in
each case, including any from, with or otherwise relating to any Governmental
Entity) relating to the Canadian Assets Business) claims, rights, benefits and
liabilities thereunder to the Applicable Transferee or its designee.

 

(c) The failure by the Parties to obtain any consent, confirmation, novation,
approval, contract, lease or Permit (in each case, including any from, with or
otherwise relating to any Governmental Entity (other than a Required
Governmental Consent)) referenced in Section 7.7(b) shall not relieve any Party
from its obligation to consummate at the Applicable Closing the transactions
contemplated by this Agreement or any other obligations hereunder, subject (to
the extent applicable) to the terms of Section 7.16.

 

(e) Except with regard to the matters addressed in Section 7.14 and, subject to
the terms of Section 7.16 (which shall control over this Section 7.7(d)), if any
consent, confirmation, novation, approval, contract, lease or Permit (in each
case, including any from, with or otherwise relating to any Governmental Entity
(other than a Required Governmental Consent)) necessary to the conduct of the
Empress System Business or the Canadian Assets Business, as applicable, as
presently conducted, is not obtained prior to the Applicable Closing Date, then
the Applicable Transferor shall establish an agency type or other arrangement
satisfactory to the Applicable Transferee under which the Applicable Transferor
shall hold the related contract, lease, Permit or other interest for the benefit
of the Applicable Transferee or its designee, and such Applicable Transferee or
such designee would obtain the claims, rights and benefits and assume the
corresponding liabilities and obligations thereunder in accordance with this
Agreement (including by means of any subcontracting, sublicensing or subleasing
arrangement) or under which the Applicable Transferor would enforce at the
direction of and for the benefit of the Applicable Transferee, with the
Applicable Transferee or its designee assuming and agreeing to pay the
Applicable Transferor’s obligations and expenses, any and all claims, rights and
benefits of the Applicable Transferor against a third-party thereto; provided
that the Applicable Transferor’s obligation to maintain any such arrangement
shall terminate upon the earliest to occur of: (1) the expiration or termination
of such consent, confirmation, novation, approval, contract, lease or Permit in
accordance with its terms (without regard to any extensions, automatic or
otherwise); or (2) with regard to a Permit, such time as the Applicable
Transferee or its designee, as the case may be, shall obtain a Permit in
reasonable substitution therefor, or have its application for such substitute
Permit denied. In any such arrangement, (i) the Applicable Transferor shall
promptly pay to the Applicable Transferee or its designee when received all
moneys relating to the period after the Applicable Closing Date received by it
under

 

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any contract or any claim, right or benefit arising thereunder not transferred
pursuant to this Section 7.7 and (ii) the Applicable Transferee or such designee
shall promptly pay, perform or discharge when due any obligation or liability
arising thereunder after the Applicable Closing Date.

 

Section 7.8 Corporate Names. Company and Duke acknowledge that, from and after
the Applicable Closing Date, Company and Duke shall have no rights with respect
to any names, marks, trade names, trademarks and logos (collectively,
“Trademarks and Logos”) incorporating “ConocoPhillips” by themselves or in
combination with any other Trademark or Logo, including the corporate design
logos associated therewith, and that COP shall retain absolute and exclusive
proprietary rights thereto or goodwill represented thereby or pertaining
thereto. From and after the Applicable Closing Date, Company and Duke shall not,
nor shall they permit any of their respective Affiliates to, use any name,
phrase or logo incorporating “ConocoPhillips” or such corporate design logo or
any confusingly similar name, phrase, logo or corporate design logo in or on any
of its literature, sales materials or products or otherwise in connection with
the sale of any products or services; provided, however, that Company and Duke
may continue to use any signage, printed literature, sales materials, purchase
orders and sales or lease agreements, and sell any products, that are included
in the inventories of the Empress System Business, on the Applicable Closing
Date and that bear a name, phrase or logo incorporating “ConocoPhillips” or such
corporate design logo, until the supplies thereof existing on the Applicable
Closing Date have been exhausted, but in any event for not longer than 180 days
from the Applicable Closing Date.

 

Section 7.9 D&O Indemnification. COP agrees that the transactions contemplated
by this Agreement shall not affect or diminish any duties and obligations of
indemnification from COP or its Affiliates (other than PTC) existing as of the
Applicable Closing Date in favor of employees, agents, directors or officers of
the Empress System Business arising by virtue of their respective certificates
of incorporation or by-laws or other organizational documents in the form in
effect at the date of this Agreement or arising by operation of law or arising
by virtue of any contract, resolution or other agreement or document existing at
the date of this Agreement, and such duties and obligations shall continue in
full force and effect and shall be honored by COP or its Affiliates for so long
as they would (but for the transactions contemplated by this Agreement)
otherwise survive and continue in full force and effect.

 

Section 7.10 Expenses. Each party shall bear its own expenses, provided that in
furtherance of the foregoing, Pre-Applicable Closing expenses and accruals of
expenses of the COP Sale-Related Group, Canadian Holding Company and the
Canadian Assets Subsidiaries arising out of the transactions contemplated by
this Agreement shall be borne by the Applicable Transferor. For the avoidance of
doubt, expenses and Liabilities of Company incurred or accrued by Company prior
to the Second Closing or otherwise in connection with this Agreement and the
transactions contemplated hereby are expenses and Liabilities relating to the
Pre-First Closing Period and shall be allocated in accordance with the Amended
and Restated LLC Agreement in effect during the Pre-First Closing Period.

 

Section 7.11 Insurance. Each Applicable Transferee acknowledges that the
programs and policies of insurance maintained by the Applicable Transferors to
provide

 

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coverage in favor of the Empress System Business or the Canadian Assets
Business, as applicable, shall be terminated effective 12:01 A.M. on the day
following the Applicable Closing Date. From and after the Applicable Closing
Date, all risk of loss with respect to properties and assets of the Empress
System Business or the Canadian Assets Business, as applicable, shall be borne
by the Applicable Transferee. With respect to events occurring prior to the
Applicable Closing Date, each Applicable Transferee shall be entitled to the
benefits of insurance from independent sources (not affiliated with the
Applicable Transferor) maintained by or for the benefit of the Empress System
Business or the Canadian Assets Business, as applicable, with respect to
properties and assets of the Empress System Business or the Canadian Assets
Business, as applicable; provided, however, that notwithstanding anything to the
contrary contained in this Agreement, from and after the Applicable Closing
Date, except as otherwise agreed by the Applicable Transferor and the Applicable
Transferee, none of Canadian Holding Company, the Canadian Assets Subsidiaries,
PTC or Duke Transferee shall be entitled to any insurance recovery from any
Applicable Transferor-affiliated insurance company. Further, the Applicable
Transferee shall indemnify and hold harmless the Applicable Transferor from any
retroactive premiums imposed by any insurer under programs or policies
maintained by the Applicable Transferor prior to the Applicable Closing as a
result of any claims made after the Applicable Closing Date with respect to the
properties and assets of the Empress System Business or the Canadian Assets
Business, as applicable, regardless of the date of loss.

 

Section 7.12 Guaranties. In the event that after the Applicable Closing Date COP
or any Affiliate thereof (other than Company or its Subsidiaries) or Company or
any Affiliate thereof (other than Canadian Holding Company and the Canadian
Assets Subsidiaries) remains liable under or for any of the guarantees (whether
of payment or performance), letters of credit or other undertakings it has
delivered prior to the Applicable Closing Date to others for the benefit of the
Empress System Business or the Canadian Assets Business, as applicable and that
are described on Schedule 7.12 of the COP Disclosure Schedule or Schedule 7.12
of the Company Disclosure Schedule, as applicable (collectively, the
“Undertakings”), the Applicable Transferee agrees to indemnify and hold harmless
the Applicable Transferor or such Affiliate thereof from any cost, expense or
loss (including reasonable attorneys’ fees) incurred by the Applicable
Transferor or such Affiliate thereof arising directly or indirectly therefrom
with respect to post-Applicable Closing periods except insofar as such cost,
expense or loss constitutes or arises from a matter with respect to which the
Applicable Transferee is entitled to indemnification hereunder. Any reasonable
out-of-pocket expense incurred by the Applicable Transferor with respect to
maintaining such support for periods after the Applicable Closing Date shall be
reimbursed to the Applicable Transferor by the Applicable Transferee. Each
Applicable Transferee shall use its reasonable efforts (including an offer of a
substitute guarantee, letter of credit or undertaking) to cause or procure the
release, within six months of the Applicable Closing Date, of all liabilities or
obligations of each Applicable Transferor or any Affiliate thereof (other than
the Applicable Transferee or its Subsidiaries) with respect to the Undertakings
designated as “Release Undertakings” on Schedule 7.12 of the COP Disclosure
Schedule or Schedule 7.12 of the Company Disclosure Schedule, as applicable,
from any of the liabilities or obligations of the Empress System Business or the
Canadian Assets Business, as applicable, for post-Closing periods.

 

Section 7.13 Actions by Affiliates of the Parties. Each Party shall ensure that
each of their respective Affiliates takes all actions necessary to be taken by
such Affiliate in order to fulfill the obligations of such Party, as the case
may be, under this Agreement.

 

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Section 7.14 Radio Licences; Radio Towers. (a) Prior to the Applicable Closing
Date, or as soon thereafter as practicable, COP shall use commercially
reasonable efforts to assign, or cause to be assigned, to Duke Transferee all of
the Radio Licences used solely by ES Transferor or PTC but held of record by COP
or a COP Retained Affiliate as of the date hereof, including those identified on
Schedule 7.14(a) of the COP Disclosure Schedule. COP shall cause each such
assignment to be filed with Industry Canada, shall use commercially reasonable
efforts to obtain any approvals and consents from Industry Canada necessary for
such transfer and shall pay all fees and other costs incurred in connection
therewith.

 

(b) This clause (b) applies to any Radio Licence identified in Schedule 7.14(a)
of the COP Disclosure Schedule that is currently being used simultaneously by
COP or a COP Retained Affiliate and by ES Transferor or PTC in their respective
business operations (“Shared License”). Prior to the Applicable Closing, COP
shall use commercially reasonable efforts to obtain two Radio Licences in
replacement of the Shared License, one in the name of and for the benefit of COP
or such COP Retained Affiliate and the second in the name of and for the benefit
of Duke Transferee or PTC, as applicable. COP shall pay, or cause the applicable
COP Retained Affiliate to pay, all fees and other costs incurred in connection
therewith. In the event that COP is unable to obtain two replacement licenses,
COP will transfer the Shared License to Duke Transferee or PTC, as applicable,
subject to a mutually acceptable arrangement whereby COP or such COP Retained
Affiliate, as the case may be, shall be permitted to continue to use such Radio
Licence subsequent to the Applicable Closing for substantially the same purpose,
in substantially the same manner and to substantially the same extent as prior
to the Applicable Closing. Any such shared-use arrangement with respect to the
Shared License shall be finalized not later than the date on which the Shared
License is transferred. COP shall pay, or shall cause the applicable COP
Retained Affiliate to pay, all fees and other costs incurred in connection
therewith.

 

(c) If COP or a COP Retained Affiliate, as of the date of this Agreement, owns
the radio tower corresponding to any Radio Licence identified in Schedule
7.14(a) of the COP Disclosure Schedule, then COP and the Applicable Transferee,
both acting reasonably and in good faith, shall jointly prepare and agree upon a
mutually acceptable arrangement whereby COP or such COP Retained Affiliate, as
the case may be, shall be permitted to continue to use such radio tower
subsequent to the Applicable Closing for substantially the same purpose, in
substantially the same manner and to substantially the same extent as prior to
the Applicable Closing. COP shall use commercially reasonable efforts to obtain,
prior to Applicable Closing, consent of third-party tower lessors for the
assignment to Duke Transferee or PTC, as applicable, of all tower leases
corresponding to the Radio Licences required to be transferred herein. In those
instances where the third-party lessor does not consent to such transfer, COP
and the Applicable Transferee shall prepare and agree upon a shared-use
agreement with respect to the radio tower as described below. Any such
shared-use arrangement with respect to a radio tower (i) shall be finalized not
later than the date on which title to such radio tower is conveyed of record to
Duke Transferee or PTC, as applicable, (ii) shall be structured so as to
minimize the interference of any use of such radio tower by either party to such
arrangement with any use of such radio tower by the other party, and (iii) shall
provide for reasonable rights of ingress and

 

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egress to and from such radio tower where necessary. It is anticipated that any
such shared-use arrangements with respect to radio towers will in most cases
consist of (A) the transfer by COP or the COP Retained Affiliate to Duke
Transferee or PTC as applicable, of record legal title to such radio tower and
the fee property on which such tower is located and (B) the grant by Duke
Transferee or PTC, as applicable, of a perpetual easement or license to COP or a
COP Retained Affiliate. COP shall cause a general warranty deed for each such
transfer to be prepared, executed and filed of record in the appropriate land
title recording office, and shall pay all recording fees, deed stamp taxes and
other costs incurred in connection with such recordation.

