Document:

Exhibit 10.21

 

 

TRANSPORTATION SERVICE AGREEMENT

Contract Identification FT8742

 

This Transportation Service Agreement (Agreement) is
entered into by Great Lakes Gas Transmission Limited Partnership (Transporter)
and TRANSCANADA PIPELINES LIMITED (Shipper).

 

WHEREAS, Shipper has requested Transporter to
transport Gas on its behalf and Transporter represents that it is willing to
transport Gas under the terms and conditions of this Agreement.

 

NOW, THEREFORE, Transporter and Shipper agree that
the terms below constitute the transportation service to be provided and the
rights and obligations of Shipper and Transporter.

 

1.             EFFECTIVE DATE: December 06,
2007

 

2.             CONTRACT IDENTIFICATION:
FT8742

 

3.             RATE SCHEDULE: FT

 

4.             SHIPPER TYPE: Other

 

5.             STATE/PROVINCE OF INCORPORATION: Canada

 

6.             TERM: November 01,
2008 to October 31, 2010

 

Transporter and Shipper agree that Shipper may extend
the primary terns of this Agreement by exercising a contractual Right of First
Refusal, pursuant to the procedures set forth in section 16 of the General
Terms and Conditions of Transporter’s FERC Gas Tariff.

 

7.             EFFECT ON PREVIOUS CONTRACTS:

 

This Agreement supersedes, cancels and terminates, as
of the effective date stated above, the following contract(s): N/A

 

8.             MAXIMUM DAILY QUANTITY (Dth/Day): 470,000

 

Please see Appendix A for further detail.

 

9.             RATES:

 

Unless Shipper and Transporter have agreed to a
Discounted Rate, pursuant to Section 19.2 of the General Terms and
Conditions, or to a Negotiated Rate, pursuant to Section 4.5 of the Rate
Schedule named above, rates shall be Transporter’s maximum rates and charges
plus all applicable surcharges in effect from time to time under the applicable
Rate Schedule (as stated above) on file with the Commission unless otherwise
agreed to by the parties in writing. Provisions governing a Discounted Rate
shall be set forth in this Paragraph 9. Provisions governing a Negotiated Rate
shall be set forth on Appendix B hereto.

 

Shipper and Transporter agree that for service under
this Agreement from the point(s) of receipt listed on Appendix A to the
point(s) of delivery listed on Appendix A, the Reservation Fee to be
charged shall be $9.733 per Dth.

 

10.           POINTS OF RECEIPT AND DELIVERY:

 

The primary receipt and delivery points are set forth
on Appendix A.

 

 

Contract ID: FT8742

 

11.           RELEASED CAPACITY:

 

N/A

 

12.           INCORPORATION OF TARIFF INTO AGREEMENT:

 

This Agreement shall incorporate and in all respects
be subject to the “General Terms and Conditions” and the applicable Rate
Schedule (as stated above) set forth in Transporter’s FERC Gas Tariff, Second
Revised Volume No. 1, as may be revised from time to time. Transporter may
file and seek Commission approval under Section 4 of the Natural Gas Act
(NGA) at any time and from time to time to change any rates, charges or
provisions set forth in the applicable Rate Schedule (as stated above) and the “General
Terms and Conditions” in Transporter’s FERC Gas Tariff, Second Revised Volume No. 1,
and Transporter shall have the right to place such changes in effect in
accordance with the NGA, and this Agreement shall be deemed to include such
changes and any such changes which become effective by operation of law and
Commission Order, without prejudice to Shipper’s right to protest the same.

 

13.           MISCELLANEOUS:

 

No waiver by either party to this Agreement of any
one or more defaults by the other in the performance of this Agreement shall
operate or be construed as a waiver of any continuing or future default(s),
whether of a like or a different character.

 

Any controversy between the parties arising render
this Agreement and not resolved by the parties shall be determined in
accordance with the laws of the State of Michigan.

 

14.           OTHER PROVISIONS:

 

It is agreed that no personal liability whatsoever
shall attach to, be imposed on or otherwise be incurred by any Partner, agent,
management official or employee of the Transporter or any director, officer or
employee of any of the foregoing, for any obligation of the Transporter arising
under this Agreement or for any claim based on such obligation and that the
sole recourse of Shipper under this Agreement is limited to assets of the
Transporter.

 

Upon termination of this Agreement, Shipper’s and
Transporter’s obligations to each other arising under this Agreement, prior to
the date of termination, remain in effect and are not being terminated by any
provision of this Agreement.

 

 

15.           NOTICES AND COMMUNICATIONS:

 

All notices and communications with respect to this
Agreement shall be in writing and sent to the addresses stated below or at any
other such address(es) as may be designated in writing:

 

	
  ADMINISTRATIVE MATTERS

  	
   

  	
   

  
	
  Great Lakes Gas Transmission Limited

  	
   

  	
  TRANSCANADA PIPELINES LIMITED

  
	
  Partnership

  	
   

  	
  450 - 1st Street S.W.

