Document:

Exhibit

Exhibit 10.1
               
AMENDED AND RESTATED
VALIDUS HOLDINGS, LTD.
2005 LONG TERM INCENTIVE PLAN

(As Amended and Restated Effective May 7, 2015)

		
	1.
	Purposes.

The purposes of the Amended and Restated 2005 Long Term Incentive Plan, as amended and restated effective May 7, 2015, are to advance the interests of Validus Holdings, Ltd. and its shareholders by providing a means to attract, retain, and motivate employees, consultants and directors of Validus Holdings, Ltd., its subsidiaries and affiliates, to provide for competitive compensation opportunities, to encourage long term service, to recognize individual contributions and reward achievement of performance goals, and to promote the creation of long term value for shareholders by aligning the interests of such persons with those of shareholders.
		
	2.
	Definitions.

For purposes of the Plan, the following terms shall be defined as set forth below:
(a)“Affiliate” means any entity other than the Company and its Subsidiaries that is designated by the Board or the Committee as a participating employer under the Plan; provided, however, that the Company directly or indirectly owns at least 20% of the combined voting power of all classes of stock of such entity or at least 20% of the ownership interests in such entity.

(b)“Award” means any Option, SAR, Restricted Share, Restricted Share Unit, Performance Share, Performance Unit, Dividend Equivalent, or Other Share-Based Award granted to an Eligible Person under the Plan.

(c)“Award Agreement” means any written agreement, contract, or other instrument or document evidencing an Award.

(d)“Beneficiary” means the person, persons, trust or trusts which have been designated by an Eligible Person in his or her most recent written beneficiary designation filed with the Company to receive the benefits specified under this Plan upon the death of the Eligible Person, or, if there is no designated Beneficiary or surviving designated Beneficiary, then the person, persons, trust or trusts entitled by will or the laws of descent and distribution to receive such benefits.

(e)“Board” means the Board of Directors of the Company.

(f)“Change in Control” means consummation of (i) a sale of all or substantially all of the consolidated assets of the Company and its Subsidiaries to a person who is not either a member of, or an affiliate of a member of, the Initial Investor Group (as defined below); or (ii) a sale by the Company, one or more members of the Initial Investor Group or any of their respective affiliates resulting in more than 50% of the voting stock of the Company (“Voting Shares”) being held by a person or group (as such terms are used in the Exchange Act) that does not include any member of the Initial Investor Group or any of their respective affiliates; or (iii) a merger or consolidation of the Company into another person as a result of which a person or group acquires more than 50% of the Voting Shares of the Company that does not include any member of, or an affiliate of a member of, the Initial Investor Group; provided, however, that a Change in Control shall occur if and only if after any such event listed in (i)-(iii) above the Initial Investor Group is unable to elect a majority of the board of directors (or other governing body equivalent thereto) of the entity that purchased the assets in the case of an event described in (i) above, the Company in the case of an event described in (ii) above, or the resulting entity in the case of an event described in (iii) above, as the case may be.  The “Initial Investor Group” shall mean (i) Aquiline Financial Services Fund L.P., and (ii) the other Investors under Subscription Agreements with the Company dated December 9, 2005.

(g)“Code” means the Internal Revenue Code of 1986, as amended from time to time.  References to any provision of the Code shall be deemed to include successor provisions thereto and regulations thereunder.

(h)“Committee” means the Compensation Committee of the Board, or such other Board committee (which may include the entire Board) as may be designated by the Board to administer the Plan.

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(i)“Company” means Validus Holdings, Ltd., a corporation organized under the laws of Bermuda, or any successor corporation.

(j)“Director” means a member of the Board who is not an employee of the Company, a Subsidiary or an Affiliate.

(k)“Dividend Equivalent” means a right, granted under Section 5(g), to receive cash, Shares, or other property equal in value to dividends paid with respect to a specified number of Shares.  Dividend Equivalents may be awarded on a free-standing basis or in connection with another Award, and may be paid currently or on a deferred basis.

(l)“Effective Date” has the meaning set forth in Section 8(k) below.

(m)“Eligible Person” means (i) an employee or consultant of the Company, a Subsidiary or an Affiliate, including any director who is an employee, or (ii) a Director. 

(n)“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time.  References to any provision of the Exchange Act shall be deemed to include successor provisions thereto and regulations thereunder.

(o)“Fair Market Value” means, with respect to Shares or other property on a day, the fair market value of such Shares or other property determined by such methods or procedures as shall be established from time to time by the Committee.  If the Shares are listed on any established stock exchange or a national market system, unless otherwise determined by the Committee in good faith, the Fair Market Value of Shares on a day shall mean the closing price per Share on the day (or, if the Shares were not traded on that day, the next preceding day that the Shares were traded) on the principal exchange or market system on which the Shares are traded, as such prices are officially quoted on such exchange.

(p)“ISO” means any Option intended to be and designated as an incentive stock option within the meaning of Section 422 of the Code.

(q)“NQSO” means any Option that is not an ISO.

(r)“Option” means a right, granted under Section 5(b), to purchase Shares.

(s)“Other Share-Based Award” means a right, granted under Section 5(h), that relates to or is valued by reference to Shares.

(t)“Participant” means an Eligible Person who has been granted an Award under the Plan.

(u)“Performance Share” means a performance share granted under Section 5(f).

(v)“Performance Unit” means a performance unit granted under Section 5(f).

(w)“Plan” means this Amended and Restated 2005 Long Term Incentive Plan, as amended and restated effective May 7, 2015.

(x)“Restricted Shares” means an Award of Shares under Section 5(d) that may be subject to certain restrictions and to a risk of forfeiture.

(y)“Restricted Share Unit” means a right, granted under Section 5(e), to receive Shares or cash at the end of a specified deferral period.

(z)“Rule 16b-3” means Rule 16b-3, as from time to time in effect and applicable to the Plan and Participants, promulgated by the Securities and Exchange Commission under Section 16 of the Exchange Act.

(aa)“SAR” or “Share Appreciation Right” means the right, granted under Section 5(c), to be paid an amount measured by the difference between the exercise price of the right and the Fair Market Value of Shares on the date of exercise of the right, with payment to be made in cash, Shares, or property as specified in the Award or determined by the Committee.

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(bb)     “Shares” means common shares, $0.10 par value per share, of the Company, 
and such other securities as may be substituted for Shares pursuant to Section 4(b) hereof.

(cc)     “Subsidiary” means any corporation (other than the Company) in an unbroken
chain of corporations beginning with the Company if each of the corporations (other than the last corporation in the unbroken chain) owns shares possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in the chain.

(dd)     “Termination of Service” means, unless otherwise defined in an applicable Award 
Agreement, the termination of the Participant’s employment, consulting services or directorship with the Company, its Subsidiaries and its Affiliates, as the case may be.  A Participant employed by a Subsidiary of the Company or one of its Affiliates shall also be deemed to incur a Termination of Service if the Subsidiary of the Company or Affiliate ceases to be such a Subsidiary or an Affiliate, as the case may be, and the Participant does not immediately thereafter become an employee or director of, or a consultant to, the Company, another Subsidiary of the Company or an Affiliate.  Temporary absences from employment because of illness, vacation or leave of absence and transfers among the Company and its Subsidiaries and Affiliates shall not be considered a Termination of Service.  If the Participant has a written employment agreement with the Company, a Subsidiary or Affiliate that defines “Date of Termination”, unless otherwise determined by the Committee, the Participant shall be treated as having terminated employment for purposes of this Plan on the Date of Termination.

		
	3.
	Administration.

(a)Authority of the Committee.  The Plan shall be administered by the Committee, and the Committee shall have full and final authority to take the following actions, in each case subject to and consistent with the provisions of the Plan:

(i)to select Eligible Persons to whom Awards may be granted;

(ii)to designate Affiliates;

(iii)to determine the type or types of Awards to be granted to each Eligible Person;

(iv)to determine the type and number of Awards to be granted, the number of Shares to which an Award may relate, the terms and conditions of any Award granted under the Plan (including, but not limited to, any exercise price, grant price, or purchase price, any restriction or condition, (subject to Sections 3(f) and 3(g) below) any schedule for lapse of restrictions or conditions relating to transferability or forfeiture, exercisability, or settlement of an Award, and waivers of performance conditions relating to an Award, based in each case on such considerations as the Committee shall determine), and all other matters to be determined in connection with an Award;

(v)to determine whether, to what extent, and under what circumstances an Award may be settled, or the exercise price of an Award may be paid, in cash, Shares, other Awards, or other property, or an Award may be canceled, forfeited, exchanged, or surrendered;

(vi)to determine whether, to what extent, and under what circumstances cash, Shares, other Awards, or other property payable with respect to an Award will be deferred either automatically, at the election of the Committee, or at the election of the Eligible Person;

(vii)to prescribe the form of each Award Agreement, which need not be identical for each Eligible Person; provided that such deferral shall be structured with the intent to be in compliance with Section 409A of the Code;

(viii)to adopt, amend, suspend, waive, and rescind such rules and regulations and appoint such agents as the Committee may deem necessary or advisable to administer the Plan;

(ix)to correct any defect or supply any omission or reconcile any inconsistency in the Plan and to construe and interpret the Plan and any Award, rules and regulations, Award Agreement, or other instrument hereunder;

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(x)to accelerate the exercisability or vesting of all or any portion of any Award consistent with the provisions of Section 3(g) below or to extend the period during which an Award is exercisable; 

(xi)to determine whether uncertificated Shares may be used in satisfying Awards and otherwise in connection with the Plan; and

(xii)to make all other decisions and determinations as may be required under the terms of the Plan or as the Committee may deem necessary or advisable for the administration of the Plan.