 

(d) Prior to the Applicable Closing Date, or as soon thereafter as practicable,
Company shall use commercially reasonable efforts to cause to be assigned to
Canadian Holding Company or the Canadian Assets Subsidiaries, as appropriate,
all of the Radio Licences used solely by them but held of record by third
parties as of the date hereof, including those identified on Schedule 7.14(d) of
the Company Disclosure Schedule. Company shall use its commercially reasonable
efforts to (i) cause each such assignment to be filed with Industry Canada and
(ii) obtain any approvals and consents from Industry Canada, as the case may be,
necessary for such transfer, and Company shall pay all fees and other costs
incurred in connection with such assignment (other than such fees and costs paid
by such third parties).

 

Section 7.15 Post-Closing TEPPCO Adjustment. (a) If subsequent to the Second
Closing Date Company receives proceeds from a purchase price or similar
adjustment pursuant to the TEPPCO Agreement or otherwise relating to the TEPPCO
Sale, Company shall make a cash distribution to each of DEFS Holding and CPGC in
the following amount: (i) to DEFS Holding, an amount equal to such proceeds
multiplied by 0.697, and (ii) to CPGC, an amount equal to such proceeds
multiplied by 0.303. Any such aforesaid distributions shall be made by wire
transfer of immediately available funds to an account designated by each of DEFS
Holding and CPGC, as applicable.

 

(b) If subsequent to the Second Closing Date Company shall be required to pay a
purchase price or similar adjustment pursuant to the TEPPCO Agreement or
otherwise relating to the TEPPCO Sale, each of DEFS Holding and CPGC shall make
a cash contribution to Company in the following amount: (i) from DEFS Holding,
an amount equal to such payment multiplied by 0.697, and (ii) from CPGC, an
amount equal to such payment multiplied by 0.303. Any such aforesaid
contributions shall be made by wire transfer of immediately available funds to
an account designated by Company.

 

(c) Any Profits or Losses (as defined in the Second Amended and Restated LLC
Agreement) arising solely from a receipt or payment described in Section 7.15(a)
or (b) shall be allocated 69.7% to DEFS Holding and 30.3% to CPGC.

 

Section 7.16 Empress System Business Covenants. (a) If on the Empress Target
Closing Date, (i) one or more Business Representations and Warranties of COP, to
the extent made in respect of the Empress System Business, shall not be true and
correct both when made and on and as of such Empress Target Closing Date with
the same effect as though such representations and warranties had been made on
and as of such Empress Target Closing Date (except for representations and
warranties expressly made as of an earlier date, in which case as of such date),
except for such failures to be true and correct (without giving effect to any

 

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Materiality Requirement) which, individually or in the aggregate, do not have a
Material Adverse Effect on the Empress System Business, (ii) one or more
covenants and agreements of COP to be performed and complied with on or before
such Empress Target Closing Date in accordance with this Agreement with respect
to the Empress System Business shall not have been duly performed and complied
with in all material respects, (iii) Duke shall not have received a certificate
dated the Empress Target Closing Date and validly executed on behalf of COP by
an officer of COP to the effect that the contingencies described in clauses (i)
and (ii) of this Section 7.16(a) have not occurred, or (iv) from December 31,
2004 through the Empress Target Closing Date, a Material Adverse Effect on the
Empress System Business shall have occurred, or there shall exist one or more
facts or circumstances which would reasonably be expected to have a Material
Adverse Effect on the Empress System Business (each of the contingencies set
forth in clauses (i), (ii), (iii) and (iv) above, an “Empress Contingency”),
then on the Empress Target Closing Date, the Empress System Business shall not
be transferred to Duke and Duke Transferee shall not pay the Empress System
Amount to ES Transferor unless Duke determines that such transfer and payment
should occur in its sole discretion.

 

(b) Notwithstanding anything to the contrary in Article II, Article III or
Article VIII, if on the Empress Target Closing Date, one or more Required
Governmental Consents or Required Empress Consents shall not have been obtained
with respect to the Empress System Business, and otherwise all conditions set
forth in Article VIII shall have been satisfied or waived, then the Empress
System Business shall not be transferred to Duke Transferee on the Empress
Target Closing Date and Duke Transferee shall not pay the Empress System Amount
to ES Transferor. Should the Empress System Business not be transferred to Duke
Transferee in the circumstances described in the preceding sentence, Duke and
COP agree to use reasonable best efforts to obtain the Required Empress
Consent(s) and complete the applicable review process with each Governmental
Entity that has not granted one or more such Required Governmental Consents. If
all Empress Contingencies (if any) that existed on the Empress Target Closing
Date shall have been cured within 30 days after the Empress Target Closing Date,
and all such Required Empress Consents and Required Governmental Consents are
obtained prior to or on the date that is eighteen months after the Empress
Target Closing Date, then the Empress System Business shall be transferred to
Duke Transferee and Duke Transferee shall pay the Empress System Amount to ES
Transferor on the same date which date (such date, the “Replacement Empress
Closing Date”) shall be the first Business Day of the calendar month next
following the later of (A) the date the last such Required Governmental Consent
and Required Empress Consent is obtained and (B) the date all such Empress
Contingencies are cured; provided that such transactions shall only take place
if no Empress Contingency is existing and all of the conditions set forth in
Sections 8.1 (other than with respect to Company) and 8.2 (other than with
respect to Company) have been satisfied or waived, in each case mutatis mutandis
with the term “Replacement Empress Closing Date” replacing the terms “First
Closing Date” and “Empress Target Closing Date” in such clauses and Sections and
in clauses (i) through (iv) of Section 7.16(a).

 

Section 7.17 Company Conduct. From the date hereof until the Second Closing
(including, for the avoidance of doubt, during the period between the First
Closing and the Second Closing), Company will continue to manage its business in
the ordinary course consistent with past practice to generate cash flows from
operations and to maintain normal levels of working capital. In furtherance of
the foregoing, from the date hereof until the Second

 

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Closing, in a manner consistent with past practice, the Company will (and Duke
and COP will cause the Company to) make quarterly distributions within 30 days
of the end of each fiscal quarter of Company in an amount equal to the lesser of
90% of the net income of Company for such fiscal quarter and 75% of the net cash
flow of Company for such fiscal quarter to the Members (as defined in the
Amended and Restated LLC Agreement) in the proportion set forth in the Amended
and Restated LLC Agreement.

 

Section 7.18 Preparation of Financials. (a) COP shall use reasonable best
efforts at Duke’s request and expense to assist Duke, promptly following request
from time to time, in the preparation of consolidated audited financial
statements for the Empress System Business for the most recent three fiscal
years ending prior to the Applicable Closing Date and the fiscal year during
which the Applicable Closing Date occurs, including providing reasonable access
to (i) COP’s employees, (ii) appropriate members of COP’s management (including
senior management, if appropriate), (iii) COP’s auditors and other third parties
with information relevant to the preparation of such financial statements, to
answer Duke’s questions concerning the business operations and affairs of the
Empress System Business, and (iv) corporate records, books of accounts,
contracts, financial statements, tax records, and all other documents reasonably
requested by Duke.

 

(b) Company shall use reasonable best efforts at Duke’s request and expense to
assist Duke, promptly following request from time to time, in the preparation of
consolidated audited financial statements for the Canadian Assets Subsidiaries
for the most recent three fiscal years ending prior to the First Closing Date
and the fiscal year during which the First Closing Date occurs, including
providing reasonable access to (i) Company’s employees, (ii) appropriate members
of Company’s management (including senior management, if appropriate), (iii)
Company’s auditor’s and other third parties with information relevant to the
preparation of such financial statements, to answer Duke’s questions concerning
the business operations and affairs of the Canadian Assets Subsidiaries, and
(iv) corporate records, books of accounts, contracts, financial statements, tax
records, and all other documents reasonably requested by Duke.

 

Section 7.19 Additional Covenant of Duke. Duke agrees not to dividend or
distribute on its equity any assets unless immediately thereafter at least one
of the following existed: (a) Duke would have an investment grade credit rating,
(b) Duke would be able to comply from a financial standpoint with its reasonably
expected future obligations under this Agreement, or (c) Duke would have its
reasonably expected future obligations under this Agreement guaranteed by an
entity that either has an investment grade credit rating or is able to comply
from a financial standpoint with such reasonably expected future obligations.

 

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ARTICLE VIII

CONDITIONS TO CLOSING

 

Section 8.1 Conditions to Duke’s Obligation to Close. Duke’s obligation to
consummate the transactions contemplated by this Agreement on each Applicable
Closing Date on the terms specified herein shall be subject to the satisfaction
or waiver on or prior to the First Closing Date of all of the following
conditions:

 

(a) Representations and Warranties of COP and Company. (i) The Organizational
Representations and Warranties of COP and of the Company shall be true and
correct both when made and on and as of such First Closing Date with the same
effect as though such representations and warranties had been made on and as of
such First Closing Date (except for representations and warranties expressly
made as of an earlier date, in which case as of such date), except for such
failures to be true and correct (without giving effect to any Materiality
Requirement) which, individually or in the aggregate, do not have a Material
Adverse Effect on Company, the Empress System Business, the Canadian Assets
Business, Canadian Holding Company or the Canadian Assets Subsidiaries.

 

(ii) Duke shall have received (A) a certificate dated the First Closing Date and
validly executed on behalf of COP by an officer of COP to the effect that the
conditions specified in clause (i) of this Section 8.1(a) have been satisfied
with respect to COP and (B) a certificate dated the First Closing Date and
validly executed on behalf of Company by an officer of Company to the effect
that the conditions specified in clause (i) of this Section 8.1(a) have been
satisfied with respect to Company.

 

(b) Required Governmental Consents. Each Required Governmental Consent has been
obtained.

 

(c) No Injunction or Proceedings. At such First Closing Date, (i) there shall be
no statute, rule, regulation, injunction, restraining order or decree of any
nature of any Governmental Entity of competent jurisdiction that is in effect
that restrains or prohibits the consummation of a material portion of the
transactions contemplated by this Agreement and (ii) no action or proceeding
before any Governmental Entity shall have been instituted by a Governmental
Entity to restrain or prohibit the consummation of a material portion of the
transactions contemplated by this Agreement.

 

Section 8.2 Conditions to COP’s Obligation to Close. COP’s obligation to
consummate the transactions contemplated by this Agreement on each Applicable
Closing Date on the terms specified herein shall be subject to the satisfaction
or waiver on or prior to the First Closing Date of all of the following
conditions:

 

(a) Representations and Warranties of Duke and Company. (i) The Organizational
Representations and Warranties of Duke and of the Company shall be true and
correct both when made and on and as of such First Closing Date with the same
effect as though such representations and warranties had been made on and as of
such First Closing Date (except for representations and warranties expressly
made as of an earlier date, in which case as of such date), except for such
failures to be true and correct (without giving effect to any Materiality
Requirement) which, individually or in the aggregate, do not have a Material
Adverse Effect on Company.

 

(ii) COP shall have received (A) a certificate dated the First Closing Date and
validly executed on behalf of Duke by an officer of Duke to the effect that the
conditions specified in clause (i) of this Section 8.2(a) have been satisfied
with respect to Duke and (B) a certificate dated the First Closing Date and
validly executed on behalf of Company by an officer of Company to the effect
that the conditions specified in clause (i) of this Section 8.2(a) have been
satisfied with respect to Company.

 

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(b) Required Governmental Consents. Each Required Governmental Consent has been
obtained.

 

(c) No Injunction or Proceedings. At such First Closing Date, (i) there shall be
no statute, rule, regulation, injunction, restraining order or decree of any
nature of any Governmental Entity of competent jurisdiction that is in effect
that restrains or prohibits the consummation of a material portion of the
transactions contemplated by this Agreement and (ii) no action or proceeding
before any Governmental Entity shall have been instituted by a Governmental
Entity to restrain or prohibit the consummation of a material portion of the
transactions contemplated by this Agreement.

