<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 27, 2000
REGISTRATION NO. 333-32502
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
DUKE ENERGY FIELD SERVICES CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
1321 DELAWARE 58-2511048
<S> <C> <C>
(Primary Standard Industrial (State or other jurisdiction of (I.R.S. Employer
Classification Code Number) incorporation or organization) Identification No.)
</TABLE>
370 17TH STREET
SUITE 900
DENVER, COLORADO 80202
(303) 595-3331
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
DAVID D. FREDERICK
SENIOR VICE PRESIDENT
AND CHIEF FINANCIAL OFFICER
370 17TH STREET
SUITE 900
DENVER, COLORADO 80202
(303) 595-3331
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------------
Copies to:
<TABLE>
<S> <C> <C>
JEFFERY B. FLOYD, ESQ. MARTHA B. WYRSCH, ESQ. ROBERT H. CRAFT, JR., ESQ.
VINSON & ELKINS L.L.P. DUKE ENERGY FIELD SERVICES SULLIVAN & CROMWELL
2300 FIRST CITY TOWER CORPORATION 1701 PENNSYLVANIA AVE., NW
1001 FANNIN STREET 370 17TH STREET, SUITE 900 WASHINGTON, D.C. 20004
HOUSTON, TEXAS 77002-6760 DENVER, COLORADO 80202 (202) 956-7500
(713) 758-2222 (303) 595-3331
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act of 1933, please check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by Duke Energy Field Services
Corporation in connection with the sale of common stock being registered. All
amounts are estimates except the SEC registration fee and the NASD filing fees.
<TABLE>
<S> <C>
SEC Registration fee........................................ $211,200
NASD fee.................................................... 30,500
NYSE initial listing fee.................................... *
Printing and engraving...................................... *
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Transfer agent fees......................................... *
Miscellaneous expenses...................................... *
--------
Total............................................. *
========
</TABLE>
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* To be provided by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law ("DGCL") provides that
a corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding whether civil, criminal, administrative or investigative (other than
an action by or in the right of the corporation by reason of the fact that he is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. Section 145 further
provides that a corporation similarly may indemnify any such person serving in
any such capacity who was or is a party or is threatened to be made a party to
any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee or agent of the corporation or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees) actually and reasonably
incurred in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Delaware Court of Chancery or such other
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all of the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Delaware Court of Chancery or such other
court shall deem proper.
The company's certificate of incorporation and bylaws provide that
indemnification shall be provided for all current and former directors and may
be provided for all current or former officers to the fullest extent permitted
by the DGCL.
As permitted by the DGCL, the certificate of incorporation provides that
directors of the company shall have no personal liability to the company or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except (1) for any breach of the director's duty of loyalty to the company or
its stockholders,
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<PAGE> 3
(2) for acts or omissions not in good faith or which involve intentional
misconduct or knowing violation of law, (3) under Section 174 of the DGCL or (4)
for any transaction from which a director derived an improper personal benefit.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The company has not sold any securities, registered or otherwise, within
the past three years, except as set forth below.
On December 8, 1999, the company issued 1,000 shares of its common stock to
Duke Energy Corporation ("Duke Energy") for $1,000. In so doing, the company
relied on the provisions of Section 4(2) of the Securities Act of 1933, as
amended (the "Securities Act"), in claiming exemption for the offering, sale and
delivery of such securities from registration under the Securities Act.
On December 16, 1999, Duke Energy, Phillips Petroleum Company ("Phillips")
and Duke Energy Field Services, LLC ("Field Services LLC") entered into a
Contribution Agreement (the "Contribution Agreement") pursuant to which Duke
Energy and Phillips, on March , 2000, contributed their respective midstream
natural gas assets to Field Services LLC, a subsidiary of the company, in
exchange for member interests in Field Services LLC and one-time cash payments.
Upon consummation of the offering contemplated by this registration statement,
the subsidiary ("Merger Subsidiary") that indirectly holds Phillips' interest in
Field Services LLC will be merged into the company, and, as a result, the
capital stock of Merger Subsidiary, all of which is owned by Phillips, will be
converted into shares of common stock of the company and the capital stock of
the company before the merger, all of which is owned by Duke Energy, will be
converted into new shares of common stock of the company. The exact allocation
between Duke Energy and Phillips of shares of common stock of the company issued
in the merger will be determined by the average of the closing prices of the
company's common stock on the New York Stock Exchange Composite Tape on the
stock's first five trading days. In so doing, the company relied on the
provisions of Section 4(2) of the Securities Act in claiming exemption for the
offering, sale and delivery of such securities from registration under the
Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1** -- Form of Underwriting Agreement
2.1* -- Form of Agreement of Merger among Duke Energy Field
Services Corporation and Phillips Gas Company
Shareholder, Inc.
3.1* -- Form of Amended and Restated Certificate of Incorporation
3.2* -- Form of Amended and Restated Bylaws
4.1** -- Form of Common Stock Certificate
5.1** -- Opinion of Vinson & Elkins L.L.P.
10.1** -- Employment Agreement dated as of , 2000
between Duke Energy Field Services Corporation and Mike
J. Panatier
10.2* -- Form of Registration Rights Agreement among Duke Energy
Corporation, Phillips Petroleum Company and Duke Energy
Field Services Corporation.
10.3* -- Services Agreement dated as of March 14, 2000 by and
between Duke Energy Corporation, Duke Energy Business
Services, LLC, Pan Service Company, Duke Energy Gas
Transmission Corporation and Duke Energy Field Services,
LLC
10.4* -- Transition Services Agreement dated as of March 17, 2000
among Phillips Petroleum Company and Duke Energy Field
Services, LLC
</TABLE>
II-2
<PAGE> 4
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.5* -- Form of Trademark License Agreement among Duke Energy
Corporation and Duke Energy Field Services, LLC
10.6* -- Form of Shareholders Agreement among Duke Energy Natural
Gas Corporation and Phillips Petroleum Company
10.7(a)+ -- Contribution Agreement dated as of December 16, 1999
among Duke Energy Corporation, Phillips Petroleum Company
and Duke Energy Field Services, LLC (incorporated by
reference to Exhibit 2.1 to Duke Energy Corporation's
Form 8-K filed December 30, 1999)
10.7(b)* -- First Amendment to Contribution and Governance Agreement
dated as of March 23, 2000 among Phillips Petroleum
Company, Duke Energy Corporation and Duke Energy Field
Services, LLC
10.8+ -- NGL Output Purchase and Sale Agreement effective as of
January 1, 2000 between GPM Gas Corporation and Phillips
66 Company, a division of Phillips Petroleum Company, as
amended by Amendment No. 1 dated December 16, 1999
10.9* -- Sulfur Sales Agreement effective as of January 1, 1999
between Phillips 66 Company, a division of Phillips
Petroleum Company, and GPM Gas Corporation
10.10* -- Form of Parent Company Agreement among Phillips Petroleum
Company, Duke Energy Corporation, Duke Energy Field
Services, LLC and Duke Energy Field Services Corporation
21.1** -- Subsidiaries of the Company
23.1+ -- Consent of Ernst & Young LLP
23.2+ -- Consent of Deloitte & Touche LLP
23.3+ -- Consent of Arthur Andersen LLP
23.5** -- Consent of Vinson & Elkins L.L.P. (included in Exhibit
5.1)
24.1+ -- Power of Attorney (included in signature page)
27.1+ -- Financial Data Schedule
99.1+ -- Consent of Michael J. Panatier to Serve as Director dated
March 13, 2000
99.2+ -- Consent of J.J. Mulva to Serve as Director dated March
10, 2000
</TABLE>
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* Filed herewith.
** To be filed by amendment.
+ Previously filed.
(B) FINANCIAL STATEMENT SCHEDULE
No financial statement schedules are required to be included herewith or
they have been omitted because the information required to be set forth therein
is not applicable.
ITEM 17. UNDERTAKINGS.
The Registrant hereby undertakes:
(a) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the provisions described
in Item 14, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer, or controlling person of
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<PAGE> 5
the Registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer, or controlling person in connection
with the securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such issue.
(b) To provide to the underwriter(s) at the closing specified in the
underwriting agreements, certificates in such denominations and registered
in such names as required by the underwriter(s) to permit prompt delivery
to each purchaser.
(c) For purpose of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
the form of prospectus filed by the Registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act shall be deemed to be part of
this Registration Statement as of the time it was declared effective.
(d) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
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<PAGE> 6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Amendment to Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Denver, State of Colorado, on the 24th day of March, 2000.
Duke Energy Field Services
Corporation
By:
/s/ JIM W. MOGG
----------------------------------
Name: Jim W. Mogg
Title: Chairman of the Board,
President and Chief
Executive Officer
(Principal Executive
Officer)
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment to Registration Statement has been signed below by the following
persons in the capacities indicated and on the 24th day of March, 2000.
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SIGNATURE TITLE
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<C> <S>
/s/ JIM W. MOGG Chairman of the Board, President and Chief
- ----------------------------------------------------- Executive Officer (Principal Executive
Jim W. Mogg Officer)
/s/ DAVID D. FREDERICK Chief Financial Officer (Principal Financial
- ----------------------------------------------------- and Accounting Officer)
David D. Frederick
FRED J. FOWLER* Director
- -----------------------------------------------------
Fred J. Fowler
RICHARD B. PRIORY* Director
- -----------------------------------------------------
Richard B. Priory
* By: /s/ DAVID D. FREDERICK
- -----------------------------------------------------
David D. Frederick, pursuant to a power of
attorney filed with the Registration Statement
No. 333-32502, filed with the Securities and
Exchange Commission on March 15, 2000.
</TABLE>
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<PAGE> 7
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
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<C> <S>
1.1** -- Form of Underwriting Agreement
2.1* -- Form of Agreement of Merger among Duke Energy Field
Services Corporation and Phillips Gas Company
Shareholder, Inc.
3.1* -- Form of Amended and Restated Certificate of Incorporation
3.2* -- Form of Amended and Restated Bylaws
4.1** -- Form of Common Stock Certificate
5.1** -- Opinion of Vinson & Elkins L.L.P.
10.1** -- Employment Agreement dated as of , 2000
between Duke Energy Field Services Corporation and Mike
J. Panatier
10.2* -- Form of Registration Rights Agreement among Duke Energy
Corporation, Phillips Petroleum Company and Duke Energy
Field Services Corporation.
10.3* -- Services Agreement dated as of March 14, 2000 by and
between Duke Energy Corporation, Duke Energy Business
Services, LLC, Pan Service Company, Duke Energy Gas
Transmission Corporation and Duke Energy Field Services,
LLC
10.4* -- Transition Services Agreement dated as of March 17, 2000
among Phillips Petroleum Company and Duke Energy Field
Services, LLC
10.5* -- Form of Trademark License Agreement among Duke Energy
Corporation and Duke Energy Field Services, LLC
10.6* -- Form of Shareholders Agreement among Duke Energy Natural
Gas Corporation and Phillips Petroleum Company
10.7(a)+ -- Contribution Agreement dated as of December 16, 1999
among Duke Energy Corporation, Phillips Petroleum Company
and Duke Energy Field Services, LLC (incorporated by
reference to Exhibit 2.1 to Duke Energy Corporation's
Form 8-K filed December 30, 1999)
10.7(b)* -- First Amendment to Contribution and Governance Agreement
dated as of March 23, 2000 among Phillips Petroleum
Company, Duke Energy Corporation and Duke Energy Field
Services, LLC
10.8+ -- NGL Output Purchase and Sale Agreement effective as of
January 1, 2000 between GPM Gas Corporation and Phillips
66 Company, a division of Phillips Petroleum Company, as
amended by Amendment No. 1 dated December 16, 1999
10.9* -- Sulfur Sales Agreement effective as of January 1, 1999
between Phillips 66 Company, a division of Phillips
Petroleum Company, and GPM Gas Corporation
10.10* -- Form of Parent Company Agreement among Phillips Petroleum
Company, Duke Energy Corporation, Duke Energy Field
Services, LLC and Duke Energy Field Services Corporation
21.1** -- Subsidiaries of the Company
23.1+ -- Consent of Ernst & Young LLP
23.2+ -- Consent of Deloitte & Touche LLP
23.3+ -- Consent of Arthur Andersen LLP
23.5** -- Consent of Vinson & Elkins L.L.P. (included in Exhibit
5.1)
24.1+ -- Power of Attorney (included in signature page)
27.1+ -- Financial Data Schedule
99.1+ -- Consent of Michael J. Panatier to Serve as Director dated
March 13, 2000
99.2+ -- Consent of J.J. Mulva to Serve as Director dated March
10, 2000
</TABLE>
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* Filed herewith.
** To be filed by amendment.
+ Previously filed.
<PAGE> 1
EXHIBIT 2.1
AGREEMENT OF MERGER
OF
PHILLIPS GAS COMPANY SHAREHOLDER, INC.
(A DELAWARE CORPORATION)
WITH AND INTO
DUKE ENERGY FIELD SERVICES CORPORATION
(A DELAWARE CORPORATION)
This Agreement of Merger, dated as of ___________, 2000 (this
"Agreement"), is hereby executed pursuant to Section 251 of the General
Corporation Law of the State of Delaware (the "DGCL") by and between PHILLIPS
GAS COMPANY SHAREHOLDER, INC., a Delaware corporation ("PGCSI"), and DUKE ENERGY
FIELD SERVICES CORPORATION, a Delaware corporation ("DEFS Corp." and, following
the Merger (as hereinafter defined), the "Surviving Corporation," and,
collectively with PGCSI, the "Constituent Corporations").
RECITALS:
1. Pursuant to its Certificate of Incorporation, as amended to the date
hereof, PGCSI is authorized to issue a total of 1,000 shares of Common Stock,
with no par value ("PGCSI Common Stock"), of which ten shares are now issued and
outstanding and each of which is entitled to one vote and held of record by
Phillips Petroleum Company ("PGCSI Parent");
2. Pursuant to its Certificate of Incorporation, DEFS Corp. is
authorized to issue a total of 1,000 shares of Common Stock, par value $.01 per
share ("DEFS Corp. Common Stock"), of which 1,000 shares are now issued and
outstanding and each of which is entitled to one vote and held of record by Duke
Energy Natural Gas Corporation ("DENG"), a wholly owned subsidiary of Duke
Energy Corporation ("Duke");
3. The registered office of PGCSI in the State of Delaware is located
at 1013 Centre Road, Wilmington, New Castle County, Delaware 19805-1297 and The
Prentice-Hall Corporation Systems, Inc. is the registered agent in charge
thereof upon whom process against PGCSI may be served;
4. The registered office of DEFS Corp. in the State of Delaware is
located at 1209 Orange Street, Wilmington, Delaware 19801 and The Corporation
Trust Company is the registered agent in charge thereof upon whom process
against DEFS Corp. may be served; and
5. The Boards of Directors of both of the Constituent Corporations have
adopted resolutions declaring the advisability of the proposed merger (the
"Merger") of PGCSI with and into DEFS Corp. upon the terms and conditions
hereinafter set forth, approving this Agreement and directing that it be
submitted to their respective sole stockholders for approval in accordance with
the applicable statutes of the State of Delaware.
<PAGE> 2
6. Upon consummation of the Merger, DENG and PGCSI Parent will enter
into a Shareholders Agreement.
7. It is intended that the Merger shall qualify as a tax-free
"reorganization" within the meaning of Section 368 of the Internal Revenue Code,
as amended.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, and for the purpose of prescribing
the terms and conditions of the Merger, the mode of carrying it into effect, the
manner and basis of converting shares of each of the Constituent Corporations
into shares of the Surviving Corporation and such other details and provisions
of the Merger as are deemed necessary or desirable, the parties hereto have
agreed and covenanted, and do hereby agree and covenant, as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 Definitions. Each capitalized term used and not otherwise
defined herein shall have the meaning given such term set forth below:
"Average Market Price" shall mean, with respect to the Surviving
Corporation Common Stock to be sold by the Surviving Corporation to the public
in the IPO, the average of the closing prices, as reported on the NYSE Composite
Tape, on each of the first five days of trading on the NYSE (exclusive of the
pricing day).
"Company" shall mean Duke Energy Field Services, LLC, a Delaware
limited liability company.
"Contribution Closing" shall mean ____________, 2000.
"Duke's Corporation Interest" shall mean the difference between (x) the
Parties' Corporation Interest and (y) Phillips' Corporation Interest.
"Enterprise Value" shall mean the sum of (x) the Parties' Equity Value
and (y) $2,400,000,000; provided that, if the Effective Time is on or after the
date two years after the consummation of the Contribution Closing, "Enterprise
Value" shall mean $5,500,000,000.
"Independent Directors" shall mean directors meeting the independence
and experience requirements, as set forth by the New York Stock Exchange as of
the date of the IPO for membership on an audit committee of a board of
directors, with respect to each of PGCSI, DENG and the Surviving Corporation.
"IPO" shall mean the initial offering of shares of Surviving
Corporation Common Stock to the public in a transaction registered under the
Securities Act of 1933, as amended.
"NYSE" shall mean the New York Stock Exchange, Inc.
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<PAGE> 3
"Parties' Corporation Interest" shall mean the difference between (x)
100% and (y) the Public's Corporation Interest.
"Parties' Equity Value" shall mean the product of (i) the quotient of
(x) the Parties' Corporation Interest divided by (y) the Public's Actual
Corporation Interest multiplied by (ii) the Public's Equity Value.
"Phillips' Corporation Interest" shall mean the quotient, expressed as
a percentage, of (x) Phillips Equity Value divided by (y) Total Equity Value.
"Phillips Enterprise Value" shall mean the product of (x) the
Enterprise Value and (y) .389.
"Phillips Equity Value" shall mean the difference between (x) Phillips
Enterprise Value and (y) $1,200,000,000.
"Public's Actual Corporation Interest" shall mean the quotient,
expressed as a percentage, of (x) [___] (equaling the number of shares of
Surviving Corporation Common Stock to be sold by the Surviving Corporation in
the IPO (excluding shares issued to officers and employees of the Surviving
Corporation or the Company concurrently with the IPO and without giving effect
to any underwriters' over-allotment)) divided by (y) [___] (equaling the number
of shares of Surviving Corporation Common Stock to be outstanding immediately
after the IPO (including shares issued to officers and employees of the
Surviving Corporation or the Company concurrently with the IPO and without
giving effect to any underwriters' over-allotment).
"Public's Corporation Interest" shall mean the quotient, expressed as a
percentage, of (x) [___] (equaling the number of shares of Surviving Corporation
Common Stock to be sold by the Surviving Corporation in the IPO (including
shares issued to officers and employees of the Surviving Corporation or the
Company concurrently with the IPO and without giving effect to any underwriters'
over-allotment)) divided by (y) [___] (equaling the number of shares of
Surviving Corporation Common Stock to be outstanding immediately after the IPO
(including shares issued to officers and employees of the Surviving Corporation
or the Company concurrently with the IPO and without giving effect to any
underwriters' over-allotment).
"Public's Equity Value" shall mean the product of (i) the Average
Market Price multiplied by (ii) the number of shares sold by the Surviving
Corporation in the IPO (excluding shares issued to officers and employees of the
Surviving Corporation or the Company in the IPO and without giving effect to any
underwriters' over-allotment).
"Surviving Corporation Common Stock" shall mean the common stock, par
value $.01 per share, of the Surviving Corporation.
"Total Equity Value" shall mean the quotient of (x) the Public's Equity
Value divided by (y) the Public's Actual Corporation Interest.
Section 1.2 Construction. Unless the context requires otherwise: (a)
the gender (or lack of gender) of all words used in this Agreement includes the
masculine, feminine and neuter; (b) references to Articles and Sections refer to
Articles and Sections of this
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<PAGE> 4
Agreement; (c) references to laws refer to such laws as they may be amended from
time to time, and references to particular provisions of a law include any
corresponding provisions of any succeeding law; (d) references to money refer to
legal currency of the United States of America; (e) the word "including" means
"including, without limitation"; and (f) all capitalized terms defined herein
are equally applicable to both the singular and plural forms of such terms.
ARTICLE II
THE AGREEMENT
Section 2.1 Approval and Certification. This Agreement shall be
submitted as promptly as practicable to the sole stockholder of each of the
Constituent Corporations, and, if duly adopted and approved by each such
stockholder in accordance with the provisions of the DGCL, shall, subject to the
further provisions of this Agreement, promptly be certified in accordance with
the DGCL at such time as the respective authorized officers of PGCSI and DEFS
Corp. deem proper.
Section 2.2 Filing of Certificate and Plan of Merger. Immediately after
the approvals and certification referenced in Section 2.1 hereof, the
Constituent Corporations shall file this Agreement with the Secretary of State
of Delaware, as required by Section 251 of the DGCL. The Merger shall be
effective upon acceptance of such filing, which time is hereinafter called the
"Effective Time."
ARTICLE III
RESULT OF MERGER
Section 3.1 Effective Time Events. At the Effective Time:
(a) PGCSI shall be merged with and into DEFS Corp., with the
effect as provided in the DGCL, at which time the separate existence of PGCSI
shall cease.
(b) DEFS Corp., as the corporation surviving the Merger, shall
continue its corporate existence under the DGCL.
(c) The Certificate of Incorporation of the Surviving
Corporation shall be amended and restated in its entirety as set forth in
Exhibit A hereto (as so amended and restated, the "Amended and Restated
Charter") until the same shall thereafter be altered, amended or repealed in
accordance with applicable law and such Amended and Restated Charter.
(d) The Bylaws of the Surviving Corporation (the "Bylaws")
shall be amended and restated, in their entirety, as set forth in Exhibit B
hereto, until the same shall thereafter be altered, amended or repealed in
accordance with applicable law, the Amended and Restated Charter and such
Bylaws.
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<PAGE> 5
(e) [All shares of PGCSI Common Stock issued and outstanding
immediately prior to the IPO shall automatically be converted, without any
action on the part of the holder thereof, into an aggregate of such number of
fully paid and non-assessable shares of Surviving Corporation Common Stock equal
to the Phillips' Corporation Interest multiplied by [____] shares of Surviving
Corporation Common Stock (equaling the aggregate number of shares of Surviving
Corporation Common Stock to be outstanding after the IPO (including shares
issued to officers and employees of the Surviving Corporation and the Company
concurrently with the IPO and without giving effect to any underwriters'
over-allotment)), and all shares of PGCSI Common Stock thereafter shall be
cancelled and cease to exist.]
(f) [All shares of DEFS Corp. Common Stock issued and
outstanding immediately prior to the IPO shall automatically be converted,
without any action on the part of the holder thereof, into an aggregate of such
number of fully paid and non-assessable shares of Surviving Corporation Common
Stock equal to Duke's Corporation Interest multiplied by [____] shares of
Surviving Corporation Common Stock (equaling the aggregate number of shares of
Surviving Corporation Common Stock to be outstanding immediately after the IPO
(including shares issued to officers and employees of the Surviving Corporation
and the Company concurrently with the IPO and without giving effect to any
underwriters' over-allotment)).]
(g) The Board of Directors of the Surviving Corporation (who
shall hold office subject to the provisions of the Bylaws from the Effective
Time until the next annual meeting of the stockholders of the Surviving
Corporation and until their successors are elected and qualified) shall be the
directors of DEFS Corp. in office immediately prior to the Effective Time.
(h) All corporate acts, plans, policies, approvals and
authorizations of PGCSI, its stockholders, Board of Directors, committees
elected or appointed by the Board of Directors, officers and agents, which were
valid and effective immediately prior to the Effective Time shall be taken for
all purposes as the acts, plans, policies, approvals and authorizations of the
Surviving Corporation and shall be as effective and binding thereon as the same
were with respect to PGCSI.
ARTICLE IV
ACTIONS OF THE CORPORATIONS
Section 4.1 Execution of Documents. Each of the Constituent
Corporations hereby agrees that at any time, or from time to time, as and when
requested by the Surviving Corporation, or by its successors and assigns, it
will execute and deliver, or cause to be executed and delivered in its name by
its last acting officers or by the corresponding officers of the Surviving
Corporation, all such acknowledgments, assurances, conveyances, assignments,
transfers, deeds or other instruments, and will take or cause to be taken such
further or other action, as the Surviving Corporation, or its successors or
assigns, may deem necessary or desirable in order to evidence the transfer,
vesting or devolution to the Surviving Corporation of any property, right,
privilege or franchise pursuant to applicable law, or to vest or perfect in
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or confirm to the Surviving Corporation, its successors and assigns, title to
and possession of all the property, rights, privileges, powers, franchises and
interests as a result of the merger referred to herein pursuant to applicable
law, and otherwise to carry out the intent and purpose hereof.
Section 4.2 [Delivery of Certificates. Upon the end of the fifth day of
trading on the NYSE (excluding the pricing day), the Surviving Corporation shall
deliver to each of DENG and to PGCSI Parent, respectively, certificates
representing the number of shares of Surviving Corporation Common Stock held by
each, calculated in accordance with Sections 3.1(e) and (f) hereof.]
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IN WITNESS WHEREOF, each of the undersigned have caused this Agreement
to be duly executed and delivered on the date first set forth above.
PHILLIPS GAS COMPANY SHAREHOLDER, INC.
By:
------------------------------------
Name:
Title:
DUKE ENERGY FIELD SERVICES CORPORATION
By:
------------------------------------
Name:
Title:
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EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
DUKE ENERGY FIELD SERVICES CORPORATION
The name of the corporation is "Duke Energy Field Services
Corporation" (the "Corporation").
The original Certificate of Incorporation was filed with the
Secretary of State of the State of Delaware on December 8, 1999, under the name
"DEFS Holding Corp."
This Amended and Restated Certificate of Incorporation has
been declared advisable by the board of directors of the Corporation (the
"Board"), duly adopted by the stockholders of the Corporation and duly executed
and acknowledged by the officers of the Corporation in accordance with Sections
103, 242 and 245 of the General Corporation Law of the State of Delaware (the
"DGCL").
The text of the Certificate of Incorporation of the
Corporation is hereby amended and restated to read in its entirety as follows:
ARTICLE I
NAME
The name of the Corporation is:
Duke Energy Field Services Corporation.
ARTICLE II
REGISTERED AGENT
The address of the Corporation's registered office in the
State of Delaware is Corporation Trust Center, 1209 Orange Street, in the city
of Wilmington, County of New Castle. The name of the Corporation's registered
agent at such address is The Corporation Trust Company.
ARTICLE III
PURPOSE
The purposes of the Corporation are to engage in the midstream
gas gathering, processing, transportation and marketing business in the United
States and Canada, the marketing of natural gas liquids in Mexico, the
transportation of refined petroleum products and liquefied petroleum gases and
related products and related terminaling, storage and other activities, and the
gathering, transportation, storage and marketing of crude oil (the "Designated
Business"). The Corporation may also pursue other legal businesses beyond the
Designated Business, provided that any such other business (i) is approved by
the Board pursuant to the Bylaws of the Corporation (the "Bylaws"), and (ii) if
Duke Energy Corporation, a North
<PAGE> 2
Carolina corporation ("Duke"), owns, directly or indirectly, a majority of the
Common Stock or otherwise controls the Corporation, directly or indirectly, is
approved by Duke in its sole discretion.
ARTICLE IV
CAPITAL STOCK
Section 4.1. Issuance of Shares. The Corporation shall be
authorized to issue shares of capital stock, of which ______ shares shall be
shares of common stock, $.01 par value ("Common Stock"), and ______ shares shall
be shares of preferred stock, $.01 par value ("Preferred Stock").
Section 4.2. Preferred Stock. The Preferred Stock may be
issued from time to time in one or more series. The Board is hereby authorized
to provide for the issuance of shares of Preferred Stock in series and, by
filing a certificate pursuant to the DGCL (hereinafter referred to as a
"Preferred Stock Designation"), to establish from time to time the number of
shares to be included in each such series, and to fix the voting rights, if any,
designations, powers, privileges, preferences and other rights, if any, of the
shares of each such series and the qualifications, limitations and restrictions
thereof. The authority of the Board with respect to each series shall include,
but not be limited to, determination of the following:
(a) the designation of the series, which may be by
distinguishing number, letter or title;
(b) the number of shares of the series, which number
the Board may thereafter (except where otherwise provided in the Preferred Stock
Designation) increase or decrease (but not below the number of shares thereof
then outstanding);
(c) whether dividends, if any, shall be cumulative or
noncumulative, and, in the case of shares of any series having cumulative
dividend rights, the date or dates or method of determining the date or dates
from which dividends on the shares of such series shall be cumulative;
(d) the rate of any dividends (or method of
determining such dividends) payable to the holders of the shares of such series,
any conditions upon which such dividends shall be paid and the date or dates (or
the method for determining the date or dates) upon which such dividends shall be
payable;
(e) the price or prices (or method of determining
such price or prices) at which, the form of payment of such price or prices
(which may be cash, property or rights, including securities of the same or
another corporation or other entity) for which, the period or periods within
which and the terms and conditions upon which the shares of such series may be
redeemed, in whole or in part, at the option of the Corporation or at the option
of the holder or holders thereof or upon the happening of a specified event or
events, if any;
(f) the obligation, if any, of the Corporation to
purchase or redeem shares of such series pursuant to a sinking fund or otherwise
and the price or prices at which, the form of payment of such price or prices
(which may be cash, property or rights, including
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securities of the same or another corporation or other entity) for which, the
period or periods within which and the terms and conditions upon which the
shares of such series shall be redeemed or purchased, in whole or in part,
pursuant to such obligation;
(g) the amount payable out of the assets of the
Corporation to the holders of shares of the series in the event of any voluntary
or involuntary liquidation, dissolution or winding up of the affairs of the
Corporation;
(h) provisions, if any, for the conversion or
exchange of the shares of such series, at any time or times at the option of the
holder or holders thereof or at the option of the Corporation or upon the
happening of a specified event or events, into shares of any other class or
classes or any other series of the same or any other class or classes of stock,
or any other security, of the Corporation, or any other corporation or other
entity, and the price or prices or rate or rates of conversion or exchange and
any adjustments applicable thereto, and all other terms and conditions upon
which such conversion or exchange may be made;
(i) restrictions on the issuance of shares of the
same series or of any other class or series, if any; and
(j) the voting rights, if any, of the holders of
shares of the series.
Section 4.3. Common Stock. The Common Stock shall be subject
to the express terms of the Preferred Stock and any series thereof. The holders
of shares of Common Stock shall be entitled to one vote for each such share upon
all proposals on which the holders of Common Stock are entitled to vote and the
Common Stock shall vote together as a single class. Except as otherwise provided
by law or by the resolution or resolutions adopted by the Board designating the
rights, powers and preferences of any series of Preferred Stock, the holders of
Common Stock shall have the exclusive right to vote for the members of the Board
(the "Directors") and for all other purposes. The number of authorized shares of
Preferred Stock may be increased or decreased (but not below the number of
shares thereof then outstanding) by the affirmative vote of the holders of a
majority of the outstanding Common Stock, without a vote of the holders of the
Preferred Stock, or of any series thereof, unless a vote of any such holders is
required pursuant to any Preferred Stock Designation. The Corporation shall be
entitled to treat the Person in which name any share of its stock is registered
as the owner thereof for all purposes and shall not be bound to recognize any
equitable or other claim to, or interest in, such share on the part of any other
person, whether or not the Corporation shall have notice thereof, except as
expressly provided by applicable law.
ARTICLE V
THE BOARD
The number, nominations, qualifications, tenure, vacancies and
removal of the Directors shall be as set forth in the Bylaws. Except and to the
extent that the Bylaws shall so require, the election of the Directors need not
be by written ballot.
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ARTICLE VI
BYLAWS
In furtherance and not in limitation of the powers conferred
by statute, the Bylaws may be altered, amended or repealed and new Bylaws may be
adopted by the Board in accordance with the Bylaws.
ARTICLE VII
AMENDMENT OF CERTIFICATE OF INCORPORATION
Except as set forth in Article VI, Article X and Article XII
hereof, the Corporation reserves the right at any time and from time to time to
amend, alter, change or repeal any provision contained in this Certificate of
Incorporation, and any other provisions authorized by the laws of the State of
Delaware at the time in force may be added or inserted, in the manner now or
hereafter prescribed by law; and, except as set forth in Article XI, all rights,
preferences and privileges of whatsoever nature conferred upon stockholders,
Directors or any other persons whomsoever by and pursuant to this Certificate of
Incorporation in its present form or as hereafter amended are granted subject to
the right reserved in this Article.
ARTICLE VIII
STOCKHOLDER ACTION BY WRITTEN CONSENT
Prior to the first date (the "Trigger Date") upon which Duke
is not the holder of record (directly or through its subsidiaries) of a majority
of the outstanding voting stock of the Corporation entitled to vote generally in
the election of directors, any action required or permitted to be taken by the
stockholders of the Corporation may be taken without a meeting if a consent in
writing, setting forth the action so taken, is signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. On and after the Trigger Date,
any action required or permitted to be taken by the stockholders of the
Corporation must be taken at a duly held annual or special meeting of
stockholders and may not be taken by any consent in writing of such
stockholders.
ARTICLE IX
DELAWARE ANTITAKEOVER STATUTE
The provisions of Section 203 of the Delaware General
Corporation Law shall not be applicable to the Corporation.
ARTICLE X
ANTI-DILUTION
At any time following the initial offering of shares of Common
Stock in a transaction registered under the Securities Act of 1933, as amended,
if the Corporation offers or issues additional shares of Common Stock or
additional shares of any other previously issued and outstanding capital stock
in a public offering, then, so long as Duke and Phillips Petroleum Company, a
Delaware corporation ("Phillips"), each owns at least 20%, directly or
indirectly, of all outstanding Common Stock, then each of Duke and Phillips
shall have the opportunity to
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<PAGE> 5
subscribe for and purchase such number of shares of Common Stock or such other
capital stock, as the case may be, such that the percentage ownership (direct or
indirect) of the total issued and outstanding Common Stock or such other capital
stock, as the case may be, of such party following the offering or issuance
remains equal to such party's percentage ownership (direct or indirect) of the
issued and outstanding Common Stock or such other capital stock, as the case may
be, immediately prior to the offering or issuance; provided, however, that
neither Duke nor Phillips shall have the right or opportunity hereunder to
purchase any additional Common Stock in connection with the issuance by the
Corporation of any Common Stock or options, warrants or other similar securities
in respect of Common Stock pursuant to a compensation or benefit plan or program
for officers or employees of the Corporation that has been approved by the Board
in accordance with the Bylaws. So long as Duke and Phillips each owns at least
20%, directly or indirectly, of all outstanding Common Stock, then any proposed
amendment to this Article X shall require the consent of Duke and Phillips.
ARTICLE XI
LIMITED LIABILITY; INDEMNIFICATION
Section 11.1. Limited Liability of Directors. A Director shall
not be personally liable to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a Director, except, if required by the
DGCL, as amended from time to time, for liability (a) for any breach of the
Director's duty of loyalty to the Corporation or its stockholders, (b) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (c) under Section 174 of the DGCL or (d) for any
transaction from which the Director derived an improper personal benefit.
Neither the amendment nor repeal of this Section 11.1 shall eliminate or reduce
the effect of this Section 11.1 in respect of any matter occurring, or any cause
of action, suit or claim that, but for this Section 11.1, would accrue or arise,
prior to such amendment or repeal.
Section 11.2. Indemnification and Insurance.
(a) Right to Indemnification. Each person who was or
is made a party to or is threatened to be made a party to or is involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter, a "proceeding"), by reason of the fact that such
person, or a person of whom such person is the legal representative, is or was a
Director or officer of the Corporation or is or was serving at the request of
the Corporation as a Director, officer, employee or agent of another corporation
or of a partnership, joint venture, trust or other enterprise, including service
with respect to employee benefit plans, whether the basis of such proceeding is
alleged action in an official capacity as a Director, officer, employee or agent
or in any other capacity while serving as a Director, officer, employee or
agent, shall be indemnified and held harmless by the Corporation to the fullest
extent authorized by the DGCL, as the same exists or may hereafter be amended
(but, in the case of any such amendment, to the fullest extent permitted by law,
only to the extent that such amendment permits the Corporation to provide
broader indemnification rights than said law permitted the Corporation to
provide prior to such amendment), against all expense, liability and loss
(including, without limitation, attorneys' fees, judgments, fines, amounts paid
or to be paid in settlement and excise taxes or penalties arising under the
Employment Retirement Income Security Act of 1974, as in effect from time to
time) reasonably incurred or suffered by such person in connection therewith,
and
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<PAGE> 6
such indemnification shall continue as to a person who has ceased to be a
Director, officer, employee or agent and shall inure to the benefit of such
person's heirs, executors and administrators; provided, however, that, except as
provided in paragraph (b) hereof, the Corporation shall indemnify any such
person seeking indemnification in connection with a proceeding (or part thereof)
initiated by such person only if such proceeding (or part thereof) was
authorized by the Board. The right to indemnification conferred in this Section
11.2 shall be a contract right and shall include the right to have the
Corporation pay the expenses incurred in defending any such proceeding in
advance of its final disposition, any advance payments to be paid by the
Corporation within 20 calendar days after the receipt by the Corporation of a
statement or statements from the claimant requesting such advance or advances
from time to time; provided, however, that, if and to the extent the DGCL
requires, the payment of such expenses incurred by a Director or officer in such
person's capacity as a Director or officer (and not in any other capacity in
which service was or is rendered by such person while a Director or officer
including, without limitation, service to an employee benefit plan) in advance
of the final disposition of a proceeding shall be made only upon delivery to the
Corporation of an undertaking, by or on behalf of such Director or officer, to
repay all amounts so advanced if it shall ultimately be determined that such
Director or officer is not entitled to be indemnified under this Section 11.2 or
otherwise. The Corporation may, to the extent authorized from time to time by
the Board, grant rights to indemnification, and rights to have the Corporation
pay the expenses incurred in defending any proceeding in advance of its final
disposition, to any employee or agent of the Corporation to the fullest extent
of the provisions of this Article XI with respect to the indemnification and
advancement of expenses of Directors and officers of the Corporation.
(b) Right of Claimant to Bring Suit. If a claim under
paragraph (a) of this Section is not paid in full by the Corporation within 30
calendar days after a written claim has been received by the Corporation, the
claimant may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim and, if successful in whole or in part,
the claimant shall be entitled to be paid also the expense of prosecuting such
claim. It shall be a defense to any such action (other than an action brought to
enforce a claim for expenses incurred in defending any proceeding in advance of
its final disposition where the required undertaking, if any is required, has
been tendered to the Corporation) that the claimant has not met the standard of
conduct which makes it permissible under the DGCL for the Corporation to
indemnify the claimant for the amount claimed, but the burden of proving such
defense shall be on the Corporation. Neither the failure of the Corporation
(including its Board, independent legal counsel or its stockholders) to have
made a determination prior to the circumstances that the claimant has met the
applicable standard of conduct set forth in the DGCL, nor an actual
determination by the Corporation (including its Board, independent legal counsel
or its stockholders) that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
(c) Non-Exclusivity of Rights. The right to
indemnification and the payment of expenses incurred in defending a proceeding
in advance of its final disposition conferred in this Section 11.2 shall not be
exclusive of any other right which any person may have or hereafter acquire
under any statute, provision of the Certificate of Incorporation, Bylaw,
agreement, vote of stockholders or disinterested Directors or otherwise. No
repeal or
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modification of this Article XI shall in any way diminish or adversely affect
the rights of any Director, officer, employee or agent of the Corporation
hereunder in respect of any occurrence or matter arising prior to any such
repeal or modification.
(d) Insurance. The Corporation may maintain
insurance, at its expense, to protect itself and any Director, officer, employee
or agent of the Corporation or another corporation, partnership, joint venture,
trust or other enterprise against any such expense, liability or loss, whether
or not the Corporation would have the power to indemnify such person against
such expense, liability or loss under the DGCL.
(e) Severability. If any provision or provisions of
this Article XI shall be held to be invalid, illegal or unenforceable for any
reason whatsoever: (i) the validity, legality and enforceability of the
remaining provisions of this Article XI (including, without limitation, each
portion of any paragraph of this Article XI containing any such provision held
to be invalid, illegal or unenforceable, that is not itself held to be invalid,
illegal or unenforceable) shall not in any way be affected or impaired thereby;
and (ii) to the fullest extent possible, the provisions of this Article XI
(including, without limitation, each such portion of any paragraph of this
Article XI containing any such provision held to be invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent manifested
by the provision or provisions held invalid, illegal or unenforceable.
ARTICLE XII
BUSINESS OPPORTUNITIES AGREEMENT
Section 12.1. Scope of Business of the Corporation and its
Subsidiaries. The Corporation hereby renounces any interest or expectancy in any
business opportunity, transaction or other matter (each, a "Business Activity")
in which Duke engages or seeks to engage that does not consist exclusively of
the Designated Business.
Section 12.2. Corporate Opportunities.
(a) In recognition that Duke is currently (at least
indirectly), and in anticipation that Duke will remain, a substantial
stockholder of the Corporation, and in anticipation that the Corporation and
Duke may engage in the same or similar activities or lines of business and have
an interest in the same or similar areas of business, and in recognition of the
benefits to be derived by the Corporation through its continued contractual,
corporate and business relations with Duke (including services of employees,
officers and directors of Duke as Directors and officers of the Corporation),
the provisions of this Article XII are set forth to regulate and define the
conduct of certain affairs of the Corporation as they may involve Duke and its
employees, officers and directors, and the powers, rights, duties, liabilities,
interests and expectancies of the Corporation in connection therewith.
(b) Duke shall have the right to engage (and shall
have no duty to refrain from engaging) in the same or similar activities or
lines of business as the Corporation, and the Corporation shall not be deemed to
have any interest or expectancy, and hereby renounces any interest or
expectancy, in any Business Activity, provided that such Business Activity is
conducted by Duke in accordance with the standards set forth in Section 12.3
hereof.