(b)Manner of Exercise of Committee Authority.  The Committee shall have sole discretion in exercising its authority under the Plan.  Any action of the Committee with respect to the Plan shall be final, conclusive, and binding on all persons, including the Company, Subsidiaries, Affiliates, Eligible Persons, any person claiming any rights under the Plan from or through any Eligible Person, and shareholders.  The express grant of any specific power to the Committee, and the taking of any action by the Committee, shall not be construed as limiting any power or authority of the Committee.   The Committee may delegate to other members of the Board or officers or managers of the Company or any Subsidiary or Affiliate the authority, subject to such terms as the Committee shall determine, to perform administrative functions and, with respect to Awards granted to persons not subject to Section 16 of the Exchange Act, to perform such other functions as the Committee may determine, to the extent permitted under Rule 16b-3 (if applicable) and applicable law.

(c)Limitation of Liability.  Each member of the Committee shall be entitled to, in good faith, rely or act upon any report or other information furnished to him or her by any officer or other employee of the Company or any Subsidiary or Affiliate, the Company’s independent certified public accountants, or other professional retained by the Company to assist in the administration of the Plan.  No member of the Committee, and no officer or employee of the Company acting on behalf of the Committee, shall be personally liable for any action, determination, or interpretation taken or made in good faith with respect to the Plan, and all members of the Committee and any officer or employee of the Company acting on their behalf shall, to the extent permitted by law, be fully indemnified and protected by the Company with respect to any such action, determination, or interpretation.

(d)No Option or SAR Repricing Without Shareholder Approval.  Except as provided in the first sentence of Section 4(b) hereof relating to certain antidilution adjustments, unless the approval of shareholders of the Company is obtained, (i) Options and SARs issued under the Plan shall not be amended to lower their exercise price, (ii) Options and SARs issued under the Plan will not be exchanged for other Options or SARs with lower exercise prices, (iii) Options and SARs issued under the Plan with an exercise price in excess of the Fair Market Value of the underlying Shares will not be exchanged for cash or other property, and (iv) no other action shall be taken with respect to Options or SARs that would be treated as a repricing under the rules of the principal stock exchange on which the Shares are listed.

(e)Limitation on Committee’s Authority Under 409A.  Anything in this Plan to the contrary notwithstanding, the Committee’s authority to modify outstanding Awards shall be limited to the extent necessary so that the existence of such authority does not (i) cause an Award that is not otherwise deferred compensation subject to Section 409A of the Code to become deferred compensation subject to Section 409A of the Code or (ii) cause an Award that is otherwise deferred compensation subject to Section 409A of the Code to fail to meet the requirements prescribed by Section 409A of the Code.

(f)Award Vesting/Exercisability/Distribution Limitations.  Notwithstanding any other provision of the Plan to the contrary, (i) Restricted Shares, Dividend Equivalents, and Other Share-Based Awards shall become vested over a period of not less than one year following the date the applicable Award is granted, (ii) Options and SARs shall become exercisable over a period of not less than one year following the date the Option or SAR is granted, and (iii) Restricted Share Units, Performance Shares and Performance Units shall not provide for distributions over a period of less than one year following the date the applicable Award is granted; provided, however, that, notwithstanding the foregoing, Awards that result in the issuance of an aggregate of up to 5% of the Shares available for grants of Awards under Section 4(a)(i) on the Effective Date may be granted to Eligible Persons without regard to such minimum vesting, exercisability and distribution provisions.

(g)No Discretionary Acceleration.  Notwithstanding any provision of the Plan to the contrary, except as set forth in the proviso below, the Committee shall not exercise discretion to accelerate vesting of any Award granted under the Plan; provided, however, that, notwithstanding any provision of the Plan to the contrary, the Committee shall have the authority, in its discretion, to provide for accelerated vesting, exercisability and distribution of any Awards held by a Participant under the Plan in the event of the Participants’ death or disability or upon or following consummation of a Change in Control.

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(h)No Dividend Equivalents on Options/SARs.  Options and SARs granted after the Effective Date may not provide for dividends or dividend equivalents to be paid thereon.

		
	4.
	Shares Subject to the Plan.

(a)Subject to adjustment as provided in Section 4(b) hereof, (i) the total number of Shares reserved for issuance in connection with Awards under the Plan on or after the Effective Date shall be 2,555,848, and (ii) the total number of Shares which may be issued under ISOs granted under the Plan shall be 2,000,000.  No Award may be granted if the number of Shares to which such Award relates, when added to the number of Shares previously issued under the Plan, exceeds the number of Shares reserved for issuance under the Plan in clause (i) of the preceding sentence.  If any Awards granted under the Plan at any time are forfeited, canceled, terminated, exchanged or surrendered or such Award is settled in cash or otherwise terminates without a distribution of Shares to the Participant, any Shares counted against the number of Shares reserved and available under the Plan with respect to such Award shall, to the extent of any such forfeiture, settlement, termination, cancellation, exchange or surrender, again be available for Awards under the Plan.  Upon the exercise of any Award granted in tandem with any other Awards, such related Awards shall be canceled to the extent of the number of Shares as to which the Award is exercised.  Subject to adjustment as provided in Section 4(b) hereof, the maximum number of Shares (i) with respect to which Options and SARs may be granted during a calendar year to any Eligible Person under this Plan shall be 3,000,000 Shares and (ii) with respect to which Performance Shares, Performance Units, Restricted Shares, Restricted Share Units, or Other Share-Based Awards intended to qualify as performance-based compensation within the meaning of Section 162(m)(4)(C) of the Code may be granted during a calendar year to any Eligible Person under this Plan shall be 1,500,000 Shares.

(b)In the event that the Committee shall determine that any dividend in Shares, recapitalization, Share split, reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase, share exchange, extraordinary distribution, or other similar corporate transaction or event, affects the Shares such that an adjustment is appropriate in order to prevent dilution or enlargement of the rights of Eligible Persons under the Plan, then the Committee shall make such equitable changes or adjustments as it deems appropriate and, in such manner as it may deem equitable, (i) adjust any or all of (x) the number and kind of shares which may thereafter be issued under the Plan, (y) the number and kind of shares, other securities or other consideration issued or issuable in respect of outstanding Awards, and (z) the exercise price, grant price, or purchase price relating to any Award or (ii) provide for a distribution of cash or property in respect of any Award; provided, however, in each case that, with respect to ISOs, such adjustment shall be made in accordance with Section 424(a) of the Code, unless the Committee determines otherwise; provided further, however, that no adjustment shall be made pursuant to this Section 4(b) that causes any Award that is not otherwise deferred compensation subject to Section 409A of the Code to be treated as deferred compensation pursuant to Section 409A of the Code.  Subject to Section 3(h) above, if an extraordinary cash dividend is declared and paid on Shares after the grant of an Option or SAR and before the exercise of the Option or SAR, unless otherwise expressly provided in an applicable Award Agreement, the holder of the Option or SAR will have a right to receive an amount equal to the amount of the dividend per Share times the number of Shares subject to the Option or SAR; provided , however, that, unless otherwise determined by the Committee, no amount will be paid in respect of an Option or SAR unless and until the Option or SAR (or the portion thereof on which the amount is paid) has vested, and it is intended that the dividend right will otherwise be structured to comply with Section 409A of the Code, to the extent applicable.  In addition, the Committee is authorized to make adjustments in the terms and conditions of, and the criteria and performance objectives, if any, included in, Awards in recognition of unusual or non-recurring events (including, without limitation, events described in the preceding sentence) affecting the Company or any Subsidiary or Affiliate or the financial statements of the Company or any Subsidiary or Affiliate, or in response to changes in applicable laws, regulations, or accounting principles.

(c)In the event that the Company is a party to a merger or consolidation or a Change in Control shall occur, outstanding Awards shall be subject to the agreement of merger or consolidation or other applicable transaction agreement.  Such agreement, without the Participants’ consent, may provide for: (i) continuation or assumption of such outstanding Awards under the Plan by the Company (if it is the surviving corporation) or by the surviving corporation or its parent; (ii) substitution by the surviving corporation or its parent of awards with substantially the same terms for such outstanding Awards (and, if the Company is not a publicly traded entity, substitution of shares with equity of the surviving corporation or its parent with substantially the same terms as the outstanding Shares); (iii) acceleration of the vesting of or right to exercise such outstanding Awards immediately prior to or as of the date of the merger or consolidation or Change in Control, and the expiration of such outstanding Awards to the extent not timely exercised by the date of the merger, consolidation, Change in Control or other date thereafter designated by the Board; or (iv) cancellation of all or any portion of the outstanding Awards by a cash payment of the excess, if any, of the Fair Market Value of the shares subject to such outstanding Awards or portion thereof being canceled over the aggregate exercise price, if any, with respect to such Awards or portion thereof being canceled.