 

Section 8.3 Conditions to Company’s Obligation to Close. Company’s obligation to
consummate the transactions contemplated by this Agreement on each Applicable
Closing Date on the terms specified herein shall be subject to the satisfaction
or waiver on or prior to the First Closing Date of all of the following
conditions:

 

(a) Representations and Warranties of Duke and COP. (i) The Organizational
Representations and Warranties of Duke and of COP shall be true and correct both
when made and on and as of such First Closing Date with the same effect as
though such representations and warranties had been made on and as of such First
Closing Date (except for representations and warranties expressly made as of an
earlier date, in which case as of such date).

 

(ii) Company shall have received (A) a certificate dated the First Closing Date
and validly executed on behalf of Duke by an officer of Duke to the effect that
the conditions specified in clause (i) of this Section 8.3(a) have been
satisfied with respect to Duke and (B) a certificate dated the First Closing
Date and validly executed on behalf of COP by an officer of COP to the effect
that the conditions specified in clause (i) of this Section 8.3(a) have been
satisfied with respect to COP.

 

(b) Required Governmental Consent. Each Required Governmental Consent has been
obtained.

 

(c) No Injunction or Proceedings. At such First Closing Date, (i) there shall be
no statute, rule, regulation, injunction, restraining order or decree of any
nature of any Governmental Entity of competent jurisdiction that is in effect
that restrains or prohibits the consummation of a material portion of the
transactions contemplated by this Agreement and (ii) no action or proceeding
before any Governmental Entity shall have been instituted by a Governmental
Entity to restrain or prohibit the consummation of a material portion of the
transactions contemplated by this Agreement.

 

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ARTICLE IX

TERMINATION

 

This Agreement may be terminated at any time prior to the First Closing by any
Party if the First Closing has not occurred by the close of business on the
third anniversary of the date hereof, provided that the failure to consummate
the transactions contemplated by this Agreement did not result from the failure
by the Party seeking termination of this Agreement to fulfill any material
undertaking or commitment provided for herein that is required to be fulfilled
prior to the First Closing. In the event of termination of this Agreement by any
or all of the Parties pursuant to this Article IX, written notice thereof shall
forthwith be given by the terminating party to the other parties hereto, and
this Agreement shall thereupon terminate and become void and have no effect, and
the transactions contemplated by this Agreement shall be abandoned without
further action by the parties hereto, except that the provisions of Section
7.1(b) shall survive the termination of this Agreement; provided, however, that
such termination shall not relieve any party hereto of any liability for any
willful breach of this Agreement. If this Agreement is terminated as provided
herein, all filings, applications and other submissions made pursuant hereto
shall, to the extent practicable, be withdrawn from the agency or other persons
to which they were made by the party making such filing, application or other
submission.

 

ARTICLE X

SURVIVAL; INDEMNIFICATION

 

Section 10.1 Indemnification by Company. Subject to the provisions of this
Article X, from and after the First Closing, Company shall indemnify and hold
harmless each of COP and its Affiliates (other than Company and its
Subsidiaries) (each a “COP Indemnified Person”) and Duke and its Affiliates
(other than Company and its Subsidiaries) (each a “Duke Indemnified Person”)
from and against any and all Damages incurred by such COP Indemnified Person or
Duke Indemnified Person in connection with (a) a breach of any representation or
warranty made by Company hereunder or in any schedule, exhibit or other document
attached to or delivered pursuant to this Agreement, (b) any failure by Company
to perform or comply with any covenant or other agreement hereunder, and (c) all
Liabilities made the responsibility of Company and/or its Subsidiaries pursuant
to Article XI.

 

Section 10.2 Indemnification by Duke and COP. (a) Subject to the provisions of
this Article X, from and after the First Closing Duke shall indemnify and hold
harmless COP and its Affiliates and Company and its Subsidiaries from and
against any and all Damages incurred by COP or its Affiliates or Company or its
Subsidiaries in connection with (i) a breach of any representation or warranty
made by Duke hereunder or in any schedule, exhibit or other document attached to
or delivered pursuant to this Agreement, (ii) any failure by Duke to perform or
comply with any covenant or agreement hereunder, (iii) all Liabilities made the
responsibility of Duke and/or its Subsidiaries (other than Company and its
Subsidiaries) pursuant to Article XI, and (iv) from and after the Applicable
Closing, all Assumed Liabilities.

 

(b) Subject to the provisions of this Article X, from and after the First
Closing COP shall indemnify and hold harmless Duke and its Affiliates (including
PTC following the Applicable Closing) and Company and its Subsidiaries from and
against any and all Damages incurred by Duke or its Affiliates (including PTC
following the Applicable Closing) or Company

 

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or its Subsidiaries, including PTC following the Applicable Closing, in
connection with (i) a breach of any representation or warranty made by COP
hereunder or in any schedule, exhibit or other document attached to or delivered
pursuant to this Agreement, (ii) any failure by COP to perform or comply with
any covenant or agreement hereunder, (iii) all Liabilities made the
responsibility of COP and/or its Subsidiaries pursuant to Article XI, and (iv)
from and after the Applicable Closing, all Liabilities relating to the Empress
System Business, except for Assumed Liabilities.

 

(c) Matters relating to indemnification for Taxes shall not be governed by this
Article X (other than this Section 10.2(c)), except to the extent otherwise
provided in Article XII.

 

Section 10.3 Indemnification Procedure. All claims by any Indemnified Party
under Article VII or this Article X shall be asserted and resolved as follows:

 

(a) In the event that (i) any claim, demand or proceeding is asserted or
instituted in writing by any Person other than the parties to this Agreement or
their Affiliates which could give rise to Damages for which an Indemnifying
Party could be liable to an Indemnified Party under this Agreement (such claim,
demand or proceeding, a “Third-Party Claim”) or (ii) any Indemnified Party shall
have a claim to be indemnified by any Indemnifying Party under this Agreement
which does not involve a Third-Party Claim (such claim, a “Direct Claim”), the
Indemnified Party shall promptly send to the Indemnifying Party a written notice
specifying the nature of such claim, together with information reasonably
available to the Indemnified Party with respect to such claim (a “Claim
Notice”), provided that, subject to the last sentence of Section 10.4, a delay
in notifying the Indemnifying Party shall not relieve the Indemnifying Party of
its obligations under this Agreement except to the extent that such failure
shall have caused actual prejudice to the Indemnifying Party. In the case where
Company is the Indemnified Party, either Duke or COP may assert an indemnity
claim on behalf of Company and each shall be considered an Indemnified Party for
purposes of this Section 10.3 in connection with any Third-Party Claim or Direct
Claim for which the other is the Indemnifying Party.

 

(b) In the event of a Third-Party Claim, the Indemnifying Party shall have 30
days (or 10 days with respect to a Claim Notice relating to the Empress System
Business or the Canadian Assets Subsidiaries) after receipt of the Claim Notice
relating to such Third-Party Claim to elect to undertake, conduct and control,
through counsel of its own choosing (provided that such counsel is reasonably
acceptable to the Indemnified Party) and at its own expense, the settlement or
defense of such Third-Party Claim (in which case the Indemnifying Party shall
not thereafter be responsible for the fees and expenses of any separate counsel
retained by any Indemnified Party except as set forth below). If the
Indemnifying Party elects to undertake such defense, it shall promptly assume
and hold such Indemnified Party harmless from and against the full amount of any
Damages resulting from such Third-Party Claim to the extent provided herein.
Notwithstanding an Indemnifying Party’s election to undertake, conduct and
control such Third-Party Claim, the Indemnified Party shall have the right to
employ separate counsel, and the Indemnifying Party shall bear the reasonable
fees, costs and expenses of such separate counsel, if the use of the counsel
selected by the Indemnifying Party to represent the Indemnified Party would
present such counsel with a conflict of interest. If the Indemnifying Party
elects to undertake such defense, (i) the Indemnified Party agrees to cooperate
with the Indemnifying

 

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Party and its counsel in contesting such Third-Party Claim, and, if appropriate
and related to such Third-Party Claim, the parties will reasonably cooperate
with each other in connection with making any counterclaim against the person
asserting the Third-Party Claim, or any cross-complaint against any Person, (ii)
such Third-Party Claim may not be settled or compromised by the Indemnified
Party without the prior written consent of the Indemnifying Party; provided that
in the event any Indemnified Party settles or compromises or consents to the
entry of any judgment with respect to any Third-Party Claim without the prior
written consent of the Indemnifying Party, such Indemnified Party shall be
deemed to have waived all rights against the Indemnifying Party for
indemnification under this Article X, and (iii) the Indemnifying Party shall
not, except with the consent of the Indemnified Party, enter into any settlement
that does not include as an unconditional term thereof the giving by the
third-party asserting such claim to all Indemnified Parties of (A) unconditional
release from all liability with respect to such Third-Party Claim or (B) consent
to entry of any judgment. If the Indemnifying Party does not notify the
Indemnified Party of its election to undertake the defense of such Third-Party
Claim within 30 days after receipt of the Claim Notice relating to such
Third-Party Claim (or 10 days with respect to a Claim Notice relating to the
Empress System Business or the Canadian Assets Subsidiaries), the Indemnified
Party shall have the right to contest, settle, compromise or consent to the
entry of any judgment with respect to such Third-Party Claim and in doing so
shall not thereby waive any right to indemnity therefor pursuant to this Article
X, provided that at any time thereafter the Indemnifying Party may assume the
defense of such Third-Party Claim.

 

(c) In the event of a Direct Claim, the Indemnifying Party shall notify the
Indemnified Party within 30 days (or 10 days with respect to Empress System
Business and Canadian Assets Subsidiaries) of receipt of a Claim Notice whether
or not the Indemnifying Party disputes such claim.

 

(d) From and after the delivery of a Claim Notice under this Agreement, at the
reasonable request of the Indemnifying Party the Indemnified Party shall grant
the Indemnifying Party and its representatives all reasonable access to the
books, records and properties of such Indemnified Party to the extent reasonably
related to the matters to which the Claim Notice relates. All such access shall
be granted during normal business hours and shall be granted under conditions
which will not unreasonably interfere with the business and operations of such
Indemnified Party. The Indemnifying Party will not, and shall cause its
representatives not to, use (except in connection with such Claim Notice) or
disclose to any third Person other than the Indemnifying Party’s representatives
(except as may be required by applicable law) any information obtained pursuant
to this Section 10.3, which is designated as confidential by the Indemnified
Party.

 

Section 10.4 Survival. The representations and warranties of the parties
contained in this Agreement shall survive each Closing and remain enforceable
for 18 months from the Applicable Closing Date; provided that (i) the
representations and warranties set forth in Section 4.11 (Environmental) shall
survive each Closing and remain enforceable for 36 months from the Applicable
Closing Date, (ii) the representations and warranties set forth in Sections 4.1,
4.2, 4.3, 4.6, 5.1, 5.2, 5.3, 5.4, 6.1, 6.2, 6.3 and 6.4 shall survive each
Closing and remain enforceable without time limit and (iii) the representations
and warranties set forth in Article XII shall survive to the extent provided in
Article XII. No claim for indemnity under this Article X for any breach of a
representation or warranty may be brought unless the appropriate

 

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Claim Notice shall have been delivered to the Indemnifying Party prior to
expiration of the applicable survival period. Notwithstanding the foregoing, any
covenants or agreements contained in this Agreement (including any covenants or
agreements contained in any representation or warranty) shall survive each
Closing and remain enforceable without time limit.

 

Section 10.5 Indemnification Limitation. (a) Each Indemnified Party under this
Article X shall use its reasonable efforts to mitigate Damages for which it
seeks indemnification hereunder and shall assign to the Indemnifying Party all
of such Indemnified Party’s claims for recovery against third parties as to
Damages, whether by insurance coverage, contribution claims, subrogation or
otherwise.

 

(b) Except as otherwise provided herein, Company’s obligation to indemnify the
other Parties and their respective Affiliates as provided in Section 10.1 shall
not become effective until the aggregate of all Damages sustained by the other
Parties and their respective Affiliates as described in Section 10.1 shall have
exceeded the Applicable Basket. If the aggregate amount of Damages sustained by
the other Parties and their respective Affiliates as described in Section 10.1
exceeds the Applicable Basket then the other Parties and their Affiliates shall
be entitled to assert claims under this Article X for indemnification for the
amount of such Damages in excess of the Applicable Basket only; provided that
Company’s obligation under this Article X shall not exceed the Applicable Cap in
the aggregate.