  
	
  5250 Corporate Drive

  	
   

  	
  Calgary, AB T2P 5H1

  
	
  Troy, MI 48098

  	
   

  	
  Canada

  
	
  Attn: Transportation Services

  	
   

  	
  Attn: Steve Pohlod

  
	
   

  	
   

  	
   

  
	
  PAYMENT BY ELECTRONIC TRANSFER

  	
   

  	
   

  
	
  Great Lakes Gas Transmission Limited

  	
   

  	
  TRANSCANADA PIPELINES LIMITED

  
	
  Partnership

  	
   

  	
  Attn: Andrea Morrical

  
	
  JPMorgan Chase Bank, Detroit, MI

  	
   

  	
   

  
	
  ABA No:  072000326

  	
   

  	
   

  
	
  Account No: 07308-43

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  AGREED TO BY:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  GREAT LAKES CAS TRANSMISSION

  	
   

  	
   

  
	
  LIMITED PARTNERSHIP

  	
   

  	
   

  
	
  By: Great Lakes Gas Transmission Company

  	
   

  	
  TRANSCANADA PIPELINES LIMITED

  
	
   

  	
   

  	
   

  
	
  Operator and Agent for Great Lakes Gas

  	
   

  	
   

  
	
  Transmission Limited Partnership

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Martin Wilde

  	
   

  	
  By:

  	
  /s/ Max Feldman

  
	
  Martin Wilde

  	
   

  	
  Max Feldman

  
	
  Title: Director, Marketing

  	
   

  	
  Title: Senior Vice President, Canadian

  and Eastern US Pipelines

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John Van der Put

  
	
   

  	
   

  	
  John Van der Put

  
	
   

  	
   

  	
  Title: Vice President, Market

  Development, Canadian and Eastern U.S.

  Pipelines

  
					

 

 

APPENDIX A Contract
Identification

FT8742

 

	
   

  	
  Date: 

  	
  December 06. 2007

  
	
   

  	
  Supersedes Appendices
  Dated: Not Applicable

  

 

Shipper:
TRANSCANADA PIPELINES LIMITED

 

Maximum
Daily Quantity (Dth/Day) per Location:

 

	
  Begin Date

  	
   

  	
  End Date

  	
   

  	
  Point(s) of Primarv Receipt

  	
   

  	
  Point(s) of Primarv Delivery

  	
   

  	
  MDQ

  	
   

  	
  (MAOP)

  	
   

  
	
  11/01/2008

  	
   

  	
  10/31/2010

  	
   

  	
  EMERSON

  	
   

  	
   

  	
   

  	
  470,000

  	
   

  	
  974

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11/01/2008

  	
   

  	
  10/31/2010

  	
   

  	
   

  	
   

  	
  ST. CLAIR

  	
   

  	
  470,000

  	
   

  	
  974Exhibit 10.22

 

THE TC PIPELINES GP, INC.

SHARE UNIT PLAN

FOR NON-EMPLOYEE DIRECTORS
(2007)

 

Section 1       Purpose

 

The
Share Unit Plan for Non-Employee Directors (2007) (the “Plan”) is intended to
enhance the ability of TC PipeLines GP, Inc. (the “General Partner”) to
attract and retain high quality individuals to serve as members of the Board
and to promote a greater alignment of interests between non-employee members of
the Board and unitholders of the Partnership. 
The Plan is effective as of October 18, 2007.

 

Section 2       Definitions

 

For
the purposes of the Plan:

 

(a)                                  “Affiliate”
With respect to any
person, any other person directly or indirectly controlling or controlled by or
under direct or indirect common control with such specified person.

 

(b)                                 “Agreement” means, with respect to a
particular Eligible Director or Participant, the written agreement, as amended
from time to time, entered into between the General Partner and such Eligible
Director pursuant to Section 5 hereof, substantially in the form of agreement
set out in Appendix A attached hereto;

 

(c)                                  “Aggregate
Purchase Price” has the meaning assigned thereto in Section 8.6 hereof;

 

(d)                                 “Annual
Retainer Fee” means the portion, expressed in dollars, of the annual retainer
fee, annual committee chair retainer fee and the annual Board and committee
attendance fee, which would, but for the Plan, be payable in cash by the
General Partner to an Eligible Director for approximately one year of service
as a member of the Board beginning on the date of the annual meeting of the
General Partner at which the Board is elected and ending on the date
immediately preceding the date of the following annual meeting of the General
Partner, and for greater certainty, Annual Retainer Fee shall exclude amounts
received by an Eligible Director as a reimbursement for expenses incurred in
attending meetings and any other fee which may be payable by the General
Partner to an Eligible Director;

 

 

(e)                                  “Beneficiary” means an individual who, on
the date of a Participant’s death, is the person who has been designated in
accordance with Section 13.1 hereof and the laws applicable to the Plan,
or where no such individual had been validly designated by the Participant, or
where the designated individual does not survive the Participant, the
Participant’s legal representative;

 

(f)                                    “Board”
means the Board of Directors of the General Partner;

 

(g)                                 “Broker”
has the meaning assigned thereto in Section 11.1 hereof;

 

(h)                                 “Common
Unit” means a common unit representing a limited partnership interest in TC
PipeLines, LP (the “Partnership”), or any subsequent security to which the
Common Units have been converted, exchanged or changed as reasonably determined
by the Board;

 

(i)                                     “Eligible
Director” has the meaning assigned thereto in Section 4 hereof;

