Exhibit 10.5


 





 


 


ATLANTIC POWER CORPORATION


 






 


DEFERRED
SHARE UNIT PLAN


 






 


April 24, 2007


 





 

















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
  Page No.

  
	
   

  	
   

  	
   

  
	
  1.

  	
  PREAMBLE AND DEFINITIONS

  	
  1

  
	
   

  	
   

  	
   

  
	
  2.

  	
  CONSTRUCTION AND INTERPRETATION

  	
  3

  
	
   

  	
   

  	
   

  
	
  3.

  	
  ELIGIBILITY AND MEMBERSHIP

  	
  3

  
	
   

  	
   

  	
   

  
	
  4.

  	
  UNIT GRANTS AND ACCOUNTS

  	
  4

  
	
   

  	
   

  	
   

  
	
  5.

  	
  REDEMPTION OF UNITS

  	
  5

  
	
   

  	
   

  	
   

  
	
  6.

  	
  ANTI-DILUTION AND RE-ORGANIZATION

  	
  6

  
	
   

  	
   

  	
   

  
	
  7.

  	
  ADMINISTRATION

  	
  7

  
	
   

  	
   

  	
   

  
	
  8.

  	
  GENERAL

  	
  8

  
	
   

  	
   

  	
   

  
	
  9.

  	
  RIGHT TO FUNDS

  	
  8

  
	
   

  	
   

  	
   

  
	
  10.

  	
  SPECIAL RULES APPLICABLE TO U.S. MEMBERS

  	
  9

  
	
   

  	
   

  	
   

  
	
  11.

  	
  DATE OF PLAN

  	
  11

  



 

















 


1.              PREAMBLE AND
DEFINITIONS


 


1.1                               The Plan herein described
shall be called the “Deferred Share Unit Plan”
and is referred to herein as “the Plan”.


 


1.2                               The purpose of the Plan is to
enhance the Company’s ability to attract and retain talented individuals to
serve as members of the Board of Directors of the Company and to promote a
greater alignment of interests between members of the Board of Directors and
the shareholders of the Company.


 


1.3                               In the Plan, the following
terms shall have the meanings indicated:


 


(a)                                  “Annual Board
Retainer” means the annual retainer paid by the Company to a
Director who is not an Employee in a financial year for service on the Board,
but does not include Chair Fees, Committee Fees and Meeting Fees.


 


(b)                                 “Annual
General Meeting” means the annual general meeting of the
shareholders of the Company.


 


(c)                                  “Beneficiary”
means any person designated by the Member by written instrument filed with the
Company to receive any amount payable under the Plan in the event of a Member’s
death or, failing any such effective designation, the Member’s estate.


 


(d)                                 “Board” or
“Board of Directors” means the board of
directors of the Company.


 


(e)                                  “Chair”
means the chair of the Board.


 


(f)                                    “Chair Fees”
means the fees or retainers, other than Meeting Fees and Committee Fees, paid
by the Company to a Director for service as the Chair and as chairman of a
committee of the Board.


 


(g)                                 “Code”
means the U.S. Internal Revenue Code of 1986.


 


(h)                                 “Committee
Fees” means the fees or retainers, other than Meeting Fees and Chair
Fees, paid by the Company to a Director for service on a committee of the
Board.


 


(i)                                     “Company”
means Atlantic Power Corporation and a reference in the Plan to action by the
Company means an action taken with authority of the Board or such committee or
person, if any, to whom the Board delegates its powers hereunder.


 


(j)                                     “Director”
means a member of the Board.


 


(k)                                  “Employee”
means an employee of the Company or any affiliate thereof.


 





















 


(l)                                     “Fees”
means the Annual Board Retainer, Chair Fees, Committee Fees, Meeting Fees or
any other fees payable to a Director.


 


(m)                               “IPS” means an income participating security of the
Company, each of which represents one Share and $5.767 principal amount of
Subordinated Notes.