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<PAGE> 8
Neither Duke nor any employee, officer, director or agent thereof shall be
liable to the Corporation or its stockholders for breach of any fiduciary or
other duty by reason of any such Business Activity of Duke or of such person's
participation therein. In the event that Duke acquires knowledge of a potential
Business Activity, unless such Business Activity is pursued in violation of the
standards set forth in Section 12.3 hereof, Duke shall have no duty to
communicate or offer to the Corporation the opportunity to participate in such
Business Activity and shall not be liable to the Corporation or its stockholders
for breach of any fiduciary duty as a stockholder of the Corporation by reason
of the fact that Duke conducts, pursues or acquires such Business Activity for
itself, directs such Business Activity to another Person or does not communicate
information regarding such Business Activity to the Corporation, and no officer,
director, employee or other agent of Duke who serves as a Director or officer of
the Corporation or of any subsidiary of the Corporation shall have any duty to
communicate or offer the opportunity to participate in such Business Activity to
the Corporation or any liability to the Corporation or its stockholders for
breach of any fiduciary duty as a Director or officer of the Corporation by
reason of the fact that Duke conducts, pursues or acquires such Business
Activity for itself, directs such Business Activity to another Person or does
not communicate information regarding such Business Activity to the Corporation.
Section 12.3. Standards for Separate Conduct of Business. In
the event that Duke or any Director or officer of the Corporation who is also a
director, officer, employee or agent of Duke acquires knowledge of a potential
Business Activity, Duke, or any such person on behalf of Duke, may pursue such
Business Activity, and such pursuit shall be in accordance with the standards
set forth in this Section 12.3, if (i) such knowledge was acquired by Duke or
any such person other than through disclosure of information by or on behalf of
a Director, officer, employee or agent of the Corporation in or during the
course of such person's relationship with the Corporation and other than solely
in, and as a direct result of, such person's service as a Director or officer of
the Corporation (it being understood that if the opportunity to pursue such
Business Activity is separately identified by Duke or one of its officers,
directors, employees or agents or separately presented to Duke or one of its
officers, directors, employees or agents, Duke, or any such officer, director,
employee or agent on behalf of Duke, shall be free to pursue such opportunity
even if it also came to the attention of another officer, director, employee or
agent of Duke as a result of and in his or her capacity as a Director or officer
of the Corporation), and (ii) such Business Activity is developed and pursued
solely through the use of personnel and assets of Duke (including such person in
his or her capacity as a director, officer, employee or agent of Duke). The
Corporation shall renounce any interest or expectancy in any Business Activity
that is conducted by Duke or its officers, directors, employees or agents on
behalf of Duke in accordance with the foregoing standards. Nothing in this
Article XII shall allow any Director designated by Duke to pursue a Business
Activity in the Designated Business solely for his or her personal benefit (as
opposed to for the benefit of Duke).
Section 12.4. Consent. Any Person purchasing or otherwise
acquiring any interest in shares of the capital stock of the Corporation shall
be deemed to have consented to these provisions.
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Section 12.5. Interpretation.
(a) For purposes of this Article XII, "Duke" shall
include all Subsidiaries and Affiliates of Duke Energy Corporation (other than
the Corporation and its Subsidiaries).
(b) As used in this Article XII, the following
definitions shall apply:
(i) "Affiliate" shall mean, with respect to
any Person, a Person directly or indirectly Controlling, Controlled by or under
common Control with such Person.
(ii) "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 Securities Exchange Act
of 1934, as amended) of both of the following: (A)(1) in the case of a
corporation, more than 25% of the direct or indirect economic interest in the
outstanding equity securities thereof; (2) 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); (3) in the
case of a trust or estate, including a business trust, more than 25% of the
beneficial interest therein; and (4) 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.
(iii) "Governmental Entity" shall mean any
federal, state, political subdivision or other governmental agency or
instrumentality, foreign or domestic.
(iv) "Person" shall mean any individual,
partnership, limited liability company, firm, corporation, association, joint
venture, trust or other entity or any Governmental Entity.
(v) "Subsidiary" shall mean, when used with
respect to any Person, any Affiliate of such Person that is Controlled by such
Person.
Section 12.6. Amendment. Any proposed amendment to Article III
or this Article XII shall require, in addition to the consent of Duke, the
approval of at least a majority of the Directors who are not officers, directors
or employees of Duke and who are otherwise disinterested or of a committee of
the Board consisting exclusively of Directors who are not officers, directors or
employees of Duke and who are otherwise disinterested.
Section 12.7. Term. The provisions of this Article XII shall
terminate at such time as Duke no longer owns, directly or indirectly, a
majority of the Common Stock and no longer otherwise controls the Corporation,
directly or indirectly.
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IN WITNESS WHEREOF, Duke Energy Field Services Corporation has
caused this Amended and Restated Certificate of Incorporation to be signed by
its President this ___ day of ___________, 2000.
-------------------------------
J. W. Mogg
President
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EXHIBIT 3.2
================================================================================
AMENDED AND RESTATED BYLAWS
OF
DUKE ENERGY FIELD SERVICES CORPORATION
Dated as of ___, 2000
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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ARTICLE I
OFFICES AND RECORDS
ARTICLE II
STOCKHOLDERS
Section 2.1. Annual Meeting.............................................1
Section 2.2. Special Meeting............................................1
Section 2.3. Place of Meeting...........................................1
Section 2.4. Notice of Meeting..........................................2
Section 2.5. Quorum and Adjournment; Voting.............................2
Section 2.6. Proxies....................................................2
Section 2.7. Notice of Stockholder Business and Nominations.............2
Section 2.8. Procedure for Election of Directors; Required Vote.........4
Section 2.9. Inspectors of Elections; Opening and Closing the Polls.....5
Section 2.10. Conduct of Meetings........................................5
ARTICLE III
THE BOARD
Section 3.1. General Powers.............................................5
Section 3.2. Number; Qualifications and Tenure..........................6
Section 3.3. Regular Meetings...........................................6
Section 3.4. Special Meetings...........................................6
Section 3.5. Notice.....................................................6
Section 3.6. Action by Consent of Board.................................6
Section 3.7. Conference Telephone Meetings..............................6
Section 3.8. Quorum.....................................................6
Section 3.9. Vacancies; Increases in the Number of Directors............7
Section 3.10. Executive and Other Committees.............................7
Section 3.11. Removal....................................................7
Section 3.12. Records....................................................7
ARTICLE IV
OFFICERS
Section 4.1. Elected Officers...........................................8
Section 4.2. Election and Term of Office................................8
Section 4.3. Chairman of the Board; Chief Executive Officer.............8
Section 4.4. President..................................................8
Section 4.5. Vice Presidents............................................8
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Section 4.6. Treasurer..................................................9
Section 4.7. Secretary..................................................9
Section 4.8. Removal....................................................9
Section 4.9. Vacancies..................................................9
ARTICLE V
STOCK CERTIFICATES AND TRANSFERS
Section 5.1. Stock Certificates and Transfers..........................10
Section 5.2. Lost, Stolen or Destroyed Certificates....................10
ARTICLE VI
MISCELLANEOUS PROVISIONS
Section 6.1. Fiscal Year...............................................10
Section 6.2. Dividends.................................................10
Section 6.3. Seal......................................................10
Section 6.4. Waiver of Notice..........................................10
Section 6.5. Audits....................................................11
Section 6.6. Resignations..............................................11
ARTICLE VII
CONTRACTS, PROXIES, ETC.
Section 7.1. Contracts.................................................11
Section 7.2. Proxies...................................................11
</TABLE>
ARTICLE VIII
AMENDMENTS
Annex A
ii
<PAGE> 4
AMENDED AND RESTATED BYLAWS
OF
DUKE ENERGY FIELD SERVICES CORPORATION
The original Bylaws of Duke Energy Field Services Corporation
(formerly known as DEFS Holding Corp.) (the "Corporation") were adopted by the
board of directors of the Corporation (the "Board") on December 8, 1999.
These Amended and Restated Bylaws have been declared advisable
by the Board, duly adopted by the stockholders of the Corporation and duly
executed and acknowledged by the officers of the Corporation in accordance with
Section 109 of the General Corporation Law of the State of Delaware ("DGCL").
The text of the Bylaws of the Corporation is hereby amended
and restated to read in its entirety as follows:
ARTICLE I
OFFICES AND RECORDS
The Corporation shall maintain a registered office in Delaware
and may maintain such other offices and keep its books, documents and records at
such places within or without Delaware as may, from time to time, be designated
by the Board.
ARTICLE II
STOCKHOLDERS
Section 2.1. Annual Meeting. The annual meeting of the
stockholders of the Corporation shall be held on such date and at such time as
may be fixed by resolution of the Board.
Section 2.2. Special Meeting. Except as otherwise required by
law and subject to the rights of the holders of any class or series of stock
having a preference over the Common Stock, as defined in the Certificate of
Incorporation of the Corporation (the "Certificate of Incorporation"), as to
dividends or upon liquidation, special meetings of the stockholders of the
Corporation for any purpose or purposes may be called only by:
(a) the Board pursuant to a resolution stating the purpose or
purposes thereof approved by a majority of the Board, or
(b) the Chairman of the Board.
No business other than that stated in the notice shall be transacted at any
special meeting.
Section 2.3. Place of Meeting. The Board or the Chairman of
the Board, as the case may be, may designate the place of meeting for any annual
meeting or for any special meeting of the stockholders. If no designation is so
made, the place of meeting shall be the principal office of the Corporation.
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Section 2.4. Notice of Meeting. Written or printed notice,
stating the place, day and hour of the meeting and, in the case of a special
meeting, the purpose or purposes for which the meeting is called, shall be
delivered by the Corporation not less than ten calendar days nor more than 60
calendar days before the date of the meeting, either personally or by mail, to
each stockholder of record entitled to vote at such meeting. Holders of
Preferred Stock, as defined in the Certificate of Incorporation, shall not be
entitled to receive notice of any meeting of stockholders at which they are not
entitled to vote. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail with postage thereon prepaid, addressed to
the stockholder at such person's address as it appears on the stock transfer
books of the Corporation. Only such business shall be conducted at a special
meeting of stockholders as shall have been included in the Corporation's notice
of meeting. Meetings may be held without notice if all stockholders entitled to
vote are present, or if notice is waived by those not present in accordance with
Section 6.4 of these Bylaws. Any previously scheduled meeting of the
stockholders may be postponed, and any special meeting of the stockholders may
be canceled, by resolution of the Board upon public notice given prior to the
date previously scheduled for such meeting of stockholders.
Section 2.5. Quorum and Adjournment; Voting. Except as
otherwise provided by law or by the Certificate of Incorporation, the holders of
a majority of the voting power of all outstanding shares of the Corporation
entitled to vote generally in the election of Directors (as hereinafter defined)
(the "Voting Stock"), represented in person or by proxy, shall constitute a
quorum at a meeting of stockholders, except that when specified business is to
be voted on by a class or series of stock voting as a class, the holders of a
majority of the shares of such class or series shall constitute a quorum of such
class or series for the transaction of such business. The chairman of the
meeting or a majority of the shares so represented may adjourn the meeting from
time to time, whether or not there is such a quorum. No notice of the time and
place of adjourned meetings need be given except as required by law. The
stockholders present at a duly called meeting at which a quorum is present may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough stockholders to leave less than a quorum.
Section 2.6. Proxies. At all meetings of stockholders, a
stockholder may vote by proxy executed in writing (or in such other manner
permitted by the DGCL) by the stockholder or by such person's duly authorized
attorney-in-fact.
Section 2.7. Notice of Stockholder Business and Nominations.
(a) Annual Meetings of Stockholders.
(i) Nominations of persons for election to the Board
and the proposal of business to be considered by the stockholders may be made at
an annual meeting of stockholders (A) pursuant to the Corporation's notice of
meeting in accordance with Section 2.4 of these Bylaws, (B) by or at the
direction of the Board, or (C) by any stockholder of the Corporation who was a
stockholder of record at the time the notice provided for in this Bylaw was
delivered, who is entitled to vote at the meeting and who complies with the
notice procedures set forth in this Bylaw.
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(ii) For nominations or other business to be properly
brought before an annual meeting by a stockholder pursuant to clause (C) of
Section 2.7(a)(i) hereof, the stockholder must have given timely notice thereof
in writing to the Secretary of the Corporation and such other business must
otherwise be a proper matter for stockholder action. To be timely, a
stockholder's notice shall be delivered to the Secretary at the principal
executive offices of the Corporation not later than the close of business on the
90th calendar day nor earlier than the close of business on the 120th calendar
day prior to the first anniversary of the preceding year's annual meeting;
provided, however, that in the event that the date of the annual meeting is more
than 30 calendar days before or more than 60 calendar days after such
anniversary date, notice by the stockholder to be timely must be so delivered
not earlier than the close of business on the 120th calendar day prior to such
annual meeting and not later than the close of business on the later of the 90th
calendar day prior to such annual meeting or the 10th calendar day following the
calendar day on which public announcement of the date of such meeting is first
made by the Corporation. In no event shall the public announcement of an
adjournment of an annual meeting commence a new time period for the giving of a
stockholder's notice as described above. Such stockholder's notice shall set
forth (A) as to each person whom the stockholder proposes to nominate for
election or reelection as a Director, all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
Directors in an election contest, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and Rule 14a-11 thereunder (including such person's
written consent to being named in the proxy statement as a nominee and to
serving as a member of the Board (a "Director") if elected); (B) as to any other
business that the stockholder proposes to bring before the meeting, a brief
description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest in
such business of such stockholder and the beneficial owner, if any, on whose
behalf the proposal is made; and (C) as to the stockholder giving the notice and
the beneficial owner, if any, on whose behalf the nomination or proposal is
made, (1) the name and address of such stockholder, as they appear on the
Corporation's books, and of such beneficial owner and (2) the class and number
of shares of the Corporation which are owned beneficially and of record by such
stockholder and such beneficial owner.
(iii) Notwithstanding anything in the second sentence
of paragraph (a)(ii) of this Bylaw to the contrary, in the event that the number
of Directors to be elected to the Board is increased and there is no public
announcement by the Corporation naming all of the nominees for Director or
specifying the size of the increased Board at least 100 calendar days prior to
the first anniversary of the preceding year's annual meeting, a stockholder's
notice required by this Bylaw shall also be considered timely, but only with
respect to nominees for any new positions created by such increase, if it shall
be delivered to the Secretary at the principal executive offices of the
Corporation not later than the close of business on the tenth calendar day
following the day on which such public announcement is first made by the
Corporation.
(b) Special Meetings of the Stockholders. Only such business
shall be conducted at a special meeting of stockholders as shall have been
brought before the meeting pursuant to the Corporation's notice of meeting under
Section 2.4 of these Bylaws. Nominations of persons for election to the Board
may be made at a special meeting of stockholders at which Directors are to be
elected pursuant to the Corporation's notice of meeting (i) by or at the
direction of the Board, (ii) provided that the Board has determined that
Directors shall be elected
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at such meeting, by any stockholder of the Corporation who is a stockholder of
record at the time of giving of notice provided for in this Bylaw, who shall be
entitled to vote at the meeting and who complies with the notice procedures set
forth in this Bylaw. In the event the Corporation calls a special meeting of
stockholders for the purpose of electing one or more Directors to the Board, any
stockholder may nominate a person or persons (as the case may be) for election
to such position(s) as specified in the Corporation's notice of meeting pursuant
to clause (ii) if the stockholder's notice required by paragraph (a)(ii) of this
Bylaw shall be delivered to the Secretary at the principal executive offices of
the Corporation not earlier than the close of business on the 120th calendar day
prior to such special meeting and not later than the close of business on the
later of the 90th calendar day prior to such special meeting or the tenth
calendar day following the day on which public announcement is first made of the
date of the special meeting and of the nominees proposed by the Board to be
elected at such meeting. In no event shall the public announcement of an
adjournment of a special meeting commence a new time period for the giving of a
stockholder's notice as described above.
(c) General.
(i) Only such persons who are nominated in accordance
with the procedures set forth in this Bylaw shall be eligible to serve as
Directors and only such business shall be conducted at a meeting of stockholders
as shall have been brought before the meeting in accordance with the procedures
set forth in this Bylaw. Except as otherwise provided by law, the Certificate of
Incorporation or these Bylaws, the chairman of the meeting shall have the power
and duty to determine whether a nomination or any business proposed to be
brought before the meeting was made or proposed, as the case may be, in
accordance with the procedures set forth in this Bylaw and, if any proposed
nomination or business in not in compliance with this Bylaw, to declare that
such defective proposal or nomination shall be disregarded.
(ii) For purposes of this Bylaw, "public
announcement" shall mean disclosure in a press release reported by the Dow Jones
News Service, Associated Press or comparable national news service or in a
document publicly filed by the Corporation with the Securities and Exchange
Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.
(iii) Notwithstanding the foregoing provisions of
this Bylaw, a stockholder shall also comply with all applicable requirements of
the Exchange Act and the rules and regulations thereunder with respect to the
matters set forth in this Bylaw. Nothing in this Bylaw shall be deemed to affect
any rights (A) of stockholders to request inclusion of proposals in the
Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act or
(B) of the holders of any series of Preferred Stock to elect Directors under an
applicable Preferred Stock Designation (as defined in the Certificate of
Incorporation).
Section 2.8. Procedure for Election of Directors; Required
Vote. Election of Directors at all meetings of the stockholders at which
Directors are to be elected shall be by ballot, and, subject to the rights of
the holders of any series of Preferred Stock to elect Directors under an
applicable Preferred Stock Designation, a plurality of the votes cast thereat
shall elect Directors. Except as otherwise provided by law, the Certificate of
Incorporation, Preferred Stock Designation or these Bylaws, in all matters other
than the election of Directors, the affirmative
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<PAGE> 8
vote of a majority of the voting power of the shares present in person or
represented by proxy at the meeting and entitled to vote on the matter shall be
the act of the stockholders.
Section 2.9. Inspectors of Elections; Opening and Closing the
Polls. The Board by resolution shall appoint, or shall authorize an officer of
the Corporation to appoint, one or more inspectors, which inspector or
inspectors may include individuals who serve the Corporation in other
capacities, including, without limitation, as officers, employees, agents or
representatives, to act at the meetings of stockholders and make a written
report thereof. One or more persons may be designated as alternate inspector(s)
to replace any inspector who fails to act. If no inspector or alternate has been
appointed to act or is able to act at a meeting of the stockholders, the
chairman of the meeting shall appoint one or more inspectors to act at the
meeting. Each inspector, before discharging such person's duties, shall take and
sign an oath faithfully to execute the duties of inspector with strict
impartiality and according to the best of such person's ability. The
inspector(s) shall have the duties prescribed by law. The chairman of the
meeting shall fix and announce at the meeting the date and time of the opening
and the closing of the polls for each matter upon which the stockholders will
vote at a meeting.
Section 2.10. Conduct of Meetings. The Board may to the extent
not prohibited by law adopt such rules and regulations for the conduct of
meetings of stockholders as it shall deem appropriate. Except to the extent
inconsistent with such rules and regulations as adopted by the Board, the
chairman of any meeting of stockholders shall have the right and authority to
prescribe such rules, regulations and procedures and to do all such acts as, in
the judgment of such chairman, are appropriate for the proper conduct of the
meeting. Such rules, regulations or procedures, whether adopted by the Board or
prescribed by the chairman of the meeting, may to the extent not prohibited by
law include, without limitation, the following: (a) the establishment of an
agenda or order of business for the meeting; (b) rules and procedures for
maintaining order at the meeting and the safety of those present; (c)
limitations on attendance at or participation in the meeting to stockholders of
record of the Corporation, their duly authorized and constituted proxies or such
other persons as the chairman of the meeting shall determine; (d) restrictions
on entry to the meeting after the time fixed for the commencement thereof; and
(e) limitations on the time allotted to questions or comments by participants.
The date and time of the opening and closing of the polls for each matter upon
which the stockholders will vote at a meeting shall be announced at the meeting
by the person presiding over the meeting. Unless and to the extent determined by
the Board or the chairman of the meeting, meetings of stockholders shall not be
required to be held in accordance with the rules of parliamentary procedure.
ARTICLE III
THE BOARD
Section 3.1. General Powers. The business and affairs of the
Corporation shall be managed under the direction of the Board. In addition to
the powers and authorities expressly conferred upon the Board by these Bylaws,
the Board may exercise all such powers of the Corporation and do all such lawful
acts and things as are not by statute, by the Certificate of Incorporation or by
these Bylaws required to be exercised or done by the stockholders. Except as
provided in the following sentence with respect to actions with respect to the
matters set forth in Annex A hereto, all decisions of the Board shall require
the affirmative vote of a majority of
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the Directors present at a meeting at which a quorum is present. So long as each
of Phillips Petroleum Company, a Delaware corporation ("Phillips"), and Duke
Energy corporation, a North Carolina corporation ("Duke"), owns, directly or
indirectly, at least 20% of the Common Stock, no action shall be taken by the
Board with respect to the matters set forth in Annex A hereto without the prior
approval of at least eight of the 11 Directors of the Board.
Section 3.2. Number; Qualifications and Tenure. The number of
the Directors shall be 11. A Director need not be a stockholder of the
Corporation.
Section 3.3. Regular Meetings. The Board shall meet at least
quarterly. The Board may, by resolution and notice to each of the Directors,
provide the time and place for the holding of additional regular meetings
without other notice than such resolution and notice to the Directors.
Section 3.4. Special Meetings. A special meeting of the Board
may be called at any time on two Business Days' prior notice at the request of
(a) the Chairman of the Board or (b) any four Directors. As used in these
Bylaws, the term "Business Day" shall mean any day on which banks are generally
open to conduct business in the State of New York. The place of any special
meeting shall be the corporate headquarters of the Corporation unless otherwise
agreed by a majority of the Directors.
Section 3.5. Notice. Written notice of all regular meetings of
the Board must be given to all Directors at least 15 days prior to the regular
meeting of the Board and two Business Days prior to any special meeting of the
Board. All notices and other communications to be given to Directors 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 as such Director shall designate by
notice to the Corporation. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the Board need be specified in the
notice of such meeting, except for amendments to these Bylaws, as provided under
Article VIII. A meeting may be held at any time without notice if all the
Directors are present or if those not present waive notice of the meeting in
accordance with Section 6.4.
Section 3.6. Action by Consent of Board. To the extent
permitted by applicable law, the Board and any committee thereof may act without
a meeting so long as all members of the Board or committee shall have executed a
written consent with respect to any Board action taken in lieu of a meeting.
Section 3.7. Conference Telephone Meetings. Members of the
Board or any committee thereof may participate in a meeting of the Board or such
committee by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and such participation in a meeting shall constitute presence in person at such
meeting.
Section 3.8. Quorum. At least six Directors, present in
person, participating in accordance with Section 3.7 or represented by proxy,
shall constitute a quorum for the
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transaction of business, but if at any meeting of the Board there shall be less
than a quorum present, a majority of the Directors present may adjourn the
meeting from time to time without further notice. Subject to the supermajority
voting provisions of Section 3.1, the act of the majority of the Directors
present at a meeting at which a quorum is present shall be the act of the Board.
The Directors present at a duly organized meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough Directors
to leave less than a quorum.
Section 3.9. Vacancies; Increases in the Number of Directors.
Vacancies and newly created directorships resulting from any increase in the
authorized number of Directors may be filled by a majority of the Directors then
in office, although less than a quorum, or a sole remaining Director; and any
Director so chosen shall hold office until the next annual election and until
his successor shall be duly elected and shall qualify, unless sooner displaced.
Section 3.10. Executive and Other Committees. (a) The Board
may establish committees of the Board and, to the extent not inconsistent with
the supermajority voting provisions of Section 3.1, may delegate certain of its
responsibilities to such committees, provided that so long as each of Phillips
and Duke owns, directly or indirectly, at least 20% of the Common Stock, each
committee of the Board, other than the audit committee, shall include at least
one Director designated by Phillips who is not an Independent Director (as
hereinafter defined) and one Director designated by Duke who is not an
Independent Director.
(b) The Board shall have an audit committee comprised of three
Independent Directors, which audit committee shall establish a written audit
committee charter in accordance with the rules of the New York Stock Exchange,
Inc. (the "NYSE"), as amended from time to time. "Independent Director" shall
mean a Director meeting the independence and experience requirements, as set
forth by the NYSE as of __ , 2000 for membership on the audit committee of the
Board, with respect to each of Phillips, Duke and the Corporation.
(c) Unless the Board shall otherwise provide, a majority of
any committee may fix the time and place of its meetings and, subject to the
supermajority voting provisions of Section 3.1, may determine its action. Notice
of such meetings shall be given to each member of the committee in the manner
provided for in Section 3.5 of these Bylaws. Subject to Section 3.10(a), the
Board shall have power at any time to fill vacancies in, to change the
membership of, or to dissolve any such committee. Nothing herein shall be deemed
to prevent the Board from appointing one or more committees consisting in whole
or in part of persons who are not Directors; provided, however, that no such
committee shall have or may exercise any authority of the Board.
Section 3.11. Removal. Any Director or the entire Board may be
removed, with or without cause, by the holders of a majority of the Voting
Stock.
Section 3.12. Records. The Board shall cause to be kept a
record containing the minutes of the proceedings of the meetings of the Board
and of the stockholders, appropriate stock books and registers and such books of
records and accounts as may be necessary for the proper conduct of the business
of the Corporation.
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ARTICLE IV
OFFICERS
Section 4.1. Elected Officers. The executive officers of the
Corporation shall be selected by, and serve at the pleasure of, the Board. Such
officers shall have the authority and duties delegated to each of them,
respectively, by the Board from time to time. The elected officers of the
Corporation shall be a Chairman of the Board, a President, a Secretary, a
Treasurer, and such other officers (including, without limitation, Executive
Vice Presidents, Senior Vice Presidents and Vice Presidents) as the Board from
time to time may deem proper. The Chairman of the Board shall be chosen from
among the Directors. All officers elected by the Board shall each have such
powers and duties as generally pertain to their respective offices, subject to
the specific provisions of this Article IV. The Board or any committee thereof
may from time to time elect, or the Chairman of the Board may appoint, such
other officers (including one or more Vice Presidents, Controllers, Assistant
Secretaries and Assistant Treasurers), as may be necessary or desirable for the
conduct of the business of the Corporation. Such other officers and agents shall
have such duties and shall hold their offices for such terms as shall be
provided in these Bylaws or as may be prescribed by the Board or such committee
or by the Chairman of the Board, as the case may be.
Section 4.2. Election and Term of Office. The elected officers
of the Corporation shall be elected annually by the Board at the regular meeting
of the Board held after the annual meeting of the stockholders. If the election
of officers shall not be held at such meeting, such election shall be held as
soon thereafter as convenient. Each officer shall hold office until such
person's successor shall have been duly elected and shall have qualified or
until such person's death or until he shall resign or be removed pursuant to
Section 4.8.
Section 4.3. Chairman of the Board; Chief Executive Officer.
The Chairman of the Board shall preside at all meetings of the stockholders and
of the Board and shall be the Chief Executive Officer of the Corporation. The
Chairman of the Board shall be responsible for the general management of the
affairs of the Corporation and shall perform all duties incidental to such
person's office which may be required by law and all such other duties as are
properly required of him by the Board. He shall make reports to the Board and
the stockholders and shall see that all orders and resolutions of the Board and
of any committee thereof are carried into effect. The Chairman of the Board may
also serve as President, if so elected by the Board. The Directors also may
elect a vice-chairman to act in the place of the Chairman upon his or her
absence or inability to act.
Section 4.4. President. The President shall act in a general
executive capacity and shall assist the Chairman of the Board in the
administration and operation of the Corporation's business and general
supervision of its policies and affairs. The President, if he is also a
director, shall, in the absence of or because of the inability to act of the
Chairman of the Board, perform all duties of the Chairman of the Board and
preside at all meetings of stockholders and of the Board.
Section 4.5. Vice Presidents. Each Executive Vice President
and Senior Vice President and any Vice President shall have such powers and
shall perform such duties as shall be assigned to him by the Board or the
Chairman of the Board.
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Section 4.6. Treasurer. (a) The Treasurer shall exercise
general supervision over the receipt, custody and disbursement of corporate
funds. The Treasurer shall cause the funds of the Corporation to be deposited in
such banks as may be authorized by the Board, or in such banks as may be
designated as depositories in the manner provided by resolution of the Board.
The Treasurer shall, in general, perform all duties incident to the office of
the Treasurer and shall have such further powers and duties and shall be subject
to such directions as may be granted or imposed from time to time by the Board
or the Chairman of the Board.
Section 4.7. Secretary. (a) The Secretary shall keep or cause
to be kept, in one or more books provided for that purpose, the minutes of all
meetings of the Board, the committees of the Board and the stockholders. The
Secretary shall see that all notices are duly given in accordance with the
provisions of these Bylaws and as required by law; shall be custodian of the
records and the seal of the Corporation and affix and attest the seal to all
stock certificates of the Corporation (unless the seal of the Corporation on
such certificates shall be a facsimile, as hereinafter provided) and affix and
attest the seal to all other documents to be executed on behalf of the
Corporation under its seal; and shall see that the books, reports, statements,
certificates and other documents and records required by law to be kept and
filed are properly kept and filed; and in general, shall perform all the duties
incident to the office of Secretary and such other duties as from time to time
may be assigned to the Secretary by the Board or the Chairman of the Board.
(b) Assistant Secretaries shall have such of the authority and
perform such of the duties of the Secretary as may be provided in these Bylaws
or assigned to them by the Board, the Chairman of the Board or the Secretary.
Assistant Secretaries shall assist the Secretary in the performance of the
duties assigned to the Secretary, and in assisting the Secretary, each Assistant
Secretary shall for such purpose have the powers of the Secretary. During the
Secretary's absence or inability, the Secretary's authority and duties shall be
possessed by such Assistant Secretary or Assistant Secretaries as the Board or
the Chairman of the Board may designate.
Section 4.8. Removal. Any officer elected, or agent appointed,
by the Board may be removed by the affirmative vote of a majority of the Board
whenever, in its judgment, the best interests of the Corporation would be served
thereby. Any officer or agent appointed by the Chairman of the Board may be
removed by him whenever, in the judgment of the Chairman of the Board, the best
interests of the Corporation would be served thereby. No elected officer shall
have any contractual rights against the Corporation for compensation by virtue
of such election beyond the date of the election of such person's successor,
such person's death, such person's resignation or such person's removal,
whichever event shall first occur, except as otherwise provided in an employment
contract or under an employee deferred compensation plan.
Section 4.9. Vacancies. A newly created elected office and a
vacancy in any elected office because of death, resignation or removal may be
filled by the Board for the unexpired portion of the term at any meeting of the
Board. Any vacancy in an office appointed by the Chairman of the Board because
of death, resignation or removal may be filled by the Chairman of the Board.
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ARTICLE V
STOCK CERTIFICATES AND TRANSFERS
Section 5.1. Stock Certificates and Transfers. The interest of
each stockholder of the Corporation shall be evidenced by certificates for
shares of stock in such form as the appropriate officers of the Corporation may
from time to time prescribe. The shares of the stock of the Corporation shall be
transferred on the books of the Corporation by the holder thereof in person or
by such person's attorney, upon surrender for cancellation of certificates for
at least the same number of shares, with an assignment and power of transfer
endorsed thereon or attached thereto, duly executed, with such proof of the
authenticity of the signature as the Corporation or its agents may reasonably
require. The certificates of stock shall be signed, countersigned and registered
in such manner as the Board may by resolution prescribe, which resolution may
permit all or any of the signatures on such certificates to be in facsimile. In
case any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate has ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may be issued
by the Corporation with the same effect as if he were such officer, transfer
agent or registrar at the date of issue. Notwithstanding the foregoing
provisions regarding share certificates, the proper officers of the Corporation
may provide that some or all of any or all classes or series of the
Corporation's common or any preferred shares may be uncertificated shares.
Section 5.2. Lost, Stolen or Destroyed Certificates. No
certificate for shares of stock in the Corporation shall be issued in place of
any certificate alleged to have been lost, destroyed or stolen, except on
production of such evidence of such loss, destruction or theft and on delivery
to the Corporation of a bond of indemnity in such amount, upon such terms and
secured by such surety, as the Board or any financial officer may in its or such
person's discretion require.
ARTICLE VI
MISCELLANEOUS PROVISIONS
Section 6.1. Fiscal Year. The fiscal year of the Corporation
shall begin on the first day of January and end on the thirty-first day of
December of each year.
Section 6.2. Dividends. The Board may from time to time
declare, and the Corporation may pay, dividends on its outstanding shares in the
manner and upon the terms and conditions provided by law and the Certificate of
Incorporation.
Section 6.3. Seal. The corporate seal, if any, shall have
inscribed thereon the words "Corporate Seal," the year of incorporation and the
word "Delaware."
Section 6.4. Waiver of Notice. Whenever any notice is required
to be given to any stockholder or Director under the provisions of the DGCL or
these Bylaws, a waiver thereof in writing, signed by the person or persons
entitled to such notice, whether before or after the time stated therein, shall
be deemed equivalent to the giving of such notice. Neither the business to be
transacted at, nor the purpose of, any annual or special meeting of the
stockholders or the Board or committee thereof need be specified in any waiver
of notice of such meeting.
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Section 6.5. Audits. The accounts, books and records of the
Corporation shall be audited upon the conclusion of each fiscal year by an
independent certified public accountant selected by the Board, and it shall be
the duty of the Board to cause such audit to be done annually.
Section 6.6. Resignations. Any Director or any officer,
whether elected or appointed, may resign at any time by giving written notice of
such resignation to the Chairman of the Board or the Secretary, and such
resignation shall be deemed to be effective as of the close of business on the
date said notice is received by the Chairman of the Board of the Secretary, or
at such later time as is specified therein. No formal action shall be required
of the Board or the stockholders to make any such resignation effective.
ARTICLE VII
CONTRACTS, PROXIES, ETC.
Section 7.1. Contracts. Except as otherwise required by law,
the Certificate of Incorporation, a Preferred Stock Designation or these Bylaws,
any contracts or other instruments may be executed and delivered in the name and
on the behalf of the Corporation by such officer or officers of the Corporation
as the Board may from time to time direct. Such authority may be general or
confined to specific instances as the Board may determine. The Chairman of the
Board, the President or any Executive Vice President, Senior Vice President or
Vice President may execute bonds, contracts, deeds, leases and other instruments
to be made or executed for or on behalf of the Corporation. Subject to any
restrictions imposed by the Board, the Chairman of the Board, the President or
any Executive Vice President, Senior Vice President or Vice President of the
Corporation may delegate contractual powers to others under such person's
jurisdiction, it being understood, however, that any such delegation of power
shall not relieve such officer of responsibility with respect to the exercise of
such delegated power.
Section 7.2. Proxies. Unless otherwise provided by resolution
adopted by the Board, the Chairman of the Board, the President or any Executive
Vice President, Senior Vice President or Vice President may from time to time
appoint an attorney or attorneys or agent or agents of the Corporation, in the
name and on behalf of the Corporation, to cast the votes which the Corporation
may be entitled to cast as the holder of stock or other securities in any other
corporation, any of whose stock or other securities may be held by the
Corporation, at meetings of the holders of the stock or other securities of such
other corporation, or to consent in writing, in the name of the Corporation as
such holder, to any action by such other corporation, and may instruct the
person or persons so appointed as to the manner of casting such votes or giving
such consent, and may execute or cause to be executed in the name and on behalf
of the Corporation and under its corporate seal or otherwise, all such written
proxies or other instruments as he may deem necessary or proper in the premises.
ARTICLE VIII
AMENDMENTS
These Bylaws, including this Article VIII, may be altered,
amended or repealed and new Bylaws may be adopted (a) at any annual or special
meeting of stockholders by the affirmative vote of the holders of a majority of
the voting power of the stock issued and
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<PAGE> 15
outstanding and entitled to vote thereat or (b) by the affirmative vote of a
majority of the Board; provided, however, that so long as each of Duke and
Phillips owns at least 20%, directly or indirectly, of the Common Stock, any
proposed alteration, amendment or repeal of, or the adoption of any Bylaw
inconsistent with Sections 3.1 through 3.11 or this Article VIII, by the
stockholders or the Board shall require the consent of both Duke and Phillips;
and provided, further, that, in the case of any such stockholder action at a
special meeting of stockholders, notice of the proposed alteration, amendment,
repeal or adoption of such Bylaws must be contained in the notice of such
special meeting.
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ANNEX A
SUPER-MAJORITY ITEMS
1. Compensation policies for employees of the Corporation, including
specific compensation and benefit plans and programs, to the extent
such policies are of the type that would customarily be considered by a
compensation committee of the board of directors of a comparably sized,
publicly-traded corporation; provided, however, that these policies
shall not include the hiring and firing and compensation of senior
officers and managers, evaluating their performance and planning for
their succession.
2. Entering a new line of business outside of the midstream gas gathering,
processing, marketing and transportation businesses (and directly
related activities) in the United States and Canada.
3. A change in auditors.
4. The following transactions:
a) Any merger, consolidation, recapitalization, acquisition,
divestiture, joint venture or alliance (or a related series of
such transactions) involving the acquisition or expenditure
(in the form of cash or otherwise) of in excess of
$200,000,000 in value to or from the Corporation;
b) Any shut-down of a facility having a fair market value in
excess of $100,000,000;
c) Entering into any sales contract or commitment that has a term
of 5 years or more and that involves annual revenues to the
Corporation in excess of 5% of the Corporation's total annual
sales revenues for the most recently completed fiscal year;
d) Liquidation or dissolution of the Corporation.
5. Any capital expenditure in excess of $200,000,000 (other than a capital
expenditure to effect any merger, consolidation, recapitalization,
acquisition, divestiture, joint venture or alliance).
6. Any borrowing in excess of $200,000,000.
7. The settlement of actions or claims against the Corporation involving
payment by the Corporation of in excess of $25,000,000, excluding
amounts covered or reimbursed by insurance.
8. Entering into transactions with either Duke or Phillips or Affiliates
of either on terms that are clearly less favorable than those terms
that are within the range of comparable transactions between
unaffiliated third parties.
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If a particular action that the Corporation proposes to take is reflected in an
operating or capital budget of the Corporation that has been approved by eight
or more directors, no further approval of such action is required before it may
be taken, notwithstanding the inclusion of such action in this Annex A.
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<PAGE> 1
EXHIBIT 10.2
- --------------------------------------------------------------------------------
Registration Rights Agreement
by and among
DUKE ENERGY FIELD SERVICES CORPORATION,
DUKE ENERGY CORPORATION
and
PHILLIPS PETROLEUM COMPANY
Dated as of ________, 2000
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<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") dated as of
__________, 2000, by and among Duke Energy Field Services Corporation, a
Delaware corporation (the "Corporation"), Duke Energy Corporation, a North
Carolina corporation ("Duke") and Phillips Petroleum Company, a Delaware
corporation ("Phillips").
RECITALS:
WHEREAS, Duke, Duke Energy Field Services LLC, a Delaware limited
liability company, and Phillips have entered into the Parent Company Agreement,
dated as of ____________, 2000 (the "Parent Company Agreement"); and
WHEREAS, in the Parent Company Agreement each of Duke and Phillips has
agreed to execute and deliver, and cause the Corporation to execute and deliver,
on or prior to the consummation of the IPO (as defined herein), a registration
rights agreement granting each of them the registration rights set forth herein;
NOW, THEREFORE, in consideration of the premises and the 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, the parties hereto agree as follows:
AGREEMENT:
The parties hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms will have the following
meanings:
"Affiliate" means, with respect to any Person, a Person directly or
indirectly Controlling, Controlled by, or under common Control with such Person.
"Common Stock" means shares of the Corporation's Common Stock.
"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, more than 25% of the direct or indirect economic
interest in the outstanding equity securities 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.
<PAGE> 3
"Demand Registration" means either a Duke Demand Registration or a
Phillips Demand Registration.
"Duke Demand Registration" has the meaning set forth in Section 4(a).
"Duke Registrable Securities" means (i) shares of Common Stock owned by
Duke or its Affiliates and securities issued in respect thereof by way of
conversion, dividend or stock split or stock issuance or in connection with a
combination of shares, recapitalization, reclassification, merger, sale of
assets, consolidation or reorganization or otherwise, to Duke or its Affiliates
and (ii) shares of Common Stock (or securities issued in respect thereof by way
of conversion, dividend or stock split or stock issuance or in connection with a
combination of shares, recapitalization, reclassification, merger or
reorganization or otherwise) transferred directly by Duke or its Affiliates to a
transferee that is assigned all or any portion of the transferor's rights
hereunder in accordance with Section 12(f); provided, however, a Duke
Registrable Security shall cease to be a Duke Registrable Security to the extent
so provided in Section 2.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time.
"Governmental Entity" shall mean any federal, state, political
subdivision or other governmental agency or instrumentality, foreign or
domestic.
"IPO" means the initial offering of shares of Common Stock to the
public in a transaction registered under the Securities Act.
"Majority" means 50.1% or more.
"Merger" means the merger of Phillips Gas Company Shareholder, Inc., a
Delaware corporation, with and into the Corporation.
"Person" means any individual, partnership, corporation, limited
liability company, firm, corporation, association, joint venture, trust or other
entity, or any Governmental Entity.
"Phillips Demand Registration" has the meaning set forth in Section
3(a).
"Phillips Registrable Securities" means (i) shares of Common Stock
owned by Phillips or its Affiliates and securities issued in respect thereof by
way of conversion, dividend or stock split or stock issuance or in connection
with a combination of shares, recapitalization, reclassification, merger, sale
of assets, consolidation, reorganization or otherwise, to Phillips or its
Affiliates and (ii) shares of Common Stock (or securities issued in respect
thereof by way of conversion, dividend or stock split or stock issuance or in
connection with a combination of shares, recapitalization, reclassification,
merger or reorganization or otherwise) transferred directly by Phillips or its
Affiliates to a transferee that is assigned all or any portion of the
transferor's rights hereunder in accordance with Section 12(f); provided,
however, a Phillips Registrable Security shall cease to be a Phillips
Registrable Security to the extent provided in Section 2.
"Piggyback Registration" has the meaning set forth in Section 5(a).
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<PAGE> 4
"Registration Expenses" has the meaning set forth in Section 8(a).
"Registrable Securities" means the Duke Registrable Securities and the
Phillips Registrable Securities.
"SEC" means the Securities and Exchange Commission or any other Federal
agency at the time administering the Securities Act and the Exchange Act.