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(d)Any Shares distributed pursuant to an Award may consist, in whole or in part, of authorized and unissued Shares or treasury Shares including Shares acquired by purchase in the open market or in private transactions.

		
	5.
	Specific Terms of Awards.

(a)General.  Awards may be granted on the terms and conditions set forth in this Section 5.  In addition, the Committee may impose on any Award or the exercise thereof, at the date of grant or thereafter (subject to Section 8(d)), such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall determine, including terms regarding forfeiture of Awards or continued exercisability of Awards in the event of Termination of Service by the Eligible Person.

(b)Options.  The Committee is authorized to grant Options, which may be NQSOs or ISOs, to Eligible Persons on the following terms and conditions:

(i)Exercise Price.  The exercise price per Share purchasable under an Option shall be determined by the Committee; provided, however, that the exercise price per Share shall not be less than the Fair Market Value per Share on the date of grant.  

(ii)Option Term.  The term of each Option shall be determined by the Committee; provided, however, that such term shall not be longer than ten years from the date of grant of the Option.

(iii)Time and Method of Exercise.  Subject to Sections 3(f) and 3(g) above, the Committee shall determine at the date of grant or thereafter the time or times at which an Option may be exercised in whole or in part (including, without limitation, upon achievement of performance criteria if deemed appropriate by the Committee), the methods by which such exercise price may be paid or deemed to be paid (including, without limitation, broker-assisted exercise arrangements), the form of such payment (including, without limitation, cash, Shares or other property), and the methods by which Shares will be delivered or deemed to be delivered to Eligible Persons.

(iv)Early Exercise.  The Committee may provide at the time of grant or any time thereafter, in its sole discretion, that any Option shall be exercisable with respect to Shares that otherwise would not then be exercisable, provided that, in connection with such exercise, the Participant enters into a form of Restricted Share agreement approved by the Committee with respect to the Shares received on exercise.

(v)ISOs.  The terms of any ISO granted under the Plan shall comply in all respects with the provisions of Section 422 of the Code, including but not limited to the requirement that the ISO shall be granted within ten years from the earlier of the date of adoption or shareholder approval of the Plan.  ISOs may only be granted to employees of the Company or a Subsidiary.

(c)SARs.  The Committee is authorized to grant SARs (Share Appreciation Rights) to Eligible Persons on the following terms and conditions:

(i)Right to Payment.  A SAR shall confer on the Eligible Person to whom it is granted a right to receive with respect to each Share subject thereto, upon exercise thereof, the excess of (1) the Fair Market Value of one Share on the date of exercise over (2) the exercise price per Share of the SAR, as determined by the Committee as of the date of grant of the SAR (which shall not be less than the Fair Market Value per Share on the date of grant).

(ii)Other Terms.  Subject to Sections 3(f) and 3(g) above, the Committee shall determine, at the time of grant or thereafter, the time or times at which a SAR may be exercised in whole or in part (which shall not be more than ten years after the date of grant of the SAR), the method of exercise, method of settlement, form of consideration payable in settlement, method by which Shares will be delivered or deemed to be delivered to Eligible Persons, whether or not a SAR shall be in tandem with any other Award, and any other terms and conditions of any SAR.  Unless the Committee determines otherwise, a SAR (1) granted in tandem with an NQSO may be granted at the time of grant of the related NQSO or at any time thereafter and (2) granted in tandem with an ISO may only be granted at the time of grant of the related ISO.

(d)Restricted Shares.  The Committee is authorized to grant Restricted Shares to Eligible Persons on the following terms and conditions:

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(i)Issuance and Restrictions.  Restricted Shares shall be subject to such restrictions on transferability and other restrictions as the Committee may impose at the date of grant or thereafter, which restrictions may lapse separately or in combination at such times, under such circumstances (including, without limitation, upon achievement of performance criteria if deemed appropriate by the Committee), in such installments, or otherwise, as the Committee may determine consistent with Sections 3(f) and 3(g) above.  Except to the extent restricted under the Award Agreement relating to the Restricted Shares, an Eligible Person granted Restricted Shares shall have all of the rights of a shareholder including, without limitation, the right to vote Restricted Shares and the right to receive dividends thereon.  

(ii)Forfeiture.  Except as otherwise determined by the Committee consistent with Sections 3(f) and 3(g) above, at the date of grant or thereafter, upon Termination of Service during any applicable restriction period, Restricted Shares and any accrued but unpaid dividends or Dividend Equivalents that are at that time subject to restrictions shall be forfeited; provided, however, that the Committee may, consistent with Sections 3(f) and 3(g) above, provide, by rule or regulation or in any Award Agreement, or may determine in any individual case, that restrictions or forfeiture conditions relating to Restricted Shares will be waived in whole or in part in the event of Termination of Service resulting from specified causes.

(iii)Certificates for Shares.  Restricted Shares granted under the Plan may be evidenced in such manner as the Committee shall determine.  If certificates representing Restricted Shares are registered in the name of the Eligible Person, such certificates shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Shares, and, unless otherwise determined by the Committee, the Company shall retain physical possession of the certificate and the Participant shall deliver a stock power to the Company, endorsed in blank, relating to the Restricted Shares.

(iv)Dividends.  Dividends paid on Restricted Shares shall be either paid at the dividend payment date, or deferred for payment to such date, and subject to such conditions, as determined by the Committee, in cash or in restricted or unrestricted Shares having a Fair Market Value equal to the amount of such dividends.  Unless otherwise determined by the Committee, Shares distributed in connection with a Share split or dividend in Shares, and other property distributed as a dividend, shall be subject to restrictions and a risk of forfeiture to the same extent as the Restricted Shares with respect to which such Shares or other property has been distributed.

(v)Early Exercise Options.  The Committee shall award Restricted Shares to a Participant upon the Participant’s early exercise of an Option under Section 5(b)(iv) hereof.  Unless otherwise determined by the Committee, the lapse of restrictions with respect to such Restricted Shares shall occur on the same schedule as the exercisability of the Option for which the Restricted Shares were exercised.

(e)Restricted Share Units.  The Committee is authorized to grant Restricted Share Units to Eligible Persons, subject to the following terms and conditions:

(i)Award and Restrictions.  Delivery of Shares or cash, as the case may be, will occur upon expiration of the deferral period specified for Restricted Share Units by the Committee (or, if permitted by the Committee, as elected by the Eligible Person).  In addition, Restricted Share Units shall be subject to such restrictions as the Committee may impose, consistent with Sections 3(f) and 3(g) above (including, without limitation, the achievement of performance criteria if deemed appropriate by the Committee), at the date of grant or thereafter, which restrictions may lapse at the expiration of the deferral period or at earlier or later specified times, separately or in combination, in installments or otherwise, as the Committee may determine consistent with Sections 3(f) and 3(g) above.  

(ii)Forfeiture.  Except as otherwise determined by the Committee at the date of grant or thereafter consistent with Sections 3(f) and 3(g) above, upon Termination of Service during the applicable deferral period or portion thereof to which forfeiture conditions apply (as provided in the Award Agreement evidencing the Restricted Share Units), or upon failure to satisfy any other conditions precedent to the delivery of Shares or cash to which such Restricted Share Units relate, all Restricted Share Units that are at that time subject to deferral or restriction shall be forfeited; provided, however, that, subject to Sections 3(f) and 3(g) above, the Committee may provide, by rule or regulation or in any Award Agreement, or may determine in any individual case, that restrictions or forfeiture conditions relating to Restricted Share Units will be waived in whole or in part in the event of Termination of Service resulting from specified causes.

(iii)Dividend Equivalents.  Unless otherwise determined by the Committee at the date of grant, Dividend Equivalents on the specified number of Shares covered by a Restricted Share Unit shall be either (A) paid 

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with respect to such Restricted Share Unit at the dividend payment date in cash or in restricted or unrestricted Shares having a Fair Market Value equal to the amount of such dividends, or (B) deferred with respect to such Restricted Share Unit and the amount or value thereof automatically deemed reinvested in additional Restricted Share Units or other Awards, as the Committee shall determine or permit the Participant to elect.

(f)Performance Shares and Performance Units.  The Committee is authorized to grant Performance Shares or Performance Units or both to Eligible Persons on the following terms and conditions:

(i)Performance Period.  The Committee shall determine a performance period (the “Performance Period”) of one or more years or other periods and shall determine the performance objectives for grants of Performance Shares and Performance Units.  Performance objectives may vary from Eligible Person to Eligible Person and shall be based upon the performance criteria as the Committee may deem appropriate.  The performance objectives may be determined by reference to the performance of the Company, or of a Subsidiary or Affiliate, or of a division or unit of any of the foregoing.  Performance Periods may overlap and Eligible Persons may participate simultaneously with respect to Performance Shares and Performance Units for which different Performance Periods are prescribed.