 


(n)                                 “Meeting Fees”
means the fees or retainers, other than the Annual Board Retainer, paid by the
Company to a Director for attending meetings of the Board and committees of the
Board.


 


(o)                                 “Member”
means an individual who becomes a participant in the Plan in accordance with Article 3,
and includes an individual whose membership in the Plan is suspended in
accordance with section 3.4.


 


(p)                                 “Payment Date”
means the date of payment of Fees to the Directors.


 


(q)                                 “Reorganization”
means any (i) capital reorganization, (ii) merger, (iii) amalgamation,
(iv) offer for shares or IPSs of the Company which if successful would
entitle the offeror to acquire all of the shares of the Company or all of one
or more particular class(es) of shares of the Company to which the offer
relates, or (v) arrangement or other scheme of reorganization.


 


(r)                                    “Shares”
means the common shares in the capital of the Company, and includes any shares
of the Company into which such shares may be converted, reclassified,
redesignated, subdivided, consolidated, exchanged or otherwise changed.


 


(s)                                  “Subordinated
Notes” means the 11.0% subordinated notes of the Company that form
part of an IPS.


 


(t)                                    “Trading Day”
means any date on which the TSX is open for the trading of Shares or IPSs.


 


(u)                                 “TSX”
means the Toronto Stock Exchange.


 


(v)                                 “Unit”
means a right to receive on a deferred basis an amount of money subject to and
in accordance with the terms of this Plan, credited under this Plan to a Member
and reflected as an entry in an account in accordance with section 4.7.


 


(w)                               “Unit Account”
has the meaning ascribed thereto in section 4.7.


 


(x)                                   “U.S. Members”
has the meaning ascribed thereto in section 10.1.


 


(y)                                 “Value of a
Unit” means:


 


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(i)                      if the Shares are trading on
the TSX, on the relevant day, the value of a Share determined by reference to
the five-day weighted average closing price of a Share on the immediately
preceding five Trading Days; or


 


(ii)                   if the Shares are not trading on the TSX,
on the relevant day, the value of a Share determined by reference to the
five-day weighted average closing price of an IPS on the immediately preceding
five Trading Days and then subtracting the Value of the Subordinated Note
component of the IPS on the relevant date.


 


(z)                                   “Value of the
Subordinated Note” means the value of the Subordinated Note based on
the most recent valuation of the Subordinated Notes completed by an independent
valuator in connection with an issuance of securities by the Company, as
adjusted by the Chief Financial Officer of the Company in his sole discretion
taking into account market factors.


 


2.              CONSTRUCTION AND
INTERPRETATION


 


2.1                               In the Plan, references to the
singular shall include the plural and vice versa, as the context shall require.


 


2.2                               The Plan shall be governed and
interpreted in accordance with the laws of the Province of Ontario and the
applicable laws in Canada.


 


2.3                               If any provision of the Plan
or part hereof is determined to be void or unenforceable in whole or in part,
such determination shall not affect the validity or enforcement of any other
provision or part hereof.


 


2.4                               Headings wherever used herein
are for reference purposes only and do not limit or extend the meaning of the
provisions herein contained.


 


3.              ELIGIBILITY AND
MEMBERSHIP


 


3.1                               Every Director is a Member
provided that he or she is not an Employee. 
For greater certainty, the Chair shall not be considered an Employee
solely as a result of his or her performing the responsibilities as Chair.


 


3.2                               Every Director who would have
become a Member in accordance with section 3.1 hereof except for the fact he or
she was an Employee, shall become a Member when he or she ceases to be an
Employee, provided he or she is a Director at that time.


 


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3.3                               A person ceases to be a Member
at such time as such person ceases to be a Director for any reason.


 


3.4                               If a Member becomes an
Employee, his or her active membership in the Plan shall be suspended effective
the date of the commencement of his or her employment and shall resume upon
termination of such employment provided he or she continues as a Director.  During the period of such suspension, such
individual shall not be entitled to receive or be credited with Units under Article 4,
except under section 4.8 in respect of cash dividends paid on Shares.  Such individual shall, for the purposes of
section 5.1, cease to be a Director on the later of the date he or she ceases
to be a Director and the date he or she ceases to be an Employee.


 


3.5                               Nothing herein contained shall
be deemed to give any person the right to be retained, appointed or elected as
a Director.


 


4.              UNIT GRANTS AND
ACCOUNTS


 


4.1                               Each Member whose active
membership in the Plan has not been suspended in accordance with section 3.4
may elect to receive 0%, 25%, 50%, 75% or 100% of their Fees in the form of
Units under this Plan.


 


4.2                               In addition, with the approval
of the Board, an annual allotment of Units under this Plan may be made at such
time and in such amounts as the Board may determine.


 


4.3                               In addition, the Board may
determine, at their discretion, that a Director who is appointed or elected
other than at an Annual General Meeting shall become a Member, on the basis
such Director may receive a number of Units calculated in accordance with
section 4.5 for any portion of such Director’s Fees for this purpose being the
amount equal to that percentage of the Fees payable to the Director which is
the percentage of the year to be served by that Director until the next Annual
General Meeting and otherwise upon the terms which they establish.


 


4.4                               A Member shall be credited on
each Payment Date, for the elected portion of the Fees, that would otherwise be
paid in cash on such date, a number of Units calculated in accordance with
section 4.5.  A Member shall be credited
with the Units allotted to that Director pursuant to section 4.2 on the day so
designated by the Board.


 


4.5                               The number of Units to be
credited to a Member will be calculated by dividing the dollar amount of the
elected portion of the Fees payable to the Member on a Payment Date by the
Value of a Unit on such Payment Date. 
For example, assuming an IPS price of $10.00 and $10,000 of elected
Fees:


 


4

















 


$10,000
[Elected Fees]   = 2,362.3907  [Number
of Units Granted]

$4.233 [Value of a Unit]


 


Value of a Unit based on: $10.00 [IPS price] – 5.767
[Value of the Subordinated Note]


 


4.6                               Fractional Units, to four
decimal places, may be credited under the Plan.


 


4.7                               An account, to be known as the
“Unit Account”, shall be maintained by
the Company for each Member and will show the Units credited to a Member from
time to time.


 


4.8                               Whenever cash dividends are
paid on the Shares, additional Units will be credited to the Member’s Unit
Account.  The number of such additional
Units will be calculated by dividing the aggregate dividends that would have
been paid to such Member if the Units in the Member’s Unit Account had been
Shares by the Value of a Unit on the date on which the dividends were paid on
the Shares.


 


4.9                               Elections by Members regarding
the amount of their Fees that they wish to receive in Units shall be made no
later than December 31 of any given year with respect to Fees for the
following year provided that for the 2007 fiscal year, Members must elect by June 30,
2007 to receive an amount of their Fees for the period July 1, 2007 to December 31,
2007 in Units.


 


5.              REDEMPTION OF UNITS


 


5.1                               Except as provided in sections
5.2 and 5.3, the value of the Units credited to a Member’s Unit Account, net of
applicable withholdings, shall be paid to the Member after the effective date
the Member ceases to be a Director for any reason on a day designated by the
Member and communicated to the Company by the Member in writing at least 10
Trading Days prior to the designated day (or such earlier date after the Member
ceases to be a Director as the Member and Company may agree, which date shall
be no later than the end of the calendar year following the year in which the
Member ceases to be a Director) and if no such notice is given, then on the
first anniversary of the effective date the Member ceases to be a Director.


 


5.2                               In the event the value of a
Unit would be determined with reference to a period commencing at a fiscal year
quarter-end of the Company and ending prior to the public disclosure of interim
financial statements for the quarter (or annual financial statements in the
case of the fourth quarter), the payment of the value of the Units will be made
to the Member with reference to the five Trading Days immediately following the
public disclosure of the interim financial statements for that quarter.


 


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5.3                               If a Member dies, the value of
the Units credited to that Member’s Unit Account, net of applicable
withholdings, shall be payable to his or her Beneficiary within 120 days after
the Member’s death.


 


5.4                               In no event may the redemption
date be later than the last day of the calendar year following the calendar
year in which the death, retirement or termination takes place.


 


5.5                               For the purposes of
determining the value of Units for the purposes of a payment to a Member (or,
where the Member has died, his or her Beneficiary) under sections 5.1, 5.2 or 5.3,
the Units will be valued on a per Unit basis on (i) for section 5.1, the
Value of a Unit on the next Trading Day after that the Member ceases to be a
member of the Board, (ii) for section 5.2, the Value of a Unit on the
sixth Trading Day following the day on which public disclosure of the interim
financial statements is made, and (iii) for section 5.3, the Value of a
Unit on the next Trading Day after the Member’s death.  In each case, the Member (or his or her Beneficiary)
shall receive a payment equal to the Value of a Unit multiplied by the number
of Units (including fractional Units) credited to a Member’s Unit account.


 


5.6                               All references in the Plan to
currency refer to lawful Canadian currency.


 


5.7                               The Company shall have the
right to deduct from all cash payments made to a Member any federal  or provincial taxes required by law to be withheld with
respect to such payments.


 


6.              ANTI-DILUTION AND
RE-ORGANIZATION


 


6.1                               If the number of outstanding
Shares of the Company shall be increased or decreased as a result of a stock
split, consolidation or recapitalization and not as a result of the issuance of
Shares or IPSs for additional consideration or by way of stock dividend, the
Board may make appropriate adjustments to the number of Units credited to a
Member.  Any determinations by the Board
as to the required adjustments shall be made in its sole discretion and all
such adjustments shall be conclusive and binding for all purposes under the
Plan.


 


6.2                               In the event of a
Reorganization or proposed Reorganization, the Company, at its option, may do
either of the following:


 


(a)                                  the Company may irrevocably
commute any Unit, upon giving to the Member to whom such Unit has been granted
at least 30 days written notice of its intention to commute the Unit, and
during such period of notice, the Member may elect to receive payment of the
value of the Unit as of the date of the notice of the Company and on the expiry
of such 


 


6

















 


period of notice, any Unit for which the Member has
not so elected shall lapse and be cancelled; or


 


(b)                                 the Company or any corporation which is or
would be the successor to the Company or which may issue securities in exchange
for Shares upon the Reorganization becoming effective may offer any Member the
opportunity to obtain a new or replacement stock appreciation or similar right
in respect of any securities into which the Shares are changed or are
convertible or exchangeable, on a basis proportionate to the number of Units
held by the Member; in such event, the Member shall, if he or she accepts such
offer, be deemed to have released his or her Units and such Units shall be
deemed to have been terminated.


 


6.3                               Sections 6.2(a) and 6.2(b) are
intended to be permissive and may be utilized independently or successively or
in combination or otherwise, and nothing therein contained shall be construed
as limiting or affecting the ability of the Company to deal with Units in any
other manner.


 


7.              ADMINISTRATION


 


7.1                               The Plan shall be administered
by the Company in accordance with its provisions.  All costs and expenses of administering the
Plan will be paid by the Company.  The
Company may from time to time establish administrative rules and
regulations relating to the operation of the Plan as it may deem necessary to
further the purpose of the Plan and amend or repeal such rules and
regulations.  In administering the Plan,
the Company may seek recommendations from the Chair.  The Company may also delegate to any director(s) or
committee of directors, officer(s) or employee(s) of the Company such
duties and powers as it may see fit.


 


7.2                               From time to time the Company
may, in addition to its powers under Article 6, add to or amend any of the
provisions of the Plan or the terms relating to Units credited under this Plan
or terminate the Plan; provided however that (i) any approvals required
under any applicable law or under the applicable rules of any stock
exchange in Canada upon which shares of the Company are listed are obtained,
and (ii) no such amendment or termination shall be made at any time which
has the effect of adversely affecting the existing rights of a Member without
his or her consent in writing unless the Company, at its option, acquires such
existing rights at an amount equal to the fair market value of such rights at
such time as verified by an independent valuator.


 


7.3                               The determination by the
Company of any question which may arise as to the interpretation or
implementation of the Plan or any of the Units granted hereunder 


 


7

















 


shall be final and binding on all Members and other
persons claiming or deriving rights through any of them.


 


7.4                               The Company shall keep or cause to be kept
such records and accounts as may be necessary or appropriate in connection with
the administration of the Plan.  At such
times as the Company shall determine, the Company shall furnish the Member with
a statement setting forth the details of the Units credited to each Member in
his or her Unit Account.  Such statement
shall be deemed to have been accepted by the Member as correct unless written
notice to the contrary is given to the Company within 30 days after such
statement is given to the Member. 
Members shall not be entitled to receive any certificate evidencing
Units.


 


7.5                               The Board may terminate the
Plan at any time.  However, if so
terminated, prior awards shall remain outstanding and in effect in accordance
with their applicable terms and condition.


 


8.              GENERAL


 


8.1                               The Plan shall enure to the
benefit of and be binding upon the Company, its successors and assigns.  The interest of any Member under the Plan or
in any Unit shall not be transferable or alienable by him or her either by
pledge, assignment or in any other manner whatsoever and, during his or her
lifetime, shall be vested only in him or her, but shall thereafter enure to the
benefit of and be binding upon the Member’s Beneficiary.


 


8.2                               A Member shall not have any
rights as a shareholder in respect of any Units.


 


9.              RIGHT TO FUNDS


 


9.1                               Neither the establishment of
the Plan, the crediting of Units or the setting aside of any funds by the
Company (if, in its sole discretion, it chooses to do so) shall be deemed to
create a trust.  Legal and equitable
title to any funds set aside for the purposes of the Plan shall remain in the
Company and no Member shall have any security or other interest in such
funds.  Any funds so set aside shall
remain subject to the claims of creditors of the Company present or
future.  Amounts payable to any Member
under the Plan shall be a general, unsecured obligation of the Company.  The right of the Member or Beneficiary to
receive payment pursuant to the Plan shall be no greater than the right of
other unsecured creditors of the Company.


 


8

















 


10.       SPECIAL RULES
APPLICABLE TO U.S. MEMBERS


 


10.1                        Application
to U.S. Members. Notwithstanding any other provision in the Plan, the
provisions of this section 10 will apply to all Members who are subject to U.S.
income tax with respect to Units issued under the Plan (“U.S. Members”).


 


10.2                        Elections
to Receive Units. In lieu of the election provisions specified in
section 4.9, the following rules will apply to elections by U.S. Members:


 


(a)                                  Elections
by U.S. Members regarding the amount of their Fees, if any, payable during a
calendar year that they wish to receive in Units generally must be made not
later than December 31 of the preceding calendar year.


 


(b)                                 Notwithstanding
the previous subsection, a new Director who first becomes eligible for
participation in the Plan as a U.S. Member under sections 3.1 and 3.2 during
the course of a calendar year may make an election to receive applicable Fees
in Units, provided (i) the election is made no later than the 30th day after the date the Director is first
eligible for the Plan, and (ii) the election applies only to Fees with
respect to services performed after the election.


 


(c)                                  If
a U.S. Member’s active membership in the Plan is suspended under section 3.4
because the Member becomes an Employee, the Member’s active membership will
resume on termination of the employment, provided he or she continues as a
Director.  If the Director resumes
membership in the course of a calendar year, he or she will be deemed a newly
eligible Member under section 10.2(b) above for purposes of deferring
Fees, unless such treatment is prohibited under Code Section 409A.  If the U.S. Member is not permitted under
Code Section 409A to be treated as a newly eligible Member in the calendar
year he or she resumes active membership, the Member will be permitted to elect
to resume receiving Fees in Units beginning with Fees received in the
subsequent calendar year, provided the election is made in compliance with
section 10.2(a) above.


 


10.3                        Redemption
of Units.
In lieu of the payment provisions of section 5.1, on a redemption of Units by
U.S. Members, the value of the Units credited to a U.S. Member’s Unit Account,
net of applicable withholdings, will be paid to the Member in a single lump sum
following the date the Member ceases to be a Director for any reason.  Notwithstanding anything else in the Plan, if
a Member ceases to be a Director for any reason other than death, payment will
be made as soon as practicable following a determination of the value of Units
pursuant to section 5.5.  In the event of
a Member’s death, payment will be made pursuant to section 5.3.


 


9

















 


10.4                        Re-Organization. In the event of a
Reorganization or proposed Reorganization under section 6.2, the following rules will
apply to U.S. Members:


 


(a)                                  If
the Reorganization or proposed Reorganization constitutes a “change in control
event” within the meaning of Code Section 409A and related guidance (“Change in Control Event”), all U.S. Members will receive
payment of the value of all their Units as soon as practicable following the
Change in Control Event, regardless of whether they cease to be Directors,


 


(b)                                 If
the Reorganization or proposed Reorganization does not constitute a Change in
Control Event, then the following will apply:


 


(i)                      If the Company elects to
implement the option set out in section 6.2(a), a U.S. Member must cease to be
a Director within the notice period provided in section 6.2(a) to receive
payment of the value of his or her Units. 
If the U.S. Member does not cease to be a Director, all of the Member’s
Units will lapse and be cancelled on the expiry of the notice period.


 


(ii)                   If the Company elects to implement the
option set out in section 6.2(b) and the exchange provided under this
section complies with the requirements of Code Section 409A and related
guidance, a U.S. Member may participate in the exchange.  If the exchange does not comply with Code Section 409A,
then a U.S. Member must cease to be a Director during the period the exchange
offer is open in order to receive payment for his or her Units.  If the Member does not cease to be a
Director, all of the Member’s Units will lapse and be cancelled on the expiry
of the offer period.


 


10.5                        Six-Month
Delay for Specified Employees. If a U.S. Member is an Employee who is determined to
be a “specified employee” within the meaning of Code Section 409A and
related guidance, based on an identification date of December 31, and if
the Member is eligible to receive payment of his or her Unit Account solely
because that Member has “separated from service” within the meaning of Code Section 409A,
no payment will be made prior to the date that is six months after the date of
separation from service (or, if earlier, the date of death of the Member).


 


10.6                        Code Section 409A
Savings Clause. Notwithstanding any other provision in this Plan, to
the extent any amounts payable under this Plan (i) are subject to Code Section 409A,
and (ii) the time or form of payment of those amounts would not be in
compliance with Code Section 409A, then, to the extent possible, payment
of those amounts will be made at such time and in such a manner that payment
will be in compliance with Code Section 409A.  If the time or form of payment cannot be
modified in such a way as to be in compliance with Code Section 409A, then



 


10

















 


the payment will be made as otherwise provided in this
Plan, disregarding the provisions of this section 10.6.


 


10.7                        409A
Liability Limitation. Benefits under the Plan payable to U.S. Members are
intended to comply with the rules of Code Section 409A and will be
construed accordingly.  However, the
Company will not be liable to any Member or Beneficiary with respect to any
benefit-related adverse tax consequences arising under Section 409A or
other provision of the Code.


 


11.       DATE OF PLAN


 


11.1                        This Plan is instituted
effective as of the date hereof.


 


11