"Securities Act" means the Securities Act of 1933, as amended from time
to time.
"Underwritten registration" or "underwritten offering" means any
registration in which securities of the Corporation are sold pursuant to a firm
commitment underwriting.
2. SECURITIES SUBJECT TO THIS AGREEMENT.
The securities entitled to the benefits of this Agreement are the Duke
Registrable Securities and the Phillips Registrable Securities but, with respect
to any particular Registrable Security, only so long as such security continues
to be a Duke Registrable Security or a Phillips Registrable Security. A
Registrable Security shall cease to be a Duke Registrable Security or a Phillips
Registrable Security when (i) it has been disposed of in a transaction
registered under the Securities Act, (ii) it has been sold pursuant to Rule 144
(or any similar provisions then in force) under the Securities Act, (iii) an
opinion of counsel to the Corporation, reasonably satisfactory to the holder of
such Registrable Security, shall have been delivered to such holder, or an
opinion of counsel to the holder of such Registrable Security, reasonably
satisfactory to the Corporation, shall have been delivered to the Corporation,
in either case to the effect that such Registrable Security may be publicly
offered for sale in the United States without restriction as to manner of sale
and amount of securities sold and without registration or other restriction
under the Securities Act, or (iv) it has been sold or transferred to a Person
that is not an Affiliate of Duke or Phillips in a private transaction in which
the transferor's rights under this Agreement are not assignable to the
transferee.
3. DEMAND REGISTRATION WITH RESPECT TO PHILLIPS REGISTRABLE SECURITIES.
(a) Requests for Registration. Subject to the provisions of Section
3(b), at any time after 180 days following the closing of the IPO any holder or
holders of a Majority of the then outstanding Phillips Registrable Securities
may request a registration by the Corporation under the Securities Act of all or
part of its or their Phillips Registrable Securities (a "Phillips Demand
Registration"); provided, that the number of Phillips Registrable Securities
requested to be registered represents at least 3% of the Corporation's then
outstanding Common Stock. Within 15 days after receipt of such request, the
Corporation will provide written notice of such registration request to all
holders of Registrable Securities and will, subject to the provisions of Section
3(b) and Section 3(d), include in such registration all Registrable Securities
with respect to which the Corporation has received written requests for
inclusion therein within 15 days after distribution to the applicable holder of
the Corporation's notice. All requests made pursuant to this Section 3(a) will
specify the number of Registrable Securities to be registered and will also
specify the intended method of disposition thereof; provided, however, that such
method of disposition will be limited to an underwritten offering if so
requested by the holders of the Phillips Registrable Securities who initiated
the request.
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<PAGE> 5
(b) Number of Registrations. The holders of Phillips Registrable
Securities will be entitled to request an aggregate of two Phillips Demand
Registrations. For purposes of this Section 3(b), a registration initiated as a
Phillips Demand Registration will not constitute a Phillips Demand Registration
(i) unless such registration is declared effective by the SEC and remains
effective for the period set forth in Section 7(a)(iii); provided, however, that
a registration which does not become effective after the Corporation has filed a
registration statement in accordance with the provisions hereof by reason of the
refusal to proceed of the initiating holders or such of the initiating holders
as would result in the inclusion of less than 3% of the then outstanding Common
Stock (other than any refusal to proceed (x) based upon the advice of their
counsel that the registration statement, or the prospectus contained therein,
contains an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing, or that such
registration statement or such prospectus, or the distribution contemplated
thereby, otherwise violates or would, if such distribution using such prospectus
took place, violate any applicable state or federal securities law or (y)
following a material breach by the Corporation of its obligations hereunder, but
only if such breach has materially and adversely affected the initiating
holder's ability to consummate the proposed offering or the pricing of such
offering) shall be deemed to have been effected; (ii) if after such registration
has been declared effective by the SEC it is subject to any stop order,
injunction or other adverse order or action of the SEC or other governmental
authority which is not removed within 15 days; or (iii) if such registration is
withdrawn as a result of the withdrawal of the demand pursuant to Section 3(g)
hereof prior to the filing by the Corporation of a registration statement with
the SEC.
(c) Limitation on Rights of Corporation or Other Securityholders to
Piggyback on Phillips Demand Registrations. Neither the Corporation nor any of
its securityholders (other than the holders of Phillips Registrable Securities
in such capacity) has any right to include any of the Corporation's securities
in a registration statement initiated as a Phillips Demand Registration under
this Section 3 if such Demand Registration is an underwritten offering unless
(i) such securities are of the same class as the Phillips Registrable Securities
being registered, (ii) the managing underwriters agree that some or all of such
securities can be included without adversely affecting such offering or offering
price, and (iii) the Corporation, or the selling securityholders, as applicable,
agree to sell their securities on the same terms and conditions as apply to the
Phillips Registrable Securities and the holders of such Phillips Registrable
Securities. If any securityholders of the Corporation (other than the holders of
Phillips Registrable Securities in such capacity) register securities of the
Corporation in a Phillips Demand Registration (in accordance with the provisions
of this Section 3(c)), such securityholders will pay the fees and expenses of
counsel to such securityholders and their pro rata share of the Registration
Expenses if such pro rata share of the Registration Expenses for such
registration are not paid by the Corporation for any reason. The Corporation and
any such securityholders may withdraw their securities from a Phillips Demand
Registration; provided, however, if the Phillips Demand Registration is an
underwritten offering, they may do so only on the reasonable and customary terms
agreed upon by the managing underwriters for such offering.
(d) Priority on Phillips Demand Registrations. If a Phillips Demand
Registration is an underwritten offering and the managing underwriters advise
the Corporation and the selling holders of the Phillips Registrable Securities
in writing that in their opinion the number of
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<PAGE> 6
Phillips Registrable Securities requested to be included exceeds the number of
securities which can be sold in such offering without adversely affecting the
proposed offering or the offering price, the Corporation will include in such
registration the number of Phillips Registrable Securities which in the opinion
of such underwriters can be sold without adversely affecting the proposed
offering or the offering price, and such securities will be allocated pro rata
among the holders of Phillips Registrable Securities requesting to be included
in the registration on the basis of the number of the Phillips Registrable
Securities requested to be included in such registration by their respective
holders. If securities (other than Phillips Registrable Securities) are proposed
to be included by the Corporation or its other securityholders in a Phillips
Demand Registration which is an underwritten offering (subject to and in
accordance with the provisions of Section 3(c)) and the managing underwriters
advise the Corporation and the selling holders of Phillips Registrable
Securities in writing that some but not all of said other securities can be sold
without adversely affecting the proposed offering or the offering price in such
underwritten offering, in addition to all of the Phillips Registrable Securities
being registered, those securities which are permitted to be included will be
allocated (i) first, to the Corporation, (ii) second, to the holders of Duke
Registrable Securities, allocated pro rata among the holders of Duke Registrable
Securities requesting to be included in the registration on the basis of the
number of Duke Registrable Securities requested to be included in such
registration by their respective holders and (iii) third, to the other
securityholders, allocated among them in such proportions as such
securityholders and the Corporation may agree.
(e) Selection of Underwriters. If any Phillips Demand Registration is
an underwritten offering, or a best efforts underwritten offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be selected by the holders of two-thirds (by number
of shares) of the Phillips Registrable Securities requested to be included in
such offering; provided, however, such investment bankers and managers must be
reasonably satisfactory to the Corporation.
(f) Other Registration Rights Agreements. Without the prior written
consent of the holders of a Majority of the Phillips Registrable Securities, the
Corporation will not enter into any agreement with any holder or prospective
holder of any securities of the Corporation which grants to such holder or
prospective holder any registration rights unless such agreement and the rights
granted thereunder are subject and subordinate to the rights of holders
hereunder.
(g) Withdrawal by Holders of Phillips Registrable Securities. The
holders of Phillips Registrable Securities may withdraw a Phillips Demand
Request at any time and under any circumstances.
4. DEMAND REGISTRATION WITH RESPECT TO DUKE REGISTRABLE SECURITIES.
(a) Requests for Registration. Subject to the provisions of Section
4(b), at any time after 180 days following the closing of the IPO any holder or
holders of a Majority of the then outstanding Duke Registrable Securities may
request a registration by the Corporation under the Securities Act of all or
part of its or their Duke Registrable Securities (a "Duke Demand Registration");
provided that the number of Duke Registrable Securities requested to be
registered represents at least 3% of the Corporation's then outstanding Common
Stock. Within 15 days after receipt of such request, the Corporation will
provide written notice of such
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<PAGE> 7
registration request to all holders of Registrable Securities and will, subject
to the provisions of Section 4(b) and Section 4(d), include in such registration
all Duke Registrable Securities with respect to which the Corporation has
received written requests for inclusion therein within 15 days after
distribution to the applicable holder of the Corporation's notice. All requests
made pursuant to this Section 4(a) will specify the amount of Registrable
Securities to be registered and will also specify the intended method of
disposition thereof; provided, however, that such method of disposition will be
limited to an underwritten offering if so requested by the holders of the Duke
Registrable Securities who initiated the request.
(b) Number of Registrations. The holders of Duke Registrable Securities
will be entitled to request an aggregate of two Duke Demand Registrations. For
purposes of this Section 4(b), a registration initiated as a Duke Demand
Registration will not constitute a Duke Demand Registration (i) unless such
registration is declared effective by the SEC and remains effective for the
period set forth in Section 7(a)(iii); provided, however, that a registration
which does not become effective after the Corporation has filed a registration
statement in accordance with the provisions hereof by reason of the refusal to
proceed of the initiating holders or such of the initiating holders as would
result in the inclusion of less than 3% of the then outstanding Common Stock
(other than any refusal to proceed (x) based upon the advice of their counsel
that the registration statement, or the prospectus contained therein, contains
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing, or that such
registration statement or such prospectus, or the distribution contemplated
thereby, otherwise violates or would, if such distribution using such prospectus
took place, violate any applicable state or federal securities law or (y)
following a material breach by the Corporation of its obligations hereunder, but
only if such breach has materially and adversely affected the initiating
holder's ability to consummate the proposed offering) shall be deemed to have
been effected; (ii) if after such registration has been declared effective by
the SEC it is subject to any stop order, injunction or other adverse order or
action of the SEC or other governmental authority which is not removed within 15
days; or (iii) if such registration is withdrawn as a result of the withdrawal
of the demand pursuant to Section 4(g) hereof prior to the filing by the
Corporation of a registration statement with the SEC.
(c) Limitation on Rights of Corporation or Other Securityholders to
Piggyback on Duke Demand Registrations. Neither the Corporation nor any of its
securityholders (other than the holders of Duke Registrable Securities in such
capacity) has any right to include any of the Corporation's securities in a
registration statement initiated as a Demand Registration under this Section 4
if such Demand Registration is an underwritten offering unless (i) such
securities are of the same class as the Duke Registrable Securities being
registered, (ii) the managing underwriters agree that some or all of such
securities can be included without adversely affecting such offering or offering
price, and (iii) the Corporation, or the selling securityholders, as applicable,
agree to sell their securities on the same terms and conditions as apply to the
Duke Registrable Securities and the holders of such Duke Registrable Securities.
If any securityholders of the Corporation (other than the holders of Duke
Registrable Securities in such capacity) register securities of the Corporation
in a Duke Demand Registration (in accordance with the provisions of this Section
4(c)), such securityholders will pay the fees and expenses of counsel to such
securityholders and their pro rata share of the Registration Expenses if such
pro rata share of the Registration Expenses for such registration are not paid
by the Corporation for
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<PAGE> 8
any reason. The Corporation and any such securityholders may withdraw their
securities from a Duke Demand Registration; provided, however, if the Duke
Demand Registration is an underwritten offering, they may do so only on the
reasonable and customary terms agreed upon by the managing underwriters for such
offering.
(d) Priority on Duke Demand Registrations. If a Duke Demand
Registration is an underwritten offering and the managing underwriters advise
the Corporation and the selling holders of the Duke Registrable Securities in
writing that in their opinion the number of Duke Registrable Securities
requested to be included exceeds the number of securities which can be sold in
such offering without adversely affecting the proposed offering or the offering
price, the Corporation will include in such registration the number of Duke
Registrable Securities which in the opinion of such underwriters can be sold
without adversely affecting the proposed offering or the offering price, and
such securities will be allocated pro rata among the holders of Duke Registrable
Securities requesting to be included in the registration on the basis of the
number of the Duke Registrable Securities requested to be included in such
registration by their respective holders. If securities (other than Duke
Registrable Securities) are proposed to be included by the Corporation or its
other securityholders in a Duke Demand Registration which is an underwritten
offering (subject to and in accordance with the provisions of Section 4(c)) and
the managing underwriters advise the Corporation and the selling holders of Duke
Registrable Securities in writing that some but not all of said other securities
can be sold without adversely affecting the proposed offering or the offering
price in such underwritten offering, in addition to all of the Duke Registrable
Securities being registered, those securities which are permitted to be included
will be allocated (i) first, to the Corporation, (ii) second, to the holders of
Phillips Registrable Securities, allocated pro rata among the holders of
Phillips Registrable Securities requesting to be included in the registration on
the basis of the number of Phillips Registrable Securities requested to be
included in such registration by their respective holders and (iii) third, to
the other securityholders, allocated among them in such proportions as such
securityholders and the Corporation may agree.
(e) Selection of Underwriters. If any Duke Demand Registration is an
underwritten offering, or a best efforts underwritten offering, the investment
banker or investment bankers and manager or managers that will administer the
offering will be selected by the holders of two-thirds (by number of shares) of
the Duke Registrable Securities requested to be included in such offering;
provided, however, such investment bankers and managers must be reasonably
satisfactory to the Corporation.
(f) Other Registration Rights Agreements. Without the prior written
consent of the holders of a Majority of the Duke Registrable Securities, the
Corporation will not enter into any agreement with any holder or prospective
holder of any securities of the Corporation which grants to such holder or
prospective holder any registration rights unless such agreement and the rights
granted thereunder are subject and subordinate to the rights of holders
hereunder.
(g) Withdrawal by Holders of Duke Registrable Securities. The holders
of Duke Registrable Securities may withdraw a Duke Demand Request at any time
and under any circumstances.
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<PAGE> 9
5. PIGGYBACK REGISTRATIONS.
(a) Right to Piggyback. If at any time after consummation of the IPO
the Corporation proposes to register any securities under the Securities Act in
connection with the public offering of such securities (other than a
registration relating to employee benefit plans or a corporate reorganization or
acquisition, or a registration on any form that does not permit inclusion of
sales of Registrable Securities) (a "Piggyback Registration"), the Corporation
will give written notice to all holders of Registrable Securities of its
intention to effect such a registration not later than the earlier to occur of
(i) 10 days following receipt by the Corporation of notice of exercise of demand
registration rights or (ii) 30 days prior to the anticipated filing date;
provided, that such notice indicate the number of shares proposed to be
registered, the proposed means of distribution of such securities and the
proposed managing underwriters of such offering; provided, however, that the
Corporation shall not be required to give such notice or to include any
Registrable Securities in a Piggyback Registration unless the Registrable
Securities to be so included are of the same class as the other securities to be
included in such registration. Subject to the provisions of Sections 5(b) and
(c), the Corporation will include in such Piggyback Registration all Registrable
Securities with respect to which the Corporation has received written requests
for inclusion therein within 15 days after delivery of the Corporation's notice.
The holders of Registrable Securities will be permitted to withdraw all or any
part of such holder's Registrable Securities from a Piggyback Registration at
any time prior to the date such Piggyback Registration becomes effective with
the SEC; provided, however, if the Piggyback Registration is an underwritten
offering, the holders of Registrable Securities may do so only on the reasonable
and customary terms agreed upon by the managing underwriters for such offering.
If a Piggyback Registration is an underwritten offering effected under (i)
Section 5(b), all Persons whose securities are included in the Piggyback
Registration will be obligated to sell their securities on the same terms and
conditions as apply to the securities being issued and sold by the Corporation
or (ii) Section 5(c), all Persons whose securities are included in the Piggyback
Registration will be obligated to sell their securities on the same terms and
conditions as apply to the securities being sold by the Person or Persons who
initiated the Piggyback Registration under Section 5(c). The foregoing
notwithstanding, if, at any time after giving written notice of a Piggyback
Registration but prior to the effective date of the registration statement filed
in connection therewith, the Corporation shall determine for any reason not to
register the securities described in its notice of its intention to file a
registration statement, the Corporation may, at its election, give written
notice of such determination to the holders of Registrable Securities and
thereupon shall be relieved of its obligation to register any Registrable
Securities in such registration.
(b) Priority on Primary Registrations. If a Piggyback Registration is
an underwritten primary registration on behalf of the Corporation, and the
managing underwriters advise the Corporation in writing that in their opinion
the total number of securities requested to be included in such registration
exceeds the number of securities which can be sold in such offering without
adversely affecting the offering or the offering price, the Corporation will
include in such registration: first, all securities the Corporation proposes to
sell, then, to the extent that additional securities can, in the opinion of such
underwriters, be included in such registration without adversely affecting the
offering or the offering price, (i) first, up to the full number of securities
requested to be included in such registration by holders of Registrable
Securities allocated pro rata among such holders on the basis of the number of
securities requested to be
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<PAGE> 10
included therein by each such holder, (ii) second, up to the full number of
securities requested to be included in such registration by other holders of
securities entitled to include securities in such Piggyback Registration, and
(iii) third, such additional securities as may be agreed upon by the Corporation
and any other securityholders.
(c) Priority on Secondary Registrations. If a Piggyback Registration is
an underwritten secondary registration on behalf of holders of the Corporation's
securities pursuant to the exercise of such holders' demand registration rights
or otherwise, and the managing underwriters advise the Corporation in writing
that in their opinion the number of securities requested to be included in such
registration exceeds the number of securities which can be sold in such offering
without adversely affecting the offering or the offering price, the Corporation
will include in such registration (i) first, the number of securities proposed
to be included therein on behalf of the holders of the Corporation's securities
exercising demand registration rights, allocated among the holders of such
securities in such proportions as the Corporation and such holders may agree,
(ii) second, up to the full number of securities the Corporation proposes to
sell, (iii) third, to the extent that additional securities can, in the opinion
of such underwriters, be included in such registration without adversely
affecting the offering or the offering price, up to the full number of
securities requested to be included in such registration by the holders of
Registrable Securities and other holders of securities entitled to include
securities in such Piggyback Registration, allocated pro rata among such holders
on the basis of the number of securities requested to be included therein by
each such holder and (iv) fourth, any additional securities that may be included
in such registration, in the opinion of such underwriters, without adversely
affecting the offering or the offering price, as may be agreed upon by the
Corporation and any other securityholders.
(d) Selection of Underwriters. If any Piggyback Registration is an
underwritten offering, as between the Corporation and the holders of the
Registrable Securities, the Corporation will have the sole right to select the
investment banker or investment bankers and manager or managers to administer
the offering.
(e) Limitation. No Piggyback Registration effected under this Section 5
(i) shall be deemed to constitute a Demand Registration or to have been effected
pursuant to Section 3 or Section 4 hereof or (ii) shall release the Corporation
of its obligations to effect any Demand Registration upon request as provided
under Section 3 or Section 4 hereof.
6. DEFERRAL OF FILING; PREEMPTION.
(a) Deferral of Filing. Anything herein to the contrary
notwithstanding, the Corporation may defer the filing of any registration
statement otherwise required to be filed by it pursuant to Section 3 or 4 for up
to 180 days if the Corporation notifies each requesting holder promptly after
such request that the Corporation's Board of Directors has determined in its
good faith judgement that the requested registration and offering would require
disclosure of pending or contemplated matters or information, the disclosure of
which would likely be detrimental to the Corporation or materially interfere
with its business or a pending or contemplated material transaction involving
the Corporation. In addition to the foregoing deferral rights, the Corporation
shall not be required to file any registration statement pursuant to Section 3
or 4 (i) within 120 days after the effectiveness of a registration statement
relating to a Demand
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<PAGE> 11
Registration or (ii) within 180 days (or such shorter period as may be agreed to
by the underwriters but in no event less than 120 days) after the effectiveness
of a registration statement referred to in Section 5.
(b) Preemption by the Corporation. Anything herein to the contrary
notwithstanding, in the event the Corporation reasonably expects to file, within
60 days of a demand for registration, a registration statement pertaining to
securities for the account of the Corporation (except a registration statement
on Form S-4 or Form S-8 or with respect to a transaction subject to Rule 145
under the Securities Act) then such request shall constitute a request made
pursuant to Section 5 hereof to include in such registration statement all
Registrable Securities subject to such request and the Corporation shall not be
obligated to file a separate registration statement for the Registrable
Securities subject to such request; provided, that the Corporation is actively
employing in good faith all reasonable efforts to cause such registration
statement to become effective.
(c) Termination of Deferral Period. In the case of a deferral pursuant
to Section 6(a), the deferral period shall terminate upon the earlier of the
completion or abandonment of the relevant securities offering or sale,
Corporation business or other pending or contemplated material transaction.
After the termination or expiration of any deferral period and without further
request from the holders of Registrable Securities, the relevant Demand
Registration shall be reinstated, and the Corporation shall effect the filing of
the relevant Demand Registration unless the initiating holders shall have, prior
to the filing of such registration, withdrawn the initial request.
7. REGISTRATION PROCEDURES.
(a) Subject to the terms hereof, whenever the holders of Registrable
Securities have requested that any Registrable Securities be registered in
accordance with the terms and conditions of this Agreement, the Corporation will
use its reasonable best efforts to effect the registration and to permit the
sale of such Registrable Securities in accordance with the intended method of
disposition thereof, and pursuant thereto the Corporation will promptly:
(i) prepare and file with the SEC, subject to the availability
of all required consents of independent accountants (which the
Corporation agrees to use all reasonable efforts to obtain), not later
than 60 days after receipt of a request to file a registration
statement with respect to such Registrable Securities, a registration
statement with respect to such Registrable Securities, and use its
reasonable best efforts to cause such registration statement to become
effective; provided, that each such registration statement will be on a
form for which the Corporation then qualifies, which is available for
the sale of the Registrable Securities in accordance with the intended
method of disposition thereof, and will provide for the registration of
at least such number of shares as shall have been demanded be
registered; provided, however, that before filing a registration
statement or prospectus or any amendments or supplements thereto, the
Corporation will furnish to each of the holders including shares
therein, and the managing underwriters, if any, draft copies of all
such documents proposed to be filed a reasonable period prior to such
filing, which documents will be subject to the reasonable review of
each of such holders, and the managing underwriters, if any, and their
respective agents and
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<PAGE> 12
representatives and (x) the Corporation will not include in any
registration statement information concerning or relating to the
holders including shares therein to which any such holder shall
reasonably object in writing (unless the inclusion of such information
is required by applicable law or the regulations of any securities
exchange to which the Corporation may be subject or is required to
prevent a material omission or misstatement in the filing), and (y)
with respect to any Duke Demand Registration or Phillips Demand
Registration, respectively, the Corporation will not file any Demand
Registration or amendment thereto or any prospectus or any supplement
thereto to which Duke or Phillips, respectively, shall reasonably
object in writing;
(ii) notify each seller of Registrable Securities of any stop
order issued by the SEC and take all reasonable actions required to
prevent the entry of such stop order or to remove it at the earliest
possible time if entered;
(iii) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for a period of not less than 90 days, or such
shorter period as may be required if all Registrable Securities covered
by such registration statement are sold prior to the expiration of such
90-day period (except in connection with an underwritten offering, in
which case such registration statement shall be kept effective as long
as the underwriters reasonably request in the underwriting agreement),
and comply with the provisions of the Securities Act with respect to
the disposition of all securities covered by such registration
statement during such period in accordance with the intended methods of
disposition by the sellers thereof set forth in such registration
statement;
(iv) furnish without charge to each seller and managing
underwriters of Registrable Securities such number of copies of such
registration statement, each amendment and supplement thereto (in each
case including all exhibits thereto), the prospectus included in such
registration statement (including each preliminary, final, summary,
amended or supplemented prospectus) and such other documents as such
seller and managing underwriters may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by such
seller;
(v) use its reasonable best efforts to register or qualify
such Registrable Securities under such other securities or blue sky
laws of such jurisdictions within the United States as any seller
reasonably requests, keep such registrations or qualifications in
effect for so long as the registration statement remains in effect, and
do any and all other acts and things which may be reasonably necessary
or advisable to enable such seller to consummate the disposition in
such jurisdictions of the Registrable Securities owned by such seller;
provided, however, that the Corporation will not be required to (i)
qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 7(a)(v), (ii)
subject itself to taxation in any such jurisdiction or (iii) consent to
general service of process in any such jurisdiction;
(vi) use its reasonable best efforts to cause the Registrable
Securities covered by such registration statement to be registered with
or approved by such other
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<PAGE> 13
governmental agencies or authorities within the United States as may be
necessary to enable the seller or sellers thereof to consummate the
disposition of such Registrable Securities;
(vii) notify each seller of such Registrable Securities, at
any time when a prospectus relating thereto is required to be delivered
under the Securities Act, of the happening of any event of which the
Corporation is aware as a result of which the prospectus included in
such registration statement or any document incorporated therein by
reference contains an untrue statement of a material fact or omits to
state any material fact necessary to make the statements therein not
misleading in light of the circumstance then existing, and prepare and
file promptly with the SEC a supplement or amendment to such prospectus
or any such document incorporated therein by reference so that, as
thereafter delivered to the purchasers of such Registrable Securities,
such prospectus will not contain an untrue statement of a material fact
or omit to state any material fact necessary to make the statements
therein not misleading in light of the circumstance then existing;
(viii) use its reasonable best efforts to cause all such
Registrable Securities to be listed on each securities exchange on
which similar securities issued by the Corporation are then listed or
traded;
(ix) provide a transfer agent and registrar for all
Registrable Securities and a CUSIP number for all such Registrable
Securities, in each case not later than the effective date of such
registration statement;
(x) enter into such customary agreements (including an
underwriting agreement in customary form with customary lock-up
provisions not to exceed 90 days from the date of the prospectus) and
take such other actions in connection therewith as the holders of a
Majority of the Registrable Securities being registered or the managing
underwriters, if any, reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities; and make
such representations and warranties with respect to the registration
statement, post-effective amendment or supplement thereto, prospectus
or any amendment or supplement thereto, and documents incorporated by
reference, if any, to the managing underwriters of the Registrable
Securities, in form, substance and scope as are customarily made by the
Corporation in connection with offerings of Registrable Securities in
transactions of such kind;
(xi) make available for inspection by any underwriter
participating in any disposition pursuant to such registration
statement, and any attorney, accountant or other agent retained by any
such underwriter, all financial and other records, pertinent corporate
documents and properties of the Corporation, and cause the
Corporation's officers, directors and employees and accountants to
supply all information reasonably requested by any such underwriter,
attorney, accountant or agent in connection with such registration
statement, in each case upon receipt of an appropriate confidentiality
agreement;
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<PAGE> 14
(xii) in the case of an underwritten offering, obtain a cold
comfort letter from the Corporation's independent public accountants in
customary form and covering such matters of the type customarily
covered by cold comfort letters, as the managing underwriters
reasonably request; and
(xiii) otherwise use its reasonable best efforts to comply
with all applicable rules and regulations of the SEC, and generally
make available to its security holders, as soon as reasonably
practicable, an earnings statement covering the period of at least
twelve months, but not more than eighteen months, beginning with the
first month after the effective date of the Registration Statement,
which earnings statement will satisfy the provisions of Section 11(a)
of the Securities Act and may be prepared in accordance with Rule 158
under the Securities Act.
(b) The Corporation may require each seller of Registrable Securities
as to which any registration is being effected to furnish to the Corporation in
writing such information regarding the seller and the distribution of such
securities as the Corporation may from time to time reasonably request and to
timely complete and execute all questionnaires, powers of attorney, indemnities,
hold-back agreements, underwriting agreements and other documents reasonably
requested by the Corporation.
8. REGISTRATION EXPENSES.
(a) All expenses incident to the Corporation's performance of or
compliance with this Agreement, including without limitation all registration
and filing fees, fees and expenses of compliance with securities or blue sky
laws (including reasonable fees and disbursements of counsel for the
underwriters in connection with blue sky qualifications of the Registrable
Securities), messenger, telephone and delivery expenses, and fees and
disbursements of counsel for the Corporation and of the Corporation's
independent certified public accountants (including the expenses of any special
audit or "cold comfort" letters required by or incident to such performance),
fees and expenses of underwriters customarily paid by issuers of securities
(including liability insurance if the Corporation so desires), all expenses
relating to the preparation, printing, distribution and reproduction of the
registration statement and prospectus and any amendment or supplement to the
foregoing, certificates representing the Registrable Securities and all other
documents relating to any of the foregoing, the reasonable fees and expenses of
any special experts retained by the Corporation or at the request of the
managing underwriters in connection with such registration and fees and expenses
of other Persons retained by the Corporation, but excluding underwriting
discounts, commissions, fees, discounts and commissions of brokers and dealers
and capital gains, income and transfer taxes, if any, relating to any sale of
Registrable Securities and the fees and disbursements of counsel for the holders
of Registrable Securities, will be borne and paid promptly by the Corporation
(all such expenses being herein called "Registration Expenses").
(b) In connection with each registration hereunder, the holders of
Registrable Securities included therein shall be responsible for all fees and
disbursements of their counsel and for (i) all underwriting discounts or other
commissions, fees, discounts and commissions of brokers and dealers payable by
them as selling securityholders and (ii) capital gains, income and transfer
taxes, if any, relating to the sale of such Registrable Securities.
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<PAGE> 15
9. INDEMNIFICATION; CONTRIBUTION.
(a) Indemnification by Corporation. In the event any Registrable
Securities are included in a registration statement pursuant to this Agreement,
the Corporation shall indemnify and hold harmless each holder of such
Registrable Securities, its employees, officers, directors and constituent
partners and each Person who controls such holder (within the meaning of the
Securities Act and the Exchange Act) against all losses, claims, damages,
liabilities and expenses (or actions in respect thereof) arising out of or based
upon any untrue or alleged untrue statement of a material fact contained in any
registration statement or preliminary or final prospectus relating to the
registration of such Registrable Securities or any amendment or supplement
thereto or any document incorporated by reference therein or any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading, except insofar as the same are contained
in any information furnished in writing to the Corporation by or on behalf of
such holder or other indemnified Person expressly for use therein or caused by
such holder's failure to deliver a copy of the registration statement or
prospectus or any amendments or supplements thereto after the Corporation has
furnished such holder with a sufficient number of copies of the same. Subject to
the provisions of Section 9(c), the Corporation will reimburse each holder of
Registrable Securities, its officers, directors, constituent partners and
controlling Persons for any reasonable legal and other expenses as incurred in
connection with investigating or defending any such losses, claims, damages,
liabilities, expenses or actions for which such Person is entitled to
indemnification hereunder. In connection with a firm commitment or best efforts
underwritten offering, the Corporation will indemnify the underwriters or
agents, their officers, directors, constituent partners and each Person who
controls such underwriters (within the meaning of the Securities Act and the
Exchange Act) or agents to the same extent as provided above (or such greater
extent as may be customarily required by the managing underwriters) with respect
to the indemnification of the holders of Registrable Securities.
(b) Indemnification by Holder of Registrable Securities. In connection
with any registration statement in which a holder of Registrable Securities is
participating, such holder will furnish to the Corporation in writing such
information and affidavits as the Corporation reasonably requests for use in
connection with any such registration statement or preliminary or final
prospectus or any amendment or supplement thereto or any document incorporated
by reference therein and shall indemnify and hold harmless the Corporation, its
employees, directors and officers, each Person who controls the Corporation
(within the meaning of the Securities Act and the Exchange Act) and all other
prospective sellers and their respective directors, officers and controlling
Persons (within the meaning of the Securities Act and the Exchange Act) against
any losses, claims, damages, liabilities and expenses (or actions in respect
thereof) arising out of or based upon any untrue or alleged untrue statement of
a material fact or any omission or alleged omission of a material fact required
to be stated in any registration statement or preliminary or final prospectus
relating to the registration of such Registrable Securities or any amendment
thereof or supplement thereto or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading, to the
extent, but only to the extent, that such untrue or alleged untrue statement or
omission or alleged omission is contained in any written information or
affidavit furnished by or on behalf of such holder specifically for use in such
registration statement or prospectus and then only to the extent of the total
proceeds received by such holder of Registrable Securities. Subject to the
provisions of Section 9(c), the
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<PAGE> 16
holders of Registrable Securities participating in any registration will
reimburse, to the extent of the total proceeds received by the holders of
Registrable Securities, the Corporation, its officers, directors and controlling
Persons and all other prospective sellers and their respective directors,
officers and controlling Persons for any reasonable legal and other expenses as
incurred in connection with investigation or defending any such losses, claims,
damages, liabilities, expenses or actions.
(c) Conduct of Indemnification Proceedings. Any Person entitled to
indemnification hereunder will (i) give prompt notice to the indemnifying party
of any claim with respect to which it seeks indemnification (but omission of
such notice shall not relieve the indemnifying party from liability hereunder
except to the extent such indemnifying party is actually prejudiced by such
failure to give notice) and (ii) unless in such indemnified party's reasonable
judgment a conflict of interest may exist between such indemnified and
indemnifying parties with respect to such claim, permit such indemnifying party
to assume the defense of such claim with counsel reasonably satisfactory to the
indemnified party. The indemnifying party will not be subject to any liability
for any settlement made without its consent (but such consent will not be
unreasonably withheld or delayed). No indemnifying party will consent to entry
of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of an unconditional release from all liability in respect to
such claim or litigation and does not subject the indemnified party to any
material injunctive relief or other material equitable remedy. An indemnifying
party who is not entitled to, or elects not to, assume the defense of a claim
will not be obligated to pay the fees and expenses of more than one counsel for
all parties indemnified by such indemnifying party with respect to such claim.
(d) Contribution. If the indemnification provided for in Section 9(a)
or Section 9(b) is unavailable or insufficient to hold harmless each of the
indemnified parties against any losses, claims, damages, liabilities and
expenses (or actions in respect thereof) to which such persons may become
subject under the Securities Act, then the indemnifying party shall, in lieu of
indemnifying each party entitled to indemnification hereunder, contribute to the
amount paid or payable by such party as a result of such losses, claims,
damages, liabilities or expenses in such proportion as is appropriate to reflect
the relative fault of the indemnifying party on the one hand and such
indemnified persons on the other in connection with the statements or omissions
or alleged statements or omissions that resulted in such losses, claims,
damages, liabilities or expenses. The relative fault of such persons shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact, or omission or alleged omission to state a
material fact, relates to information supplied by or concerning the indemnifying
party on the one hand, or by such indemnified person on the other, and such
person's relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The parties hereto agree that it
would not be just and equitable if contribution pursuant to this Section 9(d)
were determined by pro rata allocation or by any other allocation that does not
take into account the equitable considerations referred to in this Section 9(d).
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or expenses referred to above shall be deemed to
include (subject to the limitations set forth in Section 9(b) or 9(c) hereof)
any legal or other fees or expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action, proceeding
or claim. No person guilty of fraudulent misrepresentation within the
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meaning of the Act shall be entitled to contribution from any person that is not
guilty of such fraudulent misrepresentation.
(e) Priority of Indemnification. Notwithstanding the foregoing, to the
extent that provisions on indemnification and contribution contained in the
underwriting agreement entered into in connection with an underwritten offering
are in conflict with the foregoing, the provisions of the underwriting agreement
shall prevail.
(f) Payment. The indemnification and contribution required by this
Section 9 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.
(g) Beneficiaries of Indemnification. The obligations of the
Corporation and the holders of Registrable Securities under this Section 9 shall
be in addition to any liability that they may otherwise have.
10. RULE 144.
The Corporation covenants that after the consummation of the IPO it
will use its reasonable best efforts to timely file the reports required to be
filed by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the SEC thereunder (or, if the Corporation is not
required to file such reports, it will, upon the request of any holder of
Registrable Securities, make publicly available such information), all to the
extent required from time to time to enable such holder to sell Registrable
Securities without registration under the Securities Act within the limitation
of the exemptions provided by (a) Rule 144 under the Securities Act, as such
Rule may be amended from time to time, or (b) any similar rule or regulation
hereafter adopted by the SEC. Upon the request of any holder of Registrable
Securities, the Corporation will deliver to such holder a written statement as
to whether it has complied with such requirements.
11. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS; MARKET STAND-OFF AGREEMENT.
(a) Participation in Underwritten Registration. No Person may
participate in any underwritten registration hereunder unless such Person (i)
agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements and (ii) completes and executes all customary questionnaires,
powers of attorney, underwriting agreements, lock-ups and other documents
required under the terms of such underwriting arrangements.
(b) Market Stand-Off Agreement. Each holder of Registrable Securities
agrees, whether or not it is participating in such registration statement, that
it shall not, to the extent requested by an underwriter of Common Stock (or
other securities of the Corporation), sell or otherwise transfer or dispose of
any securities of the Corporation (other than those included in the
registration) during the 90 day period following the effective date of a
registration statement of the Corporation filed under the Securities Act if such
holder owns or has the right to acquire 5% or more of the outstanding Common
Stock. In order to enforce the foregoing covenant, the Corporation may impose
stop-transfer instructions with respect to the securities of the Corporation
owned by holders of Registrable Securities until the end of such 90 day period.
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12. MISCELLANEOUS.
(a) Right to Suspend. The Corporation may, by notice in writing to each
holder of Registrable Securities, require the holder of Registrable Securities
to suspend use of any prospectus included in a registration statement filed
hereunder if the Corporation reasonably determines that it contains an untrue
statement of a material fact or omits to state any material fact necessary to
make the statements therein not misleading or that any transaction in which the
Corporation is engaged or proposes to engage, or any event that has occurred or
is expected to occur, would require an amendment to such registration statement
or a supplement to such prospectus (including any such amendment or supplement
made through incorporation by reference to a report filed under Section 13 of
the Exchange Act). Each holder of Registrable Securities agrees that, upon
receipt of any notice from the Corporation of the happening of any event of the
kind described in this Section 12(a), such holder will forthwith discontinue
disposition of Registrable Securities pursuant to the registration statement
covering such Registrable Securities until such holder's receipt of the copies
of a properly supplemented or amended prospectus, and, if so directed by the
Corporation, such holder will deliver to the Corporation all copies, other than
permanent file copies, then in such holder's possession, of the most recent
prospectus covering such Registrable Securities at the time of receipt of such
notice. In the event the Corporation gives any such notice, the time period
mentioned in Section 7(a)(iii), if applicable, will be extended by the number of
days during the period from and including the date of the giving of such notice
to and including the date when each seller of Registrable Securities covered by
such registration statement has received the copies of such supplemented or
amended prospectus. The Corporation agrees to use its reasonable best efforts to
cause any suspension of use of any prospectus pursuant to this paragraph to be
as short a period of time as possible.
(b) Remedies. No holder of Registrable Securities shall have any right
to take any action to restrain, enjoin or otherwise delay any registration as a
result of any controversy that might arise with respect to the interpretation or
implementation of this Agreement.
(c) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given unless the Corporation has obtained the
written consent of (i) the holders of at least a Majority of the outstanding
Phillips Registrable Securities and (ii) the holders of at least a Majority of
the outstanding Duke Registrable Securities. Each holder of any Registrable
Securities at the time or thereafter shall be bound by any consent authorized by
this Section 12(c), whether or not such holder consented or whether or not such
Registrable Securities have been marked to indicate such consent.
(d) Registrable Securities Held by the Corporation or its Subsidiaries.
Whenever the consent or approval of holders of all or any specified percentage
of Registrable Securities is required hereunder, Registrable Securities held by
the Corporation or any of its subsidiaries will not be counted in determining
whether such consent or approval was given by such holders.
(e) Notices. All notices or other communications provided for hereunder
shall be in writing and shall be effective (i) on the day on which delivered if
delivered personally or transmitted by telex or telegram or telecopier with
evidence of receipt, (ii) one business day after
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the date on which the same is delivered to a nationally recognized overnight
courier service with evidence of receipt, or (iii) three days after the date on
which the same is deposited, postage prepaid, in the U.S. mail, sent by
certified or registered mail, return receipt requested, and addressed to the
party to be notified at the address indicated below for the Corporation, or at
the address for the holder of the Registrable Securities set forth in a registry
maintained by the Corporation, or at such other address and/or telecopy or telex
number and/or to the attention of such other person as the Corporation or the
holder of the Registrable Securities may designate by ten-day advance written
notice.
(f) Successors and Assigns; Transfer of Registration Rights. This
Agreement will inure to the benefit of and be binding upon the successors and
permitted assigns of each of the parties. The registration rights granted by
this Agreement may be transferred or assigned by operation of law or in
connection with any transfer or assignment of Registrable Securities (other than
in a transaction described in clause (i), (ii) or (iv) of Section 2) provided
that (x) upon such transfer or assignment the transferee or assignee holds
Registrable Securities equal to at least 10% of the then outstanding Common
Stock, (y) such transferee or assignee agrees in writing to be bound by the
terms of this Agreement and (z) the Corporation is given written notice of such
transfer or assignment within 10 days after such transfer or assignment, setting
forth the name and address of the transferee or assignee and identifying the
Registrable Securities with respect to which such registration rights have been
assigned. For purposes of exercise of requests pursuant to Section 3 or Section
4, transferees shall be included with Duke or Phillips, as the case may be,
based on who was the original transferor of such Registrable Securities.
(g) Counterparts. This Agreement may be executed in one or more
counterparts and by the parties hereto in separate counterparts, all of which
will constitute one and the same agreement and shall become effective when one
or more counterparts have been signed by each of the parties hereto and
delivered (including by facsimile) to the other parties.
(h) Headings. The headings in this Agreement are for convenience of
reference only and will not limit or otherwise affect the meaning hereof.
(i) Governing Law; Jurisdiction. This Agreement will be governed by and
construed in accordance with the laws of the State of Delaware, without giving
effect to conflict of law principles. Any holder of Registrable Securities may
bring any action or proceeding to enforce or arising out of this Agreement or in
the instruments and agreements annexed hereto in any court of competent
jurisdiction.
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein will not be affected or impaired thereby.
(k) Termination of Registration Rights. The rights of any holder
hereunder to request registration or inclusion in any registration pursuant to
Section 4 or 5, respectively, with respect to any Duke Registrable Securities
shall terminate at such time as Duke and its Affiliates shall own less than 10%
of the outstanding common stock of the Corporation. The rights of any holder
hereunder to request registration or inclusion in any registration pursuant to
Section 3
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<PAGE> 20
or 5, respectively, with respect to any Phillips Registrable Securities shall
terminate at such time as Phillips and its Affiliates shall own less than 10% of
the outstanding common stock of the Corporation.
(l) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted by the Corporation with respect
to the Registrable Securities. This Agreement supersedes all prior agreements
and understandings between the parties with respect to such subject matter.
-19-
<PAGE> 21
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
DUKE ENERGY FIELD SERVICES
CORPORATION
Corporation Address: By:
-----------------------------
Name:
[to come] Title:
DUKE ENERGY CORPORATION
By:
-----------------------------
Name:
Title:
PHILLIPS PETROLEUM COMPANY
By:
-----------------------------
Name:
Title:
-20-
<PAGE> 1
EXHIBIT 10.3
-------------------------------------------------------
SERVICES AGREEMENT
by and between
DUKE ENERGY CORPORATION, DUKE ENERGY BUSINESS SERVICES, LLC, PAN
SERVICE COMPANY, DUKE ENERGY GAS TRANSMISSION CORPORATION
and
DUKE ENERGY FIELD SERVICES, LLC
Dated as of March 14, 2000
-------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I
THE SERVICES
<TABLE>
<S> <C>
SECTION 1.1 THE SERVICES..................................................................1
SECTION 1.2 MODIFICATION OF SERVICES......................................................2
ARTICLE II
COSTS AND EXPENSES
SECTION 2.1 CHARGES FOR SERVICES..........................................................2
SECTION 2.2 INVOICES......................................................................3
SECTION 2.3 AUDIT OF EXPENSES.............................................................3
SECTION 2.4 ADDITIONAL EQUIPMENT, TECHNOLOGY OR THIRD PARTY SERVICES......................4
SECTION 2.5 TAXES.........................................................................4
ARTICLE III
TERM OF AGREEMENT
SECTION 3.1 TERM..........................................................................4
ARTICLE IV
INDEMNIFICATION
SECTION 4.1 INDEMNIFICATION...............................................................4
SECTION 5.2 SURVIVAL OF INDEMNIFICATION...................................................5
ARTICLE V
SCOPE OF AGREEMENT
SECTION 5.1 RELATIONSHIP OF PARTIES.......................................................5
SECTION 5.2 ACCESS TO EMPLOYEES...........................................................5
SECTION 5.3 REASONABLE AVAILABILITY OF PERSONNEL..........................................5
SECTION 5.4 SCOPE OF DUKE'S AUTHORITY.....................................................6
SECTION 5.5 INSURANCE.....................................................................6
ARTICLE VI
SERVICES REPRESENTATIVES
SECTION 6.1 SERVICES REPRESENTATIVE.......................................................6
ARTICLE VII
CONFIDENTIALITY
SECTION 7.1 CONFIDENTIALITY...............................................................7
ARTICLE VIII
MISCELLANEOUS PROVISIONS
SECTION 8.1 COUNTERPARTS..................................................................8
SECTION 8.2 GOVERNING LAW; JURISDICTION AND FORUM; WAIVER OF JURY TRIAL...................8
SECTION 8.3 ENTIRE AGREEMENT..............................................................8
SECTION 8.4 NOTICES.......................................................................9
SECTION 8.5 SUCCESSORS AND ASSIGNS........................................................9
SECTION 8.6 HEADINGS; DEFINITIONS........................................................10
SECTION 8.7 AMENDMENTS AND WAIVERS.......................................................10
SECTION 8.8 SEVERABILITY.................................................................10
SECTION 8.9 INTERPRETATION...............................................................10
SECTION 8.10 SPECIFIC PERFORMANCE.........................................................10
SECTION 8.11 NO THIRD PARTY BENEFICIARIES.................................................10
SECTION 8.12 FURTHER ASSURANCES...........................................................10
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
SECTION 8.13 FORCE MAJEURE................................................................11
SECTION 8.14 ALTERNATIVE DISPUTE RESOLUTION...............................................11
SECTION 8.15 CONFLICTS OF INTEREST........................................................13
SECTION 8.16 CONSTRUCTION.................................................................13
EXHIBIT A - SERVICES REPRESENTATIVES........................................................A-1
EXHIBIT B - THE SERVICES....................................................................B-1
</TABLE>
ii
<PAGE> 4
SERVICES AGREEMENT
This SERVICES AGREEMENT (this "Agreement") is made this 14th day
of March, 2000, by and between Duke Energy Corporation, Duke Energy Business
Services LLC, Pan Service Company and Duke Energy Gas Transmission Corporation
(collectively "Duke"), and Duke Energy Field Services, LLC (the "Company")
(each, a "Party", and collectively, the "Parties").
RECITALS:
WHEREAS, the Company, Duke Energy Corporation and Phillips
Petroleum Company, a Delaware corporation ("Phillips"), are parties to a
Contribution Agreement, dated as of December 16, 1999 (the "Contribution
Agreement");
WHEREAS, in accordance with the Contribution Agreement, Duke
Energy Corporation has agreed to cause certain of its midstream natural gas
gathering, processing and marketing operations in the United States and Canada
to be transferred to the Company;
WHEREAS, Duke has, or can make available, the personnel,
technology, and other resources necessary to provide services to the Company
during the term of this Agreement;
WHEREAS, the Company desires that Duke furnish to the Company and
its subsidiaries the services described in Exhibit B to this Agreement, and Duke
desires to furnish such services pursuant to the terms hereof; and
WHEREAS, the Company believes that the provisions of this
Agreement as a whole are fair.
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
hereby agree as follows:
ARTICLE I
THE SERVICES
Section 1.1 The Services.
(a) Duke agrees to provide to the Company and its subsidiaries
the services described in Exhibit B (the "Services") for the term described in
Section 3.1.
(b) Duke shall perform the Services for the Company with the same
degree of care, skill and prudence customarily exercised by it for its own
operations, consistent with industry practices, in compliance with statutory and
regulatory requirements, and in the same manner as such services have been
provided, or were available, to Duke Energy Field Services, Inc. and its
subsidiaries prior to the date of this Agreement.
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(c) If Duke is unable to perform the Services in accordance with
Section 1.1(b), then Duke shall hire the personnel required to provide such
Services. Duke is authorized to provide any part of the Services either from its
own resources and employees, or, by a subcontractor(s). Subcontractor(s) shall
be made subject to no less stringent performance requirements than Duke is
required to comply with under this Agreement, including confidentiality and
compliance with statutory and regulatory requirements.
(d) In accordance with the terms and conditions of this Agreement
and the Services described in Exhibit B, Duke shall provide records, financial
information, or other information that is reasonably requested by the Company to
support the Services which may not have been kept or reported in the ordinary
course of business by Duke, even if not provided to the Company prior to the
date hereof. Notwithstanding the foregoing, in the event that the records,
financial information or other information requested by the Company is not
contemplated by the Services or the rate sheet, then Duke and the Company will
negotiate the terms whereby such information will be provided.
Section 1.2 Modification of Services. The Company reserves the
right to enter into other contracts with third parties in connection with the
Services described in this Agreement. If the Company and Duke mutually consent,
after a reasonable transition period, the Parties may terminate any Service
designated under the "Annual Commitment" subheading of the rate sheet in Exhibit
B. Upon 30 days prior written notice to Duke, the Company may terminate any
Service designated under the "Monthly Commitment" subheading of the rate sheet
in Exhibit B and the monthly fees (if any) for any such terminated Services
shall be prorated through the date of termination. The Company may also request
that Duke provide additional services not provided for in Exhibit B or related
to the Services described therein, and Duke, in its sole discretion, may elect
to provide the additional new services to the Company. In the event that Duke
agrees to provide such requested additional new services to the Company, the
Parties shall create and mutually agree to an addendum to Exhibit B setting
forth the description of the additional new services and other applicable terms
thereto, which addendum shall become effective upon signing by the Parties; and
thereafter in this Agreement all references to "Services" shall also include any
such additional new services.
ARTICLE II
COSTS AND EXPENSES
Section 2.1 Charges for Services. Duke shall charge the Company
for the Services provided under this Agreement in accordance with the rate sheet
described in Exhibit B. In addition to paying the charges in the rate sheet, the
Company shall reimburse Duke for any reasonably expended or incurred out of
pocket travel expenditures and, in accordance with Section 2.4, any additional
amounts reasonably expended or incurred by Duke to satisfy any obligation under
this Agreement. Notwithstanding the foregoing, in no event shall the Company be
responsible for directly paying any salaries, wages, benefits, withholding,
severance payments or any other compensation or payments with respect to the
employees of Duke.
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<PAGE> 6
Section 2.2 Invoices. Duke shall prepare and deliver to the
Company a monthly invoice by the twenty-fifth day of the month following the
service month that describes the Services provided by Duke and the amount
charged to the Company hereunder; provided, however, if any personnel or assets
of Duke Power ("Duke Power"), a division of Duke Energy Corporation and a public
utility regulated by the North Carolina Utilities Commission ("NCUC"), the South
Carolina Public Service Commission ("SCPSC") and the Federal Energy Regulatory
Commission ("FERC"), are used in the provision of the Services, Duke shall
charge the Company and the Company shall pay Duke in accordance with Duke's
North Carolina and FERC Codes of Conduct and any other applicable regulatory
rules governing affiliate transactions. Each invoice shall be due and payable
within 20 days after receipt by the Company. Duke shall use its reasonable
efforts to invoice all Services no later than 60 days after the performance of
such Services. The Company shall promptly and diligently pay all amounts due to
Duke under this Agreement and any amounts due and owed to Duke which are over 30
days past due during the first two billing periods or 20 days past due after the
first two billing periods shall accrue late fees calculated at the average of
the Prime Rates as reported in the Wall Street Journal during such past due
payment period. In the event of the early termination of any Services hereunder,
the Company shall pay Duke for only those Services and costs (or portions
hereof) that have been (i) properly performed prior to such termination and (ii)
properly committed to in writing by Duke prior to the receipt of such
termination notice.
Section 2.3 Audit of Expenses. Duke shall maintain complete and
accurate records of and supporting documentation for all amounts billable to the
Company hereunder and shall retain such records for a period of at least two
years following the date of the inclusion in any invoice sent to the Company.
Duke agrees to provide the Company with documentation and other information with
respect to each invoice as may be reasonably requested by the Company to verify
that Duke's charges to the Company are accurate, correct and valid in accordance
with the provisions of this Agreement. The Company and its representatives shall
have access to such records for purposes of verifying all amounts billable to
and payments made by the Company hereunder upon reasonable notice during normal
business hours during the term of this Agreement and such subsequent period for
which Duke is required to maintain such records. If such examination reveals any
inaccuracy in any billing made hereunder, the necessary adjustment in such
billing and payments shall be made promptly, provided that no adjustment for any
billing or payment shall be made after the lapse of two years from the date of
invoice hereof unless challenged in writing prior thereto. If any of the
Services hereunder are performed using Duke Power employees or assets, then
Company agrees to provide Duke with records and other information necessary for
an internal or external audit of affiliate transactions. Duke and its
representatives shall have access to such records and information during normal
business hours during the term of this Agreement and for the same period after
termination of this Agreement that Duke is required to retain similar records
hereunder.
Section 2.4 Additional Equipment, Technology or Third Party
Services. If additional equipment, software, technology or third party services
are employed by Duke to perform the Services and the costs associated with such
are (i) not identified in Exhibit B or reflected in the rate sheet and (ii)
exceed two-thousand dollars, then the Company shall pay the cost of such
additional equipment, software, technology or third party services only if
previously approved in writing by the Company. To the greatest extent feasible,
charges for equipment, software, technology and third party services will be
billed directly to the Company. In the case of any emergency, prior written
approval
3
<PAGE> 7
of such expenses shall not be required; provided however, that Duke shall obtain
the Company's consent to such emergency services as soon as reasonably
practicable.
Section 2.5 Taxes. The Company shall pay all taxes, fees or
similar levies imposed on the Services provided hereunder (other than taxes
imposed on Duke's net income, including alternative minimum taxable income,
gain, excess profits or franchise taxes imposed on the capital or net income of
Duke and other than employment taxes imposed with respect to Duke's employees,
except to the extent such taxes are included in the rates designated in Exhibit
B); and, in the event that Duke is required by law to pay any of said taxes,
fees or other similar levies, the Company shall reimburse Duke for such
payments.
ARTICLE III
TERM OF AGREEMENT
Section 3.1 Term. The term of this Agreement shall begin on the
Closing Date of the Contribution Agreement (as such term is defined in the
Contribution Agreement) and remain in effect until December 31, 2000. If both
Duke and the Company desire to renew this Agreement for an additional 12-month
term to begin on January 1 of a particular year, then beginning on August 1 of
the existing year, the Parties shall renegotiate the terms and conditions of
this Agreement (including without limitation the Services to be provided and
their associated expense) which shall be applicable solely for the extended
12-month term.
ARTICLE IV
INDEMNIFICATION
Section 4.1 Indemnification. DUKE HEREBY AGREES TO INDEMNIFY AND
HOLD HARMLESS THE COMPANY AND ITS RESPECTIVE SUCCESSORS, ASSIGNS, AFFILIATES,
AND ALL OF THE COMPANY'S DIRECTORS, OFFICERS, EMPLOYEES, REPRESENTATIVES AND
AGENTS (EACH, AN "INDEMNIFIED PARTY") FROM AND AGAINST ANY AND ALL DAMAGES,
EXPENSES (INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS' FEES), LOSSES,
ACTIONS, CLAIMS, SUITS, LIABILITIES AND COSTS INCURRED BY ANY INDEMNIFIED PARTY
RESULTING FROM THE GROSS NEGLIGENCE, OR WILLFUL MISCONDUCT OF DUKE TO THE EXTENT
RELATING TO DUKE'S PERFORMANCE OF (OR FAILURE TO PERFORM) THE SERVICES UNDER
THIS AGREEMENT. NOTWITHSTANDING THE FOREGOING, THE INDEMNIFICATION OBLIGATION OF
DUKE ENERGY GAS TRANSMISSION CORPORATION SHALL BE SEVERAL FROM THE
INDEMNIFICATION OBLIGATIONS OF DUKE ENERGY CORPORATION, DUKE ENERGY BUSINESS
SERVICES, LLC AND PAN SERVICES COMPANY, WHICH COMPANIES SHALL HAVE JOINT AND
SEVERAL INDEMNIFICATION OBLIATIONS HEREUNDER.
Section 4.2 Survival of Indemnification. Subject to any
applicable statutes of limitation, Duke's obligation under Section 4.1 shall
survive any termination of the Contribution Agreement, the Governance Agreement
by and among Phillips, Duke Energy Corporation and the Company, dated December
16, 1999, those agreements executed at the closing of the transaction
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<PAGE> 8
contemplated by the Contribution Agreement, and this Agreement, and shall
continue thereafter in full force and effect.
Section 4.3 Limitation of Damages. No Party shall be liable for any
special, indirect, incidental, consequential or punitive damages of any
character resulting from, arising out of, or in any way incident to any act or
omission hereunder, irrespective of whether claims or actions for such damages
are based upon contract, warranty, negligence, gross negligence, strict
liability or any other remedy at law or equity.
ARTICLE V
SCOPE OF AGREEMENT
Section 5.1 Relationship of Parties. Duke shall act as
independent contractor hereunder, and nothing herein shall at any time be
construed to create the relationship of employer and employee, partnership,
principal and agent, broker or finder or joint venturers as between Duke and the
Company.
Section 5.2 Access to Offices. Employees of the Company shall be
freely allowed to enter and leave the buildings and offices of Duke, subject to
any guidelines imposed by Duke. Employees of Duke shall be freely allowed to
enter and leave the buildings and offices of the Company, subject to any
guidelines imposed by the Company.
Section 5.3 Reasonable Availability of Personnel. The Company
acknowledges that Duke's employees are involved in the conduct of business for
Duke and may not be required to dedicate the entirety of their business days to
the performance of the Services; provided, however, that Duke agrees to use all
reasonable efforts to have its employees made available at the reasonable
request of the Company throughout the term of this Agreement, and the Parties
agree to make all reasonable efforts to cooperate mutually with each other so as
to achieve the intents and purposes of this Agreement.
Section 5.4 Scope of Duke's Authority. Without the prior written
consent of the Company, Duke, in performing the Services, shall not borrow or
lend money, except for short-term borrowings (such as commercial paper)
initiated through Duke's Corporate Cash Management in the ordinary course of
business; create any lien or encumbrance; execute, terminate, or amend any
contract in the name of or on behalf of the Company or its subsidiaries;
purchase or sell any asset of the Company or its subsidiaries; execute any
indemnification for the benefit of any party; or take any other action not in
the ordinary course of business of Duke or the Company. When performing this
Agreement, Duke shall receive the Company's written approval before incurring
any third party expense not identified in Exhibit B or reflected in the rate
sheet; provided, however, Duke shall not be obligated to obtain the Company's
prior written consent for any third party expense which is less than
two-thousand dollars ($2000.00).
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<PAGE> 9
Section 5.5 Insurance. During the term of this Agreement, Duke
shall be required to maintain the following types of insurance, as appropriate
to the Services provided: (a) Workers' Compensation Insurance as required by
state or federal law where the work is being performed; (b) General Liability
Insurance against claims for bodily injury and/or death of and property damage
to third parties; and (c) Business Automobile Liability Insurance against claims
of bodily injury, death and property damage to third parties covering all owned,
leased, and non-leased, and non-owned and hired vehicles.
Section 5.6 Compliance with Affiliate Rules. The performance of
this Agreement shall be in compliance with all applicable provisions of the
various Codes and Standards of Conduct to which Duke Energy Corporation and its
affiliates are subject by various energy and utility regulatory commissions,
including Duke Energy Corporation's North Carolina Code of Conduct, FERC Code of
Conduct with respect to the relationship between power marketing affiliates and
the electric utility and FERC Standards of Conduct for relations between
interstate pipelines and their marketing affiliates. Any term or condition of
this Agreement that is not in compliance with the various Codes and Standards of
Conduct noted above shall be renegotiated by the Parties.
ARTICLE VI
SERVICES REPRESENTATIVES
Section 6.1 Services Representative. The Parties shall each
appoint one or more representatives (each, a "Representative") to facilitate
communications and performance under this Agreement. Each Party may treat an act
of the Representative of the other Party as being authorized by such other Party
without inquiring behind such act or ascertaining whether such Representative
had authority to so act. The initial Representatives are named in Exhibit A
hereto. Each Party shall have the right at any time and from time to time to
replace its Representative by giving notice in writing to the other Party
setting forth the name of (i) the Representative to be replaced and (ii) the
replacement, and certifying that the replacement Representative is authorized to
act for the Party giving notice in all matters relating to this Agreement.
ARTICLE VII
CONFIDENTIALITY
Section 7.1 Confidentiality.
(a) Each Party shall (and each Party shall ensure that its
employees, contractors, subcontractors, agents and affiliates who perform or
receive Services under this Agreement shall) treat as strictly confidential (and
shall not disclose) all information received or obtained as a result of this
Agreement that relates to the other Party or any aspect of its business or
operations.
(b) A Party may disclose information that would otherwise be
confidential if and only to the extent: (i) required by applicable law or legal
process, provided that the disclosing Party
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<PAGE> 10
has notified the other Party in writing prior to disclosure; (ii) required by
any securities exchange or agency to which the Party is subject, wherever
situated, whether or not the requirement has the force of law, provided that the
disclosing Party has taken all practicable legal steps to prevent such
disclosure and notified the other Party in writing prior to disclosure; (iii)
disclosed on a confidential basis to the professional advisers or auditors of
the Party or to any actual or potential bankers or financiers of that Party;
(iv) that the information has come into the public domain through no fault of
that Party or its employees, affiliates, officers, directors, representatives,
agents, or assigns; (v) that the other Party has given prior approval to such
disclosure; (vi) necessary to enforce, comply with or perform any of the terms
of this Agreement or the other agreements listed in Section 4.2 or the other
agreements contemplated hereby or thereby; or (vii) received from a third party,
unless, to the knowledge of the Party that would otherwise be subject to this
Section 7.1 or its employees, affiliates, officers, directors, representatives,
agents, or assigns, such third party is subject to an independent obligation to
keep such information confidential.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.1 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 of the Parties hereto and delivered (including by facsimile) to
the other Parties.
Section 8.2 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 hereto 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 hereto 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 hereto 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 hereto 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 hereto hereby irrevocably waives such immunity in respect
of its obligations with respect to this Agreement.
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(d) Each Party hereto 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 hereto 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 8.2.
Section 8.3 Entire Agreement. This Agreement, together with the
exhibits hereto, constitutes the entire agreement of the Parties with respect to
the services and arrangements described herein, and supercedes all prior
contracts or agreements between the Parties solely with respect to the subject
matter hereof, whether written or oral. This Agreement is not intended to confer
upon any person not a party hereto (or their successors and assigns) any rights
or remedies hereunder.
Section 8.4 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, if to a Party hereunder,
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 Duke:
Duke Energy Corporation
422 South Church Street (PB05E)
Charlotte, North Carolina 28202-1904
Attention: Ellen T. Ruff
Fax No.: (704) 382-8137
With a copy to:
Vinson & Elkins L.L.P.
1001 Fannin, Suite 2300
Houston, Texas 77002-6760
Attention: Bruce R. Bilger
Fax No.: (713) 517-5429
(b) If to the Company:
Duke Energy Field Services, LLC
370 17th Street, Suite 900
Denver, Colorado 80202
Attention: Martha B. Wyrsch
Fax No.: (303) 605-8902
With a copy to:
Vinson & Elkins L.L.P.
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1001 Fannin, Suite 2300
Houston, Texas 77002-6760
Attention: Bruce R. Bilger
Fax No.: (713) 517-5429
Section 8.5 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the Parties hereto and their respective
successors and permitted assigns; provided, however, that (a) no Party hereto
will assign its rights or delegate any or all of its obligations under this
Agreement without the express prior written consent of the other Party hereto,
and (b) any assignment of the obligations of either Party hereto shall not
relieve that Party of its obligations under any and all of the provisions of
this Agreement. Notwithstanding the foregoing, any Party may assign its rights
or delegate any or all of its obligations under this Agreement to an affiliate
of such Party without the prior written consent of the other Party.
Section 8.6 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
capitalized terms defined herein are equally applicable to both the singular and
plural forms of such terms.
Section 8.7 Amendments and Waivers. This Agreement may not be
modified or amended except by an instrument or instruments in writing signed by
both Parties, except that the Exhibits hereto may be amended in writing by the
Parties to add, delete or modify the Services, change the rates on the rate
sheet or replace the Representatives. The Company may, only by an instrument in
writing, waive compliance by Duke with any term or provision of this Agreement
on the part of Duke. The waiver by either Party hereto 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 8.8 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 8.9 Interpretation. In the event an ambiguity or question
of intent or interpretation arises with respect to this Agreement, this
Agreement shall be construed as if it was 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 8.10 Specific Performance. The Parties hereto 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, including
temporary restraining orders or temporary or permanent injunctions.
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Section 8.11 No Third Party Beneficiaries. Except as expressly
provided herein, nothing in this Agreement shall entitle any person other than
Duke or the Company or their respective successors and assigns permitted hereby
to any claim, cause of action, remedy or right of any kind.
Section 8.12 Further Assurances. Upon the terms and subject to
the conditions hereof, each of the Parties hereto shall use its reasonable best
efforts to take, or cause to take, all appropriate action, and to do or cause to
be done, all things necessary, proper or advisable under applicable laws and
regulations to make effective the transactions contemplated in this Agreement.
Notwithstanding the foregoing, the Company shall be responsible for providing
the information to Duke that is necessary for Duke to perform the Services.
Section 8.13 Force Majeure.
(a) No failure or omission to carry out or to observe any of the
terms, provisions or conditions of this Agreement, except the failure to make
payment for sums due hereunder, shall give rise to any claim by a Party against
another, or be deemed a breach of this Agreement, if the same shall have been or
shall be caused by or arise out of any event of force majeure, which term as
used herein shall include (but only to the extent that the affected Party is
unable to perform due to causes and events that are beyond the reasonable
control of the affected Party), but not be limited to, war, hostilities, acts of
the public enemy or of belligerents, sabotage, blockage, revolution,
insurrection, riot or disorder, requisitions or rationing, whether imposed by
law, decree or regulations or by voluntary cooperation of industry at the
insistence or request of any governmental authority or person purporting to act
therefor; compliance with allocation programs, voluntary or mandatory, including
reduction or cessation of production by reason of imposition by any governmental
authority or person purporting to act with government authority, acts of God,
fire, frost, earthquake, storm, or lightning, epidemic, quarantine, strikes or
combination of workmen lockouts or other labor disturbances, explosion,
accidents by fire or otherwise to pipe, storage facilities, installations,
machinery, unanticipated plant outages, delays in acquiring or inability to
acquire permits or licenses necessary to enable the Parties hereto to perform,
lack of adequate fuel, power, raw materials, labor, containers or transportation
facilities, delays or shortages caused by breakdowns, failures or unavailability
of materials or equipment, breakage, mechanical breakdowns or accident to
machinery; delay, breakdown, or destruction of a plant, terminal, or equipment;
provided, however, that the Party so affected thereby will exercise reasonable
efforts pursuant to prudent industry practice to prevent the occurrence of the
force majeure event and to cure the event of force majeure as quickly as
possible so that the Party so affected will be able to carry out and observe all
of the terms, provisions, and conditions of this Agreement, but such Party shall
not be required to settle any labor disputes giving rise to an event of force
majeure hereunder.
(b) If a Party hereunder is prevented from or delayed in
performing any of its obligations under this Agreement by a force majeure event,
the Party affected shall promptly notify the other in writing of the
circumstances constituting the force majeure event, indicating the performance
obligations which are thereby delayed or prevented and the length of the
resulting delay expected.
(c) In the event that Duke is excused from supplying a Service in
accordance with the terms of this Section, then the Company shall be free to
acquire the Services from any
10
<PAGE> 14
substitute source, for such period as the Company deems necessary or expedient,
and if so acquired, the Company shall not be obligated to pay Duke for such
Services during such period.
Section 8.14 Alternative Dispute Resolution. Any dispute arising
out of or relating to this Agreement shall be resolved in accordance with the
procedures specified below.
(a) Negotiations Between Executives. The Parties shall attempt in
good faith to resolve any dispute arising out of or relating to this Agreement
promptly by negotiation between executives who have authority to settle the
controversy and who are at a higher level of management than the persons with
direct responsibility for administration of this Agreement. Either Party may
give the other party written notice of any dispute not resolved in the normal
course of business. Within 15 days after delivery of the notice, the receiving
Party shall submit to the other a written response. The notice and the response
shall include a statement of each Party's position and a summary of arguments
supporting that position, and the name and title of the executive who will
represent that Party and of any other person who will accompany the executive.
Within 30 days after delivery of the initial notice, the executives of both
Parties shall meet at a mutually acceptable time and place, and thereafter as
often as they reasonably deem necessary, to attempt to resolve the dispute. All
reasonable requests for non-privileged and/or non-proprietary information made
by one Party to the other will be honored. All negotiations pursuant to this
clause shall be considered confidential and shall be treated as compromise and
settlement negotiations for purposes of applicable rules of evidence.
(b) Rights of Parties. Notwithstanding the foregoing, nothing
contained in this Agreement shall limit or restrict in any way the right or
power of a Party at any time (1) to commence and prosecute a proceeding for a
preliminary or temporary injunction or other temporary order pending mediation
or arbitration under this Agreement (i) to restrain a Party from breaching this
Agreement or (ii) for specific enforcement of this Section 8.14, or (2) to
consult with the other Party in an attempt to negotiate a resolution of the
dispute. The Parties agree that any legal remedy available to them with respect
to a breach of this Section will not be adequate and that, in addition to all
legal remedies, each party is entitled to an order specifically enforcing this
Section 8.14.
(c) Mediation. If the dispute has not been resolved by
negotiation described in Section 8.14(a) within 45 days after the receipt of the
initial notice by the other Party, the Parties shall endeavor to settle the
dispute by mediation conducted in the English language under the then current
Center For Public Resources' CPR Model Mediation Procedure for Business
Disputes. The mediation will be conducted at a site agreed upon by the Parties.
All mediation costs are to be borne equally by the Parties. Each Party shall be
responsible for its own attorney's fees and costs.
(d) Arbitration. If a dispute or controversy shall arise between
the Parties with respect to any matter covered by this Agreement that has not
been resolved pursuant to either Section 8.14(a) or (c) above, any Party
involved in such controversy shall have the option of submitting the matter to
arbitration in the English language pursuant to the guidelines set forth below.
Demand and submission to arbitration as provided in this Agreement must, unless
otherwise agreed, be made in writing by the requesting Party within the later of
(1) ten (10) days after negotiations and mediation held pursuant to Sections
8.14(a) and (c) above have failed, and such notifying Party intends to submit
the matter for arbitration, and (2) 60 days following the effective date of
notice of the dispute or controversy. The failure to timely submit the matter to
arbitration
11
<PAGE> 15
shall constitute a waiver of the Parties to submit their dispute to arbitration.
If submitted to arbitration, the arbitration shall be binding on the Parties and
the dispute shall be settled in accordance with the Commercial Arbitration Rules
of the American Arbitration Association (the "AAA Rules"), and judgment upon the
award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. If a dispute involves an amount in controversy of $100,000
or less, there shall be one arbitrator. If a dispute involves an amount in
controversy in excess of $100,000 or a request for preliminary injunction, there
shall be three arbitrators. All arbitration proceedings shall be conducted in
Houston, Texas.
Section 8.15 Conflicts of Interest. The Company and Duke
understand that conflicts of interest may arise during the course of Duke
providing the Services hereunder. The Company and Duke shall in good faith
cooperate in establishing reasonable guidelines for the Parties to follow in
order to minimize any unavoidable conflicts.
Section 8.16 Construction. Unless the context requires otherwise:
(a) the gender (or lack of gender) of all words used in this Agreement includes
the masculine, feminine and neuter; (b) references to Articles and Sections
refer to Articles and Sections of this Agreement; (c) references to Exhibits
refer to the Exhibits attached to this Agreement; (d) references to laws refer
to such laws as they may be amended from time to time, and references to
particular provisions of a law include any corresponding provisions of any
succeeding law; (e) references to money refer to legal currency of the United
States of America; and (f) the word "including" means "including, without
limitation."
12
<PAGE> 16
IN WITNESS WHEREOF, each of the undersigned has caused this
Agreement to be duly executed and delivered on the date first set forth above.
<TABLE>
<CAPTION>
<S> <C>
DUKE ENERGY CORPORATION DUKE ENERGY BUSINESS SERVICES LLC
By:/s/ SANDRA P. MEYER By: /s/ CECIL O. SMITH, JR.
---------------------------------- --------------------------------
Name: Sandra P. Meyer Name: Cecil O. Smith, Jr.
Title: VP & Corporate Controller Title: President
PAN SERVICE COMPANY DUKE ENERGY GAS TRANSMISSION CORPORATION
By: /s/ DOROTHY M. ABLES By: /s/ DOROTHY M. ABLES
--------------------------------- ---------------------------------
Name: Dorothy M. Ables Name: Dorothy M. Ables
Title: CFO and Treasurer Title: Vice President, Chief
Financial Officer and
Treasurer
DUKE ENERGY FIELD SERVICES, LLC
By: /s/ DAVID D. FREDERICK
---------------------------------
Name: David D. Frederick
Title: Sr. Vice President and CFO
</TABLE>
13
<PAGE> 17
EXHIBIT A
SERVICES REPRESENTATIVES
The Parties to this Services Agreement each hereby appoint a
Representative (as defined in Article VI thereof) to facilitate communications
and performance under this Agreement.
The initial Representatives of Duke and the Company shall be as follows:
1. The initial Representative of Duke shall be Sandra P. Meyer, and
shall be contacted according to the procedures set forth in Section 8.14 of this
Agreement at the following address or at the following facsimile number:
Duke Energy Corporation
422 S. Church Street
Charlotte, North Carolina 28202
Facsimile: 704-373-4749
Telephone: 704-382-8899
2. The initial Representative of the Company shall be David D.
Frederick, and shall be contacted according to the procedures set forth in
Section 8.14 of this Agreement at the following address or at the following
facsimile number:
Duke Energy Field Services, LLC
370 17th Street, Suite 900
Denver, Colorado 80202
Facsimile: 303-595-0480
Telephone: 303-605-1614
A-1
<PAGE> 18
EXHIBIT B: THE SERVICES
ARTICLE I
DESCRIPTION OF SERVICES
Section 1.1 The Services to be provided to the Company by Duke shall be
as described herein:
(a) FMIS
o Processing transactions and availability of the
PeopleSoft tool for AP, AR and GL.
o Maintenance of DataMart and access through business
objects.
(b) Property Tax
o Manage all legal compliance functions.
o Direct and coordinate Property Tax planning.
o Negotiate equitable assessments with state and local
taxing officials.
o Audit property tax statements and prepare check
requisition vouchers.
o Represent the Company at local, state and national
meetings on property tax.
o Provide property tax planning for acquisitions and
divestitures.
(c) Insurance
o Placement and administration of insurance program.
o Review of insurance and indemnity language in various
contracts.
o Claims management and coordination.
o Due diligence relative to acquisitions and
divestitures.
o Placement of special coverage.
o General activities.
(d) Cash Management
o Set cash position
o Liquidity management
o Execute wire transfers
o Maintain bank accounts
(e) Shareholder Systems
o Shareholder communications
o Maintenance of shareholder records and stock transfers
B-1
<PAGE> 19
(f) HRMS
o Payroll processing
o Timesheet reporting
o Maintenance of HRMS system
o Tax Reporting
(g) Records Management
o Provide storage and retrieval of past records in Salt
Mines.
o Imaging of current agreements and contracts.
(h) Facilities
o Mail service (twice daily pick ups) to 5718 Westheimer
location.
o Mail service to Denver.
o Monitor security access control system at 5718
Westheimer location
o Create/activate/deactivate badges.
o Monitor building space under lease at 5718 Westheimer
and oversee lease negotiations
o Use of Houston fitness center
o Use of Houston health center
(i) Finance
For routine consultations related to capital market
transactions including:
o Negotiation of Investment Banking representation
o Review of alternative financing options
o Providing support with rating agency issues
(j) Governmental Affairs (Washington, D.C.)
o General support with national legislative and
regulatory matters
o Assistance with FERC filings
o Representation in matters that involve midstream gas
business
(k) Audit
o Assist management and Audit Committee with Risk
Assessment.
o Develop Audit Plan for Audit Committee approval.
o Projects include the following: financial, operational,
information technology, contract, joint venture and
special requests.
(l) FMIS Special Services
B-2
<PAGE> 20
o Enhancement of PeopleSoft system by accounting
o New modules, new reports and system process changes
(m) Corporate Tax Planning
o Review tax consequences of acquisitions and
dispositions.
o Tax planning
(n) Media Relations
o Review and distribution of all corporate/business unit
news releases.
o Media placements.
o Media relations for IPO and trade show support
o Crisis response
o Emergency preparedness.
(o) HR/Benefits Consulting Charlotte
o Executive development/training and succession planning
o Administration of compensation programs
o EEOC/Diversity issues
o Support for recruiting and hiring
o Benefit Plan Design
o Benefit Plan Compliance
o Benefit Plan Communication
o Assess implications of acquisitions and divestitures
o HRMS special requests to support mass changes and
special Business Objects reports
(p) Design Graphics
o Graphic design, web design, trade show graphics and
support.
o Advertising.
o Computer graphics and presentations.
(q) Printing
o Stationary printing
o Copying services
(r) Legal
o General legal services, including without limitation,
labor and employment, environmental, litigation,
finance and securities.
B-3
<PAGE> 21
(s) Corporate Security
o Conduct investigations, including Ethics Line
investigations.
o Security assessments.
o High profile traveler briefings.
o Workplace violence or potential workplace threats and
coordination of security services during emergency
situations.
o Due diligence investigations.
o Liaison with law enforcement agencies.
o Security training and consulting.
(t) Reservoir/Reserves
o Attend meetings with producers to acquire information
and perform hydrocarbon appraisals, risk assessments,
economic evaluations and financial valuations as
required.
o Using data and/or statistical aggregation to evaluate
reserve potential and determine production schedules to
support capital contributions for pipeline connections,
system expansions and/or modifications.
o Perform limited connected supply studies as requested
to forecast gathering/processing volumes as a basis for
revenue forecasts.
o Provide preliminary and due diligence hydrocarbon
appraisals, risk assessments, and financial valuations
in support of acquisitions
o Provide expertise and testimony in support of
Regulatory/Legal matters
o Prepare and file nominations on Company prorated
fields.
o Perform data maintenance and maintain files of data
received on behalf of Company.
o Compile data and issue reports such as Monthly New
Volume Attachment Reports and Monthly Production
Reports
o Research, compile and report on industry new well
drilling and permit activity
o Prepare and file underground storage reports with
regulatory agencies
(u) HR Houston
o Labor negotiations.
o Compensation data.
o EEO/Diversity issues.
o Recruiting and hiring support.
o Special requests to develop/run reports from HRMS for
field personnel
(v) Information Services - Corporate
B-4
<PAGE> 22
o Applications-related products
o Operations-related products
o Server services
o Telecommunications Services
o Workstation Services
(w) Information Services - Houston
o Server Services
o Support Services
(x) Employee Service Center
o Respond to employee benefit questions
o Process benefit elections and changes
(y) SEC Compliance
o Filing fees for periodic filings (including EDGAR)
o Printing fees associated with periodic SEC filings
(z) Maintenance of books and records
o Maintenance of legal and regulatory books and records
o Payments to governmental agencies and service agents
for corporate governance
(aa) Employee Benefits Plans
o As elected by the Company
(bb) Executive Benefits
o For Company executives
B-5
<PAGE> 23
ARTICLE II
RATE SHEET
See attachment
B-6
<PAGE> 1
EXHIBIT 10.4
--------------------------------------------
TRANSITION SERVICES AGREEMENT
by and between
PHILLIPS PETROLEUM COMPANY
and
DUKE ENERGY FIELD SERVICES, LLC
Dated as of March 17, 2000
--------------------------------------------
<PAGE> 2
TRANSITION SERVICES AGREEMENT
THIS AGREEMENT is executed this 17th day of March, 2000, but shall have
an effective date ("Effective Date") as of the Closing Date of the Contribution
Agreement, as defined below, by and between Duke Energy Field Services, LLC, a
Delaware limited liability company ("Company"), and PHILLIPS PETROLEUM COMPANY,
a Delaware corporation ("Phillips") (each, a "Party" and collectively, the
"Parties".)
WITNESSETH:
WHEREAS, Phillips, the Company and Duke Energy Corporation, a North
Carolina corporation, have entered into that certain Contribution Agreement,
dated as of December 16, 1999 ("Contribution Agreement"), pursuant to which Duke
and Phillips have agreed to cause certain of their midstream natural gas
gathering, processing and marketing operations in the United States and Canada
to be transferred to the Company;
WHEREAS, Phillips has, or can make available to Company, the personnel,
technology, and other resources necessary to provide services to Company during
the term of this Agreement while Company procures or otherwise obtains and makes
available the personnel, technology and resources necessary to conduct
operations of its facilities and assets; and
WHEREAS, Company desires that Phillips furnish to Company and its
subsidiaries the services described in Exhibit B to this Agreement ("Transition
Services"), and Phillips desires to provide such Transition Services pursuant to
the terms hereof.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants contained herein, and intending to be legally bound hereby, the
Parties agree as follows:
ARTICLE I
SCOPE OF SERVICES
1.1 Transition Services. Phillips agrees to provide to Company and its
subsidiaries the Transition Services described in Exhibit B for the term
described in Section 8.1. Phillips will provide, in its sole discretion, the
personnel, equipment, tools, technology, and other resources necessary to
perform the Transition Services hereunder with the same degree of care, skill
and prudence customarily exercised by it for its own operations, consistent with
industry practices, in compliance with statutory and regulatory requirements,
and in the same manner as such services have been provided, or were available,
to Phillips Gas Company and its subsidiaries prior to the Effective Date. The
services to be provided under this Agreement shall not be increased or enlarged
to cover any operating assets, offices, and assets of the Company other than
those previously used by Phillips Gas Company and its subsidiaries, unless
Company and Phillips shall have agreed in writing on the scope of such increased
or enlarged services and the amount and method of compensation to be applied to
such increased or enlarged services.
<PAGE> 3
1.2 Budget Approvals; Emergency Action. Phillips' performance hereunder
shall generally observe the budgetary limitations and standards agreed to by
Phillips and Company in Exhibit B; provided, however, Phillips may take such
actions and make such expenditures as may be reasonably necessary, under laws,
regulations or good industry practices, in order to cure an emergency. Phillips
shall advise Company of such emergencies as soon as practicable and advise it of
the circumstances of such emergencies, the actions taken or proposed, and the
expenditures made, incurred, committed or proposed.
1.3 Reasonable Availability of Personnel. Except for those Designated
Persons (defined in Exhibit B hereto), Company acknowledges that Phillips'
employees are involved in the conduct of business for Phillips and may not be
required to dedicate the entirety of their business days to the performance of
the Transition Services; provided, however, that Phillips agrees to use all
reasonable efforts to have its employees made available at the reasonable
request of Company throughout the term of this Agreement, and the Parties agree
to make all reasonable efforts to cooperate mutually with each other so as to
achieve the intents and purposes of this Agreement.
1.4 Scope of Phillips' Authority. Without the prior written consent of
Company, Phillips, in performing the Transition Services, shall not borrow or
lend money; create any lien or encumbrance; participate in any futures or
hedging activities in the name of Company or its subsidiaries; execute,
terminate, or amend any contract in the name of or on behalf of Company or its
subsidiaries; purchase or sell any asset of Company or its subsidiaries; execute
any indemnification for the benefit of any party; or take any other action not
in the ordinary course of business of Phillips or Company.
1.5 Telecommunications, Radio and Wireless Communications. Where
necessary to allow continuous use of certain telecommunications, radio and
wireless services or facilities that were previously shared by Phillips and
certain facilities or operations of Company or its affiliates (hereinafter
"Shared Communication Facilities"), Phillips and Company shall enter into such
agreements, having terms and conditions and having the same cost sharing basis
as the arrangements that were previously used by Phillips and Company or its
affiliates with regard to the Shared Communications Facilities.
1.6 Use of Subcontractors. If Phillips is unable to perform the
Transition Services in accordance with Section 1.1, then Phillips shall hire the
personnel required to perform such Transition Services. Phillips is authorized
to provide any part of the Transition Services under this Agreement either from
its own resources and employees, or, upon written consent of Company, by a
subcontractor or subcontractors. Other contractors and subcontractors shall be
made subject to no less stringent performance requirements than Phillips is
required to comply with under this Agreement, including confidentiality and
compliance with statutory and regulatory requirements.
1.7 Relationship of Parties. Phillips shall control the manner and
method of carrying out the Transition Services. The Parties shall act as
independent contractors, and nothing herein shall at any time be construed to
create the relationship of employer and employee, partnership, principal and
agent, broker or finder or joint venturers as between Phillips and Company.
2
<PAGE> 4
1.8 Non-Exclusivity. Company reserves the right to enter into other
contracts with third parties in connection with services of the type described
in this Agreement.
ARTICLE II
CHARGES AND SETTLEMENT
2.1 Rates for Transition Services. Phillips shall charge Company for the
Transition Services provided under this Agreement in accordance with Phillips'
fully-burdened actual costs as provided for in Exhibit B. Such rates shall not
include any provision of Transition Services away from Phillips' employees' home
offices; consequently, all reasonable travel and related costs incurred in the
performance of the Transition Services away from Phillips' employees home
offices shall be reimbursed according to Section 2.2 below.
2.2 Cost Reimbursement Basis for Phillips' Transition Services. All
actual and reasonably incurred out-of-pocket costs and expenses incurred by
Phillips under this Agreement in the performance of Transition Services away
from Phillips' employees' home offices, and any expenses that are not included
in the rates agreed-upon as set forth above, shall be reimbursed by Company
monthly in accordance with the procedures set forth below in Sections 2.3 and
2.4.
2.3 Additional Equipment, Technology or Third Party Services. If
additional equipment, software, technology or third party services are required
in order for Phillips to perform the Transition Services, and written approval
is given by Company, Company shall pay the cost of such additional equipment,
software, technology or third party services. To the greatest extent feasible,
charges for equipment, software, technology and third party services will be
billed directly to Company. In the case of any emergency, prior written approval
of such expenses shall not be required; provided however, that Phillips shall
obtain Company's consent to such emergency services as soon as reasonably
practicable.
2.4 Invoicing and Payment. Within thirty (30) calendar days after the
end of each calendar month, Phillips shall submit to Company an invoice covering
the Transition Services performed and expenses incurred during the previous
calendar month, which invoice shall describe in reasonable detail the Transition
Services performed, charges therefor, out-of-pocket costs and expenses incurred
and any other charges or fees provided for hereunder. Company shall make payment
within twenty-five (25) days after receipt of the invoice. Payments shall be
made by electronic fund transfer or equivalent transfer or other means
satisfactory to Phillips in immediately available funds to Phillips' account at
such bank or depository as is designated by Phillips in writing on such
invoices.
2.5 Late Payments. In the event any payment hereunder is not made when
due, the payment shall accrue interest (beginning on the date the payment is
due) calculated at the prime rate as published in the Wall Street Journal,
between the date said payment is due and the date the payment is made. Such
payment, when made, shall be accompanied by all interest so accrued.
2.6 Bases for Rates. The rates for Transition Services shall be
calculated to equal the amounts necessary to reimburse Phillips for its
fully-burdened actual costs of providing the Transition Services relating
thereto. Phillips agrees to provide Company with documentation and
3
<PAGE> 5
other information with respect to each invoice as may be reasonably requested by
Company to verify that Phillips' charges to Company are accurate, correct and
valid in accordance with the provisions of this Agreement. If at the close of
any calendar quarter during the term of this Agreement either Party believes
that the amount which is being charged for a particular category of Transition
Services does not equal the fully-burdened costs therefor, the objecting Party
may notify the other Party that it desires to renegotiate the rates being
charged for the Transition Services. The Parties shall promptly thereafter make
reasonable efforts to renegotiate the particular disputed rates prior to the
beginning of the calendar quarter for which the renegotiated rates are to apply.
Such renegotiation shall not, however, relieve the objecting Party of the
obligation for the timely payment or crediting of all invoiced charges pending
renegotiation, or its obligation to perform Transition Services hereunder, as
the case may be.
2.7 Fees for Additional Transition Services. From time to time the
Company may desire additional services from Phillips not specifically related to
the Transition Services addressed herein. No fees shall be billable for these
additional services unless such services are requested and agreed to in writing
in an addendum to this Agreement prior to performance; thereafter in this
Agreement, all references to "Transition Services" shall also include any such
additional new services. Additional new services will then be provided on either
a fixed-fee or hourly rate, as agreed to at the time, in order to reimburse
Phillips for its fully burdened actual costs of providing such additional new
services.
2.8 Taxes. Company shall pay all taxes, fees or similar levies imposed
on the Transition Services provided hereunder (other than taxes imposed on
Phillips' net income, including alternative minimum taxable income, gain, excess
profits or franchise taxes imposed on the capital or net income of Phillips, and
other than employment taxes imposed with respect to Phillips' employees, except
to the extent such taxes are included in Phillips' fully-burdened actual costs
as provided in Section 2.6) and, in the event that Phillips is required by law
to pay any of said taxes, fees or other similar levies, Company shall reimburse
Phillips for such payments.
2.9 Exemption Certificate. Company shall provide Phillips with an
exemption certificate(s), if requested by Phillips, in a form acceptable to the
appropriate taxing authority for Transition Services provided under this
Agreement, and Company shall be responsible for the payment of any taxes, fees
or similar levies imposed on Transition Services provided hereunder if it fails
to do so, or if such taxes are otherwise assessed on such Transition Services.
ARTICLE III
AUDIT
Company and its representatives shall have the right to audit the
pertinent time records and expense and cost records of Phillips relating to
charges and performance under this Agreement for a period of at least two (2)
years from the date of the origination of such records as follows. Upon written
request by Company and at Company's expense, Company may audit the
above-referenced records of Phillips upon reasonable notice and during business
hours during the term of this Agreement and for two (2) years thereafter for the
purpose of confirming the accuracy of such records and the manner in which such
records have been used in the administration of this Agreement; provided,
however, that any such accountants undertaking the audit shall promptly
4
<PAGE> 6
report to both Parties the results of the audit and whether same shows
compliance with the terms of this Agreement, or as the case may be, a report
setting forth the facts detailing the failure to comply with the terms of this
Agreement. Unless required by legal or administrative process, a Party, as well
as its agents, representatives, employees, auditors, independent contractors,
officers, and directors who obtain actual or constructive knowledge of any
information obtained relative to any audit, shall treat as confidential and not
disclose, divulge, reveal, or report, directly or indirectly, to any third
party, any information obtained during any audit without the other Party's prior
written consent. If any legal or administrative process requires disclosure of
any information obtained during any audit, that Party shall provide prompt
written notice of such process to the other Party, thereby permitting the other
Party to seek a protective order or other appropriate remedy as it deems
necessary in its sole discretion.
ARTICLE IV
RELEASES OF LIABILITY; INDEMNITY
4.1 Release of Claims for Consequential and Other Damages. Subject to
Section 4.2 below, Company hereby releases Phillips and its officers, directors,
employees and agents from and covenants not to sue any of them for, (a) any and
all claims, causes of action, damages, and liabilities of whatsoever nature
(including, but not limited to, property damage, personal injury, death,
liabilities arising out of an employment relationship, workmen's compensation
claims, attorneys' fees, travel costs, interest expense and amounts paid in
settlement) which Company may now or hereafter have (including, but not limited
to, any consequential, incidental, indirect or special damages and losses of
whatsoever nature) which arise out of or relate directly or indirectly to
Phillips' obligations under this Agreement; and (b) expenses and losses
(including, but not limited to, attorneys' fees, travel costs, and interest
expense) relating to such matters.
4.2 THE RELEASES AND COVENANTS NOT TO SUE STATED ABOVE SHALL NOT APPLY
TO ANY CLAIMS, CAUSES OF ACTION, LIABILITIES, DAMAGES, EXPENSES AND LOSSES WHICH
RESULT PROXIMATELY AND DIRECTLY FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT
OF PHILLIPS WHICH WOULD OTHERWISE BE RELEASED OR INDEMNIFIED. THE RELEASES AND
COVENANTS NOT TO SUE STATED ABOVE SHALL APPLY TO ALL BREACHES BY PHILLIPS, IF
ANY, OF ALL LESSER STANDARDS OF CONDUCT OR CULPABILITY. IT IS A CONSIDERATION
FOR PHILLIPS' PROVISION OF SERVICES HEREUNDER AND THE INTENT OF THE PARTIES THAT
BY THIS RELEASE, COMPANY WILL RELEASE AND PROTECT PHILLIPS FROM THE CONSEQUENCES
OF PHILLIPS' OWN NEGLIGENCE WHERE THAT NEGLIGENCE IS THE SOLE, CONCURRING OR
CONTRIBUTING CAUSE OF THE INJURY, DEATH OR DAMAGE.
4.3 PHILLIPS SHALL INDEMNIFY AND HOLD COMPANY AND ITS SUCCESSORS,
ASSIGNS, AFFILIATES, AND ALL OF COMPANY'S OFFICERS, DIRECTORS, EMPLOYEES,
REPRESENTATIVES AND AGENTS HARMLESS FROM ANY CLAIMS, CAUSES OF ACTION,
LIABILITIES, DAMAGES, EXPENSES (INCLUDING REASONABLE ATTORNEY'S FEES) AND LOSSES
WHICH RESULT PROXIMATELY AND DIRECTLY FROM THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF PHILLIPS, WHICH ARE NOW OR HEREAFTER ASSERTED BY THIRD PARTIES
AGAINST COMPANY ARISING DIRECTLY OR INDIRECTLY FROM SERVICES PROVIDED BY
PHILLIPS UNDER THIS AGREEMENT.
5
<PAGE> 7
4.4 Survival of Releases and Indemnification. Nothing contained in this
Agreement shall modify, alter or amend any obligation of Phillips or any
affiliate of Phillips under the Contribution Agreement. Subject to applicable
statutes of limitation, the Parties' obligations under Section 4.1 and 4.3 shall
survive any termination of the Contribution Agreement, the Governance Agreement
by and among Phillips, Duke and the Company, dated December 16, 1999, those
agreements executed as the closing of the transaction contemplated by the
Contribution Agreement, and this Agreement, and shall continue thereafter in
full force and effect.
ARTICLE V
CONFIDENTIALITY
5.1 Confidentiality Obligation. Both Phillips and Company (and each
Party shall ensure that its employees, contractors, subcontractors, agents and
affiliates who perform or receive Transition Services under this Agreement)
shall treat as strictly confidential (and shall not disclose) all information
received or obtained as a result of this Agreement that relates to the other
Party or any aspect of its business or operations.
5.2 Disclosure of Information. A Party may disclose information that
would otherwise be confidential if and only to the extent: (a) required by
applicable law, provided that the disclosing Party has notified the other in
writing prior to disclosure and taken all practicable legal steps to prevent
such disclosure; (b) required by any securities exchange or agency to which the
Party is subject, wherever situated, whether or not the requirement has the
force of law, provided that the disclosing Party has taken all practicable legal
steps to prevent such disclosure and notified the other Party in writing prior
to disclosure; (c) disclosed on a confidential basis to the professional
advisers or auditors of the Party or to any actual or potential bankers or
financiers of that Party; (d) that the information has come into the public
domain through no fault of that Party or its employees, affiliates, officers,
directors, representatives, agents, or assigns; (e) that the other Party has
given prior written approval to such disclosure; (f) necessary to enforce,
comply with or perform any of the terms of this Agreement or the other
agreements listed in Section 4.4 or any other agreements contemplated hereby or
thereby; or (g) received from a third party, unless, to the knowledge of the
Party that would otherwise be subject to this Article V or its employees,
affiliates, officers, directors, representatives, agents, or assigns, such third
party is subject to an independent obligation to keep such information
confidential.
ARTICLE VI
NOTICES
All notices and other communications to be given to either 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, if to a Party hereunder, 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):
6
<PAGE> 8
(a) If to Phillips:
Phillips Petroleum Company
1224 Adams Building
Bartlesville, Oklahoma 74004
Attention: Clyde W. Lea
Fax No.: (918) 662-2301
(b) If to Company:
Duke Energy Field Services, LLC
370 17th Street, Suite 900
Denver, Colorado 80202
Attention: Martha B. Wyrsch
Fax No.: (303) 605-8902
ARTICLE VII
GOVERNING LAW
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF DELEWARE, WITHOUT REFERENCE TO THE CHOICE OF LAW PRINCIPLES
THEREOF.
ARTICLE VIII
TERM; TERMINATION
8.1 Term; Termination. This Agreement shall commence on the Effective
Date and shall remain in effect until (a) December 31, 2000, or (b) such earlier
date on which Company shall deliver to Phillips a written release executed by
Company for the benefit of Phillips, releasing Phillips from any further
obligation to provide Transition Services pursuant to this Agreement. Upon
written agreement by both Parties, and subject to renegotiation of applicable
charges necessitated by any changes in internal or external costs of providing
Transition Services, this Agreement may be continued after December 31, 2000 on
a month to month basis.
8.2 Specific Transition Services Rights. Company may terminate any
specific Transition Service during the term of this Agreement by giving at least
thirty (30) days prior written notice to Phillips, and if such Transition
Service is terminated during a month, any rate agreed upon for the provision of
such Transition Service shall be prorated, with the exception of IT Services
charges which shall not be prorated but shall be reimbursed for the entire month
of such termination.
7
<PAGE> 9
ARTICLE IX
ASSIGNMENT
This Agreement shall be binding upon and inure to the benefit of the
Parties hereto and their respective successors and permitted assigns; provided,
however, that (a) no Party hereto will assign its rights or delegate any or all
of its obligations under this Agreement, except to an affiliate or a successor
to all or a substantial portion of the assets or the business of such Party,
without the express prior written consent of either Party hereto, and (b) any
assignment of the obligations of either Party hereto shall not relieve that
Party of its obligations under any and all of the provisions of this Agreement.
ARTICLE X
CONFLICT OF INTEREST
Neither Party shall, and each shall require that its subcontractors
shall not, pay any commissions, fees, or grant any rebates to any employee,
officer or agent of the other Party; nor favor employees, officers or agents of
the other Party with gifts or entertainment of significant cost or value; nor
enter into any business arrangement with employees, officers or agents of the
other Party, other than as a representative of the other Party, without written
approval of such other Party.
ARTICLE XI
FORCE MAJEURE
11.1 Force Majeure. No failure or omission to carry out or to observe
any of the terms, provisions or conditions of this Agreement, except the failure
to make payment for sums due hereunder, shall give rise to any claim by one
Party against the other, or be deemed a breach of this Agreement, if the same
shall have been or shall be caused by or arise out of any event of Force
Majeure, which term as used herein shall include (but only to the extent that
the affected Party is unable to perform due to causes and events that are beyond
the reasonable control of the affected Party), but not be limited to, war,
hostilities, acts of the public enemy or of belligerents, sabotage, blockage,
revolution, insurrection, riot or disorder, requisitions or rationing, whether
imposed by law, decree or regulations or by voluntary cooperation of industry at
the insistence or request of any governmental authority or person purporting to
act therefore; compliance with allocation programs, voluntary or mandatory,
including reduction or cessation of production by reason of imposition by any
governmental authority or person purporting to act with government authority,
acts of God, fire, frost, earthquake, storm, or lightning, epidemic, quarantine,
strikes or combination of workmen lockouts or other labor disturbances,
explosion, accidents by fire or otherwise to pipe, storage facilities,
installations, machinery, unanticipated plant outages, delays in acquiring or
inability to acquire permits or licenses necessary to enable the Parties hereto
to perform, lack of adequate fuel, power, raw materials, labor, containers or
transportation facilities, delays or shortages caused by breakdowns, failures or
unavailability of materials or equipment, breakage, mechanical breakdowns or
accident to machinery; delay, breakdown, or destruction of a plant, terminal, or
equipment; provided, however, that the Party so affected thereby will exercise
reasonable efforts pursuant to prudent industry practice to prevent the
occurrence of the Force Majeure event and to cure the event of Force Majeure as
quickly as possible so that the Party so affected will be able to carry out and
observe all of the terms, provisions, and conditions
8
<PAGE> 10
of this Agreement, but such Party shall not be required to settle any labor
disputes giving rise to an event of Force Majeure hereunder.
11.2 Notification of Force Majeure. If a Party hereunder is prevented
from or delayed in performing any of its obligations under this Agreement by a
Force Majeure event, the Party affected shall promptly notify the other in
writing of the circumstances constituting the Force Majeure event, indicating
the performance obligations which are thereby delayed or prevented and the
length of the resulting delay expected. The Party claiming Force Majeure shall
use its best efforts to reduce the losses of the other Party resulting from the
Force Majeure event. The other Party may thereafter grant an extension to the
time required to complete performance of the obligation hereunder.
11.3 Substitution. In the event that Phillips is excused from supplying
a Transition Service in accordance with the terms of this Section, then Company
shall be free to acquire the Transition Services from any substitute source, for
such period as Company deems necessary or expedient, and if so acquired, Company
shall not be obligated to pay Phillips for such Transition Services during such
period.
ARTICLE XII
ALTERNATIVE DISPUTE RESOLUTION
12.1 Negotiations.
(a) Any dispute arising out of or relating to this Agreement
shall be resolved in accordance with the procedures specified in this Article.
(b) The Parties shall attempt in good faith to resolve any
dispute arising out of or relating to this Agreement promptly by negotiation
between executives who have authority to settle the controversy and who are at a
higher level of management than the persons with direct responsibility for
administration of this Agreement. Either Party may give the other Party written
notice of any dispute not resolved in the normal course of business. Within 15
days after delivery of the notice, the receiving Party shall submit to the other
a written response. The notice and the response shall include a statement of
each Party's position and a summary of arguments supporting that position, and
the name and title of the executive who will represent that Party and of any
other person who will accompany the executive. Within 30 days after delivery of
the initial notice, the executives of both Parties shall meet at a mutually
acceptable time and place, and thereafter as often as they reasonably deem
necessary, to attempt to resolve the dispute. All reasonable requests for
non-privileged and/or non-proprietary information made by one Party to the other
will be honored.
(c) All negotiations pursuant to this clause shall be considered
confidential and shall be treated as compromise and settlement negotiations for
purposes of applicable rules of evidence.
(d) Notwithstanding the foregoing, nothing contained in this
Agreement shall limit or restrict in any way the right or power of a Party at
any time (i) to commence and
9
<PAGE> 11
prosecute a proceeding for a preliminary or temporary injunction or other
temporary order pending mediation or arbitration under this Agreement (A) to
restrain a Party from breaching this Agreement or (B) for specific enforcement
of this Article, or (ii) to consult with the other Party in an attempt to
negotiate a resolution of the dispute. The Parties agree that any legal remedy
available to them with respect to a breach of this Article will not be adequate
and that, in addition to all legal remedies, each Party is entitled to an order
specifically enforcing this Article.
12.2 Mediation. If the dispute has not been resolved by negotiation
described in Section 12.1 within 45 days after the receipt of the initial notice
by the other Party, the Parties shall endeavor to settle the dispute by
mediation conducted in the English language under the then current Center For
Public Resources' CPR Model Mediation Procedure for Business Disputes. The
mediation will be conducted at a site agreed upon by the Parties. All mediation
costs are to be borne equally by the Parties. Each Party shall be responsible
for its own attorney's fees and costs.
12.3 Arbitration. If a dispute or controversy shall arise between the
Parties with respect to any matter covered by this Agreement that has not been
resolved pursuant to either Section 12.1 or 12.2 above, any Party involved in
such controversy shall have the option of submitting the matter to arbitration
in the English language pursuant to the guidelines set forth below. Demand and
submission to arbitration as provided in this Agreement must, unless otherwise
agreed, be made in writing by the requesting Party within the later of (i) ten
(10) days after negotiations and mediation held pursuant to Sections 12.1 and
12.2 above have failed, and such notifying Party intends to submit the matter
for arbitration and (ii) 60 days following the effective date of notice of the
dispute or controversy. The failure to timely submit the matter to arbitration
shall constitute a waiver of the Parties to submit their dispute to arbitration.
If submitted to arbitration, the arbitration shall be binding on the Parties and
the dispute shall be settled in accordance with the Commercial Arbitration Rules
of the American Arbitration Association ("AAA Rules"), and judgment upon the
award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. If a dispute involves an amount in controversy of $100,000
or less, there shall be one arbitrator. If a dispute involves an amount in
controversy in excess of $100,000 or a request for preliminary injunction, there
shall be three arbitrators. All arbitration proceedings shall be conducted in
Houston, Texas.
ARTICLE XIII
TRANSITION SERVICES REPRESENTATIVES
The Parties shall each appoint one or more representatives (each, a
"Representative") to facilitate communications and performance under this
Agreement. Each Party may treat an act of the Representative of the other Party
as being authorized by such other Party without inquiring behind such act or
ascertaining whether such Representative had authority to so act. The initial
Representatives are named in Exhibit A hereto. Each Party shall have the right
at any time and from time to time to replace its Representative by giving notice
in writing to the other Party setting forth the name of (i) the Representative
to be replaced and (ii) the replacement, and certifying that the replacement
Representative is authorized to act for the Party giving notice in all matters
relating to this Agreement.
10
<PAGE> 12
ARTICLE XIV
MISCELLANEOUS
14.1 Entire Agreement. This Agreement, together with the exhibits
hereto, constitutes the entire agreement of the Parties with respect to the
services and arrangements described herein, and supercedes all prior contracts
or agreements between the Parties solely with respect to the subject matter
hereof, whether written or oral. This Agreement is not intended to confer upon
any person not a party hereto (or their successors and assigns) any rights or
remedies hereunder.
14.2 Amendments. This Agreement may not be modified or amended, in whole
or in part, except by a supplemental agreement signed by the Parties hereto.
14.3 Headings; Construction. The Article and Section headings of this
Agreement have been inserted only to facilitate reference and shall have no
bearing on the construction and interpretation of this Agreement. Unless the
context requires otherwise: (a) the gender (or lack of gender) of all words used
in this Agreement includes the masculine, feminine and neuter; (b) references to
Articles and Sections refer to Articles and Sections of this Agreement; (c)
references to Exhibits refer to the Exhibits attached to this Agreement; (d)
references to laws refer to such laws as they may be amended from time to time,
and references to particular provisions of a law include any corresponding
provisions of any succeeding law; (e) references to money refer to legal
currency of the United States of America; and (f) the word "including" means
"including, without limitation."
14.4 Counterparts. This Agreement and any amendment thereto may be
executed in one or more counterparts, each of which when so executed shall be
deemed to be an original but all of which taken together shall constitute one
and the same agreement.
14.5 Waiver. No waiver of any breach of this Agreement shall be held to
be a waiver of any other or 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.
11
<PAGE> 13
IN WITNESS WHEREOF, the Parties have set their hands by their duly
authorized officials as of the date set forth above.
PHILLIPS PETROLEUM COMPANY
By: /s/ JOHN A. CARRIG
---------------------------------------
Name: John A. Carrig
Title: Vice President and Treasurer
DUKE ENERGY FIELD SERVICES, LLC
By: /s/ DAVID D. FREDERICK
---------------------------------------
Name: David D. Frederick
Title: Sr. Vice President and CFO
12
<PAGE> 14
EXHIBIT A: SERVICES REPRESENTATIVES
The Parties to this Transition Services Agreement each hereby appoint a
Representative (as defined in Article XIII thereof) to facilitate communications
and performance under this Agreement.
The initial Representatives of Phillips and the Company shall be as
follows:
1. The initial Representative of Phillips shall be Jeff W. Sheets, and
shall be contacted according to the procedures set forth in Article VI of this
Agreement at the following address or at the following facsimile number:
Phillips Petroleum Company
3 A3 Phillips Building
Bartlesville, Oklahoma 74004
Facsimile: (918) 662-1630
Telephone: (918) 661-9037
2. The initial Representative of the Company shall be David D.
Frederick, and shall be contacted according to the procedures set forth in
Article VI of this Agreement at the following address or at the following
facsimile number:
Duke Energy Field Services, LLC
370 17th Street, Suite 900
Denver, Colorado 80202
Facsimile: 303-595-0480
Telephone: 303-605-1614
A-1
<PAGE> 15
EXHIBIT B: THE SERVICES
ARTICLE I
RESOURCES
Phillips will provide the personnel, equipment, tools, technology, and other
resources necessary to perform the Transition Services as set forth and
identified in Article III of this Exhibit. Phillips shall in its sole discretion
hire and fire employees engaged in performing transition services hereunder,
determine their levels of compensation, and otherwise marshal those resources it
deems necessary or proper in order to perform services under this Agreement;
provided, however, that Phillips shall not remove any particular Designated
Person (as defined below) from the performance of Transition Services without
prior consultation with Company.
Upon request of Company, Phillips shall provide specific personnel (each
referred to as a "Designated Person") who were previously engaged in the
performance of services relating to the assets and facilities acquired by
Company from Phillips. Company shall reimburse Phillips for the services of each
such Designated Person as indicated hereinbelow. Phillips will assign each such
Designated Person to perform services relating to Company (including services
that are not specifically provided for in Article III hereof) until the date
(the "Service Termination Date") specified in a written notice from Company to
Phillips indicating that the services of such Designated Person are no longer
required by Company from and after such specified date. Phillips will be
responsible for all severance benefits and other termination costs, if any,
associated with the termination of any Designated Person's employment with
Phillips; provided, however, that if the Service Termination Date with respect
to a Designated Person occurs after the six-month period (or the nine-month
period in the case of a Designated Person who is an accountant) beginning on the
Closing Date (as defined in the Contribution Agreement), then Company shall
reimburse Phillips for the cash severance benefits, if any, paid by Phillips to
such Designated Person, but only if (1) such Designated Person receives a notice
of termination of employment from Phillips within thirty (30) days after such
Designated Person's Service Termination Date and such Designated Person's
employment is actually terminated within sixty (60) days after receipt of such
notice, and (2) such Designated Person's employment is terminated under
circumstances that entitle such Designated Person to severance benefits pursuant
to the terms of the Phillips Layoff Plan as in effect on December 16, 1999. The
amount of any such reimbursement shall not exceed the amount of the cash
severance benefit that would have been paid to such Designated Person under the
terms of the Phillips Layoff Plan as in effect on December 16, 1999.
B-1
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ARTICLE II
DESCRIPTION OF SERVICES
The Transition Services to be provided to Company by Phillips shall be
those described herein and any other service agreed to in writing by the Parties
from time to time, subject to modification and amendment by joint written
agreement of the Parties:
(a) IT SERVICES
Phillips shall perform the computing system management,
information management, and communications services specified hereinbelow
(referred to collectively herein as "the Services").
Phillips shall provide the Services as an independent contractor in
accordance with the standards of care and competence of the petroleum industry
and in compliance with the standards of data processing/computer industry,
particularly as to complying with software licenses and restricting access to
data.
(i) IT SERVICES CONTACTS
Phillips Contact Person: Ronald C. Maxwell
Company Contact Person: Fred Kesinger
(ii) SERVICE DESCRIPTIONS
IT Services include the following service types:
O SYSTEM SUPPORT
O OPERATION
O BACKUP AND RECOVERY
O CHANGE MANAGEMENT
O CONFIGURATION MANAGEMENT
O DASD STORAGE MANAGEMENT
O TAPE MANAGEMENT
O FUNCTIONS TO BE PERFORMED BY COMPANY
O FUNCTIONS TO BE PERFORMED BY PHILLIPS
(1) System Support
Phillips will take responsibility for management and support of systems
software, including the following activities:
B-2
<PAGE> 17
o apply systems software maintenance
o install new program products
o provide version control and release management
o generate system
o provide performance tuning
o provide operational assistance and problem resolution
(2) Operation
o Phillips will be responsible for normal operation of the Company systems.
o The Phillips Response Center will be manned 24 hours a day, 7 days a week.
o Company will be responsible for production batch scheduling.
o If the Company usage, measured for twenty-four (24) hours daily, exceeds the
above resources by more than 10% for an extended period of time, defined to
be three (3) consecutive months, then the charges to Company will be
increased by the incremental cost to Phillips of providing the additional
resources required by Company.
(3) Backup and Recovery
Phillips will generally maintain responsibility for backup and recovery
services, including the following:
o Vault services will be provided by Phillips.
o In the event of disaster, Phillips will have responsibility for providing
Company production environments, which can be restored at the fallback site
within 72 hours of a disaster declaration.
o Phillips will perform disaster recovery exercises, with participation of
Company personnel, on the schedule determined by Phillips Business Recovery
Services.
o Full volume disk backups will be generated weekly. o Incremental backups and
database image copies will be generated daily. o Tapes of latest full disk
backup, daily increment, and image copies will be kept in a vault located
offsite.
(4) Change Management
o Change management will be handled by Phillips.
o Changes initiated by Phillips will be executed during the specified
maintenance window, and Company will be informed accordingly.
o Changes initiated by Company may be executed at a time requested by Company,
if this does not impact other Phillips production.
o Phillips will notify the Company contact person of all major changes that
will impact the system availability at least one week prior to execution.
B-3
<PAGE> 18
(5) Configuration Management
o Phillips will have responsibility for the management of central processing
center hardware and will maintain configuration diagrams of equipment.
(6) DASD Storage Management
Phillips will have responsibility for management of DASD hardware, including:
o allocation of volumes
o monitoring and media failure intervention
o DASD consolidations
Company will have responsibility for:
o backup job processing at the application level
o recovery of files at the application level
(7) Tape Management
Phillips will have responsibility for management, operation, and support of
tapes, including maintenance:
o vaulting service
o monitoring and media failure intervention
o tape mounts
o physical tape library maintenance
o tape measurement system daily housekeeping
o scratch tape management
(8) Functions to be Performed by Company
o Company applications will be run under the Phillips production systems and
will be isolated by use of the appropriate security system.
o Company will handle security administration of data files only for their
applications.
o All production migration/change control of Company's specific application
portfolio will be performed by Company.
(9) Functions to be Performed by Phillips
o Daily, weekly, monthly, and annual scheduled batch production jobs will
continue to be managed by Phillips.
o Database administration, including physical database design, logical
database design, restore and recovery, database performance tuning, etc.,
will continue to be performed by Phillips.
B-4
<PAGE> 19
(iii) SERVICE HOURS AND PROBLEM MANAGEMENT
(1) Maintenance Hours
In general, the system and its applications will be available unless a planned
or emergency maintenance period is in effect.
Planned maintenance will take place once a week according to the table below:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Start CST End CST Comments
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Monthly, after
Saturday 21:00 03:00 12th workday
- ------------------------------------------------------------------------------------------
Weekly, except
after 12th workday
Saturday 21:00 00:00
- ------------------------------------------------------------------------------------------
</TABLE>
The times above are indicating worst case. Generally, services will be
available during the planned maintenance period, or the period of the services
unavailability will be shorter than what is specified above.
Information about system impact will be communicated to Company's
contact person before noon CST the previous Friday. Notification to Company
needs to be given one week in advance for changes to the normal maintenance
period.
(2) Problem Management
During Company manned service hours, all Company user problems should be
reported to the Company Help Desk, which will perform first level problem
determination and consult with internal resources before escalation to Phillips
Help Desk.
Phillips Help Desk will maintain a log of all problems reported.
If the problem cannot be solved immediately over the telephone, Phillips will
continue to work on the problem according to the problem codes and target times
in the Problem Severity Table shown below.
(3) Systems and Operations Problems
Problem Resolution
Service restoration will generally be provided according to the target times
shown in the problem severity table below.
B-5
<PAGE> 20
PROBLEM SEVERITY TABLE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Phillips
Code Description Impact Target Time Activity
- ------------------------------------------------------------------------------------------
Phillips
will work
continuously
Critical 1 Hour until normal
1 Critical services situation is
unavailable restored.
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Phillips
will work to
restore service
Important during normal
functions are working hours.
unavailable or Work will only
response times be interrupted
2 Serious are 3 Hours by a Code 1
unacceptable. problem.
- ------------------------------------------------------------------------------------------
Phillips
Application, will work to
network, or restore the
hardware service within
3 Minor impacted. 1 working normal working
day hours.
- ------------------------------------------------------------------------------------------
Small
deficiencies
where
improvements
4 Insignificant are wanted Not As agreed.
specified
- ------------------------------------------------------------------------------------------
</TABLE>
B-6
<PAGE> 21
(b) TREASURY SERVICES
Phillips, as agent for Company, will provide the Treasury Management
services stated below in managing the funds of Company, subject to such
restrictions, conditions and limitations as may be deemed appropriate or
desirable by Company, and notice of which has been given by Company to Phillips
in writing signed by the Treasurer or Assistant Treasurer of Company. Phillips
will:
o Maintain and operate bank accounts in the name of Company, deposit and
disburse funds therefrom and reconcile such accounts;
o Make, supervise and confirm transmission of funds to Company's accounts and
the disbursement of funds from such accounts to others by wire or otherwise,
in such manner as to provide for the efficient and effective use of
Company's cash;
o Maintain lock boxes in Company's name, and collect therefrom, as may be
needed or requested;
o Purchase and/or sell and enter into agreements to purchase and/or sell
foreign currencies as required or requested by Company;
o Pay for and administer existing foreign and domestic letters of credit,
charging the cost thereof to Company's account(s), and submit drafts and
documents and collect amounts owing Company under foreign and domestic
letters of credit;
o Endorse checks, drafts and other instruments made payable to Company, and
deposit the same in one or more of Company's account(s) or when that is
unfeasible, one or more of Phillips' general bank accounts, commingling such
funds with Phillips', only as may be necessary;
o Approve such of Company's invoices which are received by and sent to
Phillips and issue either Company's check or electronic payment thereof, or
when that is unfeasible, issue Phillips' check or electronic payment
instruction in payment thereof and invoice Company for same; and
o Maintain and administer procurement and travel card programs utilized by
Company.
To assist in the management of its cash and to maximize the amount that
may be invested, Company authorizes Phillips to maintain a "zero balance" in any
of Company's bank accounts.
B-7
<PAGE> 22
(c) PROPERTY TAX, REAL ESTATE AND CLAIMS
Services Provided:
(1) Right of Way Activities
o Research surface title, negotiate and purchase right of way
grants/easements, and secure tenant agreements for all pipeline construction
projects.
o Apply for and secure permits/licenses/easements for city street, county
road, state and federal highways, railroads, Oklahoma Public School Lands,
Bureau of Indian Affairs, Bureau of Land Management, University of Texas,
U.S. Forestry Department, U.S. Corps of Engineers, Texas Parks and Wildlife
Department and any local, state or federal agency having jurisdiction over
the land.
o Maintain and manage record system for lease/term easement
expiration/renewal/payments to insure rights do not lapse.
o Record documents with appropriate county.
o Prepare payments of right of way and damages for pipeline construction
projects and maintenance claim settlements.
o Intercede with landowner attempting to stop pipeline construction and
coordinate the securing of temporary restraining orders if required.
o Review, negotiate and prepare all documents for release of right of way
requested by landowners and developers.
o Coordinate with legal all condemnation proceedings involving fee property,
leases and easements.
o Review, negotiate and prepare all documents for the reimbursement of
expenses for pipeline adjustment due to landowner/developer activities,
local/state/federal road improvement projects, and U.S. Corps of Engineer
projects. Intercede to halt all development project activities that threaten
the safety of the pipeline.
o Coordinate obtaining of environmental assessments/impact
statements/archaeological surveys for pipeline projects.
o Maintain and manage right of way/geographic file system to insure
utilization of extensive multiple line rights and existing rights for
project planning.
o Respond to landowner inquiries concerning pipeline locations and agreements.
o Review right of way agreements, prepare assignment exhibits, and negotiate
title cure cost issues involved in asset sales.
o Prepare staking and construction release letters to field operations for
the construction of pipelines.
o Assist in route selection/landowner issues/cost estimations for pipeline
project planning.
o Negotiate easements/leases/fee acquisition for boosters and plant locations,
including title review.
o Provide status reports on pipeline projects.
B-8
<PAGE> 23
(2) Real Estate Activities
o Maintain and manage fee property/lease file system and administer lease
payment/expiration/renewal system.
o Appraise/negotiate/coordinate environmental assessment/review title for
acquisition and sale of fee property.
o Secure appropriate zoning for facilities and review zoning applications that
may impact existing facilities.
(3) Claims Activities
o Investigate, negotiate, settle, prepare releases and drafts relating to line
leaks, maintenance operations, livestock, environmental, noise, and personal
injury claims.
o Investigate, negotiate, settle and secure collection of settlements due to
damage to pipeline and company facilities.
o Handle property damage based small claims actions resulting from operations.
(4) Tax Activities
o Collect data, prepare renditions, negotiate values, review tax statements,
make payments, secure receipts and maintain tax files for personal property
and real estate.
o File valuation protests with Assessor and appear before County Board of
Equalization to appeal tax valuations.
o Participate in any tax appeal filed in District Court in the capacity of
record custodian and expert witness. Assist in the preparation of trial
exhibits, deposition/trial preparation of witnesses, settlement conferences
and trial. Assist in the preparation of appeals briefs.
o Provide tax estimates and participate in tax reduction study teams.
o Review legislation and provide expert testimony before legislative
committees on proposed Ad Valorem based legislation that impacts operations.
B-9
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ARTICLE III
CHARGES AND RATES
Phillips shall charge Company for the Transition Services provided under this
Agreement in accordance with the rates set forth hereinbelow, which represents a
reasonable estimate, as determined by Phillips and accepted by Company, of the
amount necessary to reimburse Phillips for its fully-burdened actual costs of
providing the Transition Services relating hereto ("Transition Service
Charges"), incorporating that portion of the following:
(i) the labor and benefit expense, including all wages,
salaries, compensation, and remuneration paid by Phillips to employees of
Phillips engaged in the provision of Transition Services hereunder together with
the expense of Phillips for workman's compensation, disability benefit
insurance, payroll taxes, employees' pension, welfare and fringe benefits
(including various benefit plans),
(ii) the overhead costs of the facilities of Phillips that are
engaged in the provision of the Transition Services by Phillips to Company; and
(iii) all other reasonable and necessary general and
administrative and operating costs and expenses of Phillips.
Out of pocket expenses
In addition to paying the Transition Service Charges, Company shall reimburse
Phillips for any out of pocket expenses and travel expenditures associated with
those Transition Services charged on an hourly basis and any additional amounts
reasonably expended or incurred by Phillips to satisfy any obligation under this
Agreement which has been previously approved in writing by Company. In no event
shall Company pay directly any salaries, wages, withholding, benefits, severance
payments or any other compensation or payments to employees of Phillips.
Rates for specific Transition Services are set forth in the Attached Addendum.
B-10
<PAGE> 1
EXHIBIT 10.5
TRADEMARK LICENSE AGREEMENT
THIS TRADEMARK LICENSE AGREEMENT (this "Agreement"), dated and
effective as of the ________ day of __________________, 2000 ("Effective Date"),
by and between DUKE ENERGY CORPORATION, a North Carolina corporation ("Duke
Energy"), and DUKE ENERGY FIELD SERVICES, LLC, a Delaware limited liability
company ("Licensee").
WHEREAS, substantially contemporaneously herewith, DEFS Holding Corp.,
a Delaware corporation and a wholly-owned subsidiary of Duke ("DEFS Holding"),
and Phillips Gas Company, a Delaware corporation and a wholly-owned subsidiary
of Phillips Petroleum Company, a Delaware corporation ("PGC"), have entered into
an Amended and Restated Limited Liability Company Agreement of Duke Energy Field
Services, LLC pursuant to which DEFS Holding and PGC have transferred to
Licensee certain of their midstream natural gas gathering, processing and
marketing operations and assets (the "Pooled Assets"); and
WHEREAS, Licensee desires to obtain a license from Duke Energy to
utilize the Licensed Marks (hereinafter defined) for a limited period of time
solely for the purpose of operating the Pooled Assets; and
WHEREAS, Duke Energy is willing to grant such license on the terms and
conditions more fully set forth below;
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. The term "Licensed Marks" shall mean the name and mark "Duke Energy"
and the stylized "D" logotype in connection with that name and mark
(collectively, the "Licensed Marks").
2. The term "Licensed Goods and Services" shall mean those goods and
services which were being sold, distributed or provided as part of the
businesses comprising the Pooled Assets as of the Effective Date.
3. The term "Licensed Territory" shall mean the continental United
States and Canada.
4. Duke Energy hereby grants to Licensee a nonexclusive, royalty-free
license to use, in the Licensed Territory in connection with the advertising,
sale, rendering and distribution of the Licensed Goods and Services for the term
of this Agreement, when used in the specific manner authorized herein, (a) the
name and mark "Duke Energy" as part of the names "Duke Energy Field Services"
and "Duke Energy Field Services, LLC" and (b) the stylized "D" logotype in
connection with those two names. Licensee shall not have the right to register,
as trademarks, service marks or trade names, the Licensed Marks in the Licensed
Territory or elsewhere or to sublicense the Licensed
<PAGE> 2
Marks. Except as expressly granted in this Agreement, Licensee shall have no
license of, right to use or interest in the Licensed Marks or any other
trademark, service mark, trade name or logo owned, licensed or used by Duke
Energy, including any related applications or registrations (collectively, the
"Duke Energy Marks").
5. Licensee may use the Licensed Marks only in connection with its
advertising, sale, rendering and distribution of the Licensed Goods and Services
in the Licensed Territory, inclusive of such modifications and improvements to
the Licensed Goods and Services as do not comprise materially different goods
and services. The specific manner of use of the Licensed Marks always shall be
subject to the prior written approval of Duke Energy. Licensor shall retain the
right, from time to time, and in its sole discretion, to modify, amend, alter or
discontinue any of the Licensed Marks. When Licensor gives Licensee written
notice, Licensee shall promptly, but in no event later than 180 days after the
notice, conform or discontinue, as applicable, its use of the Licensed Marks as
so modified, altered, amended or discontinued and the definition of Licensed
Marks shall be deemed to be automatically amended into conformity with those
changes in the Licensed Marks. Licensee shall disclose to the public, on its
packaging, advertising and literature for the Licensed Goods and Services that
the Licensed Marks are owned by Duke Energy and are licensed for use by
Licensee. Licensee shall not otherwise make any reference to Duke Energy in
Licensee's advertising, promotion, sale or rendering of the Licensed Goods or
Services without the prior written approval of Duke Energy. Licensee also shall
use on its packaging, labels and in its advertising and literature for the
Licensed Goods and Services its own name and address, identifying Licensee as
the manufacturer, distributor and/or provider of the Licensed Goods or Services.
Licensee may not use in connection with the Licensed Goods or Services, or on
packaging, advertising materials or literature for the Licensed Goods or
Services, any other name or mark (except for Licensee's name and the Licensed
Marks) without Duke Energy's prior written approval.
6. Licensee acknowledges that title and ownership in the Licensed Marks
and the Duke Energy Marks and the associated goodwill are and shall at all times
remain in Licensor and that, by this Agreement or otherwise, Licensee shall not
acquire any title, ownership, or other interest in the Licensed Marks or the
Duke Energy Marks. All uses of the Licensed Marks by Licensee and all goodwill
generated by those uses shall inure exclusively and completely to the benefit of
Licensor. Licensee acknowledges the validity and enforceability of the
Licensor's rights and title in the Licensed marks and the Duke Energy Marks and
shall not contest or challenge the validity of, or Licensor's title in, the
Licensed Marks or the Duke Energy Marks.
7. Licensee represents, warrants and covenants that the Licensed Goods
and Services shall not be manufactured, packaged, distributed, sold or rendered
in such a way as to constitute or be likely to constitute a health or safety
hazard to consumers or others. Licensee covenants and agrees that the Licensed
Goods and Services and Licensee's use of the Licensed Marks shall comply fully
with all applicable state, federal, national and local laws and regulations,
including those governing the manufacturing, packaging, distribution, sale or
rendering of the Licensed Goods and
2
<PAGE> 3
Services, and that the Licensed Goods and Services shall be at least of good and
merchantable quality.
8. Licensee agrees, at its expense, to submit to Duke Energy, promptly
upon Duke Energy's request, samples of the Licensed Goods, as well as specimens,
labels, advertising, promotional materials and other literature showing actual
use of the Licensed Marks in connection with the Licensed Goods and Services. If
at any time Duke Energy advises Licensee of changes which must be made in the
manner of Licensee's use of the Licensed Marks, Licensee agrees promptly to make
such changes requested by Duke Energy or, in the alternative, voluntarily to
terminate this Agreement.
9. Licensee agrees that Duke Energy, or persons authorized by Duke
Energy, may enter and inspect, during all reasonable hours, Licensee's business
premises where the Licensed Goods and Services are manufactured, assembled,
stopped, distributed or rendered, such inspection being for the sole purpose of
Duke Energy maintaining control of the nature and quality of the Licensed Goods
and Services in connection with which the Licensed Marks are being used.
10. Any cause of action for infringement or unfair competition arising
from or in connection with the use by others of marks consisting of or
confusingly similar to the Licensed Marks may be prosecuted at the sole option
of Duke Energy and at Duke Energy's expense; however, Duke Energy shall not be
obligated to bring or to prosecute any cause of action. In the event of such
action, Licensee agrees to render all reasonable assistance to Duke Energy for
the institution and prosecution of such action.
11. Licensee agrees to indemnify, defend and hold Duke Energy and
its directors, officers, employees, and subsidiaries (collectively, "Indemnified
Persons") harmless from any and all claims, liabilities, demands, actions,
causes of action, suits, loss or damage (including their reasonable attorneys'
fees and costs of court) arising out of any property damage, injury or death
of any person resulting, or alleged to have resulted, from the design,
manufacture, use, sale or marketing of the Licensed Goods and Services,
REGARDLESS OF WHETHER ANY INDEMNIFIED PERSON AND/OR OTHERS MAY BE WHOLLY,
PARTIALLY OR SOLELY NEGLIGENT OR OTHERWISE AT FAULT AND REGARDLESS OF WHETHER
SUCH CLAIM OR LIABILITY MAY BE BASED UPON NEGLIGENCE OR STRICT LIABILITY.
12. Licensee agrees to indemnify, defend and hold all Indemnified
Persons Duke Energy harmless from any and all claims, liabilities, demands,
actions, causes of action, suits, loss or damage (including their reasonable
attorneys' fees and costs of court) based in whole or in part on any claim (a)
that the Licensed Goods and Services or the advertising, promotional, packaging
or other materials of Licensee infringe the U.S. or foreign patent, trademark,
service mark, trade name or copyright rights of any person, party, or entity,
(b) that the Licensed Goods and Services incorporate or misappropriate the
confidential business information or trade secrets of any person, party or
entity, or (c) that the packaging, advertising, promotional or other printed
materials produced or distributed
3
<PAGE> 4
in connection with the Licensed Goods and Services infringe the copyright of any
person, party or entity, REGARDLESS OF WHETHER ANY INDEMNIFIED PERSON AND/OR
OTHERS MAY BE WHOLLY, PARTIALLY, OR SOLELY NEGLIGENT OR OTHERWISE AT FAULT AND
REGARDLESS OF WHETHER SUCH CLAIM OR LIABILITY MAY BE BASED UPON NEGLIGENCE OR
STRICT LIABILITY.
13. Licensee agrees that it shall maintain in force a commercial
general liability insurance policy including vendor's coverage and product
liability coverage for the Licensed Goods and Services in the form and with an
insurance carrier acceptable to Duke Energy, with minimum limits of liability of
$1,000,000 per occurrence. Such policy shall include an endorsement expressly
naming Duke Energy as an additional insured with subrogation waived in its favor
and stating that Duke Energy shall receive thirty (30) days prior notice of
cancellation, material change in coverage or intent not to renew. Licensee
shall, within thirty (30) days after the singing of this Agreement, deliver to
Duke Energy a copy of such insurance policy and endorsements certified within
the last thirty (30) days by the insurance carrier. Licensee shall deliver to
Duke Energy certified copies of all changes to the policy within 60 days after
the applicable change and additional certificates of insurance annually on the
anniversary date of this Agreement.
14. This Agreement may be assigned by Licensee to any successor in
interest to all, or substantially all, of Licensee's business and assets related
to the Licensed Goods and Services including, without limitation, to any
publicly owned corporation which may acquire all or substantially all of
Licensee's assets related to the Licensed Goods and Services, in which event
such successor or assignee shall assume all of the rights and obligations of
"Licensee" hereunder. This Agreement, and the license herein granted may not
otherwise be assigned by Licensee without Duke Energy's prior written approval.
Duke Energy shall have the right to assign, transfer, sub-contract or otherwise
delegate the performance of some or all of its rights or responsibilities under
this Agreement.
15. This Agreement shall have a term from the Effective Date until
terminated as provided herein below:
(a) Licensee may terminate the Agreement at any time, with or
without cause, upon thirty (30) day's advance written notice to Duke Energy;
(b) Duke Energy may terminate the Agreement, on thirty (30)
day's advance written notice, if Duke Energy and Licensee are unable to resolve
any dispute or difference with regard to the manner of use by Licensee of the
Licensed Marks or the nature or quality of the goods or services in connection
with which the Licensed Marks are being used;
(c) In the event Licensee shall breach any of its obligations
under this Agreement, Duke Energy may give written notice of such breach. If
Licensee shall not have cured such breach
4
<PAGE> 5
within thirty (30) days following such written notice, Duke Energy may send an
additional written notice terminating the Agreement on not less than thirty (30)
day's additional notice;
(d) In the event Duke Energy's ownership interest, both direct
and indirect, in Licensee shall, at any time, be less than or equal to thirty
five percent (35%) or in the event Duke Energy no longer controls, directly or
indirectly, the management and policies of the Licensee, Duke Energy may
terminate this Agreement on not less than thirty (30) day's advance written
notice to Licensee; or
(e) Licensee is convicted of or pleads guilty or no contest to
a felony or other crime which Duke Energy believes may adversely affect the
reputation or goodwill of the Licensed Marks or Duke Energy.
16. The obligations of paragraphs 10, 11 and 16 of this Agreement shall
survive termination hereof, regardless of the reason for such termination.
17. Following termination of this Agreement, regardless of the reason
for termination, Licensee agrees (a) to promptly discontinue all use of the
Licensed Marks and (b) to promptly amend its trade names, limited liability
company agreement, certificates of incorporation or other organizational
documents to remove the Duke Energy name therefrom. Thereafter, Licensee shall
not utilize in any way, any name, mark, phrase or logo incorporating "Duke" or
"Duke Energy" or any of the Licensed Marks, or any name or mark confusingly
similar thereto, including using any of the foregoing as a business name or as a
trademark or service mark in connection with the sale of any goods or services;
PROVIDED, however, that Licensee may continue to use any signage, printed
literature, sales materials, purchase orders and the like and sell any products
that are included in its inventory as of the date of termination which materials
or products utilize the Licensed Marks until the supplies thereof existing on
the date of termination have been exhausted, but in any event not longer than
one hundred eighty (180) days following such termination.
18. 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):
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<PAGE> 6
To Duke Energy: Duke Energy Corporation
5400 Westheimer Court, 8th Floor
Houston, Texas 77056-5310
Attention: Richard K. McGee
Fax No.: (713) 627-5510
To Licensee: Duke Energy Field Services, LLC
370 17th Street, Suite 900
Denver, Colorado 80202
Attention: Martha B. Wyrsch
Fax No.. (303) 605-8902
19. This Agreement is entered into and shall be governed for all
purposes by the laws of the State of Texas.
20. 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 of the parties hereto and
delivered (including by facsimile) to the other party.
21. This Agreement may not be modified or amended except by an
instrument or instruments in writing signed by all parties hereto. Either party
hereto may, only by an instrument in writing, waive compliance by the other
parties hereto with any term or provision of this Agreement on the part of such
other party hereto to be performed or complied with. The waiver by any party
hereto 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.
22. The parties hereto 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 tho parties
shall be entitled to specific performance in such event, in addition to any
other remedy or law or in equity.
23. Nothing in this Agreement shall be deemed to create a franchise,
joint venture, or partnership between Licensor and Licensee.
6
<PAGE> 7
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.
DUKE ENERGY CORPORATION
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
DUKE ENERGY FIELD SERVICES, LLC
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
7
<PAGE> 1
EXHIBIT 10.6
SHAREHOLDERS AGREEMENT
by and among
DUKE ENERGY NATURAL GAS CORPORATION
and
PHILLIPS PETROLEUM COMPANY
Dated as of _________ __, 2000
<PAGE> 2
SHAREHOLDERS AGREEMENT, dated as of ____________, 2000 (this
"Agreement"), by and among DUKE ENERGY NATURAL GAS CORPORATION, a Delaware
corporation ("DENG"), and PHILLIPS PETROLEUM COMPANY, a Delaware corporation
("PGCSI Parent" or "Phillips").
RECITALS
1. DENG, an indirect wholly owned subsidiary of Duke Energy
Corporation, a North Carolina corporation ("Duke"), and PGCSI Parent are
currently Shareholders (as defined below) of Duke Energy Field Services
Corporation (the "Corporation").
2. The Shareholders desire to set forth herein the terms and conditions
concerning their ownership of and cooperation concerning the Corporation.
NOW, THEREFORE, in consideration of the premises and the 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 Shareholders agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 Definitions. As used in this Agreement, the following terms
shall have the respective meanings set forth below:
"Affiliate" shall mean, with respect to any Person, a Person directly
or indirectly Controlling, Controlled by or under common Control with such
Person.
"Agreement" shall have the meaning set forth in the Preamble.
"Appraiser Committee" shall have the meaning set forth in Section
3.1(b).
"Business Day" shall mean any day on which banks are generally open to
conduct business in the State of New York.
"Buy-Out Notice" shall have the meaning set forth in Section 3.1(a).
"Buy-Out Right" shall have the meaning set forth in Section 3.1(a).
"Change of Control" shall mean an event (such as a Transfer of voting
securities) that causes a Person that holds a Corporation Interest to cease to
be Controlled by such Person's Parent; provided, however, that an event that
causes Duke or Phillips to be Controlled by another Person shall not constitute
a Change of Control, and a Transfer by either a Duke Shareholder or a Phillips
Shareholder of its Corporation Interest shall not constitute a Change of Control
(it being the intent of the parties that such Transfers shall be governed by and
subject to the right of first offer provisions set forth in Section 4.1 hereof).
<PAGE> 3
"Changing Party" shall have the meaning set forth in Section 4.2(b).
"Changing Party Appraiser" shall have the meaning set forth in Section
4.2(c).
"Contribution Agreement" shall mean the Contribution Agreement by and
among Phillips, Duke and Duke Energy Field Services L.L.C., dated as of December
16, 1999.
"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 Securities Exchange Act of 1934, as amended) of both
of the following:
(a) (i) in the case of a corporation, more than 25% of the direct or
indirect economic interests in the outstanding equity securities 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.
"Control Acceptance" shall have the meaning set forth in Section
4.2(b).
"Control Appraiser Committee" shall have the meaning set forth in
Section 4.2(c).
"Control Notice" shall have the meaning set forth in Section 4.2(b).
"Control Offer Period" shall have the meaning set forth in Section
4.2(b).
"Corporation" shall have the meaning set forth in the Recitals.
"Corporation Board" shall have the meaning set forth in Section 2.1.
"Corporation Common Stock" shall mean the common stock, par value $0.01
per share, of the Corporation.
"Corporation Interest" shall mean, with respect to any Person, such
Person's percentage ownership (direct and indirect), exclusive of any Market
Shares owned (directly or indirectly) by such Person, of the outstanding
Corporation Common Stock at the time of measurement.
"DENG" shall have the meaning set forth in the Preamble.
"Director" shall mean one or more of the members of the Corporation
Board, as the context may require.
"Duke" shall have the meaning set forth in the Recitals.
"Duke Appraiser" shall have the meaning set forth in Section 3.1(a).
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<PAGE> 4
"Duke Directors" shall have the meaning set forth in Section 2.1.
"Duke Shareholder" shall mean the holder of any Corporation Common
Stock (other than Market Shares) that is Duke or a Subsidiary of Duke or, if at
any time there is more than one such holder, each of such holders.
"Fair Market Value" shall mean, with respect to any Person's
Corporation Interest, a purchase price equal to the value that would be obtained
for such Corporation Interest in an arm's-length transaction between an informed
and willing buyer under no compulsion to buy and an informed and willing seller
under no compulsion to sell such Corporation Interest.
"GAAP" shall mean generally accepted accounting principles in the
United States.
"Governmental Entity" shall mean any federal, state, political
subdivision or other governmental agency or instrumentality, foreign or
domestic.
"Independent Directors" shall mean directors meeting the independence
and experience requirements, as set forth by the NYSE as of the date of the IPO
for membership on an audit committee of a board of directors, with respect to
each of PGCSI Parent, DENG, Duke and the Corporation.
"IPO" shall mean the initial offering of shares of Corporation Common
Stock to the public in a transaction registered under the Securities Act.
"Market Shares" shall mean shares purchased by a Person through
open-market purchases, other than those shares purchased to prevent dilution in
accordance with Article X of the Certificate of Incorporation of the
Corporation.
"Neutral Appraiser" shall have the meaning set forth in Section 3.1(b).
"Neutral Control Appraiser" shall have the meaning set forth in Section
4.2(c).
"Non-Changing Party" shall have the meaning set forth in Section
4.2(b).
"Non-Changing Party Appraiser" shall have the meaning set forth in
Section 4.2(b).
"Non-Transferring Entity" shall have the meaning set forth in Section
4.1.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Parent" shall mean, with respect to a particular Person, the Person
that Controls such particular Person and that is not itself Controlled by any
other Person.
"Party" shall mean each of DENG and PGCSI Parent and any Affiliates of
Duke or Phillips, respectively, who become party hereto in accordance with
Section 4.4.
"Person" shall mean any individual, partnership, limited liability
company, firm, corporation, association, joint venture, trust or other entity or
any Governmental Entity.
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<PAGE> 5
"PGCSI Parent" shall have the meaning set forth in the Preamble.
"Phillips" shall have the meaning set forth in the Preamble.
"Phillips Appraiser" shall have the meaning set forth in Section
3.1(b).
"Phillips Directors" shall have the meaning set forth in Section 2.1.
"Phillips Shareholder" shall mean the holder of any Corporation Common
Stock (other than Market Shares) that is Phillips or a Subsidiary of Phillips
or, if at any time there is more than one such holder, each of such holders.
"Phillips Veto" shall mean the failure of the requisite number of
directors of the Corporation Board to vote in favor of any of the actions
described in Exhibit B hereto where none of the Phillips Directors voted in
favor of such action; provided, however, that if any of the Duke Directors
failed to vote in favor of such action, such failure of the requisite number of
directors of the Corporation Board to vote in favor of such action shall not
constitute a Phillips Veto.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Shareholder" shall have the meaning set forth in Section 4.1.
"Subsidiary" shall mean, when used with respect to any Person, any
Affiliate of such Person that is Controlled by such Person.
"Total Corporation Interest" shall mean, with respect to any Person,
the sum of (i) such Person's Corporation Interest and (ii) any Market Shares
owned (directly or indirectly) by such Person (expressed as a percentage of the
outstanding Corporation Common Stock at the time of measurement).
"Transfer" shall mean any sale, assignment or other transfer, whether
by operation of law or otherwise (but not any deemed transfer pursuant to
Section 338 of the United States Internal Revenue Code of 1986, as amended, of
the assets of a corporation or its Subsidiary in connection with the purchase of
the stock of such corporation).
"Transfer Notice" shall have the meaning set forth in Section 4.1.
"Transferring Entity" shall have the meaning set forth in Section 4.1.
Section 1.2 Construction. Unless the context requires otherwise: (a)
the gender (or lack of gender) of all words used in this Agreement includes the
masculine, feminine and neuter; (b) references to Articles and Sections refer to
Articles and Sections of this Agreement; (c) references to Exhibits refer to the
Exhibits attached to this Agreement; (d) references to laws refer to such laws
as they may be amended from time to time, and references to particular
provisions of a law include any corresponding provisions of any succeeding law;
(e) references to money refer to legal currency of the United States of America;
(f) the word "including" means "including, without limitation"; and (g) all
capitalized terms defined herein are equally applicable to both the singular and
plural forms of such terms.
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<PAGE> 6
ARTICLE II
BOARD OF DIRECTORS
Section 2.1 Composition of the Corporation Board. Each Duke Shareholder
(including DENG so long as it is a Duke Shareholder) shall, and shall cause its
Affiliates to, make nominations and vote Duke's Total Corporation Interest, and
each Phillips Shareholder (including PGCSI Parent so long as it is a Phillips
Shareholder) shall, and shall cause its Affiliates to, make nominations and vote
Phillips' Total Corporation Interest, so that (a) the Corporation shall be
managed by a board of directors (the "Corporation Board") that shall be
comprised of 11 Persons, including: (i) so long as Duke's Corporation Interest
equals or exceeds 30%, (A) seven individuals designated by DENG (the "Duke
Directors"), including at least two Independent Directors, and (B) so long as
Phillips' Corporation Interest equals or exceeds 20%, four individuals
designated by PGCSI Parent (the "Phillips Directors"), including at least one
Independent Director and (ii) if Duke's Corporation Interest equals or exceeds
20% but is less than 30%, (A) the number of Duke Directors shall equal the
product, rounded to the nearest whole number, of (1) 11 and (2) the quotient of
(x) Duke's Corporation Interest divided by (y) the sum of (I) Duke's Corporation
Interest and (II) Phillips' Corporation Interest; (B) the number of Phillips
Directors shall equal the difference between (1) 11 and (2) the number of Duke
Directors, (C) if there are more Duke Directors than Phillips Directors, then at
least two of the Duke Directors and at least one of the Phillips Directors must
be Independent Directors and (D) if there are more Phillips Directors than Duke
Directors, then at least two of the Phillips Directors and at least one of the
Duke Directors must be Independent Directors, and (b) the Chairman of the
Corporation Board shall be one of the Directors designated by whichever of the
Parties has the right at such time to designate more Directors. Each Director
will serve as a Director until his or her successor is duly elected and
qualified or until his or her earlier resignation or removal.
Section 2.2 Removal and Replacement of Directors. Each Duke Shareholder
(including DENG so long as it is a Duke Shareholder) shall, and shall cause its
Affiliates to, vote Duke's Total Corporation Interest, and PGCSI Parent and each
Phillips Shareholder (including PGCSI Parent so long as it is a Phillips
Shareholder) shall, and shall cause its Affiliates to, vote Phillips' Total
Corporation Interest, to remove (a) any or all of the Duke Directors at the
request of DENG at any time and for any reason (or for no reason) and (b) any or
all of the Phillips Directors at the request of PGCSI Parent at any time and for
any reason (or for no reason). Should any Director be unwilling or unable to
continue to serve, or otherwise cease to serve (including by reason of his or
her involuntary removal or at the expiration of any applicable term of office),
then (i) each Duke Shareholder (including DENG so long as it is a Duke
Shareholder) shall, and shall cause its Affiliates to, (A) make nominations and
vote Duke's Total Corporation Interest to, and (B) cause the Duke Directors to,
and (ii) each Phillips Shareholder (including PGSCI so long as it is a Phillips
Shareholder) shall, and shall cause its Affiliates to, (A) make nominations and
vote Phillips' Total Corporation Interest to, and (B) cause the Phillips
Directors to, vote to fill the resulting vacancy on the Corporation Board by a
Person designated by DENG, in the case of a vacancy of a Duke Director, and by a
Person designated by PGCSI Parent, in the case of a vacancy of a Phillips
Director, but in each case in accordance with the Independent Director
requirements of Section 2.1.
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<PAGE> 7
ARTICLE III
OTHER AGREEMENTS
Section 3.1 Special Buy-out Right. (a) Following the one year
anniversary of the consummation of the IPO, if a Phillips Veto occurs with
regard to different proposals proposed in good faith at three separate meetings
(with at least two months between the first and third meetings) of the
Corporation Board within any 18-month period, DENG shall have the right (the
"Buy-Out Right"), exercisable upon written notice (the "Buy-Out Notice") at any
time after the third such Phillips Veto, but not later than the thirtieth day
after the end of the eighteenth month after the occurrence of the first of the
three Phillips Vetoes that are the basis for the exercise of the Buy-Out Right,
to purchase all (but not less than all) of Phillips' Corporation Interest
pursuant to this Section 3.1. The Buy-Out Notice shall set forth the name of a
nationally recognized appraisal firm (which may be an investment banking,
accounting or other firm that performs appraisal and valuation services)
designated by DENG as its appraisal firm (the "Duke Appraiser").
(b) Within 15 days from the date of receipt of the Buy-Out Notice,
PGCSI Parent shall notify DENG in writing of the name of an appraisal firm
(which may be an investment banking, accounting or other firm that performs
appraisal and valuation services) designated as PGCSI Parent's appraisal firm
(the "Phillips Appraiser"); provided, however, that if Phillips fails to select
an appraisal firm, the Phillips Appraiser shall be Ernst & Young L.L.P.
(provided, further, that if Ernst & Young L.L.P. fails to accept the appointment
within 30 days from the date of PGCSI Parent's receipt of the Buy-Out Notice,
the Appraiser Committee shall consist solely of the Duke Appraiser). If
applicable, the Duke Appraiser and the Phillips Appraiser shall jointly choose a
third appraisal firm (which may be an investment banking, accounting or other
firm that performs appraisal and valuation services) within 15 days after the
appointment of the Phillips Appraiser (provided, however, that if they fail to
select a third appraisal firm within 15 days after the appointment of the
Phillips Appraiser, such third firm (which shall be an investment banking,
accounting or other firm that performs appraisal and valuation services) will be
selected by the American Arbitration Association at the request of either party
within 10 days after such request) (the "Neutral Appraiser," and together with
the Duke Appraiser and the Phillips Appraiser, the "Appraiser Committee"). Once
the Appraiser Committee has been selected, each of DENG and PGCSI Parent shall
submit proposed Fair Market Values of Phillips' Corporation Interest to the
Appraiser Committee, together with any supporting documentation such Party deems
appropriate, as soon as practicable, but in no event earlier than 30 days after
the date of receipt of the Buy-Out Notice nor later than (i) 30 days after the
date of selection of the Neutral Appraiser, or (ii) in the event of the failure
of Ernst & Young L.L.P. to accept the appointment within the required time
period, 60 days from the date of PGCSI Parent's receipt of the Buy-Out Notice.
If either Party fails to submit its proposed Fair Market Value within the
required time period, the Fair Market Value proposed by the other Party
(assuming such other Party has submitted its proposed value within the required
time period) shall be deemed to be the Fair Market Value of Phillips'
Corporation Interest for purposes of this Section 3.1. If both Parties submit
their respective proposed values on a timely basis, the Appraiser Committee
shall determine, by majority vote, the Fair Market Value of Phillips'
Corporation Interest as of the date of the Buy-Out Notice as promptly as
possible (and in any event on or before the 30th day after submittal of the
competing proposals), which determination shall be final and binding on the
Parties. The cost of such appraisal shall be paid in equal portions by each of
DENG and PGCSI Parent. The Company shall provide to each of Duke and Phillips
and, if applicable, the Appraiser Committee, all information reasonably
requested by them.
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(c) The closing of DENG's acquisition of Phillips' Corporation Interest
shall be consummated on or before the 60th day after the determination of the
Fair Market Value in accordance with Section 3.1(b). The acquisition shall be
consummated at a closing held at the principal offices of the Corporation
(unless otherwise mutually agreed by DENG and PGCSI Parent) at which time the
purchase price, payable in the form of immediately available funds, shall be
delivered to PGCSI Parent, and PGCSI Parent shall deliver or cause to be
delivered to DENG (or, at DENG's option, to a designee of DENG designated by
DENG not less than five days prior to the closing) such transfer documentation
reasonably acceptable to DENG (or such designee) as shall be required to
evidence the transfer of Phillips' Corporation Interest, free and clear of all
liens and encumbrances, except those created under this Agreement.
ARTICLE IV
LIQUIDITY AND TRANSFER RESTRICTIONS
Section 4.1 Right of First Offer. If a Duke Shareholder or a Phillips
Shareholder (each, a "Shareholder") desires to Transfer all or any portion of
its Corporation Interest (other than pursuant to a registered public offering)
to a Person other than an Affiliate, then prior to effecting or making such
Transfer, the Person desiring to make such Transfer (a "Transferring Entity")
shall notify in writing the other Party or Parties that are not Affiliates of
the Transferring Entity (whether one or more, the "Non-Transferring Entity") of
the terms and conditions upon which it proposes to effect such Transfer (which
notice shall be herein referred to as a "Transfer Notice" and shall include all
material price and non-price terms and conditions). The Non-Transferring Entity
shall have the right to acquire all (but not less than all) of the Corporation
Interest that is the subject of the Transfer Notice on the same terms and
conditions as are set forth in the Transfer Notice. The Non-Transferring Entity
shall have 30 days following delivery of the Transfer Notice during which to
notify the Transferring Entity whether or not it desires to exercise its right
of first offer. If the Non-Transferring Entity does not respond during the
applicable period set forth above for exercising its purchasing right under this
Section 4.1, such Non-Transferring Entity shall be deemed to have waived such
right. If the Non-Transferring Entity elects to purchase all, but not less than
all, of the Corporation Interest that is the subject of the Transfer Notice, the
closing of such purchase shall occur at the principal place of business of the
Corporation on the tenth day following the first date on which all applicable
conditions precedent have been satisfied or waived (but in no event shall such
closing take place later than the date that is 60 days (subject to extension for
regulatory approvals, but in no event more than 180 days) following the date on
which the Non-Transferring Entity agrees to purchase all of the Corporation
Interest that is the subject of the Transfer Notice). The Transferring Entity
and the purchasing Non-Transferring Entity agree to use commercially reasonable
efforts to cause any applicable conditions precedent to be satisfied as
expeditiously as possible. At the closing, (a) the Transferring Entity shall
execute and deliver to the purchasing Non-Transferring Entity (or, at the option
of the Non-Transferring Entity, to an Affiliate of the Non-Transferring Entity
designated by the Non-Transferring Entity not less than five days prior to the
closing) (i) an assignment of the Corporation Interest described in the Transfer
Notice, in form and substance reasonably acceptable to the purchasing
Non-Transferring Entity (or such Affiliate) and (ii) any other instruments
reasonably requested by the purchasing Non-Transferring Entity to give effect to
the purchase; and (b) the purchasing Non-Transferring Entity shall deliver to
the Transferring Entity the purchase price specified in the Transfer Notice in
immediately available funds or other consideration as specified in the Transfer
Notice. If the Non-Transferring Entity does
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not elect to purchase the Corporation Interest pursuant to this Section 4.1, or
having elected to so purchase such Corporation Interests fails to do so within
the time period required by this Section 4.1, the Transferring Entity shall be
free for a period of 180 days after the expiration of the offer period referred
to above or the date of such failure, as applicable, to enter into a definitive
written agreement with an unaffiliated third party regarding the Transfer of its
Corporation Interest on terms and conditions that satisfy the following
criteria:
(1) the amount of consideration to be paid by the purchasing
party may not be less than the consideration set forth in the Transfer Notice;
(2) the form of consideration may not be materially different
from that set forth in the Transfer Notice, except to the extent any change in
the form of consideration makes the terms of the transaction less favorable from
the purchaser's standpoint; and
(3) the terms and conditions set forth in such definitive
written agreement, when considered together with the form and amount of
consideration to be paid by such purchasing party, may not render the terms of
such transaction, taken as a whole, materially inferior (to the Transferring
Entity from an economic standpoint) to those set forth in the Transfer Notice
(it being agreed that the granting by the Transferring Entity of
representations, warranties and indemnities with respect to the business or
properties of the Corporation, as applicable, or any of its subsidiaries that
are different from or in addition to any such provisions referenced in the
Transfer Notice shall not be considered to be more favorable to the purchaser
for purposes of this clause (3)).
If such a definitive written agreement is entered into with an unaffiliated
third party within such time period, the Transferring Entity shall be free for a
period of 270 days following the execution of such definitive written agreement
to consummate the Transfer of its Corporation Interest in accordance with the
terms thereof. If such Transfer is not consummated within such time period in
accordance with the terms of such definitive written agreement, the requirements
of this Section 4.1 shall apply anew to any further efforts by the Transferring
Entity to Transfer its Corporation Interest.
Section 4.2 Change of Control. (a) If (i) a Change of Control occurs
with respect to a Duke Shareholder, PGCSI Parent shall have the option to
purchase such Duke Shareholder's Corporation Interest for Fair Market Value
pursuant to the provisions of Section 4.2(b), (c) and (d), or (ii) a Change of
Control occurs with respect to a Phillips Shareholder, DENG shall have the
option to purchase such Phillips Shareholder's Corporation Interest for Fair
Market Value pursuant to the provisions of Section 4.2(b), (c) and (d).
(b) In the event of a transaction giving rise to a Change of Control
with respect to a Duke Shareholder or a Phillips Shareholder, as applicable, the
Party who has experienced such a Change of Control transaction (the "Changing
Party") shall promptly (and in any event within three days of the consummation
of such transaction) deliver notice (the "Control Notice") to the other Party or
Parties that are not Affiliates of the Changing Party (whether one or more, the
"Non-Changing Party") of such Change of Control transaction. The Non-Changing
Party shall have the right, to be exercised by notice (the "Control Acceptance")
on or before the 60th day following receipt of the Control Notice (the "Control
Offer Period"), to elect to purchase the Corporation Interest of the Changing
Party for Fair Market Value as of the date of the Change of Control. The Control
Acceptance shall set forth the name of a nationally recognized appraisal firm
(which may
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<PAGE> 10
be an investment banking, accounting or other firm that performs appraisal and
valuation services) designated by the Non-Changing Party as its appraisal firm
(the "Non-Changing Party Appraiser").
(c) If the Non-Changing Party timely delivers the Control Acceptance
during the Control Offer Period, within 15 days from the date of receipt of the
Control Acceptance, the Changing Party shall notify the Non-Changing Party in
writing of the name of an appraisal firm (which may be an investment banking,
accounting or other firm that performs appraisal and valuation services)
designated as the Changing Party's appraisal firm (the "Changing Party
Appraiser"); provided, however, that if the Changing Party fails to select an
appraisal firm, and the Changing Party is a Duke Shareholder, the Changing Party
Appraiser shall be Deloitte & Touche L.L.P., or, if the Changing Party is a
Phillips Shareholder, the Changing Party Appraiser shall be Ernst & Young
L.L.P.; provided, further, that if Deloitte & Touche L.L.P. or Ernst & Young
L.L.P., as the case may be, fails to accept the appointment within 30 days from
the date of receipt by the Changing Party of the Control Acceptance, the Control
Appraiser Committee shall consist solely of the Non-Changing Party Appraiser.
Except as provided in the second proviso of the immediately preceding sentence,
the Non-Changing Party Appraiser and the Changing Party Appraiser shall jointly
choose a third appraisal firm (which may be an investment banking, accounting or
other firm that performs appraisal and valuation services) within 15 days after
the appointment of the Non-Changing Party Appraiser (provided, however, that if
they fail to select a third appraisal firm within 15 days after the appointment
of the Non-Changing Party Appraiser, such third firm (which shall be an
investment banking, accounting or other firm that performs appraisal and
valuation services) will be selected by the American Arbitration Association at
the request of either Party within 10 days after such request) (the "Neutral
Control Appraiser," and together with the Changing Party Appraiser and the
Non-Changing Party Appraiser, the "Control Appraiser Committee"). Once the
Control Appraiser Committee has been chosen, each of the Changing Party and
Non-Changing Party shall submit proposed Fair Market Values of the Changing
Party's Corporation Interest to the Control Appraiser Committee, together with
any supporting documentation such Party deems appropriate, as soon as
practicable, but in no event earlier than 30 days after the date of receipt of
the Control Acceptance nor later than (i) 30 days after the date of selection of
the Neutral Appraiser or (ii) in the event of the failure of Deloitte & Touche
L.L.P. or Ernst & Young L.L.P., as the case may be, to accept the appointment
within the required time period, 60 days from the date of receipt by the
Non-Changing Party of the Control Notice. If either Party fails to submit its
proposed Fair Market Value within the required time period, the Fair Market
Value proposed by the other Party (assuming such other Party has submitted its
proposed value within the required time period) shall be deemed to be the Fair
Market Value of the Changing Party's Corporation Interest for purposes of this
Section 4.2. If both Parties submit their respective proposed values on a timely
basis, the Control Appraiser Committee shall determine, by majority vote, the
Fair Market Value as of the date of the Change of Control of the Changing
Party's Corporation Interest, as promptly as possible (and in any event on or
before the 30th day after submittal of the competing proposals), which
determination shall be final and binding on the Parties. The cost of such
appraisal shall be paid in equal portions by (A) the Changing Party and (B) the
Non-Changing Party. Each of the Changing Party and the Non-Changing Party shall
provide to the other and, if applicable, the Control Appraisal Committee, all
information reasonably requested by them.
(d) The closing of the Non-Changing Party's acquisition of the Changing
Party's Corporation Interest shall be consummated on or before the 60th day
after the determination of the
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<PAGE> 11
Fair Market Value in accordance with Section 4.2(c). The acquisition shall be
consummated at a closing held at the principal offices of the Corporation
(unless otherwise mutually agreed by the Changing Party and the Non-Changing
Party) at which time the purchase price, payable in the form of immediately
available funds, shall be delivered to the Changing Party, and the Changing
Party shall deliver or cause to be delivered to the Non-Changing Party (or, at
the option of the Non-Changing Party, to (i) an Affiliate of the Non-Changing
Party or (ii) if the interest being transferred represents the entire Duke
Corporation Interest or the entire Phillips Corporation Interest, a designee of
the Non-Changing Party, in each case as designated by the Non-Changing Party not
less than five days prior to the closing) such transfer documentation reasonably
acceptable to the Non-Changing Party (or such Affiliate or designee) as shall be
required to evidence the transfer of the Changing Party's Corporation Interest,
as the case may be, free and clear of all liens and encumbrances, except those
created under this Agreement.
Section 4.3 Open Market Purchases and Transfers. Following the IPO,
subject to applicable federal and state securities laws, each Shareholder and
its Affiliates may make open-market purchases or sales of shares of Corporation
Common Stock.
Section 4.4 Affiliate Transfers. If either a Duke Shareholder or a
Phillips Shareholder desires to Transfer all or any portion of its Corporation
Interest to an Affiliate, such Transfer shall only be permitted hereunder if the
transferee (other than any transferee that is already a party to this Agreement)
becomes a party to this Agreement by executing an adoption agreement in
substantially the form of Exhibit A hereto.
Section 4.5 Void Transfers. Any purported Transfer of all or any
portion of a Corporation Interest not permitted by this Article IV shall be
void. The provisions of this Article IV with respect to Corporation Interests
shall apply equally to any rights or options to purchase, or securities
convertible into or exchangeable for Corporation Interests.
ARTICLE V
TERMINATION
Section 5.1 Termination. (a) This Agreement shall terminate immediately
if at any time either Duke's Total Corporation Interest or Phillips' Total
Corporation Interest is less than 20%.
(b) In the case of termination in accordance with this Section 5.1,
upon such termination, this Agreement shall become void and have no effect;
provided, however, that such termination shall not relieve any Party of any
liability for any breach of this Agreement that occurred prior to such
termination.
ARTICLE VI
MISCELLANEOUS
Section 6.1 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
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effective when one or more counterparts have been signed by each of the Parties
and delivered (including by facsimile) to the other Parties.
Section 6.2 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.
(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 6.2.
Section 6.3 Entire Agreement. This Agreement constitutes the entire
agreement between the Parties with respect to the subject matter hereof and
there are no agreements, understandings, representations or warranties between
the parties other than those set forth or referred to herein. This Agreement is
not intended to confer upon any person not a Party hereto any rights or remedies
hereunder.
Section 6.4 Expenses. Except as set forth in this Agreement, all legal
and other costs and expenses incurred in connection with this Agreement and the
transactions contemplated by this Agreement shall be paid by the Party incurring
such costs and expenses.
Section 6.5 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, if to a Party hereunder, 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):
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(a) If to PGCSI Parent:
Phillips Petroleum Company
1266 Adams Building
Bartlesville, Oklahoma 74004
Attention: Clyde W. Lea
Fax No.: (918) 662-2301
With a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Andrew R. Brownstein, Esq.
Fax No.: (212) 403-2000
(b) If to DENG:
Duke Energy Natural Gas Corporation
5400 Westheimer Court, 8th Floor
Houston, Texas 77056-5310
Attention: Richard K. McGee
Fax No.: (713) 569-2491
With a copy to:
Duke Energy Field Services Corporation
370 17th Street, Suite 900
Denver, Colorado 80202
Attention: Martha B. Wyrsch
Fax No.: (303) 605-1605
And to:
Vinson & Elkins L.L.P.
1001 Fannin, Suite 2300
Houston, Texas 77002-6760
Attention: Bruce R. Bilger
Fax No.: (713) 517-5429
(c) If to the Corporation:
Duke Energy Field Services Corporation
370 17th Street, Suite 900
Denver, Colorado 80202
Attention: Martha B. Wyrsch
Fax No.: (303) 605-1605
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<PAGE> 14
With a copy to:
Duke Energy Corporation
5400 Westheimer Court, 8th Floor
Houston, Texas 77056-5310
Attention: Richard K. McGee
Fax No.: (713) 569-2491
And to:
Vinson & Elkins L.L.P.
1001 Fannin, Suite 2300
Houston, Texas 77002-6760
Attention: Bruce R. Bilger
Fax No.: (713) 517-5429
Section 6.6 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 6.7 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 6.8 Amendments and Waivers. This Agreement may not be modified
or amended except by an instrument or instruments in writing signed by all
Parties. Any Party may, only by an instrument in writing, waive compliance by
the other Parties with any term or provision of this Agreement on the part of
such other Parties to be performed or complied with. The waiver by any Party 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 6.9 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 6.10 Interpretation. In the event an ambiguity or question of
intent or interpretation arises with respect to this Agreement, this Agreement
shall be construed as if it was 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.
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Section 6.11 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, including temporary
restraining orders or temporary or permanent injunctions.
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IN WITNESS WHEREOF, each of the undersigned has caused this Agreement
to be duly executed and delivered on the date first set forth above.
DUKE ENERGY NATURAL GAS CORPORATION
By:
----------------------------------
Name:
Title:
PHILLIPS PETROLEUM COMPANY
By:
----------------------------------
Name:
Title:
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EXHIBIT A
ADOPTION AGREEMENT
This Adoption Agreement ("Adoption") is executed pursuant to the terms
of the Shareholders Agreement by and among Duke Energy Natural Gas Corporation
and Phillips Petroleum Company, dated as of _________ , 2000, as amended to
date, a copy of which is attached hereto (the "Shareholders Agreement"), by the
transferee ("Transferee") executing this Adoption. By the execution of this
Adoption, the Transferee agrees as follows:
1. Acknowledgment. Transferee acknowledges that Transferee is acquiring
certain [describe securities acquired], subject to the terms and conditions of
the Shareholders Agreement. Capitalized terms used herein without definition are
defined in the Shareholders Agreement.
2. Agreement. Transferee (a) agrees that [describe securities] acquired
by Transferee shall be bound by and subject to the terms of the Shareholders
Agreement and (b) hereby joins in, and agrees to be bound by, the Shareholders
Agreement with the same force and effect as if it were originally a party
thereto and a Duke Shareholder or a Phillips Shareholder, as applicable,
thereunder.
3. Notice. Any notice required by the Shareholders Agreement shall be
given to Transferee at the address listed beside Transferee's signature below.
EXECUTED AND DATED on this ________ day of ______________ , ______.
TRANSFEREE:
By:
----------------------------------
Notice
Address:
--------------------------------------
--------------------------------------
Telecopy:
-----------------------------
<PAGE> 1
EXHIBIT 10.7(b)
FIRST AMENDMENT
TO
CONTRIBUTION AND GOVERNANCE
AGREEMENTS
This First Amendment to Contribution and Governance Agreements (this
"Amendment"), dated as of March 23, 2000, is entered into by and among Phillips
Petroleum Company, a Delaware corporation ("Phillips"), Duke Energy Corporation,
a North Carolina corporation ("Duke") and Duke Energy Field Services, LLC, a
Delaware limited liability company (the "Company").
WHEREAS, reference is made to (i) that certain Contribution Agreement
by and among Phillips, Duke and the Company dated as of December 16, 1999 (the
"Contribution Agreement") (capitalized terms used but not defined herein shall
have the meaning given thereto in the Contribution Agreement) and (ii) that
certain Governance Agreement by and among Phillips, Duke and the Company dated
as of December 16, 1999 (the "Governance Agreement"); and
WHEREAS, Phillips, Duke and the Company desire to amend the
Contribution Agreement;
NOW, THEREFORE, for and in consideration of the mutual benefits to be
derived from this Amendment, and intending to be legally bound hereby, the
parties hereto hereby agree as follows:
ARTICLE I
AMENDMENTS
1.1 AMENDMENTS TO CONTRIBUTION AGREEMENT. The Contribution Agreement is
hereby amended as follows:
1.1.1 Article I is amended by inserting each of the following
definitions in its appropriate place in alphabetical order:
"DEFS Balance Sheet Supplement" shall have the
meaning set forth in Section 5.5.
"First Amendment" shall mean the First Amendment to
Contribution Agreement dated as of March 23, 2000, by and
among Duke, Phillips and the Company.
"PEC Note" shall mean that certain intercompany note
in the principal amount of $10,000,000 from PanEnergy Corp. to
TEPPCO Investments.
"TCTM" shall mean TCTM, L.P., a Delaware limited
partnership.
"TE Products" shall mean TE Products Pipeline
Company, Limited Partnership, a Delaware limited partnership.
<PAGE> 2
"TEPPCO" shall mean Texas Eastern Products Pipeline
Company, a Delaware corporation, or any successor entity.
"TEPPCO Excluded Assets and Liabilities" shall mean
all assets and Liabilities of TEPPCO other than (i) its
interests in and Liabilities arising out of, attributable to
or directly relating to TEPPCO Investments, TEPPCO Partners,
TE Products, TCTM or any of their respective Subsidiaries or
the performance of its duties as a general partner of TEPPCO
Partners, TE Products or TCTM, and (ii) the TEPPCO Note.
Notwithstanding the foregoing, it is agreed and understood
that deferred tax liabilities of TEPPCO for financial
accounting purposes, as distinguished from tax liabilities of
TEPPCO under the law, shall not be considered "Liabilities of
TEPPCO" for purposes of this definition of "TEPPCO Excluded
Assets and Liabilities".
"TEPPCO Investments" shall mean TEPPCO Investments,
Inc., a Delaware corporation, or any successor entity.
"TEPPCO Investments Excluded Assets and Liabilities"
shall mean all assets and Liabilities of TEPPCO Investments
other than the PEC Note and the TEPPCO Note.
"TEPPCO Note" shall mean that certain intercompany
note in the principal amount of $150,000,000 from TEPPCO to
TEPPCO Investments.
"TEPPCO Partners" shall mean TEPPCO Partners, L.P., a
Delaware limited partnership.
1.1.2 Clauses (i) and (ii) of Section 2.1(b) are amended by
deleting them in their entirety and inserting the following in
replacement therefor:
"(i) the crude oil trucking assets, facilities, operations and
directly related Liabilities held by or attributable to Duke
Energy Transport and Trading Co., a Colorado corporation
("DETTCO") to be transferred to a DEFS Subsidiary; (ii) (A)
each of TEPPCO and TEPPCO Investments to be converted into a
limited liability company organized under the laws of the
State of Delaware; (B) the TEPPCO Investments Excluded Assets
and Liabilities to be transferred out of TEPPCO Investments
(and TEPPCO); (C) the TEPPCO Excluded Assets and Liabilities
to be transferred out of TEPPCO; (D) all outstanding
membership interests in TEPPCO to be transferred to a DEFS
Subsidiary; and (E) the obligations of PanEnergy Corp. under
the PEC Note to be assumed by the Company;"
1.1.3 Clause (i) of Section 3.2(c)(2) is amended by deleting
"$1,200,000,000" in such clause and inserting "$1,425,000,000" in
replacement therefor.
2
<PAGE> 3
1.1.4 Clause (ii) of Section 3.3(a) is amended by inserting
"(excluding TEPPCO and any Subsidiaries of TEPPCO)" after the words
"DEFS Subsidiaries" and before the words "as of the Closing Date."
1.1.5 Section 5.1(b) is amended by: (1) deleting the first
occurrence of "DETTCO" in the parenthetical in the first sentence
thereof and inserting "TEPPCO" in replacement therefor; (2) deleting
the second occurrence of "DETTCO" in the parenthetical in the first
sentence thereof and inserting "TEPPCO (excluding TEPPCO Partners, TE
Products and TCTM and their respective Subsidiaries)" in replacement
therefor; (3) inserting at the end of the first parenthetical (before
the closing parenthesis) in the first sentence "; provided, that for
purposes of the representations and warranties contained in Article V
and the covenants in Article VI, (x) except as provided in Section 5.5,
TEPPCO and Subsidiaries of TEPPCO shall be considered DEFS Subsidiaries
and Subsidiaries of each of DEFS and DEFS Holding, but only from and
after the date of the First Amendment, and (y) TEPPCO Partners, TE
Products and TCTM and their respective Subsidiaries shall not be
considered Subsidiaries of DEFS Holding, DEFS or TEPPCO"; (4) deleting
"DETTCO and its Subsidiaries" in the third sentence thereof and
inserting "TEPPCO and its Subsidiaries (other than TEPPCO Partners, TE
Products and TCTM and their respective Subsidiaries)" in replacement
therefor; and (4) deleting the three occurrences of "DETTCO" in the
fourth sentence thereof and inserting "TEPPCO" in replacement therefor.
1.1.6 Section 5.5 is amended as follows:
(a) The first paragraph is amended by: (1) deleting "TEPPCO
which is an Excluded Asset" in the parenthetical in clause (i)
thereof and inserting "the Class B Subordinated Units of
TEPPCO Partners, L.P., which is part of the Duke Excluded
Assets and Liabilities" in replacement therefor; (2) inserting
"and the DEFS Balance Sheet Supplement" after the words
"Balance Sheet" in the last parenthetical thereof; and (3)
inserting a new sentence at end thereof which reads, "Duke
shall provide to Phillips as an amendment to the Duke
Disclosure Schedule pursuant to Section 1.3 of the First
Amendment, an unaudited proforma supplement to the DEFS
September 30 Balance Sheet showing proforma adjustments to
include the investment in TEPPCO (exclusive of the TEPPCO
Excluded Assets and Liabilities and the TEPPCO Investments
Excluded Assets and Liabilities) (the "DEFS Balance Sheet
Supplement")."
(b) The second paragraph is amended by inserting "and the DEFS
Balance Sheet Supplement" after the words "Balance Sheet" in
clause (i) of the last sentence thereof.
1.1.7 Section 5.10(c) is amended by inserting "and the DEFS
Balance Sheet Supplement" after the words "DEFS September 30 Balance
Sheet".
1.1.8 Section 6.5(h) is amended by deleting "Section
2.1(b)(i)" in the first sentence thereof and inserting "Section
2.1(b)(ii)" in replacement therefor.
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1.1.9 Section 6.17(a) is amended by (i) inserting "or
commercial paper" after the words "bank credit" in the first sentence
thereof and (ii) deleting "$2,400,000,000" in clause (i) thereof and
inserting "$2,625,000,000" in replacement therefor.
1.1.10 Article VI is amended by inserting the following at the
end thereof:
"Section 6.21. TEPPCO Assets. Duke shall cause TEPPCO to own
and hold all of the general partner interests in TEPPCO
Partners, TE Products and TCTM as of the Closing and to be
entitled to all of the benefits of the general partner of such
entities."
1.1.11 Clause (iii) of Section 9.2(a) is amended by inserting
", TEPPCO Excluded Assets and Liabilities and TEPPCO Investments
Excluded Assets and Liabilities" after the words "Duke Excluded Assets
and Liabilities" and before the word "and."
1.1.12 Section 2.1(c) of Annex B to the Contribution Agreement
is amended by inserting ", TEPPCO Excluded Assets and Liabilities,
TEPPCO Investments Excluded Assets and Liabilities" after the words
"Duke Excluded Assets and Liabilities" and before the words "or their
transfer."
1.1.13 Each of (1) Section 4.1 and (2) Section 4.2 of Annex B
is amended by inserting "(including any alternative minimum Tax credit
(whether consolidated, combined, affiliated or unitary or otherwise)
attributable to payments of alternative minimum Tax with respect to any
Pre-Closing Period, which credit is utilized in a Post-Closing Period)"
after the words "Pre-Closing Period" in the second sentence thereof.
1.1.14 Section 4.4 of Annex B is amended by (1) inserting "(or
credit)" after "refund" and (2) inserting "(or utilization)" after
"receipt".
1.1.15 All references in the Contribution Agreement to the
"Agreement" (and terms referencing the "Agreement" such as "hereof,"
"hereby," "herein," "hereunder" and similar terms) shall be deemed to
refer to the Contribution Agreement as amended by this Amendment.
Notwithstanding the foregoing, references to "the date of this
Agreement" and similar terms shall refer to the date of the
Contribution Agreement, provided that to the extent that such
references are contained in the representations and warranties
contained in Article V of the Contribution Agreement or in the
covenants contained in Article VI of the Contribution Agreement and
refer to any DEFS Subsidiary, DEFS Subsidiaries, or any Subsidiary or
Subsidiaries of DEFS or DEFS Holding, with regard only to TEPPCO and
its Subsidiaries (excluding TEPPCO Partners, TE Products and TCTM and
their respective Subsidiaries), such references shall refer to the date
of the First Amendment.
1.2 SPECIFIC AMENDMENTS TO THE DUKE DISCLOSURE SCHEDULE. Schedule
2.1(d) of the Duke Disclosure Schedule is amended by deleting "Class B TEPPCO
Units owned by DETTCO".
1.3 DELIVERY OF AMENDMENTS TO THE DUKE DISCLOSURE SCHEDULE. The Parties
agree that prior to the earlier of (x) March 24, 2000 or (y) five days prior to
the Closing Date, Duke may amend
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the Duke Disclosure Schedule as necessary to reflect the matters addressed in
this Amendment (it being understood and agreed that Schedule 5.10 of the Duke
Disclosure Schedule need not include contracts of TEPPCO Partners, TE Products
or TCTM for which TEPPCO also is obligated or liable by virtue of its status as
the general partner of TEPPCO Partners, TE Products or TCTM), with each
amendment subject to the approval of Phillips, which approval shall not be
unreasonably withheld. If Phillips withholds its approval for any such
amendment, then in addition to any other remedies available to it, Duke shall
have the right to terminate this Amendment. Upon any such termination, this
Amendment shall be null and void and of no further force and effect, and the
Contribution Agreement shall continue in effect as it existed prior to this
Amendment.
1.4 AMENDMENTS TO GOVERNANCE AGREEMENT. Annex F to the Governance
Agreement is hereby amended by: (1) deleting "$3,360,500,000" in each of (x)
clause (a) of Section 1.2 thereof and (y) the second sentence of Section 2.3
thereof and inserting, in each case, "$3,585,500,000" in replacement therefor
and (2) deleting the second occurrence of the words "shall treat" in clause (E)
of Section 4.2 thereof.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS AND WARRANTIES OF PHILLIPS. Phillips hereby
represents and warrants to each of Duke and the Company that (1) it has full
corporate power and authority to execute and deliver this Amendment, (2) the
execution and delivery of this Amendment have been duly and validly approved by
all corporate action on the part of Phillips, (3) this Amendment has been duly
and validly executed and delivered by Phillips and, assuming due authorization,
execution and delivery by Duke and the Company, constitutes a valid and binding
obligation of Phillips, enforceable against Phillips in accordance with its
terms and (4) the execution and delivery of this Amendment by Phillips do not,
(A) constitute a breach or violation of, or a default under, the certificate of
incorporation or by-laws or other organizational documents of Phillips or PGC,
(B) 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 PGC or of any of its Subsidiaries is a party or by
which any of them or their respective properties or assets may be bound, or (C)
assuming compliance with the applicable requirements of the HSR Act, violate any
law, rule, regulation, judgment, decree or order applicable to Phillips, PGC or
any of the PGC Subsidiaries or any of their respective properties or assets,
except in the case of (B) and (C) 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 Material Adverse Effect on the PGC
Subsidiaries or to adversely affect the ability of Phillips to consummate the
transactions contemplated by the Contribution Agreement as amended by this
Amendment.
2.2. REPRESENTATIONS AND WARRANTIES OF DUKE. Duke hereby represents and
warrants to each of Phillips and the Company that (1) each of Duke and the
Company has full corporate power and authority to execute and deliver this
Amendment, (2) the execution and delivery of this Amendment have been duly and
validly approved by all corporate action on the part of each of Duke and the
Company, (3) this Amendment has been duly and validly executed and delivered by
each
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of Duke and the Company and, assuming due authorization, execution and delivery
by Phillips, constitutes a valid and binding obligation of each of Duke and the
Company, enforceable against each of Duke and the Company in accordance with its
terms and (4) the execution and delivery of this Amendment by Duke do not, (A)
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, (B) 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 of any of its Subsidiaries is a party
or by which any of them or their respective properties or assets may be bound,
or (C) assuming compliance with the applicable requirements of the HSR Act,
violate any law, rule, regulation, judgment, decree or order applicable to Duke,
DEFS Holding or any of the DEFS Subsidiaries or any of their respective
properties or assets, except in the case of (B) and (C) 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 Material Adverse
Effect on DEFS or to adversely affect the ability of Duke to consummate the
transactions contemplated by the Contribution Agreement as amended by this
Amendment.
ARTICLE III
MISCELLANEOUS
3.1 COUNTERPARTS. This Amendment 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 of
the parties hereto and delivered (including by facsimile) to the other party.
3.2 GOVERNING LAW. (a) This Amendment 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 hereto 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 Amendment, 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 hereto 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 hereto 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 hereto 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
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to itself or its property, each party hereto hereby irrevocably waives such
immunity in respect of its obligations with respect to this Amendment.
(d) Each party hereto 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 Amendment. Each
party hereto certifies that it has been induced to enter into this Amendment by,
among other things, the mutual waivers and certifications set forth above in
this Section 3.2.
3.3 ENTIRE AGREEMENT. This Amendment, the Contribution Agreement and
the Governance Agreement, and the schedules and exhibits hereto and thereto,
together with the Confidentiality Agreements dated August 11, 1999 and August
26, 1999 between Duke and Phillips, contain the entire agreement between the
parties with respect to the subject matter hereof and there are no agreements,
understandings, representations or warranties between the parties other than
those set forth or referred to herein.
3.4 NOTICES. The provisions of Section 12.5 of the Contribution
Agreement are hereby incorporated herein.
3.5 SUCCESSORS AND ASSIGNS. This Amendment shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns; provided, however, that no party hereto will assign its
rights or delegate any or all of its obligations under this Amendment without
the express prior written consent of each other party hereto.
3.6 AMENDMENTS AND WAIVERS. This Amendment may not be modified or
amended except by an instrument or instruments in writing signed by all parties
hereto. Any party hereto may, only by an instrument in writing, waive compliance
by the other parties hereto with any term or provision of this Amendment on the
part of another party hereto to be performed or complied with. The waiver by any
party hereto of a breach of any term or provision of this Amendment 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.
3.7 SEVERABILITY. If any provision of this Amendment shall be held
invalid, illegal or unenforceable, the validity, legality or enforceability of
the other provisions of this Amendment 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.
3.8 HEADINGS; DEFINITIONS. The Section and Article headings contained
in this Amendment are inserted for convenience of reference only and will not
affect the meaning or interpretation of this Amendment. All capitalized terms
defined herein are equally applicable to both the singular and plural forms of
such terms.
3.9 INTERPRETATION. In the event an ambiguity or question of intent or
interpretation arises, this Amendment shall be construed as if drafted jointly
by the parties and no presumption or
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burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Amendment. The phrase "including" shall be
deemed to be followed by "without limitation."
3.10 RATIFICATION. Except as amended hereby, the Contribution Agreement
and the Governance Agreement shall remain in full force and effect as previously
executed by the parties, and the parties hereby ratify the Contribution
Agreement and the Governance Agreement as amended hereby.
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IN WITNESS WHEREOF, each of the undersigned, intending to be legally
bound, has caused this Amendment to be duly executed and delivered on the date
first set forth above.
PHILLIPS PETROLEUM COMPANY
By: /s/ JOHN A. CARRIG
------------------------------------
Name: John A. Carrig
----------------------------------
Title: Vice President and Treasurer
---------------------------------
DUKE ENERGY CORPORATION
By: /s/ RICHARD K. MCGEE
------------------------------------
Name: Richard K. McGee
----------------------------------
Title: Vice President
---------------------------------
DUKE ENERGY FIELD SERVICES, LLC
By: /s/ DAVID D. FREDERICK
------------------------------------
Name: David D. Frederick
----------------------------------
Title: Sr. Vice President and
Chief Financial Officer
---------------------------------
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EXHIBIT 10.9
SULFUR SALES AGREEMENT
THIS AGREEMENT is entered into this 1st day of October, 1999, but is
effective as of January 1, 1999, regardless of the date of execution, by and
between PHILLIPS 66 COMPANY, a division of Phillips Petroleum Company, a
Delaware corporation ("Buyer"), and GPM GAS CORPORATION, a Delaware corporation
("GPM").
WHEREAS, the parties desire to update and replace the previous contract
between them for the sale from GPM to Buyer of Molten Sulfur with this
Agreement;
NOW THEREFORE, for and In consideration of the mutual promises and
covenants herein contained, the parties agree as follows:
ARTICLE I: SALE AND PURCHASE
1.1 GPM shall sell and deliver and Buyer shall purchase, receive, and pay,
on the terms and conditions set forth herein, the Molten Sulfur ("Product") as
set forth in the Attachment, which is incorporated by reference herein.
ARTICLE II: QUANTITY
2.1 The quantity of each Product to be sold and purchased hereunder shall
be the full output of Product at GPM gas processing plants, as more fully stated
in the Attachment.
2.2 For planning purposes only, GPM shall be responsible for providing to
Buyer on or before the first business day of each calendar month a forecast for
the next succeeding three-month period of anticipated Product sales or
deliveries under the terms of this Agreement.
ARTICLE III: TERM
3.1 Unless otherwise set forth in the Attachment to this Agreement, this
Agreement shall be effective from the date set forth in the first paragraph of
this Agreement (the "Effective Date") and it shall remain in full force and
effect for a period of one (1) year, then from month to month thereafter;
provided however, that either Buyer or GPM may terminate this Agreement as of
the end of the primary term or as of the end of any month thereafter by
providing the other party with at least six (6) months advance written notice of
termination.
ARTICLE IV: PRICE
4.1 The purchase price of or pricing formula for, the Product hereunder
shall be as set forth on the Attachment.
<PAGE> 2
ARTICLE V: SPECIFICATIONS
5.1 The specifications for the Product to be delivered hereunder shall be
as set forth on the Attachment.
ARTICLE VI: DELIVERY AND TITLE TRANSFER
6.1 GPM shall deliver to Buyer the Product at the custody transfer point or
points set forth on the Attachment or at such other location(s) as may be
mutually agreed (each, a "Delivery Point"), in a manner typical of industry
practice for pressure and temperature. Additionally, the description and each
location where the volume, pressure, and temperature of the Product are measured
(if required) shall be referred to herein as a "Measurement Point." The
Attachment shall designate whether title to, possession of, and risk of loss of
the Product shall pass from GPM to Buyer at either the designated Delivery Point
or the Measurement Point, respectively (the "Title Transfer Point"). GPM shall
have responsibility for and retain any liability with respect to the Product
prior to its delivery to Buyer at its designated Title Transfer Point(s), and
Buyer shall have responsibility for and assume any liability with respect to the
Product at and after its delivery to Buyer at its designated Title Transfer
Point(s).
ARTICLE VII: INVOICING AND PAYMENT
7.1 GPM shall invoice Buyer separately, for the Product sold and purchased
hereunder no more often than once during each calendar month for the preceding
month's sales. Such invoices shall be dispatched promptly by GPM, electronically
[electronic data interchange ("EDI") or equivalent] or otherwise, so as to be
received by Buyer within five (5) business days after the last day of the prior
calendar month. Buyer shall make payment to GPM on or before the 15th day
following Buyer's receipt of each invoice by EDI or equivalent wire transfer or
other means satisfactory to GPM, of immediately available funds to GPM's account
at such bank or depository as is designated in the invoice. If Buyer fails to
pay any amounts due and owing, such overdue amounts shall accrue interest at the
Default Rate from the due date, which interest shall be paid at the same time as
such overdue monthly payment is paid. In no event shall the Default Rate exceed
the maximum legal interest rate permitted under Texas law. "Default Rate" shall
mean a simple interest rate per annum (no compounding) equal to or lesser of (i)
two (2) points over prime, base, or equivalent annual rate published or
announced from time to time by The Chase Manhattan Bank, N.A. (or any successor
thereto) at its principal New York City office or such other bank as may be
agreed upon by the parties as in effect for any given day based on a year of
three hundred sixty (360) days (whether or not such rate is actually charged by
The Chase Manhattan Bank, N.A., or such other bank, as the case may be) or (ii)
the maximum rate permitted by applicable law.
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7.2 If Buyer, in good faith, disputes the amount of any statement or any
part thereof, Buyer shall pay to GPM such amount as Buyer concedes to be
correct, provided however, that if Buyer disputes the amount due, Buyer must
provide reasonable supporting documentation acceptable in industry practice to
explain the amount paid. If it is ultimately determined that Buyer owes the
disputed amount, immediately upon such determination, Buyer shall pay GPM that
amount with interest as calculated above.
7.3 If GPM has a reasonable doubt as to Buyer's financial responsibility
.and so advises Buyer; GPM may decline to make deliveries of Product except for
pre-payment, cash payable on delivery, or other mutually acceptable security. If
Buyer satisfies GPM, in GPM's reasonable opinion, as to Buyer's financial
responsibility, GPM may resume deliveries hereunder based on the terms provided
in the first paragraph of this Article VII. Additionally, GPM may withhold or
suspend deliveries, in addition to any and all other remedies available
hereunder in this Article VII, if (1) Buyer files a petition or otherwise
commences, authorizes, or acquiesces in the commencement of a proceeding or
cause under any bankruptcy or similar law for the protection of creditors or has
such petition filed or proceeding commenced against it, or (2) Buyer becomes
bankrupt or insolvent (however evidenced). GPM may exercise its rights under
this Article VII at any time and from time to time during the term of this
Agreement.
7.4 To the extent that any pricing under this Agreement is to be calculated
based upon historical cost, price, or other information (collectively,
"Historical Costs") that is in the possession of one party, upon request the
party possessing such Historical Costs shall promptly deliver to the other party
each month such information as required for calculating the purchase price for
the Product and preparing invoices with respect to such Product.
ARTICLE VIII: TAXES
8.1 Buyer shall be responsible for the payment or satisfaction of any and
all taxes (including any increase in or additional tax of charge or charge
imposed) which may be imposed by Federal, State, or local taxation authorities
upon or after title to sulfur delivered hereunder has passed to Buyer, and shall
either (1) pay or (2) demonstrate its exemption from any sales taxes imposed
upon or levied coincident with the transfer of title to sulfur delivered from
GPM to Buyer, including but not limited to sales, use, gross receipts or other
similar taxes, but excluding income, excess profit, franchise, severance or
production taxes. Buyer shall indemnify, defend, and hold GPM harmless from any
and all liability for such taxes for which Buyer is responsible herein.
8.2 All other taxes, fees, or governmental charges assessed on the Product
at or before its sale to Buyer shall be assumed by and paid by GPM, and GPM
shall indemnify, defend, and hold Buyer harmless from any and all liability for
such taxes for which GPM is responsible.
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ARTICLE IX: RECORDS; AUDIT
9.1 Except as otherwise required by law, rule, or regulation, each party
shall maintain true and correct records pertaining to this Agreement and all
transactions related thereto and shall maintain such records for a period of at
least two (2) years from the date of their origination or receipt. On written
request by either party and at its expense, either party may have its
representatives audit the records of the other party relating to performance of
this Agreement at any reasonable time during the term of this Agreement and for
two (2) years thereafter for the purpose of confirming the accuracy of such
records and the manner in which such records have been used in the
administration of this Agreement; provided however, that such accountants shall
not disclose to the party requesting the audit any confidential information
obtained during such audit and shall promptly report to both Buyer and GPM only
the results of the audit and whether same shows compliance with the terms of
this Agreement, or as the case may be, a report setting forth the facts
detailing the failure to comply with the terms of this Agreement. Unless
required by legal or administrative process, a party as well as its agents,
representatives, employees, auditors, independent contractors, officers, and
directors who obtain actual or constructive knowledge of any information
obtained relative to any audit, shall treat and shall be required by the party
to this Agreement with which they are employed or retained to treat, as
confidential and not disclose, divulge, reveal, or report, directly or
indirectly, to any third party any information obtained during any audit without
the other party's prior written consent. If any legal or administrative process
requires disclosure of any information obtained during any audit, a party shall
provide prompt written notice to the other party of such process, thereby
permitting the other party to seek a protective order or other appropriate
remedy as it deems necessary in its sole discretion.
ARTICLE X: NOTICES
10.1 All notices provided for herein shall be considered as properly given
if in writing and delivered personally or sent by overnight courier, telex, fax,
or first class mail with postage prepaid, duly directed to the addresses of the
parties hereto as set forth below:
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Buyer: Phillips 66 Company
889 Adams Bldg.
Bartlesville, OK 74004
Attn: Sulfur Marketing Manager
Phone: (918) 661-8962
Fax: (918) 661-8379
GPM: GPM Gas Corporation
1300 Post Oak Blvd., Suite 800
Houston, TX 77056
Attn: Gas Marketing
Phone: (713) 297-6000
Fax: (713) 297-5964
or at such other address as either party shall from time to time designate for
the purpose by written notice to the other party.
ARTICLE XI: CLAIMS
11.1 Neither GPM nor Buyer shall be liable to the other for any variation
in quality or quantity of any Product unless the other party provides it with
written notice of the nature and details of the claim within 366 days of the
date of receipt of the affected Product or the date such Product was due to be
delivered.
11.2 Except as otherwise provided in this Agreement, the remedies available
to each party for any claims regarding a Product (including, but not limited to,
any claims of property damage, personal injury, or wrongful death due to a
breach of warranty or contract, negligence, or strict liability, and claims for
losses or damages resulting from the processing, subsequent use, or distribution
of the Product, or for failure to, timely deliver or accept delivery of the
Product) shall be as provided for under Article II of the Business and Commerce
Code of the State of Texas as in effect on the date of this Agreement (hereafter
referred to as the "UCC").
11.3 Neither party shall be liable to the other for any lost profits or any
indirect, consequential, special, incidental, or contingent damages in
connection with the sale or purchase of any Product. Neither party shall be
entitled to terminate this Agreement for the other's failure to perform unless
such nonperforming party evinces a clear intention to no longer be bound to
perform a material obligation under the terms of this Agreement. In no event
shall Buyer or GPM be liable for exemplary or punitive damages, whether or not
caused by, or resulting from the negligence or other wrongdoing of either party
in connection with the sale or purchase of any Product.
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ARTICLE XII: FORCE MAJEURE
12.1 No failure or omission to carry out or to observe any of the terms,
provisions, or conditions of this Agreement, except the failure to make payment
for sums due hereunder, shall give rise to any claim by GPM or Buyer against
the other, or be deemed a breach of this Agreement, if the same shall have been
or shall be caused by or arise out of any event of force majeure, which term as
used herein shall include (but only to the extent that the affected party is
unable to perform due to causes and events that are beyond the reasonable
control of the affected party), but not be limited to, war, hostilities, acts of
the public enemy or of belligerents, sabotage, blockage, revolution,
insurrection, riot or disorder, requisitions or rationing, whether imposed by
law, decree, or regulations or by voluntary cooperation of industry at the
insistence or request of any governmental authority or person purporting to act
therefor; compliance with allocation programs, voluntary or mandatory, including
reduction or cessation of production by reason of imposition by any governmental
authority or person purporting to act with government authority, acts of God,
fire, frost, earthquake, storm, or lightning, epidemic, quarantine, strikes or
combination of workmen lockouts or other labor disturbances, explosion,
accidents by fire or otherwise to pipe, storage facilities, installations,
machinery, plant outages (either unanticipated or for purposes of preventive
maintenance), delays in acquiring or inability to acquire permits or licenses
necessary to enable the parties hereto to perform, lack of adequate fuel, power,
raw materials, labor, containers or transportation facilities, delays or
shortages caused by breakdowns, failures or unavailability of materials or
equipment breakage, mechanical breakdowns or accident to machinery; failure, or,
inability of a plant, terminal, equipment, or any component therein including,
without limitation, computers or computer systems or components, computer chips,
hardware or software applications to property and correctly receive, process,
transmit, or provide electronic data; delay, breakdown, or destruction of a
plant, terminal, or equipment; provided however, that the party so affected
thereby will exercise reasonable efforts pursuant to prudent industry practice
to prevent the occurrence of the force majeure event and to cure the event of
force majeure as quickly as possible so that the party so affected will be able
to carry out and observe all of the terms, provisions, and conditions of this
Agreement, but such party shall not be required to settle any labor disputes
giving rise to an event of force majeure hereunder.
ARTICLE XIII: WAIVER
13.1 No waiver of any breach of this Agreement shall be held to be a waiver
of any other or subsequent breach. The right of either party to require strict
performance by the other party of any or all obligations imposed upon such other
party by this Agreement shall not in any way be affected by previous waiver,
forbearance, or course of dealing.
6
<PAGE> 7
ARTICLE XIV: WARRANTIES
14.1 GPM warrants that Product will be produced in accordance with its
designated specifications set forth in the Attachment and in compliance with the
requirements of the Fair Labor Standards Act of 1938, as amended, and that GPM
will convey good and unencumbered title thereto.
14.2 THE FOREGOING WARRANTIES ARE EXCLUSIVE, AND ARE IN LIEU OF ALL OTHER
WARRANTIES (WHETHER WRITTEN OR ORAL, EXPRESS OR IMPLIED), INCLUDING, WITHOUT
LIMITATION, WARRANTY OF MERCHANTABILITY AND WARRANTY OF FITNESS FOR A PARTICULAR
PURPOSE.
ARTICLE XV: MISCELLANEOUS PROVISIONS
15.1 Conflict of Interest. Neither Buyer nor GPM shall, and neither party
shall require that its subcontractors shall, pay any commissions, fees, or grant
any rebates to any employee, officer, or agent of the other party nor favor
employees, officers, or agents of the other party with gifts or entertainment of
significant cost or value, nor enter into any business arrangement with
employees, officers, or agents of the other party other than as a representative
of the other party, without the other party's written approval.
15.2 Assignment. All of the terms, conditions, and provisions hereof shall
extend to and be binding upon the respective parties hereto, their successors
and assigns; provided however, that neither party shall assign this Agreement or
any interest herein without the prior written consent of the other party, which
shall not unreasonably be withheld or delayed; except that either party may,
without the consent of the other, assign this Agreement or any interest herein
to (i) a successor of all or a material portion of its business to which this
Agreement relates, (ii) a new business entity resulting from a merger or joint
venture involving a party to this Agreement or all or substantially all of its
business and assets, or (iii) to a person, firm, or legal entity acquiring all
or substantially all or a material portion of the business and assets of a party
to which this Agreement relates.
15.3 Entire Agreement. This instrument (including the Attachment hereto)
contains the entire Agreement between the parties regarding the sale, purchase,
and delivery of Product during the term hereof; and all prior promises,
agreements, or warranties, written or verbal, for the sale of Product shall be
canceled and superseded hereby and shall be of no further force or effect unless
embodied herein. No modifications of this Agreement shall be valid unless in
writing and signed by both parties, and no modifications shall be effected by
the acknowledgment or acceptance of any purchase orders or printed forms
containing different conditions. If there is any conflict between the terms set
forth
7
<PAGE> 8
in this Agreement and the Attachment, the terms set forth in the Attachment
shall govern.
15.4 Applicable Law. THE VALIDITY, INTERPRETATION, AND PERFORMANCE OF THIS
AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF TEXAS WITHOUT REFERENCE
TO PRINCIPLES OF CONFLICTS OF LAW.
15.5 No Third Party Beneficiaries. Nothing in this Agreement is intended or
will be construed to confer upon or give any person or entity other than the
parties any rights or remedies under or by reason of this Agreement or any
transaction contemplated hereby.
8
<PAGE> 9
15.6 Counterparts. This Agreement and any amendment thereto may be executed
in one or more counterparts, each of which when so executed shall be deemed to
be an original but all of which taken together shall constitute one and the same
agreement.
15.7 Severability. If any term or other provision of this Agreement is
invalid, illegal, or incapable of being enforced by any rule or law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party.
IN WITNESS WHEREOF, this Agreement is executed for each party by and
through its respective officers duly authorized, as of the date first above
written.
GPM GAS CORPORATION
By: /s/ CHRISTOPHER WREN
--------------------------------
Name: Christopher Wren
------------------------------
Title: Vice President
-----------------------------
PHILLIPS 66 COMPANY division
of Phillips Petroleum Company
By: /s/ J.E. BINCKLEY
--------------------------------
Name: J.E. Binckley
------------------------------
Title: Sulfur Marketing Manager
-----------------------------
9
<PAGE> 10
GPM - PHILLIPS 66 COMPANY SULFUR
SALES AGREEMENT DATED OCTOBER 1, 1999
ATTACHMENT 1
Product: Molten Sulfur
Buyer: Phillips 66 Company
Seller: GPM Gas Corporation
Volume: Full Output of molten sulfur of existing and existing and
future GPM-operated gas Processing plants. The presently
operating GPM Plants producing molten sulfur include the
Artesia, Eunice, and Linam Ranch Plants in southeast New
Mexico and the Fullerton and Goldsmith Plants in West Texas.
Forecasting Party: GPM
Price: (a) Buyers Plant Netback Price less the higher of 5% or
$1/long ton. The "Plant Netback Price" is defined as Buyer's
actual gross resale price for the Product, less freight,
discounts, allowances, and taxes borne by Buyer on sales of
Product hereunder and not recovered by Buyer on resale.
Buyer will market the Product diligently and in good faith
consistently with its marketing of the same Product and
similar products from other sources.
(b) Buyer shall be entitled to a minimum net purchase/resale
margin of $1/long ton. In the case of any resale of Product
which does not allow Buyer to recover its out of pocket
costs for freight, discounts, allowances, and taxes borne by
Buyer and not recovered by Buyer on resale of Product plus
$1/long ton out of resale revenues, the price shall be
reduced accordingly, and GPM shall reimburse Buyer as
necessary to allow Buyer to recover a net position on the
purchase and resale of $1/long ton of Product
(c) Buyer shall notify GPM in writing as soon as Buyer gains
knowledge of the situation of each instance in which a
reduction of the Plant Netback Price is expected or will be
experienced under the preceding subparagraph. Subject to the
minimum duration of any firm resale commitments that have
been made by Buyer, not to exceed ninety (90) days, Buyer
shall then afford GPM an opportunity to make its own Product
sales or alternate disposition arrangements in lieu of
deliveries to Buyer at Plant Netback Prices reduced under
subparagraph (b) above. If the subparagraph (b) price
reduction continues for a period of three (3) months, then
GPM shall thereafter have a right to terminate this
Agreement
<PAGE> 11
upon ninety (90) days advance written notice to Buyer
effective as of the end of a month.
Measurement Method: Tank truck scales
Pressure Requirements: None
Temperature Requirements: Between 280 degrees F to 300 degrees F
Delivery Point/ At the point that Product passes through the threshold of
Title Transfer manway of the truck designated
Point:
Measurement Point: Goldsmith, Texas Plant - truck customer weighted at tank
truck scales at Martin Gas Plant near Odessa, Texas.
Artesia, New Mexico Plant - tank truck scales at Martin Gas
Dayton Rack near Artesia, New Mexico.
All Plants* - Rail cars will be weighed at tank truck scales
in Seagraves, Texas or at the GPM's Douro Rack near Odessa,
Texas.
*Present Plants: Goldsmith Plant - Goldsmith, Texas
Eunice Plant, Oil Center, New Mexico
Linam Ranch Plant - Hobbs, New Mexico
Fullerton Plant - Andrews, Texas
Title Transfer Point: Delivery Point
Special Provisions: For as long as GPM produces this Product during the term
of this Agreement, Buyer shall retain exclusive right to
sell this product. In the event GPM shall provide Buyer
with a least twelve (12) months prior notification before
discontinuing the manufacture of the Product.
Specifications:
Purity 99.5%
Carbon 0.25% max
Ash 0.05% max
Acidity 0.001% max
Tellurium 0.002% max
Selenium 0.002% max
<PAGE> 1
EXHIBIT 10.10
===============================================================================
PARENT COMPANY AGREEMENT
by and among
PHILLIPS PETROLEUM COMPANY
DUKE ENERGY CORPORATION
DUKE ENERGY FIELD SERVICES, LLC
and
DUKE ENERGY FIELD SERVICES CORPORATION
Dated as of _____, 2000
===============================================================================
<PAGE> 2
PARENT COMPANY AGREEMENT, dated as of ______, 2000 (this "Agreement"),
by and among PHILLIPS PETROLEUM COMPANY, a Delaware corporation ("Phillips"),
DUKE ENERGY CORPORATION, a North Carolina corporation ("Duke"), DUKE ENERGY
FIELD SERVICES, LLC, a Delaware limited liability company (the "Company") and
solely for purposes of Section 4.3(c) of this Agreement, DUKE ENERGY FIELD
SERVICES CORPORATION, a Delaware corporation ("DEFS Holding").
RECITALS:
1. Duke, Phillips and the Company are parties to a Governance
Agreement, dated as of December 16, 1999 (the "Governance Agreement") and a
Contribution Agreement, dated as of December 16, 1999 (the "Contribution
Agreement").
2. Phillips Gas Company, a Delaware corporation and an indirect
wholly-owned subsidiary of Phillips ("PGC"), and DEFS Holding, an indirect
wholly-owned subsidiary of Duke, have simultaneously herewith entered into an
Amended and Restated Limited Liability Company Agreement of Duke Energy Field
Services, LLC, dated as of the date hereof (the "LLC Agreement").
3. In connection with the closing of the transactions contemplated by
the Contribution Agreement, Duke, Phillips and the Company desire to terminate
the Governance Agreement and to enter into this Agreement.
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
Section 1.1 Definitions. As used in this Agreement, the
following terms shall have the respective meanings set forth below:
"Affiliate" shall mean, with respect to any Person, a Person
directly or indirectly Controlling, Controlled by or under common Control with
such Person.
"Agreement" shall have the meaning set forth in the Preamble.
"Agreement of Merger" shall have the meaning set forth in
Section 2.2(a).
"Average Market Price" shall mean, with respect to the
Corporation Common Stock to be sold by the Corporation to the public in the IPO,
the average of the closing prices, as reported on the NYSE Composite Tape, on
each of the first five days of trading on the NYSE (exclusive of the pricing
day).
<PAGE> 3
"Business Day" shall mean any day on which banks are generally
open to conduct business in the State of New York.
"Change of Control" shall mean an event (such as a Transfer of
voting securities) that causes a Person that holds a Company Interest to cease
to be Controlled by such Person's Parent; provided, however, that an event that
causes Duke or Phillips to be Controlled by another Person shall not constitute
a Change of Control.
"Closing Date" shall have the meaning set forth in Section 3.1
of the Contribution Agreement.
"Code" shall mean the United States Internal Revenue Code of
1986, as amended.
"Company" shall have the meaning set forth in the Preamble.
"Company Interest" shall mean, with respect to any Person,
such Person's equity interest in the Company at the time of measurement.
"Contribution Agreement" shall have the meaning set forth in
the Recitals.
"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 Securities Exchange Act of 1934, as amended) of
both of the following:
(a) (i) in the case of a corporation, more than 25% of the
direct or indirect economic interests in the outstanding equity
securities 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.
"Corporation" shall have the meaning set forth in Section
2.2(a).
"Corporation Common Stock" shall have the meaning set forth in
Section 2.2(e).
"Corporation Interest" shall mean, with respect to any Person,
such Person's percentage ownership (direct and indirect), exclusive of any
Market Shares owned (directly or indirectly) by such Person, of the outstanding
Corporation Common Stock at the time of measurement.
"DEFS Holding" shall have the meaning set forth in the
Preamble.
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<PAGE> 4
"DEFS Subsidiary" shall have the meaning set forth in the
Contribution Agreement for purposes of Annex B thereof.
"Disguised Sale Amount" shall mean the excess of (x)
$1,200,000,000 over (y) the product of the Percentage Interest of PGC in the
Company as of the Closing Date and $2,400,000,000.
"Distribution" shall have the meaning set forth in the LLC
Agreement.
"Duke" shall have the meaning set forth in the Preamble.
"Duke Group" shall mean Duke and its Subsidiaries (other than
the Company, any DEFS Subsidiary, any PGC Subsidiary or any other Subsidiary of
the Company).
"Duke Shareholder" shall mean the holder of any Corporation
Common Stock (other than Market Shares) that is Duke or a Subsidiary of Duke or,
if at any time there is more than one such holder, each of such holders.
"Enterprise Value" shall mean the sum of (x) the Parties'
Equity Value and (y) $2,400,000,000; provided, that if the Merger becomes
effective on or after the date two years after the Closing Date, "Enterprise
Value" shall mean $5,500,000,000.
"Financing" shall have the meaning set forth in the
Contribution Agreement.
"Flow Through Subsidiaries" shall have the meaning set forth
in the LLC Agreement.
"Governance Agreement" shall have the meaning set forth in the
Recitals.
"Governmental Entity" shall mean any federal, state, political
subdivision or other governmental agency or instrumentality, foreign or
domestic.
"Income Tax" shall mean any federal, state, local or foreign
Tax measured by net income or capital gain.
"IPO" shall mean the initial offering of shares of Corporation
Common Stock to the public in a transaction registered under the Securities Act.
"LLC Agreement" shall have the meaning set forth in the
Recitals.
"Market Shares" shall mean shares purchased by a Person
through open-market purchases, other than those shares purchased to prevent
dilution in accordance with Article X of the Certificate of Incorporation of the
Corporation.
"Member" shall have the meaning set forth in the LLC
Agreement.
"Merger" shall have the meaning set forth in Section 2.2(a).
"Neutral Firm" shall mean Arthur Andersen L.L.P.
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<PAGE> 5
"NYSE" shall mean the New York Stock Exchange, Inc.
"Parent" shall mean, with respect to a particular Person, the
Person that Controls such particular Person and that is not itself Controlled by
any other Person.
"Parties' Corporation Interest" shall mean the difference
between (x) 100% and (y) the Public's Corporation Interest.
"Parties' Equity Value" shall mean the product of (i) the
quotient of (x) the Parties' Corporation Interest divided by (y) the Public's
Actual Corporation Interest multiplied by (ii) the Public's Equity Value.
"Percentage Interest" shall mean, with respect to the Company
Interest issued to DEFS Holding pursuant to Section 2.1(j)(i) of the
Contribution Agreement, 69.7 percent, and with respect to the Company Interest
issued to PGC pursuant to Section 2.1(k)(i) of the Contribution Agreement, 30.3
percent.
"Person" shall mean any individual, partnership, limited
liability company, firm, corporation, association, joint venture, trust or other
entity or any Governmental Entity.
"PGC" shall have the meaning set forth in the Recitals.
"PGC Contribution" shall have the meaning set forth in Section
4.2.
"PGC Distribution" shall have the meaning set forth in Section
4.2.
"PGC Subsidiary" shall have the meaning set forth in the
Contribution Agreement for purposes of Annex B thereof.
"PGCSI" shall mean Phillips Gas Company Shareholder, Inc., a
Delaware corporation and a wholly-owned Subsidiary of Phillips.
"Phillips" shall have the meaning set forth in the Preamble.
"Phillips Enterprise Value" shall mean the product of (x) the
Enterprise Value and (y) .389.
"Phillips Equity Value" shall mean the difference between (x)
Phillips Enterprise Value and (y) $1,200,000,000.
"Phillips Group" shall mean Phillips and its Subsidiaries
(other than the Company, any DEFS Subsidiary, any PGC Subsidiary or any other
Subsidiary of the Company).
"Phillips Shareholder" shall mean the holder of any
Corporation Common Stock (other than Market Shares) that is Phillips or a
Subsidiary of Phillips or, if at any time there is more than one such holder,
each of such holders.
"Post-Closing Period" for any Person means any taxable period
beginning, with respect to such Person, after the Closing Date, and the portion,
beginning after the Closing Date, of
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<PAGE> 6
any taxable period that includes, with respect to such Person, but does not end
on, the Closing Date.
"Public's Actual Corporation Interest" shall mean the
quotient, expressed as a percentage, of (x) the number of shares of the
Corporation Common Stock sold by the Corporation in the IPO (excluding shares
issued to officers and employees of the Corporation or the Company concurrently
with the IPO and without giving effect to any underwriters' over-allotment)
divided by (y) the number of shares of Corporation Common Stock outstanding
immediately after the IPO (including shares issued to officers and employees of
the Corporation or the Company concurrently with the IPO and without giving
effect to any underwriters' over-allotment).
"Public's Corporation Interest" shall mean the quotient,
expressed as a percentage, of (x) the number of shares of the Corporation Common
Stock sold by the Corporation in the IPO (including shares issued to officers
and employees of the Corporation or the Company concurrently with the IPO and
without giving effect to any underwriters' over-allotment) divided by (y) the
number of shares of Corporation Common Stock outstanding immediately after the
IPO (including shares issued to officers and employees of the Corporation or the
Company concurrently with the IPO and without giving effect to any underwriters'
over-allotment).
"Public's Equity Value" shall mean the product of (i) the
Average Market Price multiplied by (ii) the number of shares sold by the
Corporation in the IPO (excluding shares issued to officers and employees of the
Corporation or the Company concurrently with the IPO and without giving effect
to any underwriters' over-allotment).
"Registration Rights Agreement" shall have the meaning set
forth in Section 3.1(a).
"Regulation" shall mean the income tax regulations promulgated
under the Code by the U.S. Department of the Treasury (whether final or
temporary).
"Returns" or "Tax Returns" means returns, declarations,
statements, reports, forms, property tax renditions or other documents or
information required to be filed with or supplied to any Taxing Authority.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Shareholders Agreement" shall have the meaning set forth in
Section 3.1(a).
"Subsidiary" shall mean, when used with respect to any Person,
any Affiliate of such Person that is Controlled by such Person.
"Tax" or "Taxes" shall mean all taxes (whether federal, state,
local or foreign) based upon or measured by income and any other tax whatsoever,
including gross receipts, profits, windfall profits, sales, use, occupation,
value added, ad valorem, transfer, franchise, withholding, payroll, employment,
excise, stamp, premium, capital stock, production, business and occupation,
disability, severance, or real or personal property taxes, fees, or assessments
of any kind whatsoever imposed by any Governmental Entity, together with any
interest or penalties imposed with respect thereto.
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<PAGE> 7
"Tax Proceeding" means any Tax audit, contest, litigation or
other proceeding with or against a Governmental Entity.
"Taxing Authority" shall mean any Governmental Entity having
jurisdiction over the assessment, determination, collection or other imposition
of any Tax.
"Transfer" shall mean any sale, assignment or other transfer,
whether by operation of law or otherwise (but not any deemed transfer pursuant
to Section 338 of the Code of the assets of a corporation or its Subsidiary in
connection with the purchase of the stock of such corporation). "Transferred"
and "Transferring" shall have correlative meanings.
"Total Equity Value" shall mean the quotient of (x) the
Public's Equity Value divided by (y) the Public's Actual Corporation Interest.
"Two Year Period" shall mean the period beginning on (and
including) the Closing Date and ending on the second anniversary thereof.
Section 1.2 Construction. Unless the context requires
otherwise: (a) the gender (or lack of gender) of all words used in this
Agreement includes the masculine, feminine and neuter; (b) references to
Articles and Sections refer to Articles and Sections of this Agreement; (c)
references to Exhibits refer to the Exhibits attached to this Agreement; (d)
references to laws refer to such laws as they may be amended from time to time,
and references to particular provisions of a law include any corresponding
provisions of any succeeding law; (e) references to money refer to legal
currency of the United States of America; (f) the word "including" means
"including, without limitation"; and (g) all capitalized terms defined herein
are equally applicable to both the singular and plural forms of such terms.
ARTICLE II
THE IPO
Section 2.1 Efforts. (a) The Company agrees to use its
reasonable best efforts to prepare for, effect and consummate the IPO (market
conditions permitting) as soon as practicable following the date hereof,
including selecting underwriters, preparing and filing with the SEC a
registration statement and filings under applicable state securities or "blue
sky" laws or similar securities laws and determining the terms of the IPO;
provided that, notwithstanding anything to the contrary in this Agreement, the
Company shall not consummate any IPO on or before the date two years after the
date of this Agreement without the prior written consent of Phillips if the
consummation of the IPO (including the potential effect of any underwriters'
over-allotment) in accordance with the provisions of this Agreement would result
in (i) Phillips' Corporation Interest being less than 20% upon consummation of
the IPO or (ii) an Enterprise Value immediately following the IPO of less than
$4,400,000,000; provided, further, that for purposes of the calculations
contemplated in (i) and (ii) in the preceding proviso only, the "Average Market
Price" shall be the proposed public offering price of the Corporation Common
Stock in the IPO.
(b) Each of Duke and Phillips agrees to (i) provide reasonable
assistance to the Company in effecting the IPO and (ii) cause any Duke
Shareholder or Phillips Shareholder,
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<PAGE> 8
respectively, not to Transfer any or all of their shares of Corporation Common
Stock for a period of six months following the consummation of the IPO and to
agree to such other customary terms as are reasonably requested by the
underwriters in connection with the IPO.
(c) Duke agrees that, prior to the consummation of the Merger,
it will cause the board of directors of DEFS Holding to be comprised solely of
three directors designated by Phillips (or four if Phillips designates an
Independent Director (as defined in the Certificate of Incorporation)) and five
directors designated by Duke (or six or seven if Duke designates one or two
Independent Directors, respectively).
Section 2.2 Formation of the Corporation. (a) Each of Duke and
Phillips agrees to take such corporate action as is necessary and desirable to
cause (i) PGCSI to be merged with and into DEFS Holding, with DEFS Holding
surviving (such surviving corporation, the "Corporation," and such merger, the
"Merger"), immediately prior to the consummation of the IPO and (ii) an
Agreement of Merger substantially in the form of Exhibit A (the "Agreement of
Merger") to be filed in accordance with the Delaware General Corporation Law.
(b) Each of Duke and Phillips presently intends that, if the
IPO occurs, approximately 20% of the Corporation Common Stock shall be sold by
the Corporation pursuant to the IPO (including shares to be issued to officers
and employees of the Corporation or the Company concurrently with the IPO);
provided, however, that this percentage may vary depending on market conditions
and other factors.
(c) Phillips represents, warrants and agrees that at the time
of such Merger, (i) PGCSI shall have no assets or liabilities, contingent or
otherwise, other than through its ownership of its interest in PGC and (ii) PGC
shall have no assets or liabilities, contingent or otherwise, other than through
its ownership of its interest in the Company.
(d) Duke represents, warrants and agrees that at the time of
the Merger, DEFS Holding shall have no assets or liabilities, contingent or
otherwise, other than through its ownership of its interest in the Company.
(e) Following the Merger and prior to the consummation of the
IPO, the percentage of the total number of issued and outstanding shares of
Corporation Common Stock owned by (i) Phillips and its Affiliates (other than
the Corporation and its Subsidiaries) shall equal the quotient, expressed as a
percentage, of (x) Phillips' Corporation Interest upon the consummation of the
IPO determined in accordance with Section 2.3(b)(1) divided by (y) the sum of
Phillips' Corporation Interest and Duke's Corporation Interest upon the
consummation of the IPO determined in accordance with Section 2.3(b)(1) and
Section 2.3(b)(2), respectively, and (ii) Duke and its Affiliates (other than
the Corporation and its Subsidiaries) shall equal the quotient, expressed as a
percentage, of (x) Duke's Corporation Interest upon consummation of the IPO
determined in accordance with Section 2.3(b)(2) divided by (y) the sum of Duke's
Corporation Interest and Phillips' Corporation Interest upon consummation of the
IPO determined in accordance with Section 2.3(b)(2) and Section 2.3(b)(1),
respectively. If necessary, for purposes of the above calculation only, Duke and
Phillips shall estimate in good faith the Average Market Price and the number of
shares of Corporation Common Stock to be sold to the public (including shares to
be issued to officers and employees of the Corporation or the Company
concurrently with the IPO). Duke agrees
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<PAGE> 9
to cause the Duke Shareholder and Phillips agrees to cause the Phillips
Shareholder, respectively, to vote its shares to cause the Corporation upon
consummation of the IPO to have a single class of common stock (the "Corporation
Common Stock") outstanding and no other classes of capital stock or other
securities (except for options to purchase shares of the Corporation Common
Stock issued to officers, directors and employees of the Corporation or the
Company or its Subsidiaries).
Section 2.3 Post-IPO Ownership. (a) Each of Duke and Phillips
presently intends that, if the IPO occurs, approximately 20% of the Corporation
Common Stock (including shares to be issued to officers and employees of the
Corporation or the Company concurrently with the IPO) shall be sold by the
Corporation pursuant to the IPO; provided, however, that this percentage may
vary depending on market conditions and other factors.
(b) Each of Duke and Phillips agrees to take, or cause to be
taken, such action (including the Merger and any adjustments by the Corporation
to the number of shares of Corporation Common Stock owned by Duke and Phillips)
as is necessary and desirable to provide that upon the end of the fifth day of
trading on the NYSE (excluding the pricing day and without regard to the
exercise of any underwriters' over-allotment), each of Duke and Phillips shall
own, directly or indirectly, a percentage of the outstanding Corporation Common
Stock determined as follows:
(1) Phillips' Corporation Interest shall equal the quotient,
expressed as a percentage, of (x) Phillips Equity Value divided by (y) Total
Equity Value.
(2) Duke's Corporation Interest shall equal the difference
between (x) the Parties' Corporation Interest and (y) Phillips' Corporation
Interest.
Annex A sets forth examples of determinations of Phillips'
Corporation Interest and Duke's Corporation Interest at various Public's Equity
Values (assuming that no shares are issued to officers or employees of the
Corporation or the Company concurrently with the IPO). The percentages and
calculations set forth in this Section 2.3 do not give effect to any
underwriters' over-allotment. In the event that there is an underwriters'
over-allotment and such over-allotment is exercised, each of Duke's and
Phillips' Corporation Interest and the interest of the public in the Corporation
(prior to such exercise) shall all be reduced pro rata.
Section 2.4 Certificate of Incorporation and Bylaws. Each of
Duke and Phillips agrees to take such corporate action as is necessary to cause
the Corporation to adopt a Certificate of Incorporation and Bylaws of the
Corporation substantially in the forms attached to the Agreement of Merger.
ARTICLE III
EXECUTION OF AGREEMENTS; PRIMARY VEHICLE
Section 3.1 Execution of Agreements. (a) Duke agrees to take
all corporate action to cause each Duke Shareholder (including Duke, if
applicable) to execute, and Phillips agrees to take all corporate action to
cause each Phillips Shareholder (including Phillips, if applicable) to execute,
a Shareholders Agreement substantially in the form of Exhibit B (the
"Shareholders
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<PAGE> 10
Agreement"). Each of Duke and Phillips agrees to execute, and agrees that it
will take all corporate action to cause the Corporation to execute, a
Registration Rights Agreement substantially in the form of Exhibit C (the
"Registration Rights Agreement").
(b) Duke agrees to cause each Duke Shareholder to comply with
the obligations of a Duke Shareholder under the Shareholders Agreement, and
Phillips agrees to cause each Phillips Shareholder to comply with the
obligations of a Phillips Shareholder under the Shareholders Agreement.
(c) The parties hereto agree that, from time to time, whether
before, at or after the date, each of them will execute and deliver, or cause to
be executed and delivered, such further agreements and instruments and take such
other action as may be necessary to effectuate the provisions, purposes and
intents of this Agreement.
Section 3.2 Market Shares. Duke agrees to, and to cause its
Affiliates to, make nominations and vote any and all of their Market Shares in
accordance with the requirements applicable to Duke's Total Corporation Interest
(as defined in the Shareholders Agreement) and take all other actions required
of a Duke Shareholder (as defined in the Shareholders Agreement) under Sections
2.1 and 2.2 of the Shareholders Agreement. Phillips agrees to, and to cause its
Affiliates to, make nominations and vote any and all of their Market Shares in
accordance with the requirements applicable to Phillips's Total Corporation
Interest (as defined in the Shareholders Agreement) and take all other actions
required of a Phillips Shareholder (as defined in the Shareholders Agreement)
under Sections 2.1 and 2.2 of the Shareholders Agreement.
Section 3.3 Primary Vehicle. Each of Duke and Phillips
presently intends that the Corporation shall be the primary vehicle by which it
conducts the midstream gas gathering and processing business in the United
States and Canada.
ARTICLE IV
TAX MATTERS
Section 4.1 Distributions to PGC. For the period, if any,
beginning at the time of consummation of the IPO and ending on the second
anniversary of the Closing Date, without the prior written consent of Duke and
Phillips: (i) the Company shall not make (or enter into a plan or arrangement to
make) any Distribution of cash or other property to PGC in excess of the product
of the aggregate Distribution to all Members and PGC's Percentage Interest as of
the Closing Date, (ii) the Company shall not make (or enter into a plan or
arrangement to make) any Distribution to PGC of cash or other property other
than Distributions to fund dividends by the Corporation to its shareholders and
Distributions pursuant to Section 7.6(a)(i) of the LLC Agreement and (iii) PGC
shall not be liquidated, shall not be merged into the Corporation, shall not
distribute to any shareholder of PGC the Company Interest issued to PGC pursuant
to Section 2.1(k) of the Contribution Agreement and shall not be converted into,
or merged into or otherwise caused to become, a partnership or disregarded
entity for federal income tax purposes (nor shall there be any plan or
arrangement to do so). Without the prior written consent of each of Duke and
Phillips: (a) no amendment shall be made to Section 6.3, Article VII or Article
VIII (other than Section 8.2(b)) of the LLC Agreement, or any reference thereto
in the LLC Agreement or any defined term
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<PAGE> 11
used therein, prior to the second anniversary of the Closing Date, and any
amendment made after such second anniversary to any such provision shall not
apply to any taxable period, or portion thereof, ending on or before the second
anniversary of the Closing Date and (b) no amendment shall be made to Section
8.2(b) of the LLC Agreement or any reference thereto in the LLC Agreement or any
defined term used therein.
Section 4.2 Tax Status. Each of Duke, Phillips and the Company
shall 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: (a) the
treatment of the Company (or any successor thereto), with respect to all times
during the Two Year Period, as a partnership for U.S. Federal income tax
purposes and the treatment of each of the Flow Through Subsidiaries (or any
successor thereto), with respect to all times during the Two Year Period, as a
partnership or disregarded entity for U.S. Federal income tax purposes; (b) the
treatment of the Company, with respect to all times during the Two Year Period,
as not being a publicly traded partnership for United States Federal income tax
purposes; (c) 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 Closing Date; (d) 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 the Company by
a Member in the Company acting in a capacity other than as a Member of the
Company; (e) the treatment of the contribution to the Company by PGC pursuant to
Section 2.3 of the Contribution Agreement (the "PGC Contribution") as a
contribution pursuant to Code Section 721, the treatment of the distribution to
PGC pursuant to Section 3.2(c)(1) of the Contribution Agreement (as adjusted
pursuant to Section 3.3) (the "PGC Distribution") as a distribution pursuant to
Code Section 731 and the treatment that, for purposes of the Code, neither the
PGC Contribution nor the PGC 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 (e) that Duke, Phillips and the
Company shall treat (except to the extent Duke, Phillips, the Members and the
Company agree in writing or are required by the Neutral Firm to treat otherwise)
an amount of the PGC Distribution equal to the Disguised Sale Amount as proceeds
of a sale by PGC to the Company under Code Section 707(a) and an amount of the
PGC Contribution equal in fair market value to the Disguised Sale Amount as
property that is sold by PGC 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 PGC 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 PGC Contribution, such value being for this
purpose $2,139,500,000); and (f) the treatment of the merger of PGCSI into DEFS
Holding pursuant to Section 2.2(a) hereof as a "reorganization" within the
meaning of Code Section 368(a) in which no gain or loss is recognized to Duke,
Phillips, PGC, DEFS Holding, the Company, or any other Person.
Section 4.3 Tax Proceedings; Cooperation and Exchange of
Information. (a) In the case of any Tax Proceeding relating to any Income Tax
Return or any Income Tax items of the
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<PAGE> 12
Company or any Subsidiary of the Company for any Post-Closing Period, the
Company shall be entitled to control such Tax Proceeding; provided, however,
that (i) the Company shall promptly notify Duke and Phillips (describing the
jurisdiction and year(s) at issue and including a copy of any materials received
from the applicable Governmental Entity in connection therewith) upon receipt of
notice of any such Tax Proceeding and shall thereafter promptly forward to Duke
and Phillips copies of any communications received from or sent to any
Governmental Entity by the Company or any of its Subsidiaries in connection with
any such Tax Proceeding; (ii) the Company shall provide Duke and Phillips with a
timely and reasonably detailed account of each stage of such Tax Proceeding and
a copy of all documents relating to such Tax Proceeding; (iii) the Company shall
consult with Duke and Phillips before taking any significant action in
connection with such Tax Proceeding; (iv) the Company shall consult with Duke
and Phillips and offer Duke and Phillips an opportunity to comment before
submitting any written materials prepared or furnished in connection with such
Tax Proceeding (including, to the extent practicable, any documents furnished to
the applicable Governmental Entity in connection with any discovery request);
(v) the Company shall defend such Tax Proceeding diligently and in good faith as
if the Company were the taxpayer in interest in connection with such Tax
Proceeding, and (vi) (A) in the case of any proposed settlement of any such Tax
Proceeding, which settlement will result in aggregate Tax payments by Phillips
with respect to the period beginning on the Closing Date and ending on the
second anniversary of the Closing Date (or, if the Tax Proceeding relates to a
taxable period (or portion thereof) after such second anniversary, then with
respect to the two year period beginning on the first day of the taxable period
to which the Tax Proceeding relates) of greater than $7,575,000, the Company
shall not settle, compromise or abandon any such Tax Proceeding without
obtaining the prior written consent, which consent shall not be unreasonably
withheld, of Phillips and (B) in the case of any proposed settlement of any such
Tax Proceeding, which settlement will result in aggregate Tax payments by Duke
with respect to the period beginning on the Closing Date and ending on the
second anniversary of the Closing Date (or, if the Tax Proceeding relates to a
taxable period (or portion thereof) after such second anniversary, then with
respect to the two year period beginning on the first day of the taxable period
to which the Tax Proceeding relates) of greater than $17,425,000, the Company
shall not settle, compromise or abandon any such Tax Proceeding without
obtaining the prior written consent, which consent shall not be unreasonably
withheld, of Duke. In the event that Duke or Phillips reasonably withholds such
consent pursuant to the preceding clause (vi)(A) or (B), the parties shall
negotiate in good faith to resolve their differences and, failing that, the
Neutral Firm shall resolve such disagreement. The above provisions of this
Section 4.3(a) shall cease to apply with respect to taxable periods beginning
after the consummation of the IPO, except to the extent that failure of such
provisions to apply could reasonably be expected to affect any member of the
Phillips Group or the Duke Group (other than in its capacity as a direct or
indirect shareholder, or affiliate of such a shareholder, of the Corporation).
(b) The Company shall present (such presentation to be made
(i) in the case of a Tax Return for a Company taxable year ending on December
31st, no later than July 1st in the year following the end of such Company
taxable year and (ii) in the case of a Tax Return for a Company taxable year
ending on a date other than December 31st, no later than the date that is six
months following the end of such Company taxable year) any Federal Income Tax
Returns of the Company to Phillips for Phillips' review and shall revise such
Tax Returns prior to filing to reflect any reasonable comments requested in good
faith by Phillips in writing within 15 Business Days after such presentation of
such Tax Returns to Phillips; provided, however, that in the event that the
Company or Duke disagrees with any such comments of Phillips, then the Company,
Duke and
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<PAGE> 13
Phillips shall endeavor to resolve their disagreement over such comments and,
failing that, the Neutral Firm shall resolve such disagreement prior to the date
such Tax Returns are due (including extensions) and such Tax Returns shall be
filed in such manner as the Neutral Firm determines. The fees and expenses of
the Neutral Firm in connection with this Section 4.3(b) shall be allocated
between Phillips and Duke by the Neutral Firm. At Duke's or Phillips' request,
the Company shall make available to Duke and Phillips, respectively, for their
review at least 15 Business Days prior to the due date (including extensions)
any state, local or foreign Income Tax Returns of the Company or its
Subsidiaries. The above provisions of this Section 4.3(b) shall cease to apply
with respect to taxable periods beginning after the consummation of the IPO,
except to the extent that failure of such provisions to apply could reasonably
be expected to affect any member of the Phillips Group (other than in its
capacity as a direct or indirect shareholder, or affiliate of such a
shareholder, of the Corporation).
(c) Cooperation and Exchange of Information. Duke, Phillips,
the Company and DEFS Holding (and the Corporation, from and after the Merger)
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 or Phillips, from and after the Closing
Date, the Company shall deliver to Duke or Phillips, respectively, such
information and data concerning the Company and its Subsidiaries and make
available such employees of the Company and its Subsidiaries as Duke or Phillips
may reasonably request (including providing the information and data reasonably
required by Duke's and Phillips' customary Tax and accounting questionnaires) in
order to enable Duke and Phillips to complete and file all Tax Returns which
they each may be required to file with respect to the Company and its
Subsidiaries or to respond to Tax audits or other inquiries relating to Taxes by
any Governmental Entities with respect to such operations and to otherwise
enable Duke and Phillips each to satisfy their respective accounting, Tax and
other legitimate business requirements. Such cooperation and information shall
include provision of powers of attorney to Duke or Phillips 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 Company and its Subsidiaries, 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 Company,
the Corporation and their Subsidiaries may possess. The Company and DEFS Holding
(and the Corporation, from and after the time of the Merger) shall (and shall
cause their respective Subsidiaries to) make their respective employees and
facilities available on a mutually convenient basis to provide explanation of
any documents or information provided hereunder. The above provisions of this
Section 4.3(c) shall cease to apply with respect to taxable periods beginning
after the consummation of the IPO, except to the extent that failure of such
provisions to apply could reasonably be expected to affect any member of the
Phillips Group or the Duke Group (other than in its capacity as a direct or
indirect shareholder or affiliate of such a shareholder, of the Corporation).
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 includes Duke or any other member of the Duke Group
and (ii) Phillips shall not be required to provide any Person with any
consolidated, combined, affiliated or unitary Income Tax Return or copy thereof
that includes Phillips or any other member of the Phillips Group.
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Section 4.4 Debt Repayment. From and after consummation of the
IPO, to the extent that proceeds from the IPO (or any other funds contributed to
the Company or any of its Subsidiaries) are used to repay debt owed by the
Company or any of its Subsidiaries (for so long as the Company or such
Subsidiary is treated as a partnership for federal income tax purposes), such
funds shall be contributed to the Company and its Subsidiaries by the limited
liability company interest holders or other equity interest holders in the
Company or such Subsidiaries in proportion to the allocation of debt to such
holders provided in Section 8.2(b)(iii) of the LLC Agreement.
ARTICLE V
TRANSFER RESTRICTIONS
Section 5.1 Structure; Transfers. For the period from the date
of this Agreement until the consummation of the IPO, (i) Duke shall cause DEFS
Holding to own and hold all of Duke's Company Interest and no other assets or
liabilities, and (ii) Phillips shall cause (A) PGC to own and hold all of
Phillips' Company Interest and no other assets or liabilities and (B) PGCSI to
own and hold all of the capital stock of PGC and no other assets or liabilities.
Section 5.2 Change of Control. Each of Duke and Phillips
agrees that prior to consummation of the IPO, as a condition to the consummation
of any transaction that will result in a Change of Control of DEFS Holding or
PGC, respectively, it will cause the new Parent of DEFS Holding or PGC,
respectively, to assume the obligations of Duke or Phillips, as applicable,
under this Agreement.
ARTICLE VI
TERMINATION OF AGREEMENTS
Section 6.1 Termination of Agreements. The Governance
Agreement is hereby terminated in its entirety and shall be void and have no
further force and effect [(it being understood that any covenants in the
Contribution Agreement that refer to the Governance Agreement and involve
post-Closing Date actions shall be deemed to refer to this Agreement, the LLC
Agreement, the Shareholders Agreement, the Registration Rights Agreement, the
Agreement of Merger, the Amended and Restated Certificate of Incorporation of
the Corporation, and the Amended and Restated Bylaws of the Corporation)];
provided, however, that such termination shall not relieve any party thereto of
any liability for any breach of the Governance Agreement that occurred prior to
the termination thereof.
ARTICLE VII
EMPLOYEE MATTERS
Section 7.1 Definitions; Controlling Provisions. As used in
this Article VII, (i) the terms "DEFS" and "TEPPCO" shall have the meanings
assigned to such terms in the Contribution Agreement, (ii) the terms "Bonuses,"
"Change in Control Severance Plan," "Continued Employees," "DEFS Employee,"
"Duke FSP," "Eligible Expenses," "Employee," "New Welfare Plans," "Old Welfare
Plans," "PGC Employee," "Phillips FSP," "Retained DEFS Employee" and
"Transferred PGC Employee" shall have the meanings assigned to such terms in
Annex A to the Contribution Agreement, (iii) the term "Continued Duke Welfare
Plan" shall have the meaning set forth in Section 7.4(a), (iv) the term "TEPPCO
Employee" shall mean any individual who is, immediately prior to the date
hereof, an Employee of TEPPCO, and (v) the term "DEFS Severance Plan" shall mean
that certain 2000 Duke Energy Field Services Severance Benefits Plan as in
effect on April 1, 2000. The terms of this Article VII shall govern and control
to the extent they are inconsistent or conflict with the terms of Annex A to the
Contribution Agreement, and the provisions of Sections 7.3, 7.4 and 7.5 shall be
deemed to be a part of Annex A to the Contribution Agreement for purposes of the
indemnification provisions of Sections 9.1(iii), 9.2(a)(iv) and 9.2(b)(iv) of
the Contribution Agreement. The provisions of Section 5.1 of Annex A to the
Contribution Agreement shall apply with respect to the compensation and benefit
matters addressed in this Article VII.
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Section 7.2 Transfer of Employees. If a DEFS Employee or a PGC
Employee is to be transferred to the Company pursuant to the terms of Annex A to
the Contribution Agreement, then the Company may direct Duke and Phillips,
respectively, to cause the transfer of such employee to be made to the Company
or to a Subsidiary of the Company that is designated by the Company. Continued
Employees may be employed by the Company or any Affiliate of the Company as
determined by the Company from time to time in its sole discretion.
Section 7.3 TEPPCO Employees. For all purposes of Annex A to
the Contribution Agreement and this Article VII (except where specifically
provided otherwise), each TEPPCO Employee shall be considered a Retained DEFS
Employee. Duke shall have no obligation under Section 3.2 of Annex A to the
Contribution Agreement to reimburse the Company for a pro-rata portion of the
Bonuses for calendar year 2000 that are paid to Retained DEFS Employees who are
TEPPCO Employees. Schedule 7.3 to this Agreement sets forth a list of agreements
relating to TEPPCO Employees that shall be considered to be among the agreements
listed in Schedule 2.5(a)(i) or Schedule 2.5(a)(ii) to Annex A to the
Contribution Agreement (as indicated on Schedule 7.3 to this Agreement);
provided, however, that the Company shall have no reimbursement obligation to
Duke with respect to any such agreement that is considered to be among the
agreements listed in Schedule 2.5(a)(i) to Annex A to the Contribution
Agreement.
Section 7.4 Welfare Benefits. (a) In order to permit benefits
transition with respect to Retained DEFS Employees, for the period beginning on
the date hereof and ending on the earliest of (i) December 31, 2000, (ii) such
date as Duke shall cease to have a greater than 50%, direct or indirect,
ownership interest in the Company, or (iii) such date as the Company or Duke
shall designate with respect to any particular Old Welfare Plan (provided that
Duke or the Company shall provide reasonable notice under the circumstances to
the other party prior to any such date), the Company and/or its wholly-owned
Subsidiaries shall be participating employers on behalf of their employees
(including any Continued Employees) who meet the requirements for eligibility
under the following Old Welfare Plans maintained by Duke: the Duke Energy
Medical, Dental, Cafeteria (FSP), Basic Life Insurance, Supplemental and
Dependent Life Insurance, Basic, Supplemental and Dependent Accidental Death and
Dismemberment Insurance, Business Travel Accident Insurance and Long-Term Care
Insurance Plans (each such Old Welfare Plan is herein referred to as a
"Continued Duke Welfare Plan"); provided, however, that retiree medical, dental
and life insurance coverages under the applicable Continued Duke Welfare Plans
shall not become applicable to an individual who either is not a Retained DEFS
Employee or fails to meet such requirements as Duke shall impose for such
coverages. Duke may terminate the participation by the Company and its
wholly-owned Subsidiaries in a particular Continued Duke Welfare Plan prior to
December 31, 2000, pursuant to clause (iii) of the preceding sentence only if
(1) Duke will be terminating such plan in its entirety as of the date designated
by Duke pursuant to such clause or (2) Duke has determined that such continued
participation by the Company and/or any of its wholly-owned Subsidiaries could
subject Duke or such plan to fines, penalties, excise taxes, loss of tax
deductions or other liabilities (other than liabilities for the benefits to be
provided under such plan). Without limiting the generality of the preceding
provisions of this Section 7.4(a), it is understood and agreed that such
provisions shall not override the provisions of Section 4.2(b) of Annex A to the
Contribution Agreement. For purposes of applying Section 4.5(c) of Annex A to
the Contribution Agreement, the Continued Duke Welfare Plans shall be deemed to
be New Welfare Plans; provided, however, that Eligible Expenses of a Retained
DEFS Employee shall be determined without regard to when such expenses are
recorded by the applicable plan administrator or reported to the Company.
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<PAGE> 16
(b) Notwithstanding the provisions of Section 4.5(d) of Annex
A to the Contribution Agreement, for the period specified in Section 7.4(a) as
it applies to the Duke FSP, the Retained DEFS Employees shall continue to be
eligible, and the Transferred PGC Employees shall be eligible, to participate in
the Duke FSP. In the case of the Retained DEFS Employees, such continued
participation shall be based on their elections under the Duke FSP that are in
effect immediately prior to the date hereof (as such elections may be adjusted
from time to time in accordance with the terms of the Duke FSP). In the case of
the Transferred PGC Employees, the provisions of Section 4.5(d) of Annex A to
the Contribution Agreement shall be applied as if the Duke FSP were the New FSP
as defined therein, except that references therein to the Company shall be
deemed to refer to Duke; provided, however, that if the aggregate amount of the
transferred account balances of Transferred PGC Employees from the Phillips FSP
to the Duke FSP is negative, then the Company shall pay Phillips the amount of
such aggregate negative balance promptly following such account balance
transfer. The parties hereto agree and acknowledge that it is their intention
that the economic risks and benefits associated with calendar year 2000 (or any
portion thereof) participation in the Duke FSP by Retained DEFS Employees (both
before and after the date hereof), Transferred PGC Employees, and any other
employees of the Company and its Subsidiaries be borne or enjoyed, as the case
may be, by the Company. Accordingly, Duke and the Company agree that, as soon as
administratively feasible after all claims under the Duke FSP have been
processed for calendar year 2000 with respect to the employees of the Company
and its Subsidiaries, one such party shall make a payment to the other (as
appropriate) to ensure such result to the greatest extent possible.
Section 7.5 Severance Benefits. (a) The Company or a
Subsidiary of the Company shall reimburse Phillips for the cash severance
benefit paid by Phillips or any Subsidiary of Phillips to certain of their
employees in accordance with the terms of Article I of Exhibit A to that certain
Transition Services Agreement between Phillips and the Company dated March 17,
2000.
(b) Section 4.2(b) of Annex A to the Contribution Agreement
shall apply to each Retained DEFS Employee who is a TEPPCO Employee and who was
covered by the Change in Control Severance Plan immediately prior to the date
hereof; provided, however, that (i) the Company shall not have any reimbursement
obligation to Duke under such Section 4.2(b) with respect to the cash severance
benefit paid to any such employee and (ii) Duke shall not have any reimbursement
obligation to the Company under such Section 4.2(b) for any extended coverage
under a welfare benefit plan.
(c) The provisions of this Section 7.5(c) shall not apply with
respect to any Retained DEFS Employee who is a TEPPCO Employee. Duke shall
reimburse the Company or a Subsidiary of the Company for the severance benefit
paid under the DEFS Severance Plan to any Retained DEFS Employee who receives
notice from the Company or a Subsidiary of the Company on or about the date
hereof that such individual's employment will be terminated in connection with
(and in any event within 30 days after) the closing of the transactions
contemplated under the Contribution Agreement. On or about the date hereof, the
Company and its Subsidiaries shall also notify certain Retained DEFS Employees
selected by the Company in its sole discretion that such individuals will be
requested to perform services for the Company or a Subsidiary of the Company on
only a transitional basis. Duke shall reimburse the Company or a Subsidiary of
the Company for the severance benefit paid under the DEFS Severance Plan to any
Retained DEFS Employee who receives the notice described in the preceding
sentence provided that the termination of such individual's employment from the
Company and its Affiliates occurs within six months of the date hereof (or
within nine months of the date hereof in the case of such a Retained DEFS
Employee who is an accountant).
Section 7.6 Miscellaneous. The reference in Section 2.3 of
Annex A to the Contribution Agreement to Section 6.1 of the Governance Agreement
shall be deemed to refer to Section 6.1 of the Governance Agreement as in effect
immediately before the termination of the Governance Agreement. All references
in Sections 3.1, 4.1, 4.5(a), 4.5(b)(i)(A), 4.5(b)(ii)(I), 4.5(b)(iii)(x) and
the last sentence of Section 4.5(b) of Annex A to the Contribution Agreement to
the "Closing Date" shall be deemed to refer to the day after the Closing Date.
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ARTICLE VIII
MISCELLANEOUS
Section 8.1 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 of the parties hereto and delivered (including by facsimile) to
the other parties.
Section 8.2 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 hereto 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 hereto 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 hereto 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 hereto 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 hereto hereby irrevocably waives such immunity in respect
of its obligations with respect to this Agreement.
(d) Each party hereto 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 hereto 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 8.2.
Section 8.3 Entire Agreement. The parties hereto acknowledge
that the Contribution Agreement, the Confidentiality Agreements dated August 11,
1999 and August 26, 1999 between Duke and Phillips, the LLC Agreement and this
Agreement, together with the exhibits hereto and the exhibits to such exhibits,
including the Certificate of Incorporation and the Bylaws of the Corporation,
have been executed or adopted as part of the same transaction. This Agreement,
together with the Contribution Agreement and the exhibits hereto and thereto,
constitutes the entire agreement of the parties with respect to the subject
matter hereof and there are no agreements, understandings, representations or
warranties between the parties other than those set forth or referred to herein.
This Agreement is not intended to confer upon any person not a party hereto (and
their successors and assigns) any rights, remedies or obligations hereunder.
Section 8.4 Expenses. Except as set forth in this Agreement,
whether or not the transactions contemplated by this Agreement or the
Contribution Agreement are consummated, all legal and other costs and expenses
incurred in connection with this Agreement and the Contribution Agreement and
the transactions contemplated by this Agreement and the Contribution Agreement
shall be paid by the party incurring such costs and expenses; provided, however,
that third party costs incurred by each party after December 16, 1999 for
planning and information purposes relating
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to the transactions contemplated by this Agreement and the Contribution
Agreement (including costs of consultants and contractors hired for such
purposes, prepayments for services required by the Company, rating agency fees
and outside attorneys fees for Hart-Scott-Rodino and regulatory matters, but
excluding wages and expenses of employees of Duke or Phillips, costs incurred in
performing due diligence on Duke or Phillips, as applicable) shall be paid or
reimbursed by the Company or the Corporation, as applicable.
Section 8.5 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, if to a party hereunder,
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 Phillips:
Phillips Petroleum Company
1266 Adams Building
Bartlesville, Oklahoma 74004
Attention: Clyde W. Lea
Fax No.: (918) 662-2301
With a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Andrew R. Brownstein, Esq.
Fax No.: (212) 403-2000
(b) If to Duke:
Duke Energy Corporation
5400 Westheimer Court, 8th Floor
Houston, Texas 77056-5310
Attention: Richard K. McGee
Fax No.: (713) 569-2491
With a copy to:
Vinson & Elkins L.L.P.
1001 Fannin, Suite 2300
Houston, Texas 77002-6760
Attention: Bruce R. Bilger
Fax No.: (713) 517-5429
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<PAGE> 19
(c) If to the Company:
Duke Energy Field Services, LLC
17th Street, Suite 900
Denver, Colorado 80202
Attention: Martha B. Wyrsch
Fax No.: (303) 605-1605
With a copy to:
Duke Energy Corporation
5400 Westheimer Court, 8th Floor
Houston, Texas 77056-5310
Attention: Richard K. McGee
Fax No.: (713) 569-2491
and
Vinson & Elkins L.L.P.
1001 Fannin, Suite 2300
Houston, Texas 77002-6760
Attention: Bruce R. Bilger
Fax No.: (713) 517-5429
Section 8.6 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns; provided, however, that no party hereto 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 hereto.
Section 8.7 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.
Section 8.8 Amendments and Waivers. This Agreement may not be
modified or amended except by an instrument or instruments in writing signed by
all parties hereto. Either party hereto may, only by an instrument in writing,
waive compliance by the other party hereto with any term or provision of this
Agreement on the part of such other party hereto to be performed or complied
with. The waiver by any party hereto 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 8.9 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.
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Section 8.10 Interpretation. In the event an ambiguity or
question of intent or interpretation arises with respect to this Agreement, this
Agreement shall be construed as if it was 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 8.11 Specific Performance. The parties hereto 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,
including temporary restraining orders or temporary or permanent injunctions.
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<PAGE> 21
IN WITNESS WHEREOF, each of the undersigned has caused this
Agreement to be duly executed and delivered on the date first set forth above.
PHILLIPS PETROLEUM COMPANY
By:
-------------------------------------
Name:
Title:
DUKE ENERGY CORPORATION
By:
-------------------------------------
Name:
Title:
DUKE ENERGY FIELD SERVICES, LLC
By:
-------------------------------------
Name:
Title:
DUKE ENERGY FIELD SERVICES CORPORATION
(solely for purposes of Section 4.3(c)
of this Agreement)
By:
-------------------------------------
Name:
Title:
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