(ii)Award Value.  During the first quarter of a Performance Period, the Committee shall determine for each Eligible Person or group of Eligible Persons with respect to that Performance Period the range of number of Shares, if any, in the case of Performance Shares, and the range of dollar values, if any, in the case of Performance Units, which may be fixed or may vary in accordance with such performance or other criteria specified by the Committee, which shall be paid to an Eligible Person as an Award if the relevant measure of Company performance for the Performance Period is met.

(iii)Significant Events.  If during the course of a Performance Period there shall occur significant events as determined by the Committee which the Committee expects to have a substantial effect on a performance objective during such period, the Committee may revise such objective.

(iv)Forfeiture.  Except as otherwise determined by the Committee consistent with Sections 3(f) and 3(g) above, at the date of grant or thereafter, upon Termination of Service during the applicable Performance Period, Performance Shares and Performance Units for which the Performance Period was prescribed shall be forfeited; provided, however, that, subject to Sections 3(f) and 3(g) above, the Committee may provide, by rule or regulation or in any Award Agreement, or may determine in an individual case, that restrictions or forfeiture conditions relating to Performance Shares and Performance Units will be waived in whole or in part in the event of Terminations of Service resulting from specified causes.

(v)Payment.  Each Performance Share or Performance Unit may be paid in whole Shares, or cash, or a combination of Shares and cash either as a lump sum payment or in installments, all as the Committee shall determine, at the time of grant of the Performance Share or Performance Unit or otherwise, commencing at the time determined by the Committee.

(g)Dividend Equivalents.  The Committee is authorized to grant Dividend Equivalents to Eligible Persons.  The Committee may provide, at the date of grant or thereafter, that Dividend Equivalents shall be paid or distributed when accrued or shall be deemed to have been reinvested in additional Shares, or other investment vehicles as the Committee may specify; provided, however, that, unless otherwise determined by the Committee, Dividend Equivalents (other than freestanding Dividend Equivalents) shall be subject to all conditions and restrictions of any underlying Awards to which they relate.

(h)Other Share-Based Awards.  The Committee is authorized, subject to limitations under applicable law, to grant to Eligible Persons such other Awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Shares, as deemed by the Committee to be consistent with the purposes of the Plan, including, without limitation, other rights convertible or exchangeable into Shares, purchase rights for Shares, Awards with value and payment contingent upon performance of the Company or any other factors designated by the Committee, and Awards valued by reference to the performance of specified Subsidiaries or Affiliates.  Subject to Sections 3(f) and 3(g) above, the Committee shall determine the terms and conditions of such Awards at the date of grant or thereafter.  Shares delivered pursuant to an Award in the nature of a purchase right granted under this Section 5(h) shall be purchased for such consideration, paid for at such times, by such methods, and in such forms, including, without limitation, cash, Shares or other property, as the Committee shall determine.  Cash awards, as an element of or supplement to any other Award under the Plan, shall also be authorized pursuant to this Section 5(h).

- 9-

		
	6.
	Certain Provisions Applicable to Awards.

(a)Stand-Alone, Additional, Tandem and Substitute Awards.  Awards granted under the Plan may, in the discretion of the Committee, be granted to Eligible Persons either alone or in addition to, in tandem with, or in exchange or substitution for, any other Award granted under the Plan or any award granted under any other plan or agreement of the Company, any Subsidiary or Affiliate, or any business entity to be acquired by the Company or a Subsidiary or Affiliate, or any other right of an Eligible Person to receive payment from the Company or any Subsidiary or Affiliate.  Awards may be granted in addition to or in tandem with such other Awards or awards, and may be granted either as of the same time as, or a different time from, the grant of such other Awards or awards.  Subject to the provisions of Section 3(d) hereof prohibiting Option and SAR repricing without shareholder approval, the per Share exercise price of any Option, grant price of any SAR, or purchase price of any other Award conferring a right to purchase Shares which is granted in connection with the substitution of awards granted under any other plan or agreement of the Company or any Subsidiary or Affiliate, or any business entity to be acquired by the Company or any Subsidiary or Affiliate, shall be determined by the Committee, in its discretion.

(b)Term of Awards.  The term of each Award granted to an Eligible Person shall be for such period as may be determined by the Committee; provided, however, that in no event shall the term of any Option or SAR exceed a period of ten years from the date of its grant (or, in the case of ISOs, such shorter period as may be applicable under Section 422 of the Code).

(c)Form of Payment Under Awards.  Subject to the terms of the Plan and any applicable Award Agreement, payments to be made by the Company or a Subsidiary or Affiliate upon the grant, maturation, or exercise of an Award may be made in such forms as the Committee shall determine at the date of grant or thereafter, including, without limitation, cash, Shares or other property, and may be made in a single payment or transfer, in installments, or on a deferred basis; provided that any such deferral shall be structured in a manner intended to be in compliance with Section 409A of the Code.  The Committee may make rules relating to installment or deferred payments with respect to Awards, including the rate of interest to be credited with respect to such payments, and the Committee may require deferral of payment under an Award if, in the sole judgment of the Committee, it may be necessary in order to avoid nondeductibility of the payment under Section 162(m) of the Code.

(d)Nontransferability.  Unless otherwise set forth by the Committee in an Award Agreement, Awards shall not be transferable by an Eligible Person except by will or the laws of descent and distribution (except pursuant to a Beneficiary designation) and shall be exercisable during the lifetime of an Eligible Person only by such Eligible Person or his guardian or legal representative.  An Eligible Person’s rights under the Plan may not be pledged, mortgaged, hypothecated, or otherwise encumbered, and shall not be subject to claims of the Eligible Person’s creditors.

(e)Noncompetition.  The Committee may, by way of the Award Agreements or otherwise, establish such other terms, conditions, restrictions and/or limitations, if any, of any Award, provided they are not inconsistent with the Plan, including, without limitation, the requirement that the Participant not engage in competition with, solicit customers or employees of, or disclose or use confidential information of the Company or its Affiliates.

(f)No Dividend Equivalents on Unvested Performance Awards.  Notwithstanding any provision of this Plan to the contrary, Dividend Equivalents shall not be paid with respect to Performance Shares, Performance Units or other Awards that vest based on achievement of performance objectives prior to the time the applicable performance objectives have been achieved.

7.Performance Awards.

(a)Performance Awards Granted to Covered Employees.  If the Committee determines that an Award (other than an Option or SAR) to be granted to an Eligible Person should qualify as “performance‐based compensation” for purposes of Section 162(m) of the Code, the grant, vesting, exercise and/or settlement of such Award (each, a “Performance Award”) shall be contingent upon achievement of preestablished performance goals and other terms set forth in this Section 7(a).

(i)Performance Goals Generally.  The performance goals for such Performance Awards shall consist of one or more business criteria and a targeted level or levels of performance with respect to each of such criteria, as specified by the Committee consistent with this Section 7(a).  The performance goals shall be objective and shall otherwise meet the requirements of Section 162(m) of the Code and regulations thereunder (including Treasury Regulation 1.162-27 and successor regulations thereto), including the requirement that the level or levels of 

- 10-

performance targeted by the Committee result in the achievement of performance goals being “substantially uncertain.”  The Committee may determine that such Performance Awards shall be granted, vested, exercised and/or settled upon achievement of any one performance goal or that two or more of the performance goals must be achieved as a condition to grant, vesting, exercise and/or settlement of such Performance Awards.  Performance goals may differ for Performance Awards granted to any one Participant or to different Participants.

(ii)Business Criteria.  One or more of the following business criteria for the Company, on a consolidated basis, and/or for specified Subsidiaries or Affiliates or other business units or lines of business of the Company shall be used by the Committee in establishing performance goals for such Performance Awards: (1) earnings per share (basic or fully diluted); (2) revenues; (3) earnings, before or after taxes, from operations (generally or specified operations), or before or after interest expense, depreciation, amortization, incentives, or extraordinary or special items; (4) cash flow, free cash flow, operating cash flow, cash flow return on investment (discounted or otherwise), net cash provided by operations, or cash flow in excess of cost of capital; (5) return on net assets, return on assets, return on investment, return on capital, return on equity; (6) economic value added; (7) operating margin or operating expense; (8) net income or net profit margin; (9) Share price or total stockholder return; (10) book value or growth in book, economic book and/or intrinsic book value; (11) dividend adjusted diluted book value; (12) expense ratio; (13) operating income; (14) comprehensive income or pro forma net income; and (15) strategic business criteria, consisting of one or more objectives based on meeting specified market penetration, geographic business expansion goals, cost targets, customer satisfaction, supervision of litigation and information technology, and goals relating to acquisitions or divestitures of Subsidiaries, Affiliates or joint ventures.  The targeted level or levels of performance with respect to such business criteria may be established at such levels and in such terms as the Committee may determine, in its discretion, including in absolute terms, as a goal relative to performance in prior periods, or as a goal compared to the performance of one or more comparable companies or an index covering multiple companies. 