 

(j)                                     “Entitlement Date” has the meaning assigned thereto in
Section 8.1 hereof as it may be adjusted pursuant to Section 8.2
hereof;

 

(k)                                  “Fair Market Value” of a Common Unit
means, as of any date, the value of Common Unit determined as follows:

 

(A)          If the Common Unit is listed on any
established stock exchange or a national market system, including without
limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The
Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for
such unit (or the closing bid, if no sales were reported) as quoted on such
exchange or system for the market trading day on the time of determination (or
if that is not a trading day, the most recently concluded trading day) as
reported in The Wall Street Journal or
such other source as the Board deems reliable;

 

(B)           If the Common Unit is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Common Unit shall be the mean between the high bid and low asked prices for
the Common Unit for the market trading day on the time of determination (or if
that is not a trading day, the most recently concluded trading day), as
reported in The Wall Street Journal or
such other source as the Board deems reliable; or

 

(C)           In the absence of an established market for the Common
Unit, the Fair Market Value thereof shall be determined in good faith by the
Board.

 

2

 

(l)                                     “Participant” means an Eligible Director
who has been credited Share Units under the Plan;

 

(m)                               “Plan” means The TC PipeLines GP, Inc.
Share Unit Plan for Non-Employee Directors (2007), as amended and restated from
time to time;

 

(n)                                 “Price
per Common Unit” has the meaning assigned thereto in Section 8.6 hereof;

 

(o)                                 “Payment
Period” means any of the four quarters of any financial year of the General
Partner, and which, on the effective date hereof, end on March 31, June 30,
September 30 and December 31;

 

(p)                                 “Quarterly Retainer Fee” means the amount,
expressed in dollars, representing up to twenty-five (25%) of the Annual
Retainer Fee which would, but for the Plan, be payable in cash on the last day
of each Payment Period by the General Partner to an Eligible Director, or if,
with respect to any Payment Period, an Eligible Director has served as a member
of the Board for a number of days that is less than the full Payment Period,
the amount, expressed in dollars, which is the product of: (i) the
quotient determined by dividing:  (A) the
number of days in the particular Payment Period during which the Eligible
Director served as a member of the Board, by (B) the aggregate number of
days in the particular Payment Period; and (ii) the amount, expressed in
dollars, of the quarterly retainer fee which would otherwise have been payable
for such Payment Period had the Eligible Director served as a member of the
Board for the full Payment Period;

 

(q)                                 “Reference
Date”, with respect to any Payment Period, means the date which shall be used
to determine, on a quarterly basis, the Fair Market Value of a Common Unit for
purposes of determining the number of Share Units to be credited, for such
Payment Period, to a Participant’s account pursuant to Sections 6 and 7 hereof,
which date shall be, unless otherwise determined by the Board, the last trading
day of such Payment Period on which the Fair Market Value of a Common Unit may
be determined;

 

(r)                                    “Share
Unit” means a unit credited by means of a bookkeeping entry on the books of the
Partnership to a Participant’s account in accordance with the terms and
conditions of the Plan;

 

(s)                                  “Subsidiary”
means any corporation, partnership or joint venture a majority of whose shares
or ownership interests normally entitled to vote in electing directors or
selecting persons charged with managing the business and affairs of such entity
is owned directly or indirectly by the Partnership, the General Partner or its
parent, TransCanada Corporation; and

 

3

 

(t)                                    “Termination
of Board Service” means the earliest date on which both of the following
conditions are met: the Participant (1) has ceased to be an Eligible
Director, and (2) is neither an employee of the Partnership, the General
Partner or any of their Affiliates nor a member of the board of an
Affiliate.  With respect to a Participant
who is a U.S. taxpayer, “Termination of Board Service” shall have the same
meaning as a “separation from service” under section 409A of the Internal
Revenue Code of 1986, as amended (“Section 409A”).

 

Section 3       Administration of the Plan

 

Except
where otherwise expressly provided herein, the Plan shall be administered by
the Board and shall be subject to applicable corporate and securities law and
policy requirements.  All expenses of
administration of the Plan shall be borne by the General Partner, including the
purchase price of and any reasonable brokerage fees relating to the purchase of
Common Units under the Plan.

 

Section 4       Eligibility

 

The
Plan shall apply to all members of the Board who, on or at any time after the
effective date of the Plan, and for so long as they continue to serve as
members of the Board, are not otherwise employees of the General Partner,
TransCanada Corporation or any of their Affiliates and have elected to
participate in the Plan (each, an “Eligible Director”).

 

Section 5       Execution of Agreement

 

Each
Eligible Director shall, as soon as practicable after the effective date of the
Plan or after the date on which such Eligible Director is elected or appointed
for the first time, enter into an Agreement with the General Partner
substantially in the form of the Agreement set out in Appendix A attached
hereto.  Such Agreement shall set out
certain rights and obligations of the parties thereto with respect to the Share
Units which shall, under the Plan, be credited to the account of a Participant
and shall remain in full force and effect until all such Share Units shall have
been redeemed.

 

Section 6       Deferral
of Annual Retainer Fees and Grants of Additional Share Units

 

6.1                                                                               Each Eligible Director may choose to have
credited to his or her account under the Plan, zero to 100 percent of his or
her Annual Retainer Fee (or the portion thereof
applicable to service of less than an entire term of approximately one year), in the form of Share Units in lieu of
being paid such portion of his or her Annual Retainer Fee (or the portion
thereof applicable to service of less than an entire term of approximately one
year) in cash.  In order to exercise this
option, each such Eligible Director shall notify the Corporate Secretary of the
General Partner before the commencement of the first calendar year for which
such option is exercised.  Thereafter,
such Eligible Director shall remain a Participant in the Plan in respect of his
or her Annual Retainer Fee until the election is withdrawn 

 

4

 

by him or her for
a subsequent calendar year.  The
Corporate Secretary of the General Partner shall make inquiries on this matter
to each Eligible Director in November of each year.

 

6.2                                                                               The
number of Share Units (including fractional Share Units) to be credited on a
quarterly basis to the account of an Eligible Director who has exercised his or
her option under Section 6.1 hereof with respect to any particular Payment
Period, shall be equal to the quotient determined by the following formula:

 

Quarterly Retainer
Fee

Fair Market Value of Common Unit

 

where:

 

i.      Quarterly Retainer Fee is
all or a portion of the entire amount, expressed in dollars, of the Eligible
Director’s Quarterly Retainer Fee which would, but for the Plan, have been paid
in cash with respect to such Payment Period; and

 

ii.     Fair Market Value of Common
Unit is the Fair Market Value of a Common Unit on the Reference Date for such
Payment Period.

 

6.3                                                                               The
Board may, at any time in satisfaction of fees other than Annual Retainer Fees
that may be payable to Eligible Directors in their capacity as members of the
Board or otherwise in respect of their service as members of the Board, grant
additional Share Units to Eligible Directors who have elected to receive Share
Units.  In the case of Eligible Directors
who have not served a full term of approximately one year, the Board may grant
additional Share Units on a pro rata basis to such Eligible Directors. Share
Units granted pursuant to this Section 6.3 shall be credited to the
applicable Eligible Director’s account under the Plan as at the date specified
by the Board.  Notwithstanding the
foregoing, with respect to any Participant who is a U.S. taxpayer, the Board
shall exercise this discretion within the time periods required under Section 409A.

 

6.4                                                                               A
Participant who becomes an employee of the General Partner or TransCanada
Corporation (other than in his or her capacity as a member of the Board) or a
Subsidiary, shall no longer be eligible to have Share Units credited to his or
her account under the Plan.  However,
Share Units already credited to such person’s account shall remain governed by
the Plan and the Agreement.

 

5

 

Section 7       Distribution-like
Amounts

 

A
Participant’s account shall, from time to time during the term of the
Participant’s Agreement, including the period following Termination of Board
Service and until the Entitlement Date referred to in Section 8 hereof
(even if the Entitlement Date a Participant elects pursuant to Section 8.1
falls between the record date for a distribution on the Common Units and the
related distribution payment date), be credited, effective on each of the
payment dates referred to below or on the Entitlement Date, as the case may be,
with such number of additional Share Units equal to the quotient determined by
the following formula:

 

(Declared
Distributions x Number of Share Units)

Fair
Market Value of Common Units

 

where:

 

i.      Declared Distributions are
one hundred percent (100%) of each distribution declared and paid by the
Partnership on its Common Units on a per share basis (excluding stock
dividends, but including distributions which may be paid in cash or in shares
at the option of the unitholder);

 

ii.     Number of Share Units are
the number of Share Units recorded in the Participant’s account on the record
date for the payment of any such distribution; and

 

iii.    Fair Market Value of Common
Units is the Fair Market Value of a Common Unit on the payment date for such
distribution, or if such payment date is not a trading date, on the preceding
trading date, with fractions computed to four decimal places.

 

Section 8       Redemption
of Share Units

 

8.1                                                                               Election of Entitlement Date

 

Participants shall redeem all of their Share
Units on the respective Entitlement Dates elected in accordance with the
following provisions:

 

(a)          Payouts to Participants who are
not U.S. Taxpayers.  The value of the
Share Units credited to the account under the Plan of each Participant who is
not a U.S. taxpayer shall be redeemable by the Participant (or where the
Participant has died, his Beneficiary) at the Participant’s option (or after
the Participant’s death, at the option of his Beneficiary) following the
Participant’s Termination of Board Service by providing written notice of
redemption to the Corporate Secretary of the General Partner specifying one of
the dates specified in Section 8.1(c). 
The date so specified shall be the Participant’s “Entitlement Date”.

 

6

 

(b)         Payouts to Participants who are
U.S. Taxpayers.  Participants who are U.S. taxpayers shall
provide a written election to the Corporate Secretary of the General Partner
prior to the end of each year that they are a Participant, fixing a single
payout date following Termination of Board Service with respect to Share Units
to be earned in the calendar year commencing immediately following the year in
which such election is made. Any applicable payout date applicable to Share Units
of a Participant under this Section 8.1(b) shall be the Participant’s
“Entitlement Date” with respect to those Share Units. For clarity and as an example, a
Participant might make an election in 2007 for Share Units that Participant
will earn in 2008 and in 2008, may elect a different Entitlement Date for Share
Units that Participant will earn in 2009.

 

(c)          The permitted Entitlement Dates that a
Participant elects pursuant to Sections 8.1(a) and (b) above, shall
be the end of the first, second, third or fourth calendar quarter following the
date of Termination of Board Service.  If
no payout date is elected with respect to any Share Units, then the payout
dates in respect of such Share Units shall be the end of the first calendar
quarter following the date of Termination of Board Service.  In the case of Section 8.1(a) such
notice shall be given within 60 days following the date of Termination of Board
Service.

 

8.2                                                                               Adjustments to Entitlement Date

 

In the event any of the following provisions apply, the
Entitlement Date elected by the Participant pursuant to Section 8.1 may be
adjusted.  In that case, the term ‘Entitlement
Date’ shall mean the adjusted Entitlement Date, adjusted in accordance with
this Section 8.2.  Notwithstanding
anything in this Section 8.2 to the contrary, with respect to Participants
who are U.S. taxpayers, the adjusted Entitlement Date shall not be extended to
a date beyond that permitted under Section 409A (and the regulations
promulgated thereunder).

 

(a)           Unavailable Data.
In the event that the General Partner is unable, by a Participant’s elected or
adjusted Entitlement Date, to compute the final number of Share Units credited
to such Participant’s account by reason of the fact that any data required in
order to compute the Fair Market Value of a Common Unit has not been made
available to the General Partner, then the Entitlement Date shall be the
trading day next following the date on which such data is made available to the
General Partner.

 

(b)           Undisclosed Material Information. Without limiting the
generality of Section 14, subject to Section 8.5 and notwithstanding
any other provision of the Plan, if, in the opinion of the Board, there is a
material fact or a material change concerning the business and affairs of the
Partnership, its Affiliates or Common Units (where “material fact” and “material
change” have the meanings given under applicable securities legislation) that
has not been generally disclosed to the public, on the Participant’s Entitlement
Date such Participant’s Entitlement Date shall be postponed and no Common Units
shall be purchased hereunder on behalf of such 

 

7

 

Participant until
such time as, in the opinion of the Board, such material fact or material
change has been generally disclosed to the public or has ceased to exist.

 

8.3                                                                               Receipt of Common Units

 

If no election is made under
Section 8.6, the General Partner shall arrange for a Participant, or a
Participant’s Beneficiary, as the case may be, to receive Common Units in
satisfaction of, and in an number equal to, the number of Share Units recorded
in the Participant’s account on the Entitlement Date, subject to any
adjustments pursuant
to Section 17 hereof and reduced as necessary to reflect any applicable
withholding taxes and other source deductions required by law to be withheld or
deducted by the General Partner in connection with the redemption of the
Participant’s Share Units. Such Common Units shall be purchased in accordance
with Sections 8.4 and Section 11 hereof.

 

8.4                                                                               Purchase of Common Units on Open
Market

 

Prior to 11:00 a.m. on
the Entitlement Date, the General Partner shall notify the Broker as to the
number of Common Units to be purchased by the Broker on behalf of the
Participant on the open market.  As soon
as practicable thereafter, the Broker shall purchase, on the open market, the
number of Common Units which the General Partner has requested the Broker to
purchase and shall notify the Participant and the General Partner of: (a) the
aggregate purchase price (“Aggregate Purchase Price”) of the Common Units, (b) the
purchase price per Common Unit or, if the Common Units were purchased at
different prices, the average purchase price (computed on a weighted average basis)
per Common Unit (“Price per Common Unit”), (c) the amount of any related
reasonable brokerage commission, and (d) the settlement date for the
purchase of the Common Units, which settlement date shall not be later than the
date specified in Section 8.5 hereof. 
On the settlement date, upon payment of the Aggregate Purchase Price and
related reasonable brokerage commissions by the General Partner, the Broker
shall deliver to the Participant or to the Participant’s representative, the
certificate representing the Common Units. 
Any entitlement to fractional Share Units shall be paid in cash based on
the Price per Common Unit.

 

8.5                                                                               Delivery & Payment Date

 

Notwithstanding any other provision of the Plan, all
Common Units to be purchased and delivered and all payments payable to or in
respect of a Participant’s Share Units hereunder, shall be delivered or paid in
accordance with the Participant’s election of an Entitlement Date pursuant to Section 8.1,
but in no event later than December 31 of the calendar year following the
year in which the Participant’s Termination of Board Service occurs.

 

8

 

8.6                                                                               Election for Cash in Lieu of Common Units.

 

The
Participant or the Participant’s Beneficiary may elect, by providing written
notice to the Corporate Secretary of the General Partner within 60 days of the
Participant’s Termination of Board Service, to receive the value of that
Participant’s Share Unit entitlement, as of the Entitlement Date, which is
determined in accordance with Section 8.1(a) or (b) as
applicable, in one lump sum cash payment (rather than receive Common Units)
less any applicable withholdings, and the General Partner shall be fully
discharged in making such cash payment. 
If the Participant or the Participant’s Beneficiary provides the notice
contemplated by this Section 8.6, the General Partner shall pay the value
of the Share Units credited to the Participant’s account under the Plan,
computed as of the Entitlement Date. The lump sum cash payment, for the purpose
of this Section 8.6, will be equivalent to the product determined by the
following formula:

 

Share
Units X Fair Market Value of a Common Unit

 

where:

 

Share Units means the
number of Share Units standing to the credit of the Participant on the
Entitlement Date; and

 

Fair Market Value of a
Common Unit has the meaning given to it in Section 2(k) hereof.

 

Section 9       Participant’s
Account

 

The
General Partner shall maintain in its books, an account for each Participant
which records the number of Share Units standing to the credit of the
Participant.  Share Units will be fully
vested upon being credited to a Participant’s account and the Participant’s
entitlement to payment of Share Units at the termination date shall not
thereafter be subject to satisfaction of any requirements as to any minimum
period of service as a member of the Board. Upon redemption of the Share Units
by way of receipt of Common Units as provided for under Section 8.3 hereof
or a cash payment as provided for under Section 8.6 hereof, such Share
Units shall be cancelled and the number of Share Units standing to the credit
of the Participant shall be reduced to reflect the cancellation of such Share
Units. A written confirmation of the balance in the account shall be mailed by the
General Partner to the Participant at least annually.

 

Section 10         Effective
Date of the Plan

 

The
effective date of the Plan shall be October 18, 2007.

 

9

 

Amendments to and Suspension or Termination of the Plan

 

10.1                                                                        The
Board may, from time to time, amend, suspend or terminate the Plan in whole or
in part; however, any such amendment, suspension or termination shall not
adversely affect the rights of any Participant under any Agreement existing at
the time of such amendment, suspension or termination without the consent of
the affected Participant.

 

Section 11         Purchases on the Open Market

 

11.1                                                                        Purchases
of Common Units pursuant to the Plan shall be made on the open market by a
broker who is independent from the Partnership and who is a member of The
National Association of Securities Dealers (the “Broker”).  The Participant who wishes to redeem his or
her Share Units under the Plan, shall designate a Broker to purchase Common
Units on the open market and any such designation may be changed by the
Participant from time to time.  Upon
designation of the Broker, or at any time thereafter, the General Partner may
elect to provide the designated Broker with a letter agreement to be entered
into and executed by the Broker, Participant and General Partner and such
letter agreement would set forth, inter alia:

 

(i)            the Broker’s concurrence to being designated to act
for the Participant, to acting for the Participant and dealing with the
Participant’s account in accordance with customary trade practice with a view
to obtaining the best share price for the Participant, and to delivering to the
Participant, or his/her representative or Beneficiary as the case may be, the
share certificate for the Common Units purchased, upon payment by the General
Partner of the purchase price and related reasonable and customary brokerage
commission; and

 

(ii)           the Partnership’s
agreement to notify the Broker of the number of Common Units to be purchased
and to pay the purchase price and the related reasonable and customary
brokerage commission in connection with the purchase of the Common Units,

 

provided however, that no terms of said letter agreement shall have the
effect of making the Broker or deeming the Broker to be an agent of the Partnership,
General Partner or an affiliate of (or not independent from) the Partnership
for purposes of any applicable corporate, securities or stock exchange
requirement.

 

11.2                                                                        The
Share Units, and any related Common Units that may be delivered under the Plan,
have not been registered under the U.S. Securities Act of
1933 as of the effective date of the Plan, and the Partnership or
General Partner has no obligation to register such units or shares.  The said Common Units may not be offered or
sold in the United States unless registered or an exemption from registration
is available.

 

10

 

Section 12         Rights
of Participants

 

12.1                                                                        Except
as specifically set out in the Plan or an Agreement, no Eligible Director,
Participant or other person shall have any claim or right to any Common Units
or any other benefit in respect of Share Units granted pursuant to the Plan.

 

12.2                                                                        Under no circumstances shall Share Units
be considered Common Units nor shall they entitle any Participant to exercise
voting rights or any other rights attaching to the ownership of the Common
Units, nor shall any Participant be considered the owner of the Common Units
until after the date of the purchase of such Common Units on the open market.

 

12.3                                                                        Neither the Plan nor any grant thereunder
shall be construed as granting a Participant a right to be retained as a
director of the General Partner or a claim or right to any future grant of
Share Units.

 

Section 13         Death
of Participant

 

13.1                                                                        Subject to the requirements of applicable
laws, a Participant may designate in writing, a person who is a dependant or
relation of the Participant as a beneficiary to receive any benefits payable or
due to the Participant under the Plan, upon the death of such Participant.  The Participant may, subject to applicable
laws, change such designation from time to time.  Such designation or change shall be in such
form and executed and filed in such manner as the Board may, from time to time,
determine.

 

13.2                                                                        In the
event of a Participant’s death, any and all payments with respect to Share
Units then credited to such Participant’s account under the Plan shall become
payable to the Participant’s Beneficiary in accordance with Section 8
hereof.

 

Section 14         Compliance
with Applicable Laws

 

Any
obligation of the General Partner with respect to the Common Units pursuant to
the terms of the Plan, is subject to compliance with all applicable laws and
the rules of any stock exchange on which units of the Partnership are
listed.  Should the General Partner
determine that it is not feasible to arrange for purchase and delivery of
Common Units to the Participant in accordance with Section 8 in
satisfaction of Share Units by reason of any such laws, such obligation shall
be satisfied by means of an equivalent cash payment, calculated in accordance
with the provisions of Section 8.6. 
The Participant shall comply with all such laws and furnish the General
Partner with any and all information and undertakings as may be required to
ensure compliance therewith.

 

11

 

Section 15         Withholding
Taxes

 

The
General Partner shall be entitled to deduct any amount of withholding taxes and
other withholdings from any amount paid or credited hereunder, which taxes
shall reduce the amounts to which the Participant is entitled.

 

Section 16         Transferability

 

In
no event may the rights or interests of a Participant under the Plan be
assigned, encumbered, pledged, transferred or alienated in any way, except to
the extent that certain rights may pass to a Beneficiary upon death of a
Participant, by will or by the laws of succession and distribution.

 

Section 17         Alteration
of Number of Share Units Subject to the Plan

 

17.1                        In the
event that the Common Units are subdivided or consolidated into a different
number of Common Units, or a dividend that is payable in Common Units (rather
than in cash or in shares at the option of the shareholder) is declared on the
Common Units, the number of Share Units then recorded in the Participant’s
account shall be adjusted to equal the number of Common Units which would be
held by the Participant immediately after the dividend, subdivision or
consolidation, should the Participant have held a number of Common Units equal
to the number of Share Units recorded in the Participant’s account on the
record date fixed for such dividend, or the effective date of such subdivision
or consolidation.

 

17.2                        In the
event that the outstanding Common Units are changed into, or exchanged for a
different number or kind of securities of the Partnership or of another entity,
whether through an arrangement, amalgamation or other similar statutory
procedure, or a share recapitalization, then there shall be substituted for
each Common Unit referred to in the Plan, the kind of securities into which
each outstanding Common Unit shall be so changed or exchanged and an equitable
adjustment shall be made, if required, in the number of Share Units then
recorded in the Participant’s account. Any such adjustment will be reasonably
determined by the Board and will be effective and binding for all purposes.

 

17.3                                                                        In the event there is any distribution to
all or substantially all the holders of Common Units of:

 

(i)            equity interests of any class other than Common Units
and other than equity interests distributed as a dividend which may be paid in
shares at the option of the shareholder;

 

(ii)           rights, options or warrants other than rights, options
or warrants to subscribe for or purchase Common Units (or securities
convertible or exchangeable into Common Units) for a period of not more than 45
days at a price per Common Unit (or having a conversion or exchange price per 

 

12

 

Common Unit) of
not less than 95% of the current market price of a Common Unit on the record
date for such distribution;

 

(iii)          instruments of indebtedness of the Partnership; or

 

(iv)          assets (excluding dividends paid in the ordinary
course),

 

then, in each such case,
an equitable adjustment shall be made in the number of Share Units then
recorded in a Participant’s account, such adjustment will be reasonably
determined by the Board and will be effective and binding for all purposes.

 

17.4                                                                        In the
case of any substitution, change or adjustment as provided for in this section,
the variation shall generally require that the dollar value of the Share Units
then recorded in the Participant’s account prior to such substitution, change
or adjustment will be proportionately and appropriately varied so that it be
equal to such dollar value after the variation. 
The “dollar value” for this purpose means the number of Share Units
recorded on the day immediately prior to the date such substitution, change or
adjustment is made multiplied by the Fair Market Value of a Common Unit
determined on that same day.

 

17.5                                                                        In the event that, at the time
contemplated for the purchase of Common Units under the Plan, there is no
public market for the Common Units or for securities substituted therefor as
provided by this section, the obligations of the General Partner under the Plan
shall be met by a payment in cash in such amount as is reasonably determined by
the Board to be fair and equitable in the circumstances.

 

17.6                                                                        Notwithstanding
any other provision of the Plan, in no event shall any amount be paid to, or in
respect of, a Participant under the Plan or pursuant to any other arrangement,
and no Share Units will be granted nor will any credit be made to Participant’s
account under the Plan to compensate for a downward fluctuation in the price of
the Common Units, nor will any other form of benefit be conferred upon, or in
respect of, a Participant for such purpose.

 

Section 18         Unfunded Plan

 

Unless otherwise determined by the Board, the Plan
shall be unfunded.  To the extent that
any person holds any rights by virtue of an election under the Plan, such
rights, unless otherwise determined by the Board, shall be no greater than the
rights of an unsecured general creditor of the General Partner.

 

Section 19         Governing
Law

 

The
Plan shall be governed by, and interpreted in accordance with, the laws in
force in the State of Delaware.

 

13

 

Appendix A

 

The TC PipeLines GP, Inc.

