Document:

exv10w2

Exhibit 10.2

PAA NATURAL GAS STORAGE, L.P.

2010 LONG TERM INCENTIVE PLAN

     SECTION 1. Purpose of the Plan.

     The PAA Natural Gas Storage, L.P. 2010 Long Term Incentive Plan (the “Plan”) has been
adopted by PNGS GP LLC, a Delaware limited liability company (the “Company”), the general
partner of PAA Natural Gas Storage, L.P., a Delaware limited partnership (the
“Partnership”), and is intended to promote the interests of the Partnership and the Company
by providing to employees, consultants and directors of the Company and its Affiliates incentive
compensation awards for superior performance that are based on Common Units. The Plan is also
contemplated to enhance the ability of the Company, the Partnership and their Affiliates to attract
and retain the services of individuals who are essential for the growth and profitability of the
Company, the Partnership and their Affiliates and to encourage them to devote their best efforts to
advancing the business of the Company, the Partnership and their Affiliates.

     SECTION 2. Definitions.

     As used in the Plan, the following terms shall have the meanings set forth below:

     “Affiliate” means, with respect to any Person, any other Person that directly or
indirectly through one or more intermediaries controls, is controlled by or is under common
control with, the Person in question. As used herein, the term “control” means the possession,
direct or indirect, of the power to direct or cause the direction of the management and policies
of a Person, whether through ownership of voting securities, by contract or otherwise.

     “Award” means an Option, Restricted Unit, Phantom Unit, Unit Appreciation Right, or
Unit Award granted under the Plan, and may include any tandem DERs granted with respect to a
specific Option, Unit Appreciation Right or Phantom Unit.

     “Award Agreement” means the written or electronic agreement by which an Award shall
be evidenced, and which may describe any terms, conditions, criteria, restrictions or other
elements of such Award as determined by the Committee in its discretion.

          “Board” means the Board of Directors of the Company.

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

          “Committee” means the entity appointed to administer the Plan, which may be the Board,
the Compensation Committee of the Board, or such other committee as may be appointed by the Board.

          “Common Unit” means a Common Unit (as defined in the Partnership Agreement).

          “Consultant” means an individual who renders consulting services to the Company, the
Partnership or an Affiliate of either.

     “DER” means a contingent right, granted in tandem with a specific Option, Unit
Appreciation Right or Phantom Unit, to receive with respect to each Common Unit covered by the
Award, an amount in cash, Common Units and/or Phantom Units, as determined by the Committee in
its sole discretion, equal in value to the distributions made by the Partnership with respect to
a Common Unit during the period such Award is outstanding.

          “Director” means a member of the Board who is not an Employee or a Consultant (other
than in that individual’s capacity as a Director).

          “Employee” means any employee of the Company or an Affiliate of the Company.

 

 

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

     “Fair Market Value” means the closing sales price of a Common Unit on the date
preceding the applicable date (or if there is no trading in the Common Units on such date, on
the next preceding date on which there was trading) or (other than with respect to establishing
the exercise price of an Option or Unit Appreciation Right) as defined in an Award Agreement. In
the event Common Units are not publicly traded at the time a determination of fair market value
is required to be made hereunder, the determination of fair market value shall be made in good
faith by the Committee.

     “Option” means an option to purchase Common Units granted under the Plan.

     “Participant” means any Employee, Consultant or Director granted an Award under the
Plan.

     “Partnership Agreement” means the Amended and Restated Agreement of Limited
Partnership of PAA Natural Gas Storage, L.P., as it may be amended or amended and restated from
time to time.

     “Person” means an individual or a corporation, limited liability company,
partnership, joint venture, trust, unincorporated organization, association, government agency
or political subdivision thereof or other entity.

     “Phantom Unit” means a phantom (notional) Common Unit granted under the Plan that
entitles the Participant to receive, at the time of settlement, a Common Unit or an amount of
cash equal to the Fair Market Value of a Common Unit, as determined by the Committee in its
discretion.

     “Restricted Period” means the period established by the Committee with respect to
an Award during which the Award or Common Unit may remain subject to restrictions established by
the Committee, including without limitation a period during which such Award or Common Unit is
subject to forfeiture or restrictions on transfer, or is not yet exercisable by or payable to
the Participant, as the case may be. As the context requires the word “vest” and its derivatives
refers to the lapse of some or all, as the case may be, of the restrictions imposed during such
Restricted Period.

     “Restricted Unit” means a Common Unit delivered under the Plan that is subject to a
Restricted Period.

     “Rule 16b-3” means Rule 16b-3 promulgated by the SEC under the Exchange Act, or any
successor rule or regulation thereto as in effect from time to time.

     “SEC” means the Securities and Exchange Commission, or any successor thereto.

     “UDR” means a distribution made by the Partnership with respect to a Restricted
Unit.

     “Unit Appreciation Right” means an Award that, upon exercise, entitles the holder
to receive the excess of the Fair Market Value of a Common Unit on the exercise date over the
exercise price established for such Unit Appreciation Right. Such excess may be paid in cash
and/or in Common Units as determined by the Committee in its discretion.

     “Unit Award” means a grant of a Common Unit that is not subject to a Restricted
Period.

     SECTION 3. Administration.

     The Plan shall be administered by the Committee. A majority of the Committee shall constitute
a quorum, and the acts of the members of the Committee who are present at any meeting thereof at
which a quorum is present, or acts unanimously approved by the members of the Committee in writing,
shall be the acts of the Committee. Subject to the following and applicable law, the Committee, in
its sole discretion, may delegate any or all of its powers and duties under the Plan, including the
power to grant Awards under the Plan, to the Chief Executive Officer of the Company, subject to
such limitations on such delegated powers and duties as the Committee may impose, if any. Upon any
such delegation all references in the Plan to the “Committee”, other than in Section 7, shall be
deemed to include the Chief Executive Officer; provided, however, that such delegation shall not
limit the Chief Executive

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Officer’s right to receive Awards under the Plan. Notwithstanding the foregoing, the Chief
Executive Officer may not grant Awards to, or take any action with respect to any Award previously
granted to, a person who is an officer subject to Rule 16b-3 or who is a Director. Subject to the
terms of the Plan and applicable law, and in addition to other express powers and authorizations
conferred on the Committee by the Plan, the Committee shall have full power and authority to: (i)
designate Participants; (ii) determine the type or types of Awards to be granted to a Participant;
(iii) determine the number of Common Units to be covered by Awards; (iv) determine the terms and
conditions of any Award; (v) determine whether, to what extent, and under what circumstances Awards
may be vested, settled (including settlement in cash), exercised, canceled, or forfeited; (vi)
interpret and administer the Plan and any instrument or agreement relating to an Award made under
the Plan; (vii) establish, amend, suspend, or waive such rules and regulations and appoint such
agents as it shall deem appropriate for the proper administration of the Plan; (viii) delegate its
duties under the Plan to such agents as it may appoint from time to time, provided that the
Committee may not delegate its duties where such delegation would violate state corporate law, or
with respect to making Awards to, or otherwise with respect to Awards granted to, Employees,
Consultants or Directors who are subject to section 16(b) of the Exchange Act, and (ix) make any
other determination and take any other action that the Committee deems necessary or desirable for
the administration of the Plan. The Committee may correct any defect or supply any omission or
reconcile any inconsistency in the Plan or an Award Agreement in such manner and to such extent as
the Committee deems necessary or appropriate. Unless otherwise expressly provided in the Plan, all
designations, determinations, interpretations, and other decisions under or with respect to the
Plan or any Award shall be within the sole discretion of the Committee, may be made at any time and
shall be final, conclusive, and binding upon all Persons, including the Company, the Partnership,
any Affiliate, any Participant, and any beneficiary of any Award.