(iii)Performance Period; Timing for Establishing Performance Goals; Per-Person Limit.  Achievement of performance goals in respect of such Performance Awards shall be measured over a performance period, as specified by the Committee.  A performance goal shall be established not later than the earlier of (A) 90 days after the beginning of any performance period applicable to such Performance Award or (B) the time 25% of such performance period has elapsed.  In all cases, the maximum Performance Award of any Participant shall be subject to the limitation set forth in Section 4(a) or Section 7(a)(v), as applicable.

(iv)Settlement of Performance Awards; Other Terms.  Settlement of such Performance Awards shall be in cash, Shares, other Awards or other property, in the discretion of the Committee.  The Committee may, in its discretion, reduce the amount of a settlement otherwise to be made in connection with such Performance Awards, but may not exercise discretion to increase any such amount payable to the Participant in respect of a Performance Award if the applicable Award Agreement expressly provides that the Performance Award is subject to this Section 7(a).  Any settlement which changes the form of payment from that originally specified shall be implemented in a manner such that the Performance Award and other related Awards do not, solely for that reason, fail to qualify as “performance-based compensation” for purposes of Section 162(m) of the Code.  The Committee shall specify the circumstances, consistent with Sections 3(f) and 3(g) above and the requirements to qualify as “performance-based compensation” for purposes of Section 162(m) of the Code, in which such Performance Awards shall be paid or forfeited in the event of Termination of Service of the Participant or other event (including a change in control) prior to the end of a performance period or settlement of such Performance Awards.

(v)Maximum Annual Cash Award.  The maximum amount payable upon settlement of a cash-settled Performance Unit (or other cash-settled Award) granted under this Plan that is intended to satisfy the requirements for “performance-based compensation” under Section 162(m) of the Code for any calendar year to any Eligible Person shall not exceed $5,000,000.

(b)Written Determinations.  Determinations by the Committee as to the establishment of performance goals, the amount potentially payable in respect of Performance Awards, the level of actual achievement of the specified performance goals relating to Performance Awards and the amount of any final Performance Award shall be recorded in writing in the case of Performance Awards intended to qualify under Section 162(m) of the Code.  Specifically, the Committee shall certify in writing, in a manner conforming to applicable regulations under Section 162(m), prior to settlement of each such Award, that the performance objective relating to the Performance Award and other material terms of the Award upon which settlement of the Award was conditioned have been satisfied.

- 11-

		
	8.
	General Provisions.

(a)Compliance with Legal and Trading Requirements.  The Plan, the granting and exercising of Awards thereunder, and the other obligations of the Company under the Plan and any Award Agreement, shall be subject to all applicable federal, state and foreign laws, rules and regulations, and to such approvals by any stock exchange, regulatory or governmental agency as may be required.  The Company, in its discretion, may postpone the issuance or delivery of Shares under any Award until completion of such stock exchange or market system listing or registration or qualification of such Shares or any required action under any state, federal or foreign law, rule or regulation as the Company may consider appropriate, and may require any Participant to make such representations and furnish such information as it may consider appropriate in connection with the issuance or delivery of Shares in compliance with applicable laws, rules and regulations.  No provisions of the Plan shall be interpreted or construed to obligate the Company to register any Shares under federal, state or foreign law.  The Shares issued under the Plan may be subject to such other restrictions on transfer as determined by the Committee.

(b)No Right to Continued Employment or Service.  Neither the Plan nor any action taken thereunder shall be construed as giving any employee, consultant or director the right to be retained in the employ or service of the Company or any of its Subsidiaries or Affiliates, nor shall it interfere in any way with the right of the Company or any of its Subsidiaries or Affiliates to terminate any employee’s, consultant’s or director’s employment or service at any time.

(c)Taxes.  The Company or any Subsidiary or Affiliate is authorized to withhold from any Award granted, any payment relating to an Award under the Plan, including from a distribution of Shares, or any payroll or other payment to an Eligible Person, amounts of withholding and other taxes due in connection with any transaction involving an Award, and to take such other action as the Committee may deem advisable to enable the Company and Eligible Persons to satisfy obligations for the payment of withholding taxes and other tax obligations relating to any Award.  This authority shall include authority to withhold or receive Shares or other property and to make cash payments in respect thereof in satisfaction of an Eligible Person’s tax obligations; provided, however, that the amount of tax withholding to be satisfied by withholding Shares shall be limited to the minimum amount of taxes, including employment taxes, required to be withheld under applicable Federal, state and local law.

(d)Changes to the Plan and Awards.  The Board may amend, alter, suspend, discontinue, or terminate the Plan or the Committee’s authority to grant Awards under the Plan without the consent of shareholders of the Company or Participants, except that any such amendment or alteration shall be subject to the approval of the Company’s shareholders (i) to the extent such shareholder approval is required under the rules of any stock exchange or automated quotation system on which the Shares may then be listed or quoted, or (ii) as it applies to ISOs, to the extent such shareholder approval is required under Section 422 of the Code; provided, however, that, without the consent of an affected Participant, no amendment, alteration, suspension, discontinuation, or termination of the Plan may materially and adversely affect the rights of such Participant under any Award theretofore granted to him or her.  Subject to Sections 3(f) and 3(g) above, the Committee may waive any conditions or rights under, amend any terms of, or amend, alter, suspend, discontinue or terminate, any Award theretofore granted, prospectively or retrospectively; provided, however, that, without the consent of a Participant, no amendment, alteration, suspension, discontinuation or termination of any Award may materially and adversely affect the rights of such Participant under any Award theretofore granted to him or her.

(e)No Rights to Awards; No Shareholder Rights.  No Eligible Person or employee shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of Eligible Persons and employees.  No Award shall confer on any Eligible Person any of the rights of a shareholder of the Company unless and until Shares are duly issued or transferred to the Eligible Person in accordance with the terms of the Award.

(f)Unfunded Status of Awards.  The Plan is intended to constitute an “unfunded” plan for incentive compensation.  With respect to any payments not yet made to a Participant pursuant to an Award, nothing contained in the Plan or any Award shall give any such Participant any rights that are greater than those of a general creditor of the Company; provided, however, that the Committee may authorize the creation of trusts or make other arrangements to meet the Company’s obligations under the Plan to deliver cash, Shares, other Awards, or other property pursuant to any Award, which trusts or other arrangements shall be consistent with the “unfunded” status of the Plan unless the Committee otherwise determines with the consent of each affected Participant.

(g)Nonexclusivity of the Plan.  Neither the adoption of the Plan by the Board nor its submission to the shareholders of the Company for approval shall be construed as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of options and other awards otherwise than under the Plan, and such arrangements may be either applicable generally or only in specific cases.

- 12-

(h)Not Compensation for Benefit Plans.  No Award payable under this Plan shall be deemed salary or compensation for the purpose of computing benefits under any benefit plan or other arrangement of the Company for the benefit of its employees, consultants or directors unless the Company shall determine otherwise.

(i)No Fractional Shares.  No fractional Shares shall be issued or delivered pursuant to the Plan or any Award.  The Committee shall determine whether cash, other Awards, or other property shall be issued or paid in lieu of such fractional Shares or whether such fractional Shares or any rights thereto shall be forfeited or otherwise eliminated.

(j)Governing Law.  The validity, construction, and effect of the Plan, any rules and regulations relating to the Plan, and any Award Agreement shall be determined in accordance with the laws of New York, without giving effect to principles of conflict of laws thereof.

(k)Effective Date; Plan Termination.  This Amendment and Restatement of the Plan shall become effective as of May 7, 2015 (the “Effective Date”), subject to approval by the shareholders of the Company.  The Plan shall terminate as to future awards on the date which is ten (10) years after the Effective Date.

(l)Section 409A .   Awards granted under the Plan are intended to comply with, or be exempt from, the applicable requirements of Section 409A and Section 457A of the Code and shall be limited, construed and interpreted in accordance with such intent.  Although the Company does not guarantee any particular tax treatment, to the extent that any Award is subject to Section 409A of the Code, it shall be paid in a manner that is intended to comply with Section 409A of the Code, including regulations and any other guidance issued by the Secretary of the Treasury and the Internal Revenue Service with respect thereto.  In no event whatsoever shall the Company be liable for any additional tax, interest or penalties that may be imposed on a Participant by Sections 409A or 457A of the Code or any damages for failing to comply with Sections 409A or 457A of the Code.