Share Unit Plan for
Non-Employee Directors (2007)

 

 

THIS AGREEMENT is made
effective this · day of ·, 2007,

 

BETWEEN:

 

TC PipeLines GP, Inc. a corporation incorporated under the laws of
Delaware having its registered office in Wilmington, Delaware (hereinafter
called the “General Partner”)

AND

[Name of Participant],
residing at

[Address]

[City,
State]

 

(hereinafter called the “Participant”)

 

PURSUANT TO THE TC PIPELINES GP, INC. SHARE UNIT
PLAN FOR NON-EMPLOYEE DIRECTORS (2007) OF THE GENERAL PARTNER AS AMENDED FROM
TIME TO TIME (THE “PLAN”) AND FOR GOOD AND VALUABLE CONSIDERATION, THE RECEIPT
AND SUFFICIENCY OF WHICH IS HEREBY ACKNOWLEDGED, THE PARTIES AGREE AS FOLLOWS:

 

1.                                       This Agreement sets out the terms, conditions
and restrictions which, together with the terms, conditions and restrictions
set out in the Plan, shall govern the rights and obligations of the parties
hereto with respect to all of the Share Units which shall be credited to the
Participant’s account under the Plan while the Participant remains an Eligible
Director, as well as with respect to the delivery of Common Units to the
Participant in compliance with the terms of the Plan; defined terms not
otherwise defined herein shall have the same meaning as in the Plan, the text
of which as at the date of this Agreement is attached hereto under Schedule A.

 

2.                                       As set out in Section 11 of the Plan,
the Broker shall be designated by the Participant by a written notification to
the General Partner under Section 3 hereof.  Any designation shall include the name and
address, telephone and fax numbers of the Broker.

 

3.                                       Any notices to the General Partner under this
Agreement shall be sent to the address indicated below, unless notice of change
of address is given by the General Partner to the Participant in accordance
with this Section 3.  Any notices to
the Participant under this

 

14

 

Agreement shall be sent, and delivery of Common
Units in respect of Share Units shall be made, to the address indicated below,
unless notice of change of address is given by the Participant to the General
Partner in accordance with this Section 3. 
Any notices under this Agreement or the Plan shall be given by
registered mail, facsimile, courier service or personal delivery as follows:

 

With
respect to the General Partner:

450 – 1 Street SW

Calgary, Alberta

T2P 5H1

Attention:  Corporate Secretary

Facsimile number: (403)
920-2460

 

With
respect to the Participant:

Mr./Ms.[Name]

[Address]

[City,
State, Zip Code] United States

Facsimile
number:  (·) ·

 

4.             In case of any conflict between the text of
the Plan and the text of this Agreement, the text of the Plan shall govern.

 

5.             The General Partner and the Participant
hereby agree to comply with terms of the Plan as it may be amended from time to
time.  Within 30 days of the date on
which any Plan amendment becomes effective, the General Partner shall provide
the Participant with an amended copy of the Plan together with a memo outlining
the amendments made.  The Participant
also agrees to comply with any and all applicable laws and policies of
regulatory authorities, to furnish to the General Partner any and all
information and undertakings as may be required to permit compliance by the
Participant or the General Partner with any such laws and to consent to any
revisions of the Plan and this Agreement as may be required to permit
compliance by the General Partner with any such laws and policies or as the
General Partner determines to be necessary or desirable.

 

6.             The Participant understands that there may be
restrictions on the Participant’s right to sell the Common Units related to any
Share Units within the United States and accordingly, agrees not to do so
without prior discussion with, and approval by, the General Partner.

 

7.             This Agreement shall be governed by and
interpreted in accordance with the laws in force in the State of Delaware.

 

15

 

8.                                       In connection with the Participant’s
execution of this Agreement, the Participant provides the confirmations, which
are included in Schedule B hereto, which is incorporated in and forms part of
this Agreement.

 

IN WITNESS WHEREOF the Parties hereto have executed
these presents as of the day and year first written above.

 

	
   

  	
   

  	
  TC PipeLines GP, Inc.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Per:

  	
   

  
	
  [Name of
  Participant]

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Per:

  	
   

  
	
  Witness

  	
   

  	
   

  	
   

  

 

16

 

Schedule B

 

To

The TC PipeLines GP, Inc.

Share Unit Plan for
Non-Employee Directors (2007)

 

In connection with the Share Units to be credited to
the Participant’s account and the Participant’s receipt of Common Units under
the Plan, the Participant confirms that:

 

(1)           The Participant will
receive the Share Units and any related Common Units for its own account for
investment and not with a view to, or for resale in connection with, any
distribution thereof or of any interest therein that would violate the United
States Securities Act of 1933 (the “Securities Act”).

 

(2)           The Participant agrees that
the certificates representing any Common Units delivered under the Plan (and,
until the transfer agent for the Common Units is otherwise advised by the
General Partner, any certificates issued in exchange or substitution for or on
registration of transfer of such securities) shall, at the request of the
General Partner, on behalf of the Partnership, bear the following legend:

 

“THE COMMON UNITS EVIDENCED
BY THIS UNIT CERTIFICATE HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933 (THE “SECURITIES ACT”).  ACCORDINGLY, THE UNITS MAY NOT BE SOLD,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF, EXCEPT IN COMPLIANCE WITH THE
SECURITIES ACT OR AN EXEMPTION THEREFROM.”

 

(3)           The
Participant has been afforded an opportunity to ask questions and receive
answers concerning the terms and condition of the Plan and to obtain such
additional information with respect to the Partnership and the Plan as the
Participant has requested.

 

(4)           The
Participant is an “accredited investor” as defined in Rule 501(a) under
the Securities Act.

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