Exhibit 10(m)
▇▇▇▇▇ ▇▇▇▇▇▇▇ ELECTRIC POWER INC.
Wilton, Connecticut
November 24,
1996
Duke Energy Marketing Corp.
Duke Energy Corp.
Dear Sirs:
You and we are parties to an agreement (the "Agreement") dated as of July
30, 1996, relating to Duke/▇▇▇▇▇ ▇▇▇▇▇▇▇ L.L.C. ("D/LD"). You have informed us
that one of your Affiliates proposes to enter into an agreement (the "Merger
Agreement") with PanEnergy Corp ("Pipe") pursuant to which Pipe will merge
into a subsidiary of Duke Power. Pipe, through its affiliates, and Mobil
Corporation ("Red"), through its affiliates, are members of PanEnergy Trading
and Market Services L.L.C., a Delaware limited liability company, and partners
of PanEnergy Marketing Limited Partnership, an Alberta, Canada, limited
partnership (collectively, the "Pipe Joint Venture"). The Pipe Joint Venture
is engaged in Power Marketing and Natural Gas Marketing. In connection with
the Merger Agreement, you have requested us to amend the Agreement.
Capitalized words not defined in this letter shall have the meanings given to
them in the Agreement.
We hereby agree that, in consideration for and fulfillment of all of the
terms of this letter, the Agreement is hereby amended by the addition of a new
Section 3.8 as follows:
Notwithstanding anything to the contrary in this Agreement (and in
particular Sections 3.2 and 3.4 hereof), Duke Power or any of its
Affiliates may merger with Pipe and own Pipe and may operate, through its
Affiliates or otherwise, the business of Pipe, including the business of
the Pipe Joint Venture.
In consideration of our agreement to this amendment, you agree that:
(1) Duke/▇▇▇▇▇ ▇▇▇▇▇▇▇ L.L.C. ("D/LD") shall continue to be operated
until the Effective Time, as defined in the Merger Agreement (the
"Effective Time"), in the same manner as it has been operated heretofore,
with each Member having a 50% ownership interest in D/LD. However, at or
prior to the Effective Time, D/LD operations, assets, and liabilities shall
be merged into, contributed to, or otherwise acquired by the Pipe Joint
Venture, or LD Electric and Duke Energy Marketing shall have contributed
their entire ownership interest in D/LD to the Pipe Joint Venture, in such
manner as Duke Energy and LD Electric shall reasonably agree (the
"Combination").
(2) In consideration of LD Electric's agreement to enter into the
Combination, and subject to paragraphs 3 and 4 of this letter, Duke Energy
Marketing, or, if the parties and Red shall mutually agree, the Pipe Joint
Venture, shall, beginning at the closing date of the Combination
("Combination Date"), pay to LD Electric annually an amount equal to ten
percent (10%) of the net income before taxes (the "10% Interest") of the
Pipe Joint Venture (inclusive of the operations, assets and liabilities of
D/LD). Duke Power hereby guarantees the obligations of Duke Energy
Marketing or the Pipe Joint Venture to pay the 10% Interest. The net income
before taxes of the Pipe Joint Venture shall be determined in accordance
with generally accepted accounting principles and as set forth in the
audited income statements of the Pipe Joint Venture. Duke Energy Marketing
will pay the amount of the 10% Interest annually to LD Electric within six
months following the conclusion of each fiscal year of the Pipe Joint
Venture. In the event that the Pipe Joint Venture incurs a net loss for any
year, the amount of such loss shall be deducted from the subsequent year's
or subsequent years' net income before taxes until the loss has been
eliminated. The 10% Interest represents only the contractual undertaking of
Duke Energy Marketing, or, if the parties and Red agree, the Pipe Joint
Venture, to make the payments described herein and shall not entitle LD
Electric to any board
representation, voting rights, or any other right, title, benefit, or
interest in the Pipe Joint Venture; provided, however, that (i) LD Electric
shall be entitled to receive, subject to reasonable confidentiality
restrictions, copies of the Pipe Joint Venture's quarterly unaudited and
annual audited financial statements and, at LD Electric's expense, to have
an independent accounting firm audit the annual financial statements of the
Pipe Joint Venture, and (ii) LD Energy shall have a Co-Investment right,
consistent with the Co-Investment right set forth in Section 3.6 of the
Agreement, except that such Co-Investment shall be passive and will carry
no voting or governance rights, with respect to any Investment in an
Electricity-Generating Asset made by Duke Power Company or any of its
Affiliates, whether made through the Pipe Joint Venture or otherwise, in
North America up to a Co-Investment Percentage of 10 per cent, for so long
as LD Electric shall continue to receive the 10% Interest. LD Energy shall
respond promptly, and in any event within 30 days of receipt of notice
thereof, to any Co-Investment Opportunity.
(3) From and after this Combination Date, the restrictions of Power
Marketing and Natural Gas Marketing activities set forth in Sections 3.1
and 3.2 of the Agreement shall continue to apply to the Members and their
Affiliates until the 10% Interest has been acquired by Duke Energy
Marketing pursuant to Paragraphs 4 or 5 hereof, except that Duke Power and
its Affiliates may (i) conduct or perform any such activities through the
Pipe Joint Venture instead of D/LD, and (ii) conduct or perform outside the
Pipe Joint Venture certain activities permitted under the Pipe Joint
Venture Agreement.
(4) LD Electric shall be entitled to put the 10% Interest to Duke Energy
Marketing at any time between the third and fourth anniversaries of the
Effective Time at a price equal to the greater of (i) 10% of the Fair
Market Value of the Pipe Joint Venture (inclusive of the operations,
assets, and liabilities of D/LD), determined by appraisal and in accordance
with Sections 11.2 and 11.3 of the Agreement, or (ii) $150 million; and (b)
LD Electric shall be entitled to put the 10% Interest to Duke Energy
Marketing at any time between the fifth and sixth anniversaries of the
Effective Time at a price equal to the greater of (i) 10% of the Fair
Market Value of the Pipe Joint Venture (inclusive of the operations,
assets, and liabilities of D/LD), determined by appraisal and in accordance
with Sections 11.2 and 11.3 of the Agreement, or (ii) $250 million. After
April 1, 2006, the 10% Interest shall be subject to a put in LD Electric's
favor, and a call in Duke Energy Marketing's favor, at a price equal to 10%
of the Fair Market Value of the Pipe Joint Venture (inclusive of the
operations, assets, and liabilities of D/LD), determined by appraisal and
in accordance with Sections 11.2 and 11.3 of the Agreement. Duke Power
hereby guarantees the payment obligations of Duke Energy Marketing in
connection with any such put or call.
(5) From and after the Combination Date, (i) subject to LD Energy's Co-
Investment rights set forth in Paragraph 2 above, Duke Power and its
Affiliates shall have no obligation to make Investments in Electricity-
Generating Assets or other Energy Assets through the Pipe Joint Venture,
and (ii) LD Energy and its Affiliates shall not use the name Duke/▇▇▇▇▇
▇▇▇▇▇▇▇ or the name Duke in connection with any business activity.
(6) From and after the Combination Date, the Pipe Joint Venture shall
establish a Strategic Advisory Committee that shall include at least the
following persons: ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ or ▇▇▇▇▇▇▇ Priory, ▇▇▇▇▇ ▇▇▇▇▇▇▇ or ▇▇▇▇ ▇▇▇▇▇▇▇▇. The Strategic
Advisory Committee will meet periodically to discuss the strategic position
and planning of the Pipe Joint Venture, subject to reasonable
confidentiality restrictions. Any member of the Strategic Advisory
Committee who is not an employee of Duke Power or any of its Affiliates,
Red or any of its Affiliates, or the Pipe Joint Venture shall receive
reasonable compensation and reimbursement of expenses in connection with
such Committee participation.
(7) Duke Energy Marketing shall be responsible for and shall reimburse
D/LD and ▇▇▇▇▇ ▇▇▇▇▇▇▇ Corp. for all renewable severance costs incurred
pursuant to employment agreements and policies in effect on the date of
this letter and all other reasonable costs, including lease payments,
incurred by D/LD or ▇▇▇▇▇ ▇▇▇▇▇▇▇ Corp. directly as a result of the
Combination.
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(8)(i) Except as specifically set forth in this letter, the Agreement
shall remain in full force and effect and nothing herein shall constitute a
waiver or release of any party's rights or benefits under the Agreement.
(ii) The parties to this letter agreement shall, as expeditiously as
possible and in any event within 90 days after the date of this letter,
execute such further documents and instruments, including any further
amendment to the Agreement, reasonably requested by any other party and
shall take such further actions as any other party shall reasonably request
to effect the agreements set forth in this letter. (iii) This letter
agreement shall be subject to any required governmental approvals, and each
of the Members and their Affiliates shall use their best efforts, including
the restructurings of any FERC-jurisdictional entities if necessary, to
obtain all such approvals. (iv) Each party to this letter hereby
irrevocably waives and releases any and all causes of action for tortious
interference or any similar claim that such party might now or hereafter
have against any other party or any Affiliate, or against Pipe or Red or
any of their Affiliates or controlling persons, for or by reason of any
matter that relates to or arises out of the negotiations, discussions,
communications, and statements made in connection with this letter;
provided, however, that nothing herein shall limit, restrict, waive, or
affect any obligation of any party pursuant to the Agreement except as
specifically amended by this letter.
(9) Except for the mutual releases set forth in Paragraph 8(iv) which
shall survive the termination of the Merger Agreement, if for any reason
the Merger Agreement is terminated, then this letter agreement shall be of
no effect and the Agreement shall remain in full force and effect without
regard to the amendments in this letter.
If you agree with the terms of this letter, please sign and return a copy to
us. Since D/LD was also a party to the Agreement, we shall arrange to have it
sign this letter as well. Each of us agrees that this is intended to be, and
is, a binding agreement and that Duke Power is relying on this Agreement in
entering into the Merger Agreement.
Yours truly,
▇▇▇▇▇ ▇▇▇▇▇▇▇ Energy Corp.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇▇▇▇ Electric Power Inc.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇▇▇▇
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Agreed:
Duke Energy Marketing Corp.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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Duke Energy Corp.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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Duke Power Company
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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Confirmed:
Duke/▇▇▇▇▇ ▇▇▇▇▇▇▇ L.L.C.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇▇▇▇
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