(m)Titles and Headings.  The titles and headings of the sections in the Plan are for convenience of reference only.  In the event of any conflict, the text of the Plan, rather than such titles or headings, shall control.exhibit101psa.htm

EXHIBIT 10.1

 

 

 

 

 

 

 

 

 

 

 

 

 

AGREEMENT FOR PURCHASE AND SALE

 

OF

 

PARTNERSHIP INTEREST

 

by and between

 

TCPL PORTLAND INC., as SELLER

 

and

 

TC PIPELINES INTERMEDIATE LIMITED PARTNERSHIP, as BUYER

 

 

November 5, 2015

 

  

  

  

	
TABLE OF CONTENTS

	  
	  	  
	
ARTICLE I

	  	  
	  	
SALE AND PURCHASE

	
1

	  	
Section 1.01

	
Agreement to Sell and Purchase PNGTS Interest

	
1

	  	
Section 1.02

	
Purchase Price

	
1

	  	
Section 1.03

	
Purchase Price Adjustments

	
1

	  	
Section 1.04

	
Time and Place of the Closing

	
3

	  	
Section 1.05

	
Closing Statement; Closing Payment

	
3

	  	
Section 1.06

	
Deliveries by Seller

	
3

	  	
Section 1.07

	
Deliveries by Buyer

	
4

	  	  	  	  
	
ARTICLE II

	  	  
	  	
REPRESENTATIONS AND WARRANTIES OF SELLER

	
4

	  	
Section 2.01

	
Organization and Qualification

	
4

	  	
Section 2.02

	
Authorization; Validity and Effect of Transaction Agreements

	
5

	  	
Section 2.03

	
No Conflict; Required Filings and Consents

	
5

	  	
Section 2.04

	
Ownership and Delivery of the PNGTS Interest

	
6

	  	
Section 2.05

	
No Brokers

	
6

	  	
Section 2.06

	
Legal Proceedings

	
6

	  	
Section 2.07

	
Absence of Certain Changes

	
6

	  	
Section 2.08

	
PNGTS  Organization and Qualification

	
7

	  	
Section 2.09

	
No Subsidiaries

	
7

	  	
Section 2.10

	
Consolidated Financial Statements

	
7

	  	
Section 2.11

	
Litigation; Observance of Orders

	
7

	  	
Section 2.12

	
Tax

	
7

	  	
Section 2.13

	
Title to Real and Personal Property

	
9

	  	
Section 2.14

	
Permits; Intellectual Property

	
9

	  	
Section 2.15

	
Condition of Assets

	
9

	  	
Section 2.16

	
Employee Matters

	
10

	  	
Section 2.17

	
No Violation or Default

	
10

	  	
Section 2.18

	
Material Agreements

	
10

	  	
Section 2.19

	
Insurance

	
11

	  	
Section 2.20

	
Compliance With Environmental Laws

	
11

	  	
Section 2.21

	
No Conflict; Required Filings and Consents Applicable

	
12

	  	
Section 2.22

	
Intercompany Matters

	
12

	  	  	  	  

 

  

i

  

	
ARTICLE III

	  	  	  
	  	
REPRESENTATIONS AND WARRANTIES OF BUYER

	
12

	  	
Section 3.01

	
Organization and Qualification of Buyer

	
12

	  	
Section 3.02

	
Authorization; Validity and Effect of Transaction Agreements

	
12

	  	
Section 3.03

	
No Conflict; Required Filings and Consents Applicable to Buyer

	
13

	  	
Section 3.04

	
No Brokers

	
13

	  	
Section 3.05

	
Legal Proceedings Relating to Buyer

	
13

	  	
Section 3.06

	
Acquisition for Investment

	
14

	  	
Section 3.07

	
No Other Representations; Waiver of Implied Warranties

	
14

	  	  	  	  
	
ARTICLE IV

	  	  
	  	
COVENANTS OF THE PARTIES

	
14

	  	
Section 4.01

	
Expenses

	
14

	  	
Section 4.02

	
Access to Information by Buyer

	
14

	  	
Section 4.03

	
Conduct of the Business Pending the Closing Date

	
15

	  	
Section 4.04

	
[INTENTIONALLY OMITTED]

	
16

	  	
Section 4.05

	
Disputes

	
16

	  	
Section 4.06

	
Commercially Reasonable Efforts

	
16

	  	
Section 4.07

	
Regulatory Approvals

	
16

	  	
Section 4.08

	
Schedules

	
16

	  	  	  	  
	
ARTICLE V

	  	  
	  	
CONDITIONS PRECEDENT

	
17

	
  

	
Section 5.01

	
Conditions to Obligation of Each Party to Close

	
17

	  	
Section 5.02

	
Conditions to Seller’s Obligation to Close

	
17

	  	
Section 5.03

	
Conditions to Buyer’s Obligation to Close

	
18

	  	  	  	  
	
ARTICLE VI

	  	  	  
	  	
SURVIVAL; INDEMNIFICATION

	
18

	  	
Section 6.01

	
Survival

	
18

	  	
Section 6.02

	
Indemnification of Buyer

	
19

	  	
Section 6.03

	
Indemnification of Seller

	
19

	  	
Section 6.04

	
Indemnification Procedures

	
19

	  	
Section 6.05

	
Limitations

	
20

	  	
Section 6.06

	
Exclusive Remedy

	
21

	  	
Section 6.07

	
Exclusion

	
22

 

  

ii

  

	  	
Section 6.08

	
Purchase Price Adjustment

	
22

	  	  	  	  
	
ARTICLE VII

	  	  
	  	
TAX MATTERS

	
22

	  	
Section 7.01

	
Tax Returns; Payment of Taxes

	
22

	  	
Section 7.02

	
Transfer Taxes

	
23

	  	
Section 7.03

	
Controversies; Cooperation

	
23

	  	
Section 7.04

	
Seller Taxes

	
24

	  	
Section 7.05

	
Tax Refunds

	
24

	  	  	  	  
	
ARTICLE VIII

	  	  
	  	
TERMINATION

	
24

	  	
Section 8.01

	
Termination

	
24

	  	
Section 8.02

	
Effect of Termination

	
25

	  	  	  	  
	  	  	  	  
	
ARTICLE IX

	  	  	  
	  	
MISCELLANEOUS

	
25

	  	
Section 9.01

	
Modification

	
25

	  	
Section 9.02

	
Notices

	
25

	  	
Section 9.03

	
Entire Agreement

	
26

	  	
Section 9.04

	
Successors and Assigns

	
26

	  	
Section 9.05

	
Press Releases

	
26

	  	
Section 9.06

	
Assignment

	
27

	  	
Section 9.07

	
Severability

	
27

	  	
Section 9.08

	
Captions; Article and Section References

	
27

	  	
Section 9.09

	
Choice of Law

	
27

	  	
Section 9.10

	
Counterparts

	
27

	  	
Section 9.11

	
Waiver

	
27

	  	
Section 9.12

	
Construction

	
28

	  	
Section 9.13

	
Incorporation of Exhibits, Schedules and Appendices

	
28

	  	
Section 9.14

	
No Third-Party Beneficiaries

	
28

	  	
Section 9.15

	
No Consequential or Punitive Damages

	
28

	  	
Section 9.16

	
Parent Guaranty

	
28

	  	
Section 9.17

	
Time of Essence

	
28

  

iii

  

	  	
Section 9.18

	
Defined Terms

	
29

	  	  	  	  
	  	
Appendix A:

	
Definitions

	  
	  	  	  
	  	
Exhibit A:

	
Form of Closing Tax Certificate

	  
	  	
Exhibit B:

	
Form of Assignment and Assumption Agreement

	  
	  	
Exhibit C:

	
PNGTS Budget

	  
	  	
Exhibit D:

	
Promissory Note

	  
	  	
Exhibit E:

	
Expansion Consideration

	  
	  	
Exhibit F:

	
Parent Guaranty

	  
	  	  	  	  
	  	
Schedules:

	
Schedules to Agreement

 

	  

  

iv

  

 

AGREEMENT FOR PURCHASE AND SALE

OF

PARTNERSHIP INTEREST

THIS AGREEMENT FOR PURCHASE AND SALE OF PARTNERSHIP INTEREST (this “Agreement”), is executed as of this 5th day of November, 2015, by and between TCPL PORTLAND INC., a Delaware corporation (“Seller”) and TC PIPELINES INTERMEDIATE LIMITED PARTNERSHIP, a Delaware limited partnership (“Buyer”).  Seller and Buyer are sometimes referred to herein individually as a “Party” and collectively as the “Parties.”

 

WITNESSETH:

 

WHEREAS, Seller owns a 61.71% partnership interest, in Portland Natural Gas Transmission System, a Maine general partnership (“PNGTS”);

 

WHEREAS, Buyer desires to purchase and acquire, and Seller desires to sell and assign, a 49.9% partnership interest in PNGTS (the “PNGTS Interest”) pursuant to the terms and conditions set forth in this Agreement;

 

WHEREAS, Buyer is an indirectly wholly owned subsidiary of TC PipeLines, LP (“MLP”).

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows:

 

	
ARTICLE I

	 

 

	
  

	
SALE AND PURCHASE

 

Section 1.01 Agreement to Sell and to Purchase PNGTS Interest.

 

At the Closing, and on the terms and subject to the conditions set forth in this Agreement, Seller shall sell, assign and deliver to Buyer, and Buyer shall purchase and accept from Seller, the PNGTS Interest.