 

(c) Except as otherwise provided herein, COP’s obligation to indemnify the other
Parties and their respective Affiliates as provided in Section 10.2 shall not
become effective until the aggregate of all Damages sustained by the other
Parties and their respective Affiliates as described in Section 10.2 shall have
exceeded the Applicable Basket. If the aggregate amount of Damages sustained by
the other Parties and their respective Affiliates as described in Section 10.2
exceeds the Applicable Basket then the other Parties and their Affiliates shall
be entitled to assert claims under this Article X for indemnification for the
amount of such Damages in excess of the Applicable Basket only; provided that
COP’s obligation under this Article X shall not exceed the Applicable Cap in the
aggregate.

 

(d) Except as otherwise provided herein, Duke’s obligation to indemnify the
other Parties and their respective Affiliates as provided in Section 10.2 shall
not become effective until the aggregate of all Damages sustained by the other
Parties and their respective Affiliates as described in Section 10.2 shall have
exceeded the Applicable Basket. If the aggregate amount of Damages sustained by
the other Parties and their respective Affiliates as described in Section 10.2
exceeds the Applicable Basket then the other Parties and their Affiliates shall
be entitled to assert claims under this Article X for indemnification for the
amount of such Damages in excess of the Applicable Basket only; provided that
Duke’s obligation under this Article X shall not exceed the Applicable Cap in
the aggregate.

 

(e) Notwithstanding the foregoing, (i) the indemnification provision set forth
in Section 10.1(b), Section 10.1(c), Section 10.2(a)(ii), Section 10.2(a)(iii),
Section 10.2(a)(iv), Section 10.2(b)(ii), Section 10.2(b)(iii) and Section
10.2(b)(iv) shall not be subject to the Basket or Cap and (ii) none of Duke, COP
or Company or their respective Affiliates shall be entitled to assert claims for
indemnification under this Article X unless the aggregate amount of Damages

 

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claimed in any individual Claim Notice exceeds (A) with respect to Claim Notices
claiming indemnification solely under the Organizational Representations and
Warranties, $260,000 and (B) with respect to all other Claim Notices, $50,000.

 

(f) The parties hereto agree that the indemnification provisions in Articles VII
and X shall be the exclusive remedy of the parties with respect to breaches of
the representations and warranties in Articles IV, V and VI, except for actions
grounded in fraud, with respect to which the remedies and limitations set forth
in this Agreement shall not apply or in any manner limit the scope or
availability of any other remedy at law or in equity.

 

Section 10.6 Materiality Qualifiers. For purposes of determining Damages and
rights to indemnification under this Article X, the representations and
warranties set forth in Articles IV, V and VI shall be read without giving
effect to any Materiality Requirement set forth therein; provided, that
representations and warranties qualified by “Material Adverse Effect” shall be
deemed to be true to the extent the breach thereof is reasonably attributable to
the general state of the industries in which such Party and its Subsidiaries
operate (including natural gas and petroleum price levels), to general economic
conditions in the United States and Canada (including prevailing interest rate
and stock market levels) or to the transactions contemplated by this Agreement.
As used in this Agreement, a “Materiality Requirement” shall mean any
requirement in a representation or warranty that a condition, event or state of
fact be “material,” correct or true in “all material respects,” have a “Material
Adverse Effect,” “COP Sale-Related Material Adverse Effect,” or “Canadian Assets
Material Adverse Effect,” or be or not be “reasonably expected to have a
Material Adverse Effect” (or Canadian Assets Material Adverse Effect or COP
Sale-Related Material Adverse Effect) (or other words or phrases of similar
effect or impact) in order for such condition, event or state of facts to cause
such representation or warranty to be inaccurate.

 

ARTICLE XI

EMPLOYEE MATTERS

 

Section 11.1 Empress System Employees. (a) No later than 10 days prior to the
Applicable Closing Date, but effective as of the Applicable Closing Date, Duke
shall, or Duke shall cause an Affiliate of Duke to, make offers of employment to
all non-unionized Empress System Employees who are employed by COP or a
Subsidiary of COP immediately prior to the Applicable Closing Date (which offers
shall be for full-time or part-time employment consistent with the employment
status of the particular Empress System Employee with COP or a Subsidiary of
COP). The terms and conditions of each such offer of employment shall be
consistent with the provisions of this Section 11.1. In respect of the unionized
Empress System Employees employed by COP or a Subsidiary of COP immediately
prior to the Applicable Closing Date, Duke or an Affiliate of Duke will be the
successor employer under the Collective Agreements between COP (or its
applicable Subsidiary) and the Communications, Energy and Paperworkers Union,
Locals 745 and 746 pursuant to the provisions of applicable labor legislation,
and effective as of the Applicable Closing Date, Duke or an Affiliate of Duke
shall accept all legal obligations and responsibilities arising under such
legislation with respect to the Continuing Empress System Employees who are
subject to such agreements. As used in this Agreement, the term “Continuing
Empress System Employee” means each individual who accepts an offer of
employment from Duke or an Affiliate of Duke or in respect of whom Duke

 

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or an Affiliate of Duke becomes the successor employer as provided in the
preceding provisions of this paragraph. The Hire Date for each non-unionized
Empress System Employee who accepts an employment offer from Duke or an
Affiliate of Duke pursuant to the first sentence of this paragraph and who
actually becomes employed by Duke or an Affiliate of Duke in accordance with
such offer shall be the Applicable Closing Date, except with respect to those
individuals to whom employment offers are made and who are not Actively Employed
as of the Applicable Closing Date, in which case the Hire Date shall be the date
upon which such individual is able to and does commence active duty with Duke or
an Affiliate of Duke, it being agreed that with respect to an Empress System
Employee who is not Actively Employed as of the Applicable Closing Date due to
disability but who subsequently obtains a medical release to return to work
(which medical release, if requested by Duke, is confirmed by a doctor selected
by Duke), Duke or its applicable Affiliate will participate with such employee
in a return-to-work program, intended to lead to full-time employment for that
employee with Duke or its applicable Affiliate. From the Applicable Closing Date
through the first anniversary thereof, Duke and its Affiliates shall provide
each Continuing Empress System Employee with compensation and employee benefits
that are substantially similar in aggregate economic value to the compensation
and employee benefits provided to such employee immediately prior to the
Applicable Closing Date. Neither COP nor any of its Affiliates shall, unless
acting in accordance with Duke’s prior written consent, (i) during the period
beginning on the date of this Agreement and ending on the Applicable Closing
Date, solicit, encourage or induce any Empress System Employee to reject an
employment offer from Duke or an Affiliate of Duke or solicit, encourage or
induce any such employee to continue in the employment of COP or any of its
Affiliates from and after the Applicable Closing Date and (ii) for the period
beginning on the Applicable Closing Date and ending on the date that is one year
after the Applicable Closing Date, solicit, encourage or induce any Continuing
Empress System Employee to become an employee of COP or any of its Affiliates;
provided, however, that this sentence shall not (x) apply to any Continuing
Empress System Employee whose employment has been terminated by Duke and its
Affiliates, (y) prohibit COP or any of its Affiliates from making a general
solicitation by advertisement or otherwise (and from thereafter soliciting or
hiring any Continuing Empress System Employee who responds to such general
solicitation), or (z) apply to the Empress System Employees designated on
Schedule 11.1(a) as “Multiple Offer Employees”; provided, further, that (A) in
no event shall COP or any of its Affiliates, during the period beginning on the
date of this Agreement and ending on the date that is one year after the
Applicable Closing Date, offer or provide a Multiple Offer Employee with
compensation or benefits in excess of the compensation and benefits provided by
COP and its Affiliates to such employee immediately prior to the date of this
Agreement (other than for increases in compensation and benefits that are of
general applicability to employees of COP, including any merit raises in salary
resulting from the annual review processes of COP and its Affiliates, operated
in the ordinary course) and (B) the exception to the application of this
sentence that is provided for in clause (z) of this sentence shall cease to
apply with respect to a particular Multiple Offer Employee immediately upon the
acceptance by such employee of an employment offer from Duke or an Affiliate of
Duke. With respect to each Empress System Employee (other than a Multiple Offer
Employee) to whom Duke or an Affiliate of Duke makes an employment offer on or
before the Applicable Closing Date in accordance with this Section 11.1(a), COP
and its Affiliates shall not take any action to influence such employee to
reject such offer, including assisting such employee in procuring alternative
employment arrangements.

 

 

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(b) Except to the extent specifically provided elsewhere in this Section 11.1,
Duke Group shall not, and from and after the Applicable Closing Date, PTC shall
not, have any responsibility or liability with respect to the COP Plans. Duke or
an Affiliate of Duke shall, as of each Continuing Empress System Employee’s Hire
Date, assume and honor all accrued vacation entitlement of such employee.

 

(c) On and after the applicable Hire Date, Duke shall cause each Continuing
Empress System Employee to receive full credit for all service credited under
the COP Plans for all purposes (including eligibility to participate, vesting
and benefit accrual) under the corresponding employee benefit plans and policies
of Duke and its Affiliates, including vacation, floating holidays, retirement,
severance and pension plans; provided, however, that such service credit for
benefit accrual purposes shall not be provided under any defined benefit plan,
except that such service credit for benefit accrual purposes shall be recognized
under the defined benefit component of the Duke Canadian Pension Plan subject to
(i) the completion of the transfers described in Sections 11.1(d)(iii) and (iv)
and (ii) limitation by Duke and its Affiliates to the extent necessary to ensure
that benefits in excess of those accrued under the defined benefit component of
the COP Canadian Pension Plan (assuming for this purpose, however, that the
amount so accrued was based upon the final average pay that would have applied
under such plan had all compensation from Duke and its Affiliates following the
applicable Hire Date been taken into account) are not provided under the Duke
Canadian Pension Plan for the period preceding the applicable Hire Date. If Duke
or an Affiliate of Duke provides coverage under a group health plan to a
Continuing Empress System Employee, then Duke shall cause such group health plan
to (A) make available such coverage to such Continuing Empress System Employee
and his or her eligible dependents effective immediately upon such Continuing
Empress System Employee’s Hire Date, and (B) waive any preexisting condition
restrictions to the extent such restrictions were not imposed with respect to
such Continuing Empress System Employee and his or her eligible dependents, as
applicable, under the corresponding COP Plan, and waive any proof of
insurability requirements (and accept any pre-approvals of coverage) for amounts
of insurance already approved under the corresponding COP Plan or up to the
non-evidence maximums in the group health plan of Duke and its Affiliates,
whichever is greater.

 

(d) COP Canadian Pension Plan.

 

(i) Continuing Empress System Employees who are active participants in the COP
Canadian Pension Plan, which is comprised of both a defined contribution and a
defined benefit component, shall, effective as of the applicable Hire Date,
cease participation in the COP Canadian Pension Plan and shall, effective as of
the applicable Hire Date, become members of the pension plan or plans of Duke
and its Affiliates applicable to similarly situated employees of Duke and its
Affiliates (such plan or plans, the “Duke Canadian Pension Plan”). The Duke
Canadian Pension Plan shall recognize Continuing Empress System Employees’
service as recognized under the COP Canadian Pension Plan as of the applicable
Hire Date as unbroken continuous service with Duke and its Affiliates for all
purposes under the Duke Canadian Pension Plan, including vesting and locking-in
pursuant to the Employment Pension Plans Act (Alberta) and, to the extent
provided in Section 11.1(c), benefit accrual. Effective as of the applicable
Hire Date, but subject to the completion of the transfers described in Sections
11.1(d)(iii) and (iv), the Duke Canadian Pension Plan shall assume all of the
obligations of the COP Canadian Pension Plan in respect of each Continuing
Empress System Employee.

 

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(ii) The actuary of the COP Canadian Pension Plan shall determine the amount of
assets to be transferred from the defined benefit pension fund for the COP
Canadian Pension Plan to the pension fund for the Duke Canadian Pension Plan as
of the Applicable Closing Date (the “DB Transfer Amount”) in accordance with the
actuarial methods and assumptions as set forth on Schedule 11.1(d)(ii) of the
COP Disclosure Schedule, which determination (along with reasonable background
data) shall be furnished to Duke. The DB Transfer Amount shall equal the greater
of the going-concern liabilities and the solvency liabilities of the COP
Canadian Pension Plan as of the Applicable Closing Date in respect of the
Continuing Empress System Employees hired on that date. Duke shall within 30
days of receiving such determination and data notify COP of any disagreement
with such determination. In the event that Duke does not notify COP of any such
disagreement, such determination shall become final. In the event that Duke
notifies COP that it disagrees with such determination and Duke and COP cannot
reach agreement with respect to proper determination of the DB Transfer Amount,
such determination shall be referred to and settled with final and binding
effect by an independent actuary mutually agreeable to Duke and COP.

 

(iii) COP shall, as soon as practicable, make an application to the applicable
governmental authorities for any and all required approvals to transfer both the
accrued liabilities of the Continuing Empress System Employees under the COP
Canadian Pension Plan and assets equal to the Pension Transfer Amount (as
defined below) from the COP Canadian Pension Plan to the Duke Canadian Pension
Plan. Within 30 days following receipt of all regulatory approvals required with
respect to such transfer of assets (but in no event prior to final determination
of the DB Transfer Amount), COP shall cause the trustee of the COP Canadian
Pension Plan to transfer to the pension fund for the Duke Canadian Pension Plan
an amount (the “Pension Transfer Amount”) of cash equal to the sum of: (1) the
DB Transfer Amount, plus interest from the Applicable Closing Date to the date
of such transfer (the “Pension Transfer Date”) at a rate per annum equal to the
going-concern or solvency valuation rate, whichever is used in the determination
of the DB Transfer Amount, compounded annually, reduced by any benefits paid to
Continuing Empress System Employees under the terms of the COP Canadian Pension
Plan during the period between the Applicable Closing Date and the Pension
Transfer Date; and (2) the sum of the defined contribution balances in the COP
Canadian Pension Plan as of the Pension Transfer Date in respect of each
Continuing Empress System Employee who has entitlements under the defined
contribution provisions of the COP Canadian Pension Plan. In the event the
applicable government authorities will only approve the transfer of an amount
that is less than the Pension Transfer Amount, then (i) COP shall cause such
lesser amount to be transferred from the COP Canadian Pension Plan to the Duke
Canadian Pension Plan and (ii) COP shall simultaneously pay, or cause an
Affiliate of COP to pay, to Duke (or an Affiliate of Duke designated by Duke)
the difference between the Pension Transfer Amount and the amount so transferred
pursuant to clause (i) of this sentence.

 

(iv) Duke and COP shall enter into similar arrangements as described in the
preceding provisions of this Section 11.1(d) for Continuing Empress System
Employees whose Hire Date is after the Applicable Closing Date, mutatis
mutandis.

 

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(e) Duke shall be responsible for and hereby agrees to indemnify COP and its
Affiliates from all losses, expenses, or Liabilities whatsoever, including
severance costs and loss of benefits, arising from any: (i) wrongful or
constructive dismissal claims made by or on behalf of Continuing Empress System
Employees that are based on actions of Duke and its Affiliates taken on or after
the Applicable Closing Date or in connection with the processes concerning
offers of employment contemplated by Section 11.1(a), or (ii) long-term
disability claims made after the Applicable Closing Date by or on behalf of any
Continuing Empress System Employee, provided such Continuing Empress System
Employee was not receiving short-term or long-term disability benefits as of the
Applicable Closing Date.

 

(f) On or before each Continuing Empress System Employee’s Hire Date, COP shall
take any necessary action to (x) fully vest as of such date such Continuing
Empress System Employee in all restricted stock units, if any, that were granted
prior to 2005 to such employee under COP’s restricted stock unit plan, and (y)
provide for prorated vesting (based upon a fraction, the numerator of which
shall be the number of full months elapsed from the date of granting through
such date and the denominator of which shall be 12) as of such date in all such
units that were granted to such employee in 2005. To the extent that any cash
payment amount or shares of COP stock remain unpaid or unvested with respect to
a Continuing Empress System Employee as of his or her Hire Date under the terms
of COP’s long-term incentive program for employees in Canada and the
ConocoPhillips Canada Employee Stock Ownership Plan, COP shall vest and
distribute such payment or shares as soon as practicable following the
applicable Hire Date.

 

(g) Duke agrees that any personal information provided by COP and its Affiliates
to Duke and its Affiliates with respect to Empress System Employees shall be
used and disclosed by Duke and its Affiliates only for those purposes for which
the information was initially collected, in order to carry on the business being
purchased from COP and, where the personal information concerns a former
employee of COP and its Affiliates, to carry on the employment relationship, if
any, between Duke and its Affiliates and such employee.

 

(h) Nothing in this Agreement shall require or be construed or interpreted as
requiring Duke or any Affiliate of Duke to continue the employment of any of
their employees (including Continuing Empress System Employees) following the
Applicable Closing Date, or to prevent Duke or an Affiliate of Duke from
changing the terms and conditions of employment (including compensation and
benefits) of any of their employees (including Continuing Empress System
Employees) following the Applicable Closing Date, subject to the requirements of
this Section 11.1 and the provisions of any applicable collective bargaining
agreement and applicable law.

 

(i) Notwithstanding the preceding provisions of this Section 11.1, this Section
11.1 shall not apply if an Empress Contingency existed on the First Closing Date
and the Empress System Business was not transferred to Duke.

 

Section 11.2 Canadian Assets Employees. (a) Company shall cause all Canadian
Assets Employees, and only the Canadian Assets Employees, to be employed by
Canadian Holding Company or a Canadian Assets Subsidiary as of the Second
Closing Date. From and after the Second Closing Date, the terms and conditions
of employment of each non-

 

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unionized Continuing Canadian Assets Employee shall be determined by Duke in its
sole discretion, provided such terms and conditions are consistent with the
provisions of this Section 11.2. In respect of the unionized Continuing Canadian
Assets Employees, Canadian Holding Company or a Canadian Assets Subsidiary, as
applicable, shall continue immediately after the Second Closing Date to be the
employer and responsible party under any applicable collective bargaining
agreement pursuant to the provisions of applicable labor legislation.

 

(b) On or before the Second Closing Date, Company shall take all actions
necessary, if any, to cause (i) Canadian Holding Company and/or one or more
Canadian Assets Subsidiaries to be the sole adopting or participating employers
under the Company Plans (other than the Company Plans maintained primarily in
the United States that cover Canadian Assets Employees who are United States
expatriates) and (ii) Canadian Holding Company and all Canadian Assets
Subsidiaries to cease to be adopting or participating employers under the
Company Plans maintained primarily in the United States that cover Canadian
Assets Employees who are United States expatriates.

 

(c) On and after the applicable Hire Date, Duke shall cause each Continuing
Canadian Assets Employee to receive full credit for all service credited under
the Company Plans for all purposes (including eligibility to participate,
vesting and benefit accrual) under the corresponding employee benefit plans and
policies of Duke and its Affiliates, including vacation, floating holidays,
retirement, retiree medical, severance and welfare plans, provided that such
service credit shall not be provided for purposes of benefit accrual under any
defined benefit plan.

 

(d) Nothing in this Agreement shall require or be construed or interpreted as
requiring Duke or any Affiliate of Duke to continue the employment of any of
their employees (including Continuing Canadian Assets Employees) following the
Second Closing Date, or to prevent Duke or an Affiliate of Duke from changing
the terms and conditions of employment (including compensation and benefits) of
any of their employees (including Continuing Canadian Assets Employees)
following the Second Closing Date, subject to the provisions of any applicable
collective bargaining agreement or applicable law.

 

Section 11.3 No Third-Party Beneficiaries. Without limiting the generality of
Section 13.3, this Article XI is not intended to confer upon any Empress System
Employee, Canadian Assets Employee or Continuing Employee any rights or remedies
hereunder.

 

ARTICLE XII

TAX MATTERS

 

Section 12.1 Indemnification by COP with respect to Empress System. Unless the
Empress System is not transferred to Duke Transferee, COP shall indemnify and
hold harmless each member of the Duke Group against:

 

(a) Any and all Taxes of PTC or with respect to any of the assets or properties
comprising the Empress System for any Pre-Empress Closing Period, including any
Taxes arising by reason of the 2005 reorganization (on or prior to the Empress
Closing Date) of the

 

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ownership of the Empress System or the transfer of assets and liabilities of PTC
pursuant to the last sentence of Section 3.2(c), as applicable, but excluding
any Taxes that are permitted to be passed on to customers under regulatory
accounting; and

 

(b) Any and all Damages resulting from a breach of the representation contained
in Section 12.18(e), such Damages to be determined without regard to the
Materiality Requirement set forth in Section 12.18 (provided, however, that COP
shall have no obligation under this Section 12.1(b) in the event that any member
of the Duke Group breaches the covenant contained in Section 12.23(a)).

 

Section 12.2 [Intentionally Blank]

 

Section 12.3 Indemnification by Duke with respect to Empress System. Unless the
Empress System is not transferred to Duke Transferee, Duke shall indemnify and
hold harmless COP and each of its Subsidiaries against any and all Taxes of PTC
or with respect to any of the assets or properties comprising the Empress System
for any Post-Empress Closing Period (other than Taxes covered by the
indemnification set forth in Section 12.1(b)), or that are permitted to be
passed on to customers under regulatory accounting.

 

Section 12.4 Indemnification by Duke with respect to Canadian Assets Business.
Duke shall indemnify and hold harmless Company and each of its Subsidiaries
(other than Canadian Holding Company and the Canadian Assets Subsidiaries) and
each member of the COP Group against any and all Taxes of the Canadian Holding
Company or any Canadian Assets Subsidiary or with respect to any of the assets
or properties comprising the Canadian Assets Business for any taxable period.

 

Section 12.5 No Basket and Cap on Tax Indemnities. Notwithstanding Section 10.5,
the indemnification provided in Sections 12.1, 12.3 and 12.4 shall not be
subject to the limitations set forth in Section 10.5.

 

Section 12.6 Procedures for Tax Proceedings. Notwithstanding Section 10.3:

 

(a) and notwithstanding any other provision, Duke shall be entitled to control
in all respects, including with respect to settlement, any Tax Proceeding with
respect to any consolidated, combined, affiliated or unitary group of which Duke
or any member of the Duke Group is the common parent or any other consolidated,
combined, affiliated or unitary Tax Returns that include any member of the Duke
Group (whether or not such Tax Returns also include Company or any Subsidiary
thereof) and neither COP nor any Subsidiary of COP shall be entitled to
participate in any such Tax Proceeding.

 

(b) and notwithstanding any other provision, COP shall be entitled to control in
all respects, including with respect to settlement, any Tax Proceeding with
respect to any consolidated, combined, affiliated or unitary group of which COP
or any member of the COP Group is the common parent or any other consolidated,
combined, affiliated or unitary Tax Returns that include any member of the COP
Group (whether or not such Tax Returns also include Company or any Subsidiary
thereof) and neither Duke nor any Subsidiary of Duke shall be entitled to
participate in any such Tax Proceeding.

 

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(c) in the case of any Tax Proceeding (other than a Tax Proceeding described in
Section 12.6(a) or (b)) relating to Taxes of PTC or the Empress System (or Taxes
with respect to any of their respective assets or properties) (a “Section
12.6(c) Tax Proceeding”), the provisions of Section 10.3 shall apply; provided,
however, that: (i) in the case of any Section 12.6(c) Tax Proceeding, for
purposes of Section 10.3 and this Section 12.6(c), references to the “Agreement”
or “Article X” in Article X shall also refer to this Article XII, “Indemnified
Party” shall include the party seeking indemnification under this Article XII
and “Indemnifying Party” shall include the party against whom an indemnification
claim is asserted under this Article XII, (ii) the Indemnifying Party shall
defend any Section 12.6(c) Tax Proceeding as if it were the only party in
interest with respect to the Taxes covered by such Section 12.6(c) Tax
Proceeding, (iii) in the case of a Section 12.6(c) Tax Proceeding for a taxable
period that begins on or before the Applicable Closing Date and ends after such
Applicable Closing Date, (A) in the case of a Section 12.6(c) Tax Proceeding
relating to Taxes of PTC or the Empress System (or Taxes with respect to their
respective assets or properties) whichever of Duke or COP, respectively, is
reasonably expected to have the greater liability with respect to such Section
12.6(c) Tax Proceeding shall be considered the “Indemnifying Party” for purposes
of Section 10.3 and this Section 12.6(c) and whichever of Duke or COP,
respectively, is reasonably expected to have the lesser liability with respect
to such Section 12.6(c) Tax Proceeding shall be considered the “Indemnified
Party” for purposes of such Sections, and (B) the costs of such Section 12.6(c)
Tax Proceeding shall be borne by the Indemnifying Party and the Indemnified
Party in proportion to such expected liabilities, (iv) in the case of a Section
12.6(c) Tax Proceeding in which Duke or COP is the Indemnifying Party and COP or
Duke is the Indemnified Party, the Indemnifying Party shall not, except with the
consent of the Indemnified Party (which consent shall not be unreasonably
withheld), enter into any settlement of any such Section 12.6(c) Tax Proceeding
(provided further, however, that, in the event that the Indemnified Party
withholds consent under this clause (iv) to a proposed settlement, the
Indemnified Party shall assume the defense of such Section 12.6(c) Tax
Proceeding at its sole cost for expenses incurred thereafter and the liability
of the Indemnifying Party shall not exceed the amount that such liability would
have been under the proposed settlement) and (v) in the case of a Tax Proceeding
relating to Taxes of the Canadian Holding Company or a Canadian Assets
Subsidiary (or Taxes with respect to any of their respective assets or
properties) for a taxable period that ends on or before the Contribution Date or
a taxable period that begins on or before the Contribution Date and ends after
the Contribution Date, Section 3.1 of Annex B of the Contribution Agreement
shall apply.

 

Section 12.7 Filing Responsibility.

 

(a) COP shall prepare and file, or shall cause to be prepared and filed, all Tax
Returns of PTC or with respect to the assets or properties comprising the
Empress System for taxable periods ending on or prior to the Empress Closing
Date. COP shall prepare and file, or shall cause to be prepared and filed, any
consolidated, combined, affiliated or unitary Tax Return that includes PTC or
the assets or properties comprising the Empress System for any Pre-Empress
Closing Period. All such Tax Returns (other than any consolidated, combined,
affiliated or unitary Tax Returns) shall be filed in a manner that is consistent
with past practice; provided, that an election (if available) under subsection
256(9) of the Income Tax Act (Canada) shall be made in the appropriate Tax
Return. Duke shall prepare and file, or shall cause to be prepared and filed,
all Tax Returns of PTC or with respect to the assets or properties comprising
the Empress System for which COP does not have filing responsibility pursuant to
the foregoing

 

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provisions of this Section 12.7(a). Any such Tax Return filed, or caused to be
filed, by Duke that includes any Pre-Empress Closing Period shall be filed in a
manner that is consistent with past practice of COP.

 

(b) Company shall prepare and file, or shall cause to be prepared and filed, all
Tax Returns of the Canadian Holding Company and each of the Canadian Assets
Subsidiaries or with respect to the assets or properties comprising the Canadian
Assets Business for taxable periods ending on or prior to the Second Closing
Date. Company shall prepare and file, or shall cause to be prepared and filed,
any consolidated, combined, affiliated or unitary Tax Return that includes the
Canadian Holding Company or any Canadian Assets Subsidiary or the assets or
properties comprising the Canadian Assets Business for any Pre-Second Closing
Period. All such Tax Returns (other than any consolidated, combined, affiliated
or unitary Tax Returns) shall be filed in a manner that is consistent with past
practice; provided, that an election (if available) under subsection 256(9) of
the Income Tax Act (Canada) shall be made in the appropriate Tax Return. Duke
shall prepare and file, or shall cause to be prepared and filed, all other Tax
Returns of the Canadian Holding Company and each of the Canadian Assets
Subsidiaries or with respect to the assets or properties comprising the Canadian
Assets Business for which Company does not have filing responsibility pursuant
to the foregoing provisions of this Section 12.7(b). Any such Tax Return filed,
or caused to be filed, by Duke that includes any Pre-Second Closing Period shall
be filed in a manner that is consistent with past practice of Company.

 

Section 12.8 Cooperation and Exchange of Information. Duke, COP and Company
shall (and shall cause their respective Subsidiaries to) cooperate with one
another with respect to Tax matters. As soon as practicable, but in any event
within 30 days after the request of Duke, COP or Company (referred to herein as
a “Requesting Party”), from and after the Applicable Closing Date, Company, COP
or Duke (referred to herein as the “Requested Party”) shall deliver to the
Requesting Party such information and data concerning the Empress System
Business or the Canadian Assets Business, respectively, and make available such
employees as the Requesting Party may reasonably request (including providing
the information and data reasonably required by the Requesting Party’s customary
Tax and accounting questionnaires) in order to enable the Requesting Party to
complete and file all Tax Returns which it may be required to file with respect
to the Empress System Business or the Canadian Assets Business, respectively, or
to respond to Tax audits or other inquiries relating to Taxes by any
Governmental Entities with respect to such operations and otherwise to enable
the Requesting Party to satisfy its accounting, Tax and other legitimate
business requirements. Such cooperation and information shall include provision
of powers of attorney to the Requesting Party relating to Tax matters (e.g., for
the purpose of signing Returns and defending audits) and promptly forwarding
copies of appropriate notices and forms or other communications received from or
sent to any Governmental Entity that relate to the Empress System Business or
the Canadian Assets Business, respectively, and providing copies of all relevant
Tax Returns, together with accompanying schedules and related workpapers,
documents relating to rulings or other determinations by any Governmental
Entities and records concerning the ownership and tax basis of property, which
the Requested Party may possess. The Requested Party shall (and shall cause its
Subsidiaries to) make its respective employees and facilities available on a
mutually convenient basis to provide explanation of any documents or information
provided hereunder. Notwithstanding any other provision, (i) Duke shall not be
required to provide any Person with any consolidated, combined, affiliated or
unitary Income Tax Return or copy thereof that

 

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includes Duke or any other member of the Duke Group and (ii) COP shall not be
required to provide any Person with any consolidated, combined, affiliated or
unitary Income Tax Return or copy thereof that includes COP or any other member
of the COP Group. At or prior to the Second Closing, Company shall deliver to
Duke (a) existing schedules in the possession of the Company showing the cost
amount and classification of property owned by the Canadian Holding Company and
the Canadian Assets Subsidiaries for purposes of determining the future
amortization, depreciation and any other Tax deductions for Canadian income tax
purposes, in each case as reflected on the most recently filed Canadian Income
Tax Returns of such entities, (b) existing schedules in the possession of the
Company showing the accumulated earnings and profits of, and the aggregate
regular tax basis of the assets owned by, the Canadian Holding Company and the
Canadian Assets Subsidiaries for United States federal income tax purposes, in
each case as reflected on the most recently filed United States federal Income
Tax information returns with respect to such entities, and (c) existing copies
of the Income Tax Returns in the possession of the Company filed by or on behalf
of the Canadian Holding Company and the Canadian Assets Subsidiaries.

 

Section 12.9 COP Refunds with respect to Empress System. COP shall be entitled
to any refunds or credits of Taxes of or with respect to PTC or with respect to
any of the assets or properties comprising the Empress System attributable to or
arising in any Pre-Empress Closing Period (plus any interest received with
respect thereto), except to the extent that any such refund or credit is
received by any member of the Duke Group after the Empress Closing and is
required to be passed on to customers under regulatory accounting.

 

Section 12.10 [Intentionally Blank]

 

Section 12.11 Duke Refunds with respect to Empress System. Unless the Empress
System is not transferred to Duke Transferee, Duke shall be entitled to any
refunds or credits of Taxes of or with respect to PTC or with respect to any of
the assets or properties comprising the Empress System attributable to or
arising in any Post-Empress Closing Period (plus any interest received with
respect thereto).

 

Section 12.12 Prompt Payment. Each Party shall promptly (and shall cause its
Subsidiaries promptly to) forward to another Party or reimburse such other Party
for any refund due such other Party (pursuant to the terms of this Article XII)
after receipt thereof.

 

Section 12.13 Survival. The provisions of this Article XII (other than Sections
12.18(a), (b), (c) and (d) and Section 12.19) shall survive the Closing until
the expiration of each statute of limitations or limitation period in respect of
the assessment or reassessment of Taxes applicable to any Pre-Closing Period
(or, to the extent relating to any Post-Closing Period, the expiration of the
statute of limitations or limitation period in respect of the assessment or
reassessment of Taxes applicable to such Post-Closing Period). The provisions of
Sections 12.18(a), (b), (c) and (d) and Section 12.19 shall not survive the
Closing. It is understood and agreed that neither Duke, COP nor Company provides
any representations or warranties in respect of Taxes in this Agreement, other
than the representations and warranties contained in this Article XII.

 

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Section 12.14 Treatment of Indemnity Payments. Duke, COP and Company shall (and
shall cause their respective Subsidiaries to) treat any indemnity payment made
pursuant to this Agreement as an adjustment to the amount transferred,
distributed or contributed pursuant to Section 3.2, as appropriate, unless
otherwise required pursuant to a “determination” within the meaning of Code
Section 1313(a) or any similar provision of state, local or foreign Tax law.

 

Section 12.15 Tax Sharing Agreements. Any Tax sharing agreement or arrangement
between COP and PTC shall be terminated as of the Empress Closing Date and shall
thereafter have no further effect for any taxable year (whether the current
year, a future year, or a past year). Any Tax sharing agreement or arrangement
between the Canadian Holding Company and any of the Canadian Asset Subsidiaries,
on the one hand, and the Company or any of its other Subsidiaries, on the other
hand, shall be terminated as of the Second Closing Date and shall thereafter
have no further effect for any taxable year (whether the current year, or future
year, or a past year).

 

Section 12.16 Allocation of Certain Taxes.

 

(a) In the case of any Taxes that are imposed on a periodic basis and are
payable for a period that begins on or before an Applicable Closing Date and
ends after such Applicable Closing Date (or, for Canadian income Tax purposes in
the case of PTC, that begins prior to the Applicable Closing and ends after such
Applicable Closing), the portion of such Tax that shall be allocable to the
portion of the period ending on such Applicable Closing Date (or, for Canadian
income Tax purposes in the case of PTC, immediately prior to the Applicable
Closing) shall (i) in the case of any Taxes, other than Income Taxes and Taxes
based upon or related to receipts, be deemed to be the amount of such Taxes for
the entire period, whether actually paid before, during, or after such period,
multiplied by a fraction the numerator of which is the number of calendar days
in the period ending on (and including) such Applicable Closing Date and the
denominator of which is the number of calendar days in the entire period, and
(ii) in the case of any Taxes based upon or related to income, net income,
capital gains or receipts (including but not limited to withholding Taxes), be
deemed equal to the amount which would be payable if the taxable year ended on
the close of business on such Applicable Closing Date (or, for Canadian income
Tax purposes in the case of PTC, if the taxable year ended immediately prior to
the Applicable Closing); provided, however, that any franchise Tax measured by
assets or capital shall be allocable to the taxable period for which the right
to do business obtained by the payment of such franchise Tax relates, regardless
of whether such franchise Tax is measured by assets or capital relating to
another taxable period. Clause (i) of the preceding sentence shall be applied
with respect to Taxes, if any, for such period relating to capital (including
net worth or long-term debt) or intangibles by reference to the level of such
items on such Applicable Closing Date. The portion of any Taxes (or refunds)
that are imposed on a periodic basis, payable for a period that begins on or
before the Applicable Closing Date and ends after such Applicable Closing Date
(or, for Canadian income Tax purposes in the case of PTC, that begins prior to
the Applicable Closing and ends after such Applicable Closing) and not allocable
to the portion of such period ending on such Applicable Closing Date (or, for
Canadian income Tax purposes in the case of PTC, immediately prior to the
Applicable Closing) shall be allocable to the portion of the period beginning
after such Applicable Closing Date (or, for Canadian income Tax purposes in the
case of PTC, at the Applicable Closing).

 

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(b) If the amount of any Tax described in Section 12.16(a), or any refund
thereof or credit therefor, is voluntarily redetermined or redetermined by a
Taxing Authority, the principles of Section 12.16(a) shall apply to the amount
as so redetermined.

 

Section 12.17 Predecessors and Successors. For purposes of this Article XII, any
reference to a corporation shall include a reference to any limited liability
company or corporation into which such corporation is merged, amalgamated or
converted and any reference to a limited liability company shall include a
reference to any corporation which merged into, or was converted into, such
limited liability company or corporation.

 

Section 12.18 COP Tax Representations with respect to Empress System. Unless an
Empress Contingency existed on the First Closing Date, COP hereby represents and
warrants that, except (i) as disclosed in Schedule 12.18 of the COP Disclosure
Schedule or (ii) to the extent that any breach, failure or inaccuracy,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on PTC or the assets or properties comprising the
Empress System:

 

(a) All Tax Returns that are required to be filed by or with respect to PTC or
with respect to the assets or properties comprising the Empress System have been
duly filed with the appropriate Taxing Authority within the times and in the
manner prescribed by applicable law, and all such Tax Returns are complete and
accurate and reflect accurately all liability for Taxes of PTC or with respect
to the assets or properties comprising the Empress System for the periods
covered thereby.

 

(b) All Taxes due and payable by PTC or with respect to the assets or properties
comprising the Empress System have been paid in full within the time required by
applicable law, regardless of whether such Taxes have been assessed or are shown
or required to be shown on any Tax Return. All assessments and reassessments in
respect of Taxes that have been received by PTC or with respect to the assets or
properties comprising the Empress System have been paid in full. Neither PTC nor
ES Transferor has received any refund of Taxes to which it was not entitled.

 

(c) The liability for Taxes of PTC or with respect to the assets or properties
comprising the Empress System has been assessed by all relevant Taxing
Authorities for all periods up to and including those set forth in Section 12.18
of the COP Disclosure Schedule. The only taxation years of PTC or with respect
to the assets or properties comprising the Empress System that remain open for
the assessment or reassessment of additional Taxes are those set out in Section
12.18 of the COP Disclosure Schedule. There are no outstanding agreements,
arrangements, waivers or objections extending the statutory period or providing
for an extension of time with respect to the assessment or reassessment of Taxes
or the filing of any Tax Return or any payment of Taxes by or with respect to
PTC or the assets or properties comprising the Empress System.

 

(d) Each of ES Transferor and PTC has withheld and collected all amounts
required by applicable law to be withheld or collected by it on account of Taxes
and has remitted all such amounts to the appropriate Taxing Authority within the
time prescribed under any applicable Law.

 

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(e) At the time of the Applicable Closing, the property nominally owned by PTC
will be owned beneficially by CFC for Canadian income tax purposes, and for
periods following the reorganization of the ownership of the Empress System
separating title and beneficial ownership COP has consistently treated PTC for
U.S. federal income tax purposes as not the tax owner of the property nominally
owned by PTC.

 

Section 12.19 Company Tax Representations with respect to Canadian Assets
Business. Company hereby represents and warrants to Duke that, except (i) as
disclosed in Schedule 12.19 of the Company Disclosure Schedule or (ii) to the
extent that any breach, failure or inaccuracy, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect on the
Canadian Holding Company, the Canadian Assets Subsidiaries, or on the assets or
properties comprising the Canadian Assets Business:

 

(a) As of the date of this Agreement, all Tax Returns that are required to be
filed by or with respect to the Canadian Holding Company or any of the Canadian
Assets Subsidiaries or with respect to the assets or properties comprising the
Canadian Assets Business have been duly filed and all such Tax Returns are
complete and accurate.

 

(b) As of the date of this Agreement, all Taxes shown to be due on the Tax
Returns referred to in clause (a) have been paid in full.

 

(c) As of the date of this Agreement, no waivers of statutes of limitation have
been given by or requested with respect to any Tax Returns of the Canadian
Holding Company or any of the Canadian Assets Subsidiaries or with respect to
the assets or properties comprising the Canadian Assets Business.

 

Section 12.20 Tax Characterization of Transactions.

 

(a) Transactions in Connection with Formation of Company. Each of Duke, COP and
Company shall (and agree that the affiliated group for U.S. federal income tax
purposes that reports the income of each shall) (and Duke agrees that it shall
cause Duke Energy and the affiliated group for U.S. federal income tax purposes
that reports the income of Duke Energy to) take no action or position
inconsistent with (or that could reasonably be expected to be viewed by the
Internal Revenue Service as inconsistent with), and shall make or cause to be
made all applicable elections with respect to: (i) the treatment of Company (or
any successor thereto) as a partnership for U.S. federal income tax purposes and
the treatment of each of the Flow Through Subsidiaries (or any successor
thereto) as a partnership or disregarded entity for U.S. federal income tax
purposes; (ii) the treatment of Company as not being a publicly traded
partnership for United States federal income tax purposes; (iii) for all periods
(or portions thereof) prior to the First Closing, the allocation of the
Financing under Regulation Section 1.752-3(a)(3) among the Members in proportion
to their Percentage Interests as of the Contribution Date; (iv) the treatment of
the contribution to the Company by DEFS Holding pursuant to Section 2.2 of the
Contribution Agreement as a contribution pursuant to Code Section 721, the
treatment of the distribution to DEFS Holding pursuant to Section 3.2(c)(2) of
the Contribution Agreement (as adjusted pursuant to Section 3.3 thereof) as a
distribution pursuant to Code Section 731 and the treatment that, for purposes
of the Code, neither such contribution nor such distribution is a transfer that
constitutes a sale or exchange (or portion thereof) of property in whole or in
part to

 

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the Company by a Member in the Company acting in a capacity other than as a
Member of the Company; and (v) the treatment of the contribution to the Company
by CPGC pursuant to the CPGC Contribution as a contribution pursuant to Code
Section 721, the treatment of the CPGC Distribution as a distribution pursuant
to Code Section 731 and the treatment that, for purposes of the Code, neither
the CPGC Contribution nor the CPGC Distribution is a transfer that constitutes a
sale or exchange (or portion thereof) of property in whole or in part to the
Company by a Member in the Company acting in a capacity other than as a Member
of the Company (except in the case of this clause (v) that Duke, COP and the
Company shall (and agree that the affiliated group for U.S. federal income tax
purposes that reports the income of each shall) (and Duke agrees that it shall
cause Duke Energy and the affiliated group for U.S. federal income tax purposes
that reports the income of Duke Energy to) treat (except to the extent Duke,
COP, the Members and the Company agree in writing or are required by a neutral
nationally-recognized law firm or accounting firm designated by Duke and COP by
mutual agreement (the “Neutral Firm”) to treat otherwise) an amount of the CPGC
Distribution equal to the Disguised Sale Amount as proceeds of a sale by CPGC to
the Company under Code Section 707(a) and an amount of the CPGC Contribution
equal in fair market value to the Disguised Sale Amount as property that is sold
by CPGC to the Company under Code Section 707(a) (such property treated as
having been sold having regular federal income tax basis equal to the aggregate
regular Federal income tax basis of the property contributed in the CPGC
Contribution multiplied by a fraction the numerator of which is the Disguised
Sale Amount and the denominator of which is the value of the property
contributed in the CPGC Contribution, such value being for this purpose
$2,139,500,000)). Capitalized terms used in this Section 12.20(a) but not
otherwise defined in this Agreement shall have the meanings ascribed to them in
the Second Amended and Restated LLC Agreement.

 

(b) Transactions Pursuant to this Agreement. For U.S. federal income tax
purposes, Duke, COP and Company agree to file (and agree that the affiliated
group for U.S. federal income tax purposes that reports the income of each shall
file) (and Duke agrees that it shall cause Duke Energy and the affiliated group
for U.S. federal income tax purposes that reports the income of Duke Energy to
file) their respective federal income Tax Returns on a basis that is consistent,
and agree not to take (and agree that the affiliated group for U.S. federal
income tax purposes that reports the income of each shall not take) (and Duke
agrees that it shall cause Duke Energy and the affiliated group for U.S. federal
income tax purposes that reports the income of Duke Energy not to take) any
position for U.S. federal income tax purposes that is inconsistent, with the
following (in each case unless either (i) required to do otherwise pursuant to a
“determination” within the meaning of Section 1313(a) of the Code (or any
similar provision of state, local or foreign Tax law) or (ii) there is a change
in applicable law or regulation):

 

(1) The fair market value of the membership interests in Company as of December
31, 2004 was $6,797,969,547 plus an amount determined by dividing the COP Excess
Canadian Cash by 30.3%.

 

(2) The sale of the Subject Company Equity Interest by DEFS Holding to COP
Transferee will be treated as a sale by a partner of an interest in a
partnership to which Sections 741 and 751 of the Code apply. The fair market
value of the Subject Company Equity Interest as of December 31, 2004 was $440
million.

 

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(3) The distribution of 100% of the TEPPCO GP Sale Proceeds Amount by Company to
DEFS Holding will be treated as a distribution to DEFS Holding of money to which
Sections 731(a), 733 and 751 of the Code apply; provided, however, that for
purposes of Section 751(b), the interest in Company property of each of DEFS
Holding and CPGC after the transactions contemplated by this Agreement shall be
determined (i) giving effect to the adjustment to the Book Value (as defined in
the Second Amended and Restated LLC Agreement) of all Company assets by reason
of clauses (1)(A) and (1)(B) of such definition and (ii) taking into account
reverse Code Section 704(c) allocations.

 

(4) The distribution of the Equity Interests in the Canadian Holding Company by
Company to DEFS Holding will be treated as a distribution by a partnership of
property to a partner to which Sections 731(a), 731(b), 732(a) and 733 of the
Code apply. The fair market value of the Equity Interests in the Canadian
Holding Company as of the Second Closing Date is equal to $300 million plus an
amount determined by dividing the COP Excess Canadian Cash by 30.3%.

 

(5) The purchase by Duke Transferee of the Empress System Business will be
treated as a purchase of the Empress System Business from ES Transferor for $233
million and the assumption by Duke Transferee of the Assumed Liabilities.

 

(6) The contribution of the Second Closing Cash Amount in cash by CPGC to
Company pursuant to Section 2.2(d) will be treated as a contribution of money by
a partner to a partnership to which Sections 721 and 722 of the Code apply.

 

(7) The transactions described in Section 12.20(b)(2), (3), (4) and (6) will
result in a reduction in the DEFS Holding’s Percentage Interest from 69.7% to
50% based upon the values of such transactions and of the membership interests
in Company set forth above, subject to any adjustment to such values as agreed
by the parties.

 

(8) The purchase price paid for the Empress System Business (including the
Assumed Liabilities) shall be allocated among the Empress System Business in
accordance with a schedule to be agreed upon by Duke and COP within 60 days
following the Empress Closing (provided that, if Duke and COP have not agreed on
such schedule by such date then such schedule shall be determined by the Neutral
Firm) and such allocation schedule shall be used in filing all United States
Federal Income Tax Returns, including Internal Revenue Service Form 8594, and
all Canadian Income Tax Returns.

 

(9) Any contribution of cash pursuant to Section 3.3(a)(ii) by Company to
Canadian Holding Company will be treated as a contribution to a corporation to
which Section 351 of the Code applies.

 

(10) Any distribution of cash pursuant to Section 3.3(b) to DEFS Holding and
CPGC will be treated as a distribution by a partnership to which Sections 731(a)
and 733 of the Code apply, and any contribution of cash pursuant to Section
3.3(b) by DEFS Holding and CPGC will be treated as a contribution to a
partnership to which Section 721 of the Code applies.

 

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Section 12.21 Intentionally Omitted. This Section 12.21 has been intentionally
omitted.

 

Section 12.22 Canadian Tax Matters.

 

(a) ES Transferor and Duke Transferee will, on or before the Empress Closing
Date, jointly execute an election, in prescribed form and containing the
prescribed information, to have subsection 167(1) of the Excise Tax Act (Canada)
and any equivalent, analogous or corresponding provision under any applicable
provincial or territorial legislation imposing a similar value added or
multi-staged tax apply to the sale and purchase of the Empress System Business
hereunder. ES Transferor and Duke Transferee will make such elections in
prescribed form containing prescribed information and Duke Transferee shall file
such election(s) in compliance with the requirement of the applicable law.

 

(b) ES Transferor and Duke Transferee will jointly complete and execute
elections under section 22 of the Income Tax Act (Canada) and under any
equivalent, analogous or corresponding provision under applicable Canadian
provincial or territorial legislation as to the sale of any accounts receivable
comprising the Empress System as soon as practicable following the Empress
Closing Date, but in any event no later than 30 days prior to the earliest time
that either ES Transferor or Duke Transferee is required to file its tax return
under the Income Tax Act (Canada) or provincial taxing legislation for the
taxation year in which the Empress Closing Date occurs. Such elections will
designate therein the applicable portion of the purchase price as the
consideration paid by ES Transferor for such accounts receivable in accordance
with the allocation made pursuant to Section 12.20(b)(8) and ES Transferor and
Duke Transferee will each file such election in a timely manner.

 

(c) ES Transferor and Duke Transferee shall, if so requested by Duke Transferee,
file in mutually agreeable form elections under subsection 20(24) of the Income
Tax Act (Canada) and under any equivalent, analogous or corresponding provision
under applicable Canadian provincial or territorial legislation, in the form and
manner and within the time prescribed by applicable law, with respect to
undertakings arising from the operation of the Empress System Business and which
undertakings are of the type described in subsection 20(24) of the Income Tax
Act (Canada). ES Transferor and Duke Transferee acknowledge that ES Transferor
is transferring assets to Duke Transferee which have a value equal to the amount
specified pursuant to Section 12.20(b)(8) as consideration for the assumption by
Duke Transferee of ES Transferor’s obligations in respect of such undertakings.

 

(d) To the extent legally able to do so, ES Transferor shall deliver any
certificates required by the sales tax legislation of any province to the effect
that all requisite taxes and other amounts under the relevant sales tax
legislation have been paid by ES Transferor.

 

Section 12.23 Covenant of Duke.

 

(a) No member of the Duke Group shall take any action or position that is
inconsistent with the representations contained in Section 12.18(e).

 

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(b) Duke Transferee (for purposes of the transfer of the Empress System from
CFC) will be registered under Part IX of the Excise Tax Act (Canada) before the
Applicable Closing Date.

 

Section 12.24 Coordination. To the extent there is a conflict between Annex B of
the Contribution Agreement and this Article XII (or to the extent the provisions
of Annex B of the Contribution Agreement and this Article XII do not assign the
obligation, control right or refund with respect to any Tax to the same Party),
the provisions of this Article XII shall control. Section 8.3(d) of the Second
Amended and Restated LLC Agreement and any other provisions in that Agreement
regarding the Tax Committee are for the benefit of COP and Duke and shall not be
amended without their consent. If any Transfer (as defined in the Second Amended
and Restated LLC Agreement) of a Company Interest (as defined in the Second
Amended and Restated LLC Agreement) that is owned by COP (or any of its
Affiliates) (a “COP Transfer”), on one hand, or Duke (or any of its Affiliates)
(a “Duke Transfer”), on the other hand, would result in a termination of the
Company pursuant to Section 708(b)(1)(B) of the Code, such Transfer shall not be
made without the prior written consent of Duke (in the case of a COP Transfer)
or COP (in the case of a Duke Transfer).

 

ARTICLE XIII

MISCELLANEOUS

 

Section 13.1 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each
Party and delivered (including by facsimile) to the other Parties.

 

Section 13.2 Governing Law; Jurisdiction and Forum; Waiver of Jury Trial. (a)
This Agreement shall be governed by and construed in accordance with the laws of
the State of Delaware without reference to the choice of law principles thereof.

 

(b) Each Party irrevocably submits to the jurisdiction of any Delaware state
court or any federal court sitting in the State of Delaware in any action
arising out of or relating to this Agreement, and hereby irrevocably agrees that
all claims in respect of such action may be heard and determined in such
Delaware state or federal court. Each Party hereby irrevocably waives, to the
fullest extent it may effectively do so, the defense of an inconvenient forum to
the maintenance of such action or proceeding. The Parties further agree, to the
extent permitted by-law, that final and unappealable judgment against any of
them in any action or proceeding contemplated above shall be conclusive and may
be enforced in any other jurisdiction within or outside the United States by
suit on the judgment, a certified copy of which shall be conclusive evidence of
the fact and amount of such judgment.

 

(c) To the extent that any Party has or hereafter may acquire any immunity from
jurisdiction of any court or from any legal process (whether through service or
notice, attachment prior to judgment, attachment in aid of execution, execution
or otherwise) with respect to itself or its property, each Party hereby
irrevocably waives such immunity in respect of its obligations with respect to
this Agreement.

 

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(d) Each Party waives, to the fullest extent permitted by applicable law, any
right it may have to a trial by jury in respect of any action, suit or
proceeding arising out of or relating to this Agreement. Each Party certifies
that it has been induced to enter into this Agreement by, among other things,
the mutual waivers and certifications set forth above in this Section 13.2.

 

Section 13.3 Entire Agreement. This Agreement and the schedules and exhibits
hereto, together with the Confidentiality Agreement between Duke Capital LLC and
ConocoPhillips dated February 2, 2005, contain the entire agreement between the
Parties with respect to the subject matter hereof and supercedes in all respects
the Term Sheet between Duke Energy and COP dated February 23, 2005, which has
been terminated pursuant to the Term Sheet Termination Agreement, and there are
no agreements, understandings, representations or warranties between the Parties
other than those set forth or referred to herein. Except for Sections 7.9 and
7.12, Article X and Article XII, which are intended to benefit, and to be
enforceable by, any of the indemnified parties thereunder, this Agreement is not
intended to confer upon any Person not a Party (and their successors and
assigns) any rights or remedies hereunder.

 

Section 13.4 Expenses. Any sales, use, transfer, gains, excise or similar Taxes
(but not Income Taxes) incurred in connection with any transfers required by
this Agreement shall be paid and borne as follows:

 

(a) with respect to any transfer between Company, on the one hand, and Duke or
any of its Affiliates (other than Company and its Subsidiaries), on the other
hand, 50% by each of the transferor and the transferee;

 

(b) with respect to any transfer between Company, on the one hand, and COP or
any of its Affiliates (other than Company and its Subsidiaries), on the other
hand, 50% by each of the transferor and the transferee;

 

(c) with respect to any transfer between Duke or any of its Affiliates, on the
one hand, and COP or any of its Affiliates (other than Company and its
Subsidiaries), on the other hand, 50% by each of the transferor and the
transferee; provided, however, that (i) Duke Transferee shall bear 100% of any
Goods & Services Tax (plus any interest, penalties or other additions with
respect to such Goods & Services Tax) imposed by the Excise Tax Act (Canada)
resulting from, arising out of or relating to the transfer of the Empress System
Business by COP to Duke Transferee, and (ii) notwithstanding the preceding
clause (i), COP shall indemnify and hold harmless each member of the Duke Group
against any interest, penalties or other additions with respect to such Goods &
Services Tax that arise by reason of any action or inaction on the part of any
member of the COP Group that causes the election under subsection 167(1) of the
Excise Tax Act (Canada) to be invalid (including the election not being
applicable as a result of there being more than one ES Transferor) (provided,
however, that in the case of any Tax Proceeding related to any such interest,
penalties or other additions with respect to such Goods & Services Tax, the
provisions of Section 10.3 and 12.6(c) shall apply and, for purposes of such
provisions, COP shall be the “Indemnifying Party” and Duke shall be the
“Indemnified Party”); and

 

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(d) with respect to any transfers between Company or any Company Retained
Subsidiary, on the one hand, and Canadian Holding Company or any of the Canadian
Assets Subsidiaries, on the other hand, 100% by Company.

 

Section 13.5 Notices. All notices and other communications to be given to any
Party hereunder shall be sufficiently given for all purposes hereunder if in
writing and delivered by hand, courier or overnight delivery service or three
days after being mailed by certified or registered mail, return receipt
requested, with appropriate postage prepaid, or when received in the form of a
telegram or facsimile and shall be directed to the address or facsimile number
set forth below (or at such other address or facsimile number as such Party
shall designate by like notice):

 

  (a)         If to COP:

 

               ConocoPhillips

        600 North Dairy Ashford Road

        Houston, Texas 77079-1175

        Attention: Wayne C. Byers

        Fax No.: (281) 293-4111

 

        With a copy to:

 

        Wachtell, Lipton, Rosen & Katz

        51 West 52nd Street

        New York, New York 10019

        Attention:    Andrew R. Brownstein

                              Gregory N. Racz

        Fax No.:        (212) 403-2000

 

  (b)         If to Duke:

 

        c/o Duke Energy Corporation

        5400 Westheimer Court, 8th Floor

        Houston, Texas 77056-5310

        Attention: Wayne Wiesen

        Fax No.: (713) 386-4087

 

        With a copy to:

 

        Vinson & Elkins L.L.P.

        First City Tower

        1001 Fannin Street, Suite 2300

        Houston, Texas 77002-6760

        Attention: Bruce R. Bilger

        Fax No.: (713) 615-5429

 

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  (c)         If to Company:

 

        Duke Energy Field Services, LLC

        370 17th Street, Suite 2500

        Denver, Colorado 80202

        Attention: Brent Backes

        Fax No.: (303) 605-8902

 

        and on or prior to the Second Closing, with a copy to:

 

        ConocoPhillips

        600 North Dairy Ashford Road

        Houston, Texas 77079-1175

        Attention: Wayne C. Byers

        Fax No.: (281) 293-4111

 

        Duke Energy Corporation

        5400 Westheimer Court, 8th Floor

        Houston, Texas 77056-5310

        Attention: Wayne Wiesen

        Fax No.: (713) 386-4087

 

Section 13.6 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the Parties and their respective successors and
permitted assigns; provided, however, that no Party will assign its rights or
delegate any or all of its obligations under this Agreement without the express
prior written consent of each other Party.

 

Section 13.7 Headings; Definitions. The Section and Article headings contained
in this Agreement are inserted for convenience of reference only and will not
affect the meaning or interpretation of this Agreement. All references to
Sections or Articles contained herein mean Sections or Articles of this
Agreement unless otherwise stated. All capitalized terms defined herein are
equally applicable to both the singular and plural forms of such terms.

 

Section 13.8 Amendments and Waivers. This Agreement may not be modified or
amended except by an instrument or instruments in writing signed by the Parties.
All other Parties may, only by an instrument in writing, waive compliance by a
Party with any term or provision of this Agreement on the part of such Party
hereto to be performed or complied with. The waiver by the Parties of a breach
of any term or provision of this Agreement shall not be construed as a waiver of
any subsequent breach. Except as otherwise expressly provided herein, no failure
to exercise, delay in exercising or single or partial exercise of any right,
power or remedy by any Party, and no course of dealing between the Parties,
shall constitute a waiver of any such right, power or remedy.

 

Section 13.9 Schedules. The disclosure or inclusion of any matter or item in any
Schedule to the COP Disclosure Schedule, the Duke Disclosure Schedule or the
Company Disclosure Schedule shall not be deemed an acknowledgment or admission
that any such matter or item is required to be disclosed or is material for
purposes of the representations and warranties set forth in this Agreement or
whether the subject matter of such disclosure may have a Material Adverse Effect
on the Canadian Assets Business or the Empress System

 

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Business. None of COP, Duke or Company shall be prejudiced in any manner
whatsoever by, and no presumptions shall be created by virtue of, any disclosure
of any matter in the COP Disclosure Schedule, the Duke Disclosure Schedule or
the Company Disclosure Schedule, respectively, which is not expressly required
to be disclosed under this Agreement. Information disclosed in any schedule
hereto shall only constitute a disclosure with respect to the specific Section
of this Agreement in which such schedule is referenced.

 

Section 13.10 Severability. If any provision of this Agreement shall be held
invalid, illegal or unenforceable, the validity, legality or enforceability of
the other provisions of this Agreement shall not be affected thereby, and there
shall be deemed substituted for the provision at issue a valid, legal and
enforceable provision as similar as possible to the provision at issue.

 

Section 13.11. Interpretation. For the purposes of this Agreement, “knowledge”
shall mean, with respect to COP, except as otherwise specified in this
Agreement, the actual knowledge (after due inquiry) of the persons identified in
Schedule 13.11 of the COP Disclosure Schedule, with respect to Company, the
actual knowledge (after due inquiry) of the persons identified in Schedule 13.11
of the Company Disclosure Schedule, and with respect to Duke, the actual
knowledge (after due inquiry) of the persons identified in Schedule 13.11 of the
Duke Disclosure Schedule. The phrase “including” shall be deemed to be followed
by “without limitation.” The words “hereof,” “hereby,” “herein,” “hereunder” and
similar terms in this Agreement shall refer to this Agreement as a whole and not
any particular Section or article in which such words appear. For the avoidance
of doubt, the term “applicable law” or “applicable laws” shall be deemed to
refer to applicable laws in both the United States and Canada, in addition to
any other applicable laws. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the Parties and no presumption or burden of proof shall arise favoring or
disfavoring any Party by virtue of the authorship of any provisions of this
Agreement.

 

Section 13.12 Specific Performance. The Parties agree that irreparable damage
would occur in the event that any Party fails to consummate the transactions
contemplated by this Agreement in accordance with the terms of this Agreement
and that the Parties shall be entitled to specific performance in such event, in
addition to any other remedy at law or in equity.

 

[signatures on the following page]

 

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IN WITNESS WHEREOF, each of the undersigned, intending to be legally bound, has
caused this Agreement to be duly executed and delivered on the date first set
forth above.

 

CONOCOPHILLIPS

By:

 

/s/ John E. Lowe

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

Name:

 

John E. Lowe

Title:

 

Executive Vice President, Planning, Strategy

and Corporate Affairs

DUKE CAPITAL LLC

By:

 

/s/ Paul H. Barry

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

Name:

 

Paul H. Barry

Title:

 

Vice President

DUKE ENERGY FIELD SERVICES, LLC

By:

 

/s/ Brent L. Backes

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

Name:

 

Brent L. Backes

Title:

 

Vice President, General Counsel and

Secretary

 

[Signature Page to Reorganization Agreement]