     SECTION 4. Units.

     (a) Limits on Units Deliverable. Subject to adjustment as provided in Section 4(c), the
number of Common Units that may be actually delivered with respect to Awards under the Plan is
3,000,000. If any Award is forfeited, cancelled, exercised, paid or otherwise terminates or
expires without the actual delivery of Common Units pursuant to such Award, including any Award
under which Common Units are withheld to cover the exercise price or tax withholding obligations
with respect to an Award, the Common Units subject to such Award shall be available to satisfy
future Awards under the Plan; provided, however, the issuance of a Restricted Unit will be an
“actual delivery” for purposes of the preceding; thus, any Restricted Unit used to cover an
exercise price or tax withholding obligation shall not become available to satisfy future Awards
under the Plan. There shall not be any limitation on the number of Awards that may be granted and
paid in cash.

     (b) Sources of Units Deliverable Under Awards. Any Common Units delivered pursuant to an
Award shall consist, in whole or in part, of Common Units acquired in the open market, from any
Affiliate, the Partnership or any other Person, or any combination of the foregoing, as determined
by the Committee in its discretion.

     (c) Adjustments. In the event that the Committee determines that any distribution (whether in
the form of cash, Common Units, other securities, or other property), recapitalization, split,
reverse split, reorganization, merger, change of control, consolidation, split-up, spin-off,
combination, repurchase, or exchange of Common Units or other securities of the Partnership,
issuance of warrants or other rights to purchase Common Units or other securities of the
Partnership, or other similar transaction or event affects the Common Units such that an adjustment
is determined by the Committee to constitute an “equity restructuring” event that could result in
an additional compensation expense to the Company or the Partnership pursuant to the provisions of
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 718 if
adjustments to Awards with respect to such event were discretionary, or to otherwise be appropriate
in order to prevent dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan, then the Committee shall, as necessary to equitably reflect such
restructuring event in accordance with Topic 718, if applicable, or otherwise in such manner as it
may deem equitable, adjust any or all of (i) the number and type of Common Units (or other
securities or property) with respect to which Awards may be granted, (ii) the number and type of
Common Units (or other securities or property) subject to outstanding Awards, and (iii) the grant
or exercise price with respect to any Award or, if deemed appropriate, make provision for a cash
payment to the holder of an outstanding Award; provided, that the number of Common Units subject to
any Award shall always be a whole number.

     SECTION 5. Eligibility.

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     Any Employee, Consultant or Director shall be eligible to be designated a Participant and
receive an Award under the Plan.

     SECTION 6. Awards.

     (a) Options. The Committee shall have the authority to determine the Employees, Consultants
and Directors to whom Options shall be granted, the number of Common Units to be covered by each
Option, whether DERs are granted with respect to such Option, the exercise price therefor, the
Restricted Period, if any, and the other conditions and limitations applicable to the exercise of
the Option, including the following terms and conditions and such additional terms and conditions,
as the Committee shall determine, that are not inconsistent with the provisions of the Plan.

     (i) Exercise Price. The exercise price per Common Unit purchasable under an Option shall
be determined by the Committee at the time the Option is granted but may not be less than the
Fair Market Value of a Common Unit as of the date of grant of the Option.

     (ii) Time and Method of Exercise. The Committee shall determine the exercise terms and the
Restricted Period (i.e., the time or times at which an Option may be exercised in whole or in
part, including, without limitation, any provision for accelerated vesting upon the achievement
of specified performance goals or other events) and the method or methods by which payment of
the exercise price with respect to an Option may be made or deemed to have been made, which may
include, without limitation, cash, check acceptable to the Company, withholding Common Units
from the Award, a “cashless-broker” exercise through procedures approved by the Company, other
securities or other property, a note (in a form acceptable to the Company), or any combination
thereof, having a Fair Market Value on the exercise date equal to the relevant exercise price.

     (iii) Forfeitures. Except as otherwise provided in the terms of the Option Award
Agreement, upon termination of a Participant’s employment with or consulting services to the
Company and its Affiliates or membership on the Board, whichever is applicable, for any reason
during the applicable Restricted Period, all unvested Options shall be forfeited by the
Participant. The Committee may, in its discretion, waive in whole or in part such forfeiture
with respect to a Participant’s Options.

     (iv) Option DERs. To the extent provided by the Committee, in its discretion, an Option
Award Agreement may include a tandem DER grant, which may provide that such DERs shall be paid
directly to the Participant, be credited to a bookkeeping account (with or without interest in
the discretion of the Committee) subject to the same vesting restrictions as the tandem Option
Award, or be subject to such other provisions or restrictions as determined by the Committee in
its discretion.

     (b) Restricted Units and Phantom Units. The Committee shall have the authority to determine
the Employees, Consultants and Directors to whom Restricted Units or Phantom Units shall be
granted, the number of Restricted Units or Phantom Units to be granted to each such Participant,
the Restricted Period, the conditions under which the Restricted Units or Phantom Units may become
vested or forfeited, and such other terms and conditions as the Committee may establish with
respect to such Awards, including whether DERs are granted with respect to the Phantom Units.

     (i) DERs. To the extent provided by the Committee, in its discretion, a Phantom Units
Award Agreement may include a tandem DER grant, which may provide that such DERs shall be paid
directly to the Participant, be credited to a bookkeeping account (with or without interest in
the discretion of the Committee), be “reinvested” in Restricted Units or additional Phantom
Units and be subject to the same or different vesting restrictions as the tandem Phantom Unit
Award, or be subject to such other provisions or restrictions as determined by the Committee in
its discretion. Absent a contrary provision in the Award Agreement, upon a distribution with
respect to a Common Unit, DERs equal in value to such distribution shall be paid promptly to the
Participant in cash without vesting restrictions.

     (ii) UDRs. To the extent provided by the Committee, in its discretion, a Restricted Units
Award Agreement may provide that distributions made by the Partnership with respect to the
Restricted Units shall be subject to the

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same forfeiture and other restrictions as the Restricted Unit and, if restricted, such
distributions shall be held, without interest, until the Restricted Unit vests or is forfeited
with the UDR being paid or forfeited at the same time, as the case may be. In addition, the
Committee may provide that such distributions be used to acquire additional Restricted Units for
the Participant. Such additional Restricted Units may be subject to such vesting and other terms
as the Committee may prescribe. Absent such a restriction on the UDRs in the Award Agreement,
UDRs shall be paid promptly to the holder of the Restricted Unit without restriction.

     (iii) Forfeitures. Except as otherwise provided in the terms of the applicable Restricted
Units or Phantom Units Award Agreement, upon termination of a Participant’s employment with or
consulting services to the Company and its Affiliates or membership on the Board, whichever is
applicable, for any reason during the applicable Restricted Period, all outstanding, unvested
Restricted Units and Phantom Units awarded the Participant shall be automatically forfeited on
such termination. The Committee may, in its discretion, waive in whole or in part such
forfeiture with respect to a Participant’s Restricted Units and/or Phantom Units.

     (iv) Lapse of Restrictions.

     (A) Phantom Units. Upon or as soon as reasonably practical following the vesting of each
Phantom Unit, subject to the provisions of Section 8(b), the Participant shall be entitled to
settlement of such Phantom Unit and shall receive from the Company either one Common Unit or an
amount in cash equal to the Fair Market Value of a Common Unit, as determined by the Committee
in its discretion.

     (B) Restricted Units. Upon or as soon as reasonably practical following the vesting of
each Restricted Unit, subject to the provisions of Section 8(b), the Participant shall be
entitled to have the relevant restrictions removed from his or her Award so that the Participant
then holds an unrestricted Common Unit certificate.

     (c) Unit Awards. Unit Awards may be granted under the Plan to such Employees, Consultants
and/or Directors and in such amounts as the Committee, in its discretion, may select.

     (d) Unit Appreciation Rights. The Committee shall have the authority to determine the
Employees, Consultants and Directors to whom Unit Appreciation Rights shall be granted, the number
of Common Units to be covered by each Unit Appreciation Right Award Agreement, whether DERs are
granted with respect to such Unit Appreciation Right, the exercise price therefor, the Restricted
Period, if any, and the other conditions and limitations applicable to the exercise of the Unit
Appreciation Right, including the following terms and conditions and such additional terms and
conditions, as the Committee shall determine, that are not inconsistent with the provisions of the
Plan.

     (i) Exercise Price. The exercise price per Unit Appreciation Right shall be determined by
the Committee at the time the Unit Appreciation Right is granted but may not be less than the
Fair Market Value of a Common Unit as of the date of grant of the Unit Appreciation Right.

     (ii) Time of Exercise. The Committee shall determine the exercise terms and the Restricted
Period (i.e., the time or times at which a Unit Appreciation Right may be exercised in whole or
in part, including, without limitation, a provision for accelerated vesting upon the achievement
of specified performance goals or other events).

     (iii) Forfeitures. Except as otherwise provided in the terms of the Unit Appreciation
Right Award Agreement, upon termination of a Participant’s employment with or consulting
services to the Company and its Affiliates or membership on the Board, whichever is applicable,
for any reason during the applicable Restricted Period, all outstanding, unvested Unit
Appreciation Rights awarded the Participant shall be automatically forfeited on such
termination. The Committee may, in its discretion, waive in whole or in part such forfeiture
with respect to a Participant’s Unit Appreciation Rights.

     (iv) Unit Appreciation Right DERs. To the extent provided by the Committee, in its
discretion, a Unit Appreciation Rights Award Agreement may include a tandem DER grant, which may
provide that such DERs shall be paid directly to the Participant, be credited to a bookkeeping
account (with or without interest in the discretion of the Committee) subject to the same
vesting restrictions as the tandem Unit Appreciation Rights Award, or be subject to such other
provisions or restrictions as determined by the Committee in its discretion.

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     (e) General.

     (i) Awards May Be Granted Separately or Together. Awards may, in the discretion of the
Committee, be granted either alone or in addition to, in tandem with, or in substitution for any
other Award granted under the Plan or any award granted under any other plan of the Company or
any Affiliate. Awards granted in addition to or in tandem with other Awards or awards granted
under any other plan of the Company or any Affiliate may be granted either at the same time as
or at a different time from the grant of such other Awards or awards.

     (ii) Limits on Transfer of Awards.

          (A) Except as provided in (C) below, each Option and Unit Appreciation Right shall be
exercisable only by the Participant during the Participant’s lifetime, or by the person to whom
the Participant’s rights shall pass by will or the laws of descent and distribution.

          (B) Except as provided in (C) below, no Award and no right under any such Award may be
assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a
Participant otherwise than by will or by the laws of descent and distribution and any such
purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be
void and unenforceable against the Company, the Partnership or any Affiliate.

          (C) To the extent specifically provided by the Committee with respect to an Option or Unit
Appreciation Right Award Agreement, an Option or Unit Appreciation Right may be transferred by a
Participant without consideration to immediate family members or related family trusts, limited
partnerships or similar entities or on such terms and conditions as the Committee may from time
to time establish.

     (iii) Term of Awards. The term of each Award shall be for such period as may be determined
by the Committee.

     (iv) Issuance of Units. The Common Units or other securities of the Partnership purchased
or delivered under the Plan pursuant to any Award or the exercise thereof may be evidenced in
any manner deemed appropriate by the Committee in its sole discretion, including but not limited
to, in the form of a certificate issued in the name of the Participant or by book entry,
electronic or otherwise, and shall be subject to such stop transfer orders and other
restrictions as the Committee may deem advisable under the Plan or the rules, regulations, and
other requirements of the SEC, any stock exchange upon which such Common Units or other
securities are then listed, and any applicable federal or state laws, and the Committee may
cause a legend or legends to be put on any such certificates to make appropriate reference to
such restrictions.

     (v) Consideration for Grants. Awards may be granted for such consideration, including
services, as the Committee determines.

     (vi) Delivery of Units or other Securities and Payment by Participant of Consideration.
Notwithstanding anything in the Plan or any Award Agreement to the contrary, delivery of Common
Units pursuant to the exercise, vesting and/or settlement of an Award may be deferred for any
period during which, in the good faith determination of the Committee, the Company is not
reasonably able to obtain Common Units to deliver pursuant to such Award without violating
applicable law or the applicable rules or regulations of any governmental agency or authority or
securities exchange. Unless other arrangements have been made that are acceptable to the
Company, no Common Units or other securities shall be delivered pursuant to any Award until
payment in full of any amount required to be paid pursuant to the Plan or the applicable Award
Agreement (including, without limitation, any exercise price or tax withholding) is received by
the Company. Such payment may be made by such method or methods and in such form or forms as the
Committee shall determine, including without limitation cash, other Awards, withholding of
Common Units, cashless broker exercises with simultaneous sale, or any combination thereof;
provided that the combined value, as determined by the Committee, of all cash and cash
equivalents and the Fair Market Value of any such Common Units or other property so tendered to
the Company, as of the date of such tender, is at least equal to the full amount required to be
paid to the Company pursuant to the Plan or the applicable Award Agreement.

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     (vii) Change of Control. If specifically provided in an Award Agreement, upon a change of
control (as defined in the Award Agreement) the Award may automatically vest and/or be payable
or become exercisable in full, as the case may be.

     (viii) Substitute Awards. Awards may be granted under the Plan in substitution for similar
awards held by individuals who become employees as a result of a merger, consolidation or
acquisition by the Company or an Affiliate of another entity or the assets of another entity. To
the extent permitted by section 409A of the Code and the regulations thereunder, such substitute
Awards may have exercise prices less than the Fair Market Value of a Common Unit on the date of
such substitution.

     SECTION 7. Amendment and Termination.

Except to the extent prohibited by applicable law:

     (a) Amendments to the Plan. Except as otherwise required by the rules of the principal
securities exchange on which the Common Units are traded, by the Code or by the Exchange Act,
and subject to Section 7(b) below, the Board or the Committee may amend, alter, suspend,
discontinue, or terminate the Plan in any manner, including increasing the number of Common
Units available for Awards under the Plan, without the consent of any partner, Participant,
other holder or beneficiary of an Award, or any other Person.

     (b) Amendments to Awards. Subject to Section 7(a), the Committee may waive any conditions
or rights under, amend any terms of, or alter any Award theretofore granted (including without
limitation requiring or allowing for an election to settle an Award in cash), provided no
change, other than pursuant to Section 7(c), in any Award shall (i) materially reduce the rights
or benefits of a Participant with respect to an Award without the consent of such Participant or
(ii) cause the Plan or such Award to fail to comply with the requirements of section 409A of the
Code.

     (c) Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events. The
Committee is hereby authorized, upon the occurrence of unusual or nonrecurring events
(including, without limitation, the events described in Section 4(c) of the Plan) affecting the
Partnership or the financial statements of the Partnership, or of changes in applicable laws,
regulations, or accounting principles, without the consent of any Participant or holder of the
Award, in its sole discretion and on such terms and conditions as it deems appropriate in order
to prevent dilution or enlargement of the benefits or potential benefits intended to be made
available under the Plan or an outstanding Award, to take one or more of the following actions:

     (i) provide for either (A) the cancellation and termination of any Award in exchange for
an amount of cash, other property, or securities, if any, equal to the amount that would have
been attained upon the exercise of such Award or realization of the Participant’s rights or if
Participant were a unitholder as of the date of the occurrence of such event (and, for the
avoidance of doubt, if as of the date of the occurrence of such transaction or event the
Committee determines in good faith that no amount would have been attained upon the exercise
of such Award or realization of the Participant’s rights, then such Award may be terminated by
the Company without payment) or (B) the replacement of such Award with or the conversion of
such Award into cash or other securities, rights or other property selected by the Committee
in its sole discretion;

     (ii) provide that such Award be assumed by the successor or survivor entity, or a parent
or subsidiary thereof, or be exchanged for similar options, rights or awards covering the
equity of the successor or survivor, or a parent or subsidiary thereof, or cash or other
property with appropriate adjustments as to the number and kind of equity interests or cash or
other property and prices, provided, however, in the discretion of the Committee, the vesting
schedule applicable to such Award may be retained;

     (iii) make adjustments in the number and type of Common Units (or other securities or
property) subject to outstanding Awards, and in the number and kind of outstanding Awards or
in the terms and conditions of (including the exercise price), and the vesting and performance
criteria included in, outstanding Awards, or both;

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     (iv) provide that such Award shall be exercisable and payable, notwithstanding anything
to the contrary in the Plan or the applicable Award Agreement;

     (v) provide that such Award shall be fully vested and/or nonforfeitable; and

     (vi) provide that the Award cannot be exercised or become payable after such event (i.e.,
shall terminate upon such event).

     Notwithstanding the foregoing, (i) no adjustment may be made that would cause the Plan or such
Award to fail to comply with the requirements of section 409A of the Code, and (ii) with respect to
an above event that is an “equity restructuring” event that would be subject to compensation
expense pursuant to FASB Accounting Standards Codification Topic 718, the provisions in Section
4(c) shall control to the extent they are in conflict with the discretionary provisions of this
Section 7.

     SECTION 8. General Provisions.

     (a) No Rights to Award. No Person shall have any claim to be granted any Award under the
Plan, and there is no obligation for uniformity of treatment of Participants. The terms and
conditions of Awards need not be the same with respect to each recipient.

     (b) Tax Withholding. Unless other arrangements have been made that are acceptable to the
Company, the Company or any Affiliate is authorized to withhold from any Award, from any payment
due or transfer made under any Award or from any compensation or other amount owing to a
Participant the amount (in cash, Common Units, other securities, Common Units that would otherwise
be issued pursuant to such Award or other property) of any applicable taxes payable in respect of
the grant or settlement of an Award, its exercise, the lapse of restrictions thereon, or any other
payment or transfer under an Award or under the Plan and to take such other action as may be
necessary in the opinion of the Company to satisfy its withholding obligations for the payment of
such taxes.

     (c) No Right to Employment or Services. The grant of an Award shall not be construed as
giving a Participant the right to be retained in the employ of the Company or any Affiliate, to
continue consulting services or to remain on the Board, as applicable. Further, the Company or an
Affiliate may at any time dismiss a Participant from employment or consulting services, free from
any liability or any claim under the Plan, unless otherwise expressly provided in the Plan, any
Award Agreement or other agreement.

     (d) Governing Law. The validity, construction, and effect of the Plan and any rules and
regulations relating to the Plan shall be determined in accordance with the laws of the State of
Delaware without regard to its conflict of laws principles.

     (e) Severability. If any provision of the Plan or any Award is or becomes or is deemed to be
invalid, illegal, or unenforceable in any jurisdiction or as to any Person or Award, or would
disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision
shall be construed or deemed amended to conform to the applicable laws, or if it cannot be
construed or deemed amended without, in the determination of the Committee, materially altering the
intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, Person
or Award and the remainder of the Plan and any such Award shall remain in full force and effect.

     (f) Other Laws. The Committee may refuse to issue or transfer any Common Units or other
consideration under an Award if, in its sole discretion, it determines that the issuance or
transfer of such Common Units or such other consideration might violate any applicable law or
regulation, the rules of the principal securities exchange on which the Common Units are then
traded, or entitle the Partnership or an Affiliate to recover the same under Section 16(b) of the
Exchange Act, and any payment tendered to the Company by a Participant, other holder or beneficiary
in connection with the exercise of such Award shall be promptly refunded to the relevant
Participant, holder or beneficiary.

     (g) No Trust or Fund Created. Neither the Plan nor any Award shall create or be construed to
create a trust or separate fund of any kind or a fiduciary relationship between the Company or any
participating Affiliate and a Participant or any other Person. To the extent that any Person
acquires a right to receive payments from the

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Company or any participating Affiliate pursuant to an Award, such right shall be no greater
than the right of any general unsecured creditor of the Company or any participating Affiliate.

     (h) No Fractional Units. No fractional Common Units shall be issued or delivered pursuant to
the Plan or any Award, and the Committee shall determine in its sole discretion whether cash, other
securities, or other property shall be paid or transferred in lieu of any fractional Common Units
or whether such fractional Common Units or any rights thereto shall be canceled, terminated, or
otherwise eliminated with or without consideration.

     (i) Headings. Headings are given to the Sections and subsections of the Plan solely as a
convenience to facilitate reference. Such headings shall not be deemed in any way material or
relevant to the construction or interpretation of the Plan or any provision thereof.

     (j) Facility Payment. Any amounts payable hereunder to any individual under legal disability
or who, in the judgment of the Committee, is unable to properly manage his financial affairs, may
be paid to the legal representative of such individual, or may be applied for the benefit of such
individual in any manner that the Committee may select, and the Company shall be relieved of any
further liability for payment of such amounts.

     (k) Participation by Affiliates. To the extent necessary so that an Award hereunder will not
constitute a “deferral of compensation” within the meaning of section 409A of the Code, any
compensation paid or provided pursuant to this Plan to compensate any Employee, Consultant or
Director will be paid or provided as compensation for such individual’s direct services to the
Partnership.

     (l) Gender and Number. Words in the masculine gender shall include the feminine gender, the
plural shall include the singular and the singular shall include the plural.

     (m) Compliance with Section 409A. Nothing in the Plan or any Award Agreement shall operate or
be construed to cause the Plan or an Award to fail to comply with the requirements of section 409A
of the Code. The applicable provisions of section 409A of the Code and the regulations thereunder
are hereby incorporated by reference into and shall control over any Plan or Award Agreement
provision in conflict therewith or that would cause a failure of compliance thereunder, to the
extent necessary to resolve such conflict or obviate such failure.

     (n) Deferrals. The Committee may, to the extent permitted by applicable law, permit
Participants to defer Awards under the Plan. Any such deferrals shall be subject to such terms,
conditions and procedures that the Committee may establish from time to time in its sole discretion
and consistent with the advance and subsequent deferral requirements of Code section 409A.

     SECTION 9. Term of the Plan.

     The Plan shall be effective on the date immediately preceding the close of the initial public
offering of Common Units and shall continue until the earliest of (i) the date terminated by the
Board or the Committee, or (ii) all available Common Units under the Plan have been paid to
Participants, whichever occurs first. However, unless otherwise expressly provided in the Plan or
in an applicable Award Agreement, any Award granted prior to such termination, and the authority of
the Board or the Committee to amend, alter, adjust, suspend, discontinue, or terminate any such
Award or to waive any conditions or rights under such Award, shall extend beyond such termination
date.

9exv10w3

Exhibit 10.3

Execution Version

TAX SHARING AGREEMENT

BY AND AMONG

PLAINS ALL AMERICAN PIPELINE, L.P.

AND

PAA
NATURAL GAS STORAGE, L.P.

May 5, 2010

 

 

TAX SHARING AGREEMENT

BY AND AMONG

PLAINS ALL AMERICAN PIPELINE, L.P. AND PAA NATURAL GAS STORAGE, L.P.

     Tax Sharing Agreement (the “Agreement”), dated this 5th day of May, 2010, by and
among PLAINS ALL AMERICAN PIPELINE, L.P. (“PAA”), a Delaware limited partnership, and PAA NATURAL
GAS STORAGE, L.P. (“PNGS”), a Delaware limited partnership.

RECITALS

     WHEREAS, PAA is the owner of the member interests of PNGS GP LLC (the general partner of PNGS)
and common and subordinated units of PNGS;

     WHEREAS, the PNGS Group (as defined below) includes various entities that may be required to
join with PAA or its affiliates in the filing of a consolidated, combined or unitary state tax
return;

     WHEREAS, the Parties (as defined below) wish to set forth the general principles under which
they will allocate and share various Taxes (as defined below) and related liabilities;

     WHEREAS, PAA, on behalf of itself and its present and future subsidiaries other than the PNGS
Group (“PAA Group”), and PNGS, on behalf of itself and its present and future subsidiaries (the
“PNGS Group”), are entering into this Agreement to provide for the allocation among the PAA Group
and the PNGS Group of all responsibilities, liabilities and benefits relating to any Tax for which
a Combined Return (as defined below) is filed for a taxable period including or beginning on or
after the Effective Date (as defined below) and to provide for certain other matters;

NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in
this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Parties hereby agree as follows:

ARTICLE I

Definitions

     1.1 Definitions. The following terms shall have the following meanings (such meanings to be
equally applicable to both the singular and the plural forms of the terms defined):

     “Accounting Referee” is defined in Section 6.11 herein.

     “Code” means the Internal Revenue Code of 1986, as amended, or any successor thereto, as in
effect for the taxable period in question.

     “Combined Group” means a group of corporations or other entities that files a Combined Return.

2

 

     “Combined Return” means any Tax Return (other than a Tax Return for U.S. federal income taxes)
filed on a consolidated, combined (including nexus combination, worldwide combination, domestic
combination, line of business combination or any other form of combination) or unitary basis that
includes activities of any member of the PAA Group and any member of the PNGS Group.

     “Effective Date” means 7:00 a.m., Central time, on [date of closing].

     “Final Determination” means the final resolution of any Tax (or other matter) for a taxable
period, including related interest or penalties, that, under applicable law, is not subject to
further appeal, review or modification through proceedings or otherwise, including (i) by the
expiration of a statute of limitations or a period for the filing of claims for refunds, amending
Tax Returns, appealing from adverse determinations or recovering any refund (including by offset),
(ii) by a decision, judgment, decree or other order by a court of competent jurisdiction, which has
become final and unappealable, (iii) by a closing agreement, an accepted offer in compromise or a
comparable agreement under laws of the particular Tax Authority, (iv) by execution of a form under
the laws of a Tax Authority that is comparable to an Internal Revenue Service Form 870 or 870-AD
(excluding, however, with respect to a particular Tax Item for a particular taxable period any such
form that reserves (whether by its terms or by operation of law) the right of the taxpayer to file
a claim for refund and/or the right of the Tax Authority to assert a further deficiency with
respect to such Tax Item for such period) or (v) by any allowance of a refund or credit, but only
after the expiration of all periods during which such refund may be adjusted.

     “Notice” is defined in Section 6.1 herein.

     “PAA Group” is defined in the recitals to this Agreement.

     “Party” means each of PAA and PNGS, and solely for purposes of this definition, “PAA” includes
the PAA Group and PNGS includes the PNGS Group. Each of PAA and PNGS shall cause the PAA Group and
the PNGS Group, respectively, to comply with this Agreement.

     “PNGS Group” is defined in the Recitals to this Agreement.

     “PNGS Group Combined Tax Liability” means, with respect to any Tax, the PNGS Group’s liability
for such Tax owed with respect to a Combined Return for a taxable period, as determined under
Section 3.2 of this Agreement.

     “PNGS Group Deposit” is defined in Section 3.4 herein.

     “PNGS Group Members” means those entities included in the PNGS Group.

     “PNGS Group Pro Forma Combined Return” means a pro forma Combined Return or other schedule
prepared pursuant to Section 3.2 of this Agreement.

     “Reporting Entity” means the entity that is required by statute or rule to file the particular
Combined Return.

3

 

     “Tax Attribute” means a Tax Item of a member of the PNGS Group reflected on a Combined Return
that is comparable to one or more of the following attributes with respect to a U.S. federal income
tax consolidated tax return: a net operating loss, a net capital loss, an unused investment
credit, an unused foreign tax credit, an excess charitable contribution, a U.S. federal minimum tax
credit or a U.S. federal general business credit (but not tax basis or earnings and profits).

     “Tax Authority” means a domestic governmental authority (other than the United States) or any
subdivision, agency, commission or authority thereof or any quasi-governmental or private body
having jurisdiction over the assessment, determination, collection or imposition of any Tax
(excluding the U.S. Internal Revenue Service).

     “Tax Controversy” means any audit, examination, dispute, suit, action, litigation or other
judicial or administrative proceeding initiated by PAA or PNGS or any Tax Authority.

     “Tax Item” means any item of income, gain, loss, deduction or credit, or other item reflected
on a Tax Return or any Tax Attribute.

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

     “Tax” or “Taxes” means all forms of taxation, whenever created or imposed, and whether imposed
by a domestic, local, municipal, governmental, state, federation or other body, but excluding taxes
imposed by the United States, and without limiting the generality of the foregoing, shall include
net income, alternative or add-on minimum, gross income, sales, use, ad valorem, gross receipts,
value added, franchise, profits, license, transfer, recording, withholding, payroll, employment,
excise, severance, stamp, occupation, premium, property, windfall profit, custom duty or other tax,
governmental fee or like assessment or charge of any kind whatsoever, together with any related
interest, penalties or other additions to tax, or additional amounts imposed by any such Tax
Authority.

Any term used but not capitalized herein that is defined in the Code or in the Treasury Regulations
thereunder shall, to the extent required by the context of the provision at issue, have the meaning
assigned to it in the Code or such regulation.

ARTICLE II

Preparation and Filing of Tax Returns

2.1 Manner of Filing

          (a) For periods that include the Effective Date and periods after the Effective Date, PAA
shall have the sole and exclusive responsibility for the preparation and filing of, and shall
cause the Reporting Entity to prepare and file, all Combined Returns. PAA shall be authorized
to take any and all action necessary or incidental to the preparation and filing of a

4

 

Combined Return, including, without limitation, (i) making elections and adopting
accounting methods, (ii) filing all extensions of time, including extensions of time for payment
of tax, (iii) filing claims for refund or credit or (iv) giving waivers or bonds.

          (b) For periods that include the Effective Date and periods after the Effective Date, the
PNGS Group shall have the sole and exclusive responsibility for the preparation and filing of,
and shall prepare and file or cause to be prepared and filed, all Tax Returns of the PNGS Group
Members that are not Combined Returns.

          (c) PAA shall have sole discretion to include, or cause to be included, in a Combined
Return for any Tax any member of the PNGS Group for which inclusion in such Combined Return is
elective; provided, however, that the PNGS Group Combined Tax Liability for any period shall not
exceed the aggregate of (x) each such elective PNGS Group Member’s liability for such Tax for
such period, computed as if such PNGS Group Member were not included in such Combined Return and
(y) the PNGS Group Combined Tax Liability calculated for the PNGS Group Members for which
inclusion is not elective. PAA shall provide pro forma Tax Returns pursuant to Section 3.5 of
this Agreement to support the calculation of the amount of any decrease in the PNGS Group
Combined Tax Liability pursuant to this Section 2.1(c).

     2.2 Franchise Tax Taxable Period. References to “taxable period” for any franchise or other
doing business Tax shall mean the taxable period during which the income, operations, assets or
capital comprising the base of such Tax is measured, regardless of whether the right to do business
for another taxable period is obtained by the payment of such franchise Tax.

ARTICLE III

Allocation of Taxes

     3.1 Liability of the PNGS Group for Combined Taxes. For each Tax for each taxable period that
includes or begins on or after the Effective Date and for which a Combined Return is filed, the
PNGS Group Members included in such Combined Return shall be liable to PAA for an amount equal to
the PNGS Group Combined Tax Liability in respect of such Tax.

     3.2 PNGS Group Combined Tax Liability. With respect to each Tax for each taxable period that
includes or begins on or after the Effective Date and for which a member of the PNGS Group is
included in a Combined Return, the PNGS Group Combined Tax Liability for such Tax for such taxable
period shall be the Tax for such taxable period as determined on a PNGS Group Pro Forma Combined
Return prepared:

          (a) by including only the Tax Items of the members of the PNGS Group that are included in the
Combined Return and computing the liability of the PNGS Group Members for such Tax as if such PNGS
Group Members were included in a separate combined, consolidated or unitary return that includes
only the PNGS Group Members;

          (b) except as provided in Section 3.2(e) hereof, using all elections, accounting methods and
conventions used on the Combined Return for such period;

5

 

          (c) applying the Tax rate in effect for the Combined Return of the Combined Group for such
taxable period;

          (d) assuming that the PNGS Group elects not to carry back any net operating losses and

          (e) assuming that the PNGS Group’s utilization of any Tax Attribute carryforward or carryback
is limited to the Tax Attributes of the PNGS Group that would be available if the PNGS Group
Combined Tax Liability for each taxable period ending after the Effective Date were determined in
accordance with this Section 3.2.

     3.3 Preparation and Delivery of Pro Forma Tax Returns. Not later than 90 days following the
date on which a Combined Return is filed with the appropriate Tax Authority, PAA shall prepare and
deliver to PNGS the related PNGS Group Pro Forma Combined Return calculating the PNGS Group
Combined Tax Liability attributable to the period covered by such filed Combined Return.

     3.4 Payment of Tax. PAA shall timely pay (or shall cause to be timely paid) any Tax reflected
on a Combined Return and hold PNGS harmless for all liability for such Tax. In the event PAA is
required to make an estimated payment or deposit of any Tax of any Combined Group which includes
any member of the PNGS Group, PAA shall calculate the portion, if any, of such estimated payment or
deposit attributable to the PNGS Group using a methodology similar to that described in Section 3.2
(the “PNGS Group Deposit”) and shall present such calculation to PNGS. Within 5 days thereafter,
PNGS shall pay the PNGS Group Deposit to PAA. Within 30 days after delivery by PAA of a PNGS Group
Pro Forma Combined Return to PNGS calculating the PNGS Group Combined Tax Liability with respect to
a Combined Return, PNGS shall pay to PAA such PNGS Group Combined Tax Liability less the amount of
any PNGS Group Deposit relating to the same Combined Return.

     3.5 Subsequent Changes in Treatment of Tax Items. With respect to any Combined Return for any
taxable period beginning on or after the Effective Date, in the event of a change in the treatment
of any Tax Item of any member of a Combined Group as a result of a Final Determination, within 30
days following such Final Determination (i) PAA shall calculate the change, if any, to the PNGS
Group Combined Tax Liability resulting from such change, (ii) PAA shall pay any decrease in the
PNGS Group Combined Tax Liability to PNGS and (iii) PNGS shall pay any increase in the PNGS Group
Combined Tax Liability to PAA.

ARTICLE IV

Control of Tax Proceedings; Cooperation and Exchange of Information

     4.1 Control of Proceedings. Except as provided in this Article IV, PAA shall have full
responsibility and discretion in handling, settling or contesting any Tax Controversy involving a
Tax Return for which it has filing responsibility under this Agreement as well as all Tax Returns
for all taxable periods ending before the Effective Date. PNGS shall have full responsibility and
discretion in handling, settling or contesting any Tax Controversy involving a Tax Return for which
it has filing responsibility under this Agreement. Except as otherwise

6

 

provided in this Article IV, any costs incurred in handling, settling or contesting any Tax
Controversy shall be borne by the Party having full responsibility and discretion thereof.

     4.2 Cooperation and Exchange of Information.

          (a) Each Party shall cooperate fully at such time and to the extent reasonably requested by
any other Party in connection with the preparation and filing of any Tax Return or claim for
refund, or the conduct of any audit, dispute, proceeding, suit or action concerning any issues or
other matters considered in this Agreement. Such cooperation shall include, without limitation,
the following: (i) the retention and provision on demand of Tax Returns, books, records (including
those concerning ownership and Tax basis of property which a Party may possess), documentation or
other information relating to the Tax Returns, including accompanying schedules, related workpapers
and documents relating to rulings or other determinations by Taxing Authorities, until the
expiration of the applicable statute of limitations (giving effect to any extension, waiver or
mitigation thereof); (ii) the provision of additional information, including an explanation of
material provided under clause (i) of this Section 4.2(a), to the extent such information is
necessary or reasonably helpful in connection with the foregoing; (iii) the execution of any
document that may be necessary or reasonably helpful in connection with the filing of a Tax Return
by PAA, PNGS or of their respective subsidiaries, or in connection with any audit, dispute,
proceeding, suit or action and (iv) such Party’s commercially reasonable efforts to obtain any
documentation from a governmental authority or a third party that may be necessary or reasonably
helpful in connection with any of the foregoing.

          (b) Each Party shall make its employees and facilities available on a reasonable and mutually
convenient basis in connection with any of the foregoing matters.

          (c) If any Party fails to provide any information requested pursuant to Section 4.2 hereof
within a reasonable period, as determined in good faith by the Party requesting the information,
then the requesting Party shall have the right to engage a public accounting firm to gather such
information, provided that 30 days’ prior written notice is given to the unresponsive Party. If
the unresponsive Party fails to provide the requested information within 30 days of receipt of such
notice, then such unresponsive Party shall permit the requesting Party’s public accounting firm
full access to all appropriate records or other information as reasonably necessary to comply with
this Section 4.2 and shall reimburse the requesting Party or pay directly all costs connected with
the requesting Party’s engagement of the public accounting firm.

ARTICLE V

Warranties and Representations; Payment Obligations

     5.1 Warranties and Representations Relating to Actions of PAA and PNGS. Each of PAA and PNGS
warrants and represents to the other that:

          (a) in the case of PAA, it is a limited partnership duly organized, validly existing and in
good standing under the laws of the State of Delaware and has all requisite power to carry out the
transactions contemplated by this Agreement;

7

 

          (b) in the case of PNGS, it is a limited partnership duly organized, validly existing and in
good standing under the laws of the State of Delaware and has all requisite power to carry out the
transactions contemplated by this Agreement;

          (c) it has duly and validly taken all action necessary to authorize the execution, delivery
and performance of this Agreement and the consummation of the transactions contemplated hereby;

          (d) this Agreement has been duly executed and delivered by it and constitutes its legal, valid
and binding obligation enforceable in accordance with its terms subject, as to the enforcement of
remedies, to (i) applicable bankruptcy, reorganization, insolvency, moratorium or other similar
laws affecting the enforcement of creditors’ rights generally from time to time in effect and (ii)
general principles of equity, whether enforcement is sought in a proceeding at law or in equity and

          (e) the execution and delivery of this Agreement, the consummation of the transactions
contemplated hereby or the compliance with any of the provisions of this Agreement will not (i)
conflict with or result in a breach of any provision of its certificate of incorporation, by-laws,
certificate of limited partnership, limited partnership agreement or general partnership agreement,
as the case may be, (ii) breach, violate or result in a default under any of the terms of any
agreement or other instrument or obligation to which it is a party or by which it or any of its
properties or assets may be bound or (iii) violate any order, writ, injunction, decree, statute,
rule or regulation applicable to it or affecting any of its properties or assets.

     5.2 Calculation of Payment Obligations. Except as otherwise provided under this Agreement, to
the extent that the payor Party has a payment obligation to the payee Party pursuant to this
Agreement, the payee Party shall provide the payor Party with its calculation of the amount of such
obligation. The documentation of such calculation shall provide sufficient detail to permit the
payor Party to reasonably understand the calculation. All payment obligations shall be made to the
payee Party or to the appropriate Tax Authority as specified by the payee Party within 30 days
after delivery by the payee Party to the payor Party of written notice of a payment obligation.
Any disputes with respect to payment obligations shall be resolved in accordance with Section 6.11
below.

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

     5.4 Interest. Payments pursuant to this Agreement that are not made within the period
prescribed therefor in this Agreement shall bear interest (compounded daily) from and including the
date immediately following the last date of such period through and including the date of payment
at a rate equal to the U.S. federal short-term rate or rates established pursuant to Section 6621
of the Code for the period during which such payment is due but unpaid.

     5.5 Tax Records. The Parties to this Agreement hereby agree to retain and provide on proper
demand by any Tax Authority (subject to any applicable privileges) the books, records,
documentation and other information relating to any Tax Return until the later of (i) the

8

 

expiration of the applicable statute of limitations (giving effect to any extension, waiver or
mitigation thereof), (ii) the date specified in an applicable records retention agreement entered
into with a Tax Authority, (iii) a Final Determination made with respect to such Tax Return and
(iv) the final resolution of any claim made under this Agreement for which such information is
relevant.

     5.6 Continuing Covenants. Each Party agrees (i) not to take any action reasonably expected to
result in a new or changed Tax Item that is detrimental to any other Party and (ii) to take any
action reasonably requested by any other Party that would reasonably be expected to result in a new
or changed Tax Item that produces a benefit or avoids a detriment to such other Party; provided
that such action does not result in any additional cost not fully compensated for by the requesting
Party. The Parties hereby acknowledge that the preceding sentence is not intended to limit, and
therefore shall not apply to, the rights of the Parties with respect to matters otherwise covered
by this Agreement.

ARTICLE VI

Miscellaneous Provisions

     6.1 Notice. Any notice, demand, claim or other communication required or permitted to be
given under this Agreement (a “Notice”) shall be in writing and may be personally served provided a
receipt is obtained therefor, or may be sent by certified mail return receipt requested postage
prepaid, to the Parties at the following addresses (or at such other address as one Party may
specify by notice to any other Party):

	 	 	 	 	 

	 

	 	PAA at:
	 	Plains All American Pipeline, L.P.
	 

	 	 	 	333 Clay Street, Suite 1600
	 

	 	 	 	Houston, Texas 77002
	 

	 	 	 	Attention: General Counsel
	 
	 	 	 	 
	 

	 	PNGS at:
	 	PAA Natural Gas Storage, L.P.
	 

	 	 	 	c/o PAA All American Pipeline, L.P.
	 

	 	 	 	333 Clay Street, Suite 1500
	 

	 	 	 	Houston, Texas 77002
	 

	 	 	 	Attention: Vice President – Legal

     A Notice which is delivered personally shall be deemed given as of the date specified on the
written receipt therefor. A Notice mailed as provided herein shall be deemed given on the third
business day following the date so mailed. Notification of a change of address may be given by any
Party to another in the manner provided in this Section 6.1 for providing a Notice.

     6.2 Required Payments. Unless otherwise provided in this Agreement, any payment of Tax
required shall be due within 30 days of a Final Determination of the amount of such Tax.

     6.3 Injunctions. The Parties acknowledge that irreparable damage would occur in the event
that any of the provisions of this Agreement were not performed in accordance with its specific
terms or were otherwise breached. The Parties hereto shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically

9

 

the terms and provisions of this Agreement in any court having jurisdiction, such remedy being
in addition to any other remedy to which they may be entitled at law or in equity.

     6.4 Further Assurances. Subject to the provisions hereof, the Parties hereto shall make,
execute, acknowledge and deliver such other instruments and documents, and take all such other
actions, as may be reasonably required in order to effectuate the purposes of this Agreement and to
consummate the transactions contemplated hereby. Subject to the provisions hereof, each of the
Parties shall, in connection with entering into this Agreement, perform its obligations hereunder
and take any and all actions relating hereto, comply with all applicable laws, regulations, orders
and decrees, obtain all required consents and approvals and make all required filings with any
governmental agency, other regulatory or administrative agency, commission or similar authority and
promptly provide the other Parties with all such information as such Parties may reasonably request
in order to be able to comply with the provisions of this sentence.

     6.5 Parties in Interest. Except as herein otherwise specifically provided, nothing in this
Agreement expressed or implied is intended to confer any right or benefit upon any person, firm or
corporation other than the Parties and their respective successors and permitted assigns.

     6.6 Setoff. Except as provided by Section 2.1(c) of this Agreement, all payments to be made
under this Agreement shall be made without setoff, counterclaim or withholding, all of which are
expressly waived.

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

     6.8 Termination and Survival. Notwithstanding anything in this Agreement to the contrary,
this Agreement shall remain in effect and its provisions shall survive for the full period of all
applicable statutes of limitation (giving effect to any extension, waiver or mitigation thereof) or
until otherwise agreed to in writing by PAA and PNGS, or their successors.

     6.9 Amendments; No Waivers.

          (a) Any provision of this Agreement may be amended or waived if, and only if, such amendment
or waiver is in writing and signed, in the case of an amendment, by PAA and PNGS, or in the case of
a waiver, by the Party against whom the waiver is to be effective.

          (b) No failure or delay by any Party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power or privilege.

10

 

     6.10 Governing Law and Interpretation. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to agreements made and to be performed
in the State of Delaware.

     6.11 Resolution of Certain Disputes. Any disagreement between the Parties with respect to any
matter that is the subject of this Agreement, including, without limitation, any disagreement with
respect to any calculation or other determinations by PAA hereunder, which is not resolved by
mutual agreement of the Parties, shall be resolved by a nationally recognized independent
accounting firm chosen by and mutually acceptable to the Parties hereto (an “Accounting Referee”).
Such Accounting Referee shall be chosen by the Parties within fifteen (15) business days from the
date on which one Party serves written notice on another Party requesting the appointment of an
Accounting Referee, provided that such notice specifically describes the calculations to be
considered and resolved by the Accounting Referee. In the event the Parties cannot agree on the
selection of an Accounting Referee, then the Accounting Referee shall be any office or branch of
the public accounting firm of [PricewaterhouseCoopers LLP]. The Accounting Referee shall resolve
any such disagreements as specified in the notice within 30 days of appointment; provided, however,
that no Party shall be required to deliver any document or take any other action pursuant to this
Section 6.11 if it determines that such action would result in the waiver of any legal privilege or
any detriment to its business. Any resolution of an issue submitted to the Accounting Referee
shall be final and binding on the Parties hereto without further recourse. The Parties shall share
the costs and fees of the Accounting Referee equally.

     6.12 Confidentiality. Except to the extent required to protect a Party’s interests in a Tax
Controversy, each Party shall hold and shall cause its consultants and advisors to hold in strict
confidence, unless compelled to disclose by judicial or administrative process or, in the opinion
of its counsel, by other requirements of law, all information (other than any such information
relating solely to the business or affairs of such Party) concerning another Party or its
representatives pursuant to this Agreement (except to the extent that such information can be shown
to have been (i) previously known by the Party to which it was furnished, (ii) in the public domain
through no fault of such Party or (iii) later lawfully acquired from other sources by the Party to
which it was furnished), and each Party shall not release or disclose such information to any other
person, except its auditors, attorneys, financial advisors, bankers and other consultants and
advisors who shall be advised of the provisions of this Agreement. Each Party shall be deemed to
have satisfied its obligation to hold confidential information concerning or supplied by another
Party if it exercises the same care as it takes to preserve confidentiality for its own similar
information.

     6.13 Costs, Expenses and Attorneys’ Fees. Except as expressly set forth in this Agreement,
each Party shall bear its own costs and expenses incurred pursuant to this Agreement. In the event
a Party to this Agreement brings an action or proceeding for the breach or enforcement of this
Agreement, the prevailing party in such action, proceeding or appeal, whether or not such action,
proceeding or appeal proceeds to final judgment, shall be entitled to recover as an element of its
costs, and not as damages, such reasonable attorneys’ fees as may be awarded in the action,
proceeding or appeal in addition to whatever other relief the prevailing party may be entitled.
For purposes of this Section 6.13, the “prevailing party” shall be the Party who is entitled to
recover its costs; a Party not entitled to recover its costs shall not recover

11

 

attorneys’ fees. No sum for attorneys’ fees shall be counted in calculating the amount of the
judgment for purposes of determining whether a Party is entitled to recover its costs or attorneys’
fees.

     6.14 Counterparts. This Agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original, but all of which together shall constitute one and the same
instrument.

     6.15 Severability. The Parties hereby agree that, if any provision of this Agreement should
be adjudicated to be invalid or unenforceable, such provision shall be deemed deleted herefrom with
respect, and only with respect, to the operation of such provision in the particular jurisdiction
in which such adjudication was made, and only to the extent of the invalidity, and any such
invalidity or unenforceability in a particular jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. All other remaining provisions of this
Agreement shall remain in full force and effect for the particular jurisdiction and all other
jurisdictions.

     6.16 Entire Agreement.

          (a) This Agreement contains the entire agreement between the Parties with respect to the
subject matter hereof and supersedes all other agreements, whether or not written, in respect of
any Tax between the PAA Group and the PNGS Group.

          (b) In the event of any conflict or inconsistency between the provisions of this Agreement and
the provisions of any other agreement between the PAA Group and the PNGS Group, the provisions of
this Agreement shall take precedence and to such extent shall be deemed to supersede such
conflicting provisions under the other agreement.

     6.17 Assignment. This Agreement is being entered into by PAA and PNGS on behalf of themselves
and each member of the PAA Group and the PNGS Group. This Agreement shall constitute a direct
obligation of each such member and shall be deemed to have been readopted and affirmed on behalf of
any entity that becomes a member of the PAA Group or the PNGS Group in the future. Each of PAA and
PNGS hereby guarantee the performance of all actions, agreements and obligations provided for under
this Agreement of each member of the PAA Group and the PNGS Group, respectively. Each of PAA and
PNGS shall, upon the written request of the other, cause any of their respective group members to
formally execute this Agreement. This Agreement shall be binding upon, and shall inure to the
benefit of, the successors, assigns and persons controlling any of the entities bound hereby for so
long as such successors, assigns or controlling persons are members of the PAA Group or the PNGS
Group or their successors and assigns.

     6.18 Fair Meaning. This Agreement shall be construed in accordance with its fair meaning and
shall not be construed strictly against the drafter.

     6.19 Titles and Headings. Titles and headings to sections herein are inserted for the
convenience of reference only and are not intended to be a part of or to affect the meaning or
interpretation of this Agreement.

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     6.20 Construction. In this Agreement, unless the context otherwise requires, the terms
“herein,” “hereof” and “hereunder” refer to this Agreement.

[Signature Page Follows]

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     IN WITNESS WHEREOF, the Parties hereto have executed and delivered this Agreement as of the
day and year first above written.

	 	 	 	 	 
	 	PLAINS ALL AMERICAN PIPELINE, L.P.

 	 
	 	By:  	  PAA GP LLC,
 	 
	 	 	its general partner 	 
	 	 	 
	 	By:  	                           Plains AAP, L.P.,
 	 
	 	 	its sole member 	 

	 	 	 	 	 
	 	 	 
	 	By:  	      Plains All American GP LLC
 	 
	 	 	its general partner 	 
	 	 	 
	 	By:  	                   /s/ Al Swanson
 	 
	 	 	Name:  	Al Swanson 	 
	 	 	Title:  	Senior Vice President and

Chief Financial Officer 	 
	 

	 	 	 	 	 
	 	PAA NATURAL GAS STORAGE, L.P.

 	 
	 	By:  	PNGS GP LLC,
 	 
	 	 	its general partner 	 
	 	 	 
	 	By:  	                        /s/ Richard McGee
 	 
	 	 	Name:  	Richard McGee 	 
	 	 	Title:  	Vice President – Legal and Business

Development and Secretary

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