 

Section 1.02 Purchase Price.

 

The purchase price to be paid by Buyer to Seller for the PNGTS Interest (the “Purchase Price”) shall equal the Closing Payment, which shall be adjusted in accordance with Section 1.03.

 

Section 1.03 Purchase Price Adjustments.

 

(a) Working Capital Adjustments:

 

(i) Within ninety (90) days after the Closing, Seller shall prepare and deliver to Buyer a written statement (the “Working Capital Adjustment Statement”), together with supporting work papers with respect to the calculation of the

 

  

1

  

(ii) amounts set forth therein, which reflects the Working Capital as of the Effective Time for PNGTS.  Seller agrees to cooperate with Buyer in connection with the preparation of the Working Capital Adjustment Statement and related information, and shall provide to Buyer and Buyer’s representatives such books, records and information relating to PNGTS during normal business hours, as may be reasonably requested from time to time by Buyer or its representatives.

 

(iii) Buyer may dispute the Working Capital Adjustment Statement and the items reflected therein; provided, however, that Buyer shall notify Seller in writing of any disputed amounts, and provide a reasonably detailed description of the basis of such dispute, within ninety (90) days after Buyer’s receipt of the Working Capital Adjustment Statement.  In the event of such a dispute, the Parties shall attempt to reconcile their differences and any resolution by them as to any disputed amounts shall be final, binding and conclusive on the Parties.  If the Parties are unable to reach a resolution of any such differences within ninety (90) days after Seller’s receipt of Buyer’s written notice of dispute, the Parties shall submit the amounts remaining in dispute for determination and resolution to the Independent Accounting Firm, which shall be instructed to determine and report to the Parties, within ninety (90) days after such submission, a resolution of such remaining disputed amounts, and such resolution shall be final, binding and conclusive on the Parties with respect to the remaining amounts disputed.  The Independent Accounting Firm shall only resolve the disputed amounts by choosing the amounts submitted by Buyer or Seller or amounts in between.  The fees and disbursements of the Independent Accounting Firm shall be shared equally by Buyer, on the one hand, and Seller, on the other hand.  For the avoidance of doubt, the Working Capital Adjustment Statement and the amounts reflected thereon shall be deemed to be modified to the extent of any changes thereto that become final, binding and conclusive on the Parties based on mutual agreement or a determination of the Independent Accounting Firm in accordance with this Section 1.03(b).

 

(iv) Within five (5) Business Days after the earliest to occur of (i) a mutual written agreement of the Parties with respect to the Working Capital Adjustment Statement (ii) the termination of the ninety (90) day period described in Section 1.03(b) if Buyer does not provide a notice of dispute within such period as provided therein and (iii) the final determination of all such disputed amounts in accordance with Section 1.03(b), (A) if Working Capital as of the Effective Time exceeds the Estimated Working Capital, Buyer shall pay Seller 49.9% of the amount of such excess, and (B) if Working Capital as of the Effective Time is less than the Estimated Working Capital, Seller shall pay to Buyer 49.9% of the amount of such deficiency.  All payments made pursuant to the previous sentence shall be paid together with interest thereon for the period commencing on the Effective Time through the date of payment, calculated at the Prime Rate in effect on the Closing Date, in cash by wire transfer of immediately available funds.

 

(b) Expansion Consideration:

 

  

2

  

(i) as additional consideration for the sale of the PNGTS Interest, Seller shall be entitled to receive from the Buyer (subject to the terms and conditions of this Section 1.03(b)) cash determined in accordance with Exhibit E.

 

(ii) In the event an Expansion results in an increase to PNGTS’ FERC Certificated Capacity to an amount stated on Exhibit E, then upon commencement of service of such Expansion that results in such increase, Buyer shall pay, by wire transfer on the first Business Day of the first quarter following such commencement of service, the appropriate Expansion Consideration as more particularly described in Exhibit E hereto.

 

(iii) The Parties acknowledge and agree that there can be more than one Expansion and, accordingly, more than one payment of Expansion Consideration.

 

Section 1.04 Time and Place of the Closing.

 

Upon the terms and subject to the satisfaction of the conditions contained in this Agreement, the closing of the transactions contemplated by this Agreement (the  “Closing”) shall take place at the offices of Vinson & Elkins L.L.P., 1001 Fannin Street, Suite 2500, Houston, TX 77002-6760 at 10:00 a.m., local time, on January 1, 2016 provided that all of the conditions to each Party’s obligations hereunder have been satisfied or waived (other than conditions to be satisfied at the Closing), or at such other place or time as the Parties may agree.  The date and time at which the Closing actually occurs is hereinafter referred to as the “Closing Date.”  Other than with respect to those matters that are effective or applicable as of the Effective Time as expressly provided herein, the Closing shall be effective for all purposes as of 12:01 a.m. Eastern time on the Closing Date.

 

Section 1.05 Closing Statement; Closing Payment.

 

(a) On the third (3rd) Business Day prior to Closing, Seller shall deliver to Buyer a statement (the “Closing Statement”) setting forth the Estimated Working Capital. The Closing Statement shall be prepared by Seller in good faith and be accompanied by reasonably detailed supporting documentation.

 

(b) At the Closing, Buyer shall pay and satisfy the Closing Payment by executing and delivering to Seller a promissory note (the “Promissory Note”) in an amount equal to the Closing Payment and in the form attached as Exhibit D hereto.

 

Section 1.06 Deliveries by Seller.

 

At the Closing, Seller shall deliver or cause to be delivered to Buyer the following:

 

(a) the Assignment and Assumption Agreement, duly executed by Seller;

 

(b) amendment to Schedule A and Appendix B of the PNGTS Partnership Agreement to add the Buyer as a party;

 

  

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(c) a properly completed and an executed certificate of non-foreign status satisfying the requirements of Treasury Regulation Section 1.1445-2(b)(2) with respect to Seller (substantially in the form attached hereto as Exhibit A);

 

(d) a properly completed and executed IRS Form W-9 with respect to Seller;

 

(e) evidence satisfactory to the Buyer acting reasonably of the receipt of the consents described on Schedule 2.03(b); and

 

(f) such other agreements, documents, instruments and writings as are expressly required to be delivered by Seller at or prior to the Closing Date pursuant to this Agreement.

 

Section 1.07 Deliveries by Buyer.

 

At the Closing, Buyer shall deliver or cause to be delivered to Seller, or its designate, the following:

 

(a) the Closing Payment in the form of the Promissory Note;

 

(b) the Assignment and Assumption Agreement, duly executed by Buyer;

 

(c) any documents required to be delivered at Closing pursuant to the Debt Documents, including the Debt Service Reserve Backup Guaranty and any guarantees for debt service reserve accounts or other acceptable assurances required thereunder;

 

(d) any documents to be delivered pursuant to Section 9.1.4 of the PNGTS Partnership Agreement; and

 

(e) such other agreements, documents, instruments and writings as are expressly required to be delivered by Buyer at or prior to the Closing Date  pursuant to this Agreement.

 

	
  

	
ARTICLE II

 

	
  

	
REPRESENTATIONS AND WARRANTIES OF SELLER

 

Seller represents and warrants to Buyer that the statements contained in this Article II are correct and complete as of the date hereof as follows, except as set forth in the Schedules.

 

Section 2.01 Organization and Qualification.

 

Seller (a) is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, (b) has all requisite corporate power and authority to own and operate its business as presently conducted, and (c) is duly qualified as a foreign corporation and is in good standing in each jurisdiction where the character of its properties owned or held under lease or the nature of its activities makes such qualification necessary, except for such failures to be so qualified as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

  

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Authorization; Validity and Effect of Transaction Agreements.

 

Seller has the requisite power and authority to execute, deliver and perform its obligations under this Agreement and the other Transaction Agreements to which it is a party and to consummate the transactions contemplated hereby and thereby.  The execution and delivery of this Agreement and the Transaction Agreements by Seller and the performance of its obligations hereunder and thereunder and the consummation of all of the transactions contemplated hereby and thereby have been (or, with respect to those Transaction Agreements to be delivered at the Closing, will, at or prior to the Closing, be) duly authorized by the Board of Directors (and, if required, shareholders) of Seller and by all other necessary corporate action, and no other proceedings are (or will be) necessary for Seller to authorize this Agreement or the other Transaction Agreements and the transactions contemplated hereby and thereby.  This Agreement and the Transaction Agreements have been (or, with respect to those Transaction Agreements to be delivered at the Closing, will at or prior to the Closing, be) duly and validly executed and delivered by Seller and constitute (or will constitute) legal, valid and binding obligations of Seller, enforceable against Seller in accordance with their terms, except that such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally and general equitable principles (whether considered in a proceeding in equity or at law).

 

Section 2.02 No Conflict; Required Filings and Consents.

 

(a) Neither the execution and delivery by Seller of this Agreement and the Transaction Agreements, nor the performance by Seller of its obligations hereunder or thereunder, nor the consummation of the transactions contemplated hereby and thereby, will: (i) conflict with, or result in the breach of, any provision of the certificate of incorporation or bylaws of Seller; (ii) violate any Applicable Laws; or (iii) except as set forth on Schedule 2.03(a), conflict with or result in any violation or breach of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation, suspension, modification or acceleration of any obligation or any increase in any payment required by, or the impairment, loss or forfeiture of any benefits, rights or privileges under, or the creation of a Lien on any assets pursuant to (any such conflict, violation, breach, default, right of termination, cancellation or acceleration, loss, forfeiture or Lien, a “Violation”) any Contract (A) to which Seller is a party, (B) by which Seller or any of its assets or properties are bound or affected, or (C) pursuant to which Seller is entitled to any rights or benefits, except for such Violations which, individually or in the aggregate,  would not reasonably be expected to have a Material Adverse Effect.

 

(b) Except as set forth on Schedule 2.03(b), no consent, approval, authorization, exemption or waiver of or permit from, or declaration, filing or registration with, any Governmental Authority or any other Person is required to be made or obtained by Seller in connection with the execution, delivery and performance of this Agreement or the other Transaction Agreements or the consummation of the transactions contemplated hereby or thereby, except where the failure to obtain such consent, approval, authorization, permit or declaration or to make such filing or registration would not reasonably be expected to have a Material Adverse Effect.

 

  

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Section 2.03 Ownership and Delivery of the PNGTS Interest.

 

Seller is the legal and beneficial owner of the PNGTS Interest.  Except as set forth on Schedule 2.04, at the Closing, Seller will transfer good and valid title to the PNGTS Interest to Buyer, free and clear of any and all Liens.  Except as expressly provided in the PNTGS Partnership Agreement, to Seller’s Knowledge, there are (i) no authorized or outstanding subscriptions, warrants, options, convertible securities or other rights (contingent or otherwise) to purchase or otherwise acquire from PNGTS any equity interests of or in PNGTS, (ii) no commitments on the part of PNGTS to issue membership interests, shares, subscriptions, warrants, options, convertible securities or other similar rights, and (iii) no equity securities of PNGTS reserved for issuance for any such purpose. PNGTS has no obligation (contingent or other) to purchase, redeem or otherwise acquire any of its equity securities or interests. Except as expressly provided in the PNGTS Partnership Agreement and in this Agreement, there is no voting trust or agreement, stockholders agreement, pledge agreement, buy-sell agreement, right of first refusal, preemptive right or proxy relating to any equity securities of PNGTS. There are no outstanding subscriptions, options, warrants, calls, rights, commitments, arrangements, understandings or agreements of any character affecting Seller’s right to transfer the PNGTS Interest as contemplated herein. The PNGTS Interest has been duly authorized and are validly issued, fully paid and nonassessable.

 

Section 2.04 No Brokers.

 

Seller does not have any liability to pay any compensation to any broker, finder or agent with respect to the transactions contemplated hereby for which Buyer or PNGTS could be liable or that could result in any Lien on the PNGTS Interest.

 

Section 2.05 Legal Proceedings.

 

There are no actions or proceedings pending or, to the Knowledge of Seller, threatened, against Seller before any court, arbitrator or Governmental Authority acting in an adjudicative capacity which, if adversely determined, would prohibit or restrain the execution, delivery or performance by Seller of this Agreement or the Transaction Agreements or any of the transactions contemplated hereby or thereby.  Seller is not subject to any outstanding judgments, rules, orders, writs, injunctions or decrees of any court or Governmental Authority which would prohibit or restrain the execution, delivery or performance by Seller of this Agreement, the Transaction Agreements or any of the transactions contemplated hereby or thereby.

 

Section 2.06 Absence of Certain Changes.

 

Except as set forth on Schedule 2.07, since September 30, 2015 and the date hereof: (a) PNGTS  has not incurred any liabilities or obligations, fixed, contingent, accrued or otherwise that are of the type that are required to be set forth on a balance sheet prepared in accordance with GAAP (except for liabilities and obligations incurred in the ordinary course of business, which are not Material); (b) PNGTS  has conducted the Business, in all Material respects, in the ordinary course; and (c) no event, occurrence or other matter has occurred that would reasonably be expected to have a Material Adverse Effect.

 

  

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PNGTS  Organization and Qualification.

 

PNGTS (a) is a general partnership duly organized, validly existing and in good standing under the laws of the State of Maine, (b) has all requisite general partnership power and authority to own and operate its business as presently conducted and (c) is duly qualified as a foreign general partnership in each of the jurisdictions where the character of its properties owned or held under lease or the nature of its activities makes such qualification necessary, except for such failures to be so qualified as would not reasonably be expected to have a Material Adverse Effect.  Seller has made available to Buyer true and complete copies of the organizational documents of PNGTS as in effect as of the date of this Agreement.

 

Section 2.07  No Subsidiaries.

 

(a) PNGTS owns a 99% equity interest in PNGTS Operating Co., LLC (“OpCo”). PNGTS does not own any equity interest in any other Person.

 

(b) Neither PNGTS nor OpCo is a party to any Contract, or otherwise subject to any legal restriction, restricting its ability to distribute profits or make any other similar distributions, except (i) as set forth in Schedule 2.09(b) and (ii) for legal restrictions, if any, under the Maine Uniform Partnership Act.

 

Section 2.08 Consolidated Financial Statements.

 

Copies of the unaudited consolidated financial statements of PNGTS as at September 30, 2015 are attached as Schedule 2.10 (the “Financial Statements”).  The Financial Statements fairly present in all Material respects the consolidated financial position of PNGTS as of the date specified therein, and the results of its consolidated operations for the respective period so specified, and have been prepared in accordance with GAAP consistently applied throughout the period involved, provided however that these unaudited Financial Statements are subject to normal and recurring year-end adjustments and do not contain all of the footnotes and schedules contained in audited financial statements.  There are no Material off balance sheet arrangements of PNGTS.

 

Section 2.09 Litigation; Observance of Orders.

 

(a) Except as set forth on Schedule 2.11(a), there are no Material actions, suits or proceedings pending or, to the Knowledge of Seller, threatened against PNGTS or OpCo in any court or before any arbitrator of any kind or before or by any Governmental Authority.

 

(b) Except as set forth on Schedule 2.11(a), PNGTS is not in Material default under any order, judgment, decree or ruling of any court, arbitrator or Governmental Authority.

 

Section 2.10 Tax

 

Except as set forth in Schedule 2.12:

 

  

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all Material Tax Returns required to be filed by PNGTS have been or will be timely filed with the appropriate taxing authorities in all jurisdictions in which such Tax Returns are required to be filed;

 

(a) such Tax Returns are or will be true, correct and complete in all Material respects, and all Taxes reported on such Tax Returns and all Taxes owed by PNGTS or for which PNGTS may be liable have been or will be timely paid;

 

(b) PNGTS has not extended or waived the application of any statute of limitations of any jurisdiction regarding the assessment or collection of any Tax;

 

(c) there are no audits, claims, assessments, levies, administrative proceedings, or lawsuits pending, or to the Knowledge of Seller, threatened against PNGTS by any taxing authority and PNGTS has not received any written notices from any taxing authority relating to any issue  which could have a Material effect on the Tax liability of PNGTS after the Closing Date;

 

(d) no claim has ever been made by any taxing authority in a jurisdiction where PNGTS does not file Tax Returns that it is or may be subject to taxation in that jurisdiction;

 

(e) there are no Liens for Taxes (other than Permitted Encumbrances) upon the assets of PNGTS;

 

(f) none of the assets of PNGTS, directly or indirectly, secures any debt the interest on which is tax exempt under Section 103(a) of the Code;

 

(g) Seller is not a person other than a United States person within the meaning of the Code and the transactions contemplated herein are not subject to the tax withholding provisions of the Code;

 

(h) all Taxes which PNGTS is (or was) required by law to withhold or collect in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder or other third party have been duly withheld or collected, and have been or will be timely paid over to the proper authorities to the extent due and payable;

 

(i) there are no Tax sharing, allocation, indemnification or similar agreements in effect as between PNGTS, on the one hand, and any other party (including Seller and its other Affiliates and any predecessors thereof), on the other hand, under which Buyer or PNGTS could be liable for any Taxes of any such party for any periods or portions thereof after the Closing Date;

 

(j) PNGTS does not have any liability for the Taxes of any Person under Treasury Regulations Section 1.1502-6 (or any corresponding provisions of state, local or foreign Tax law), or as a transferee or successor, by contract or otherwise;

 

(k) PNGTS has not applied for, nor been granted, nor agreed to any accounting method change for which it will be required to take into account any adjustment

 

  

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(l) under Section 481 of the Code or any similar provision of the Code or the corresponding tax laws of any nation, state or locality;

 

(m) PNGTS has not entered into any agreement or arrangement with any taxing authority that requires it to take any action or to refrain from taking any action and PNGTS is not a party to any agreement with any taxing authority that would be terminated or adversely affected as a result of the transactions contemplated by this Agreement;

 

(n) PNGTS has not participated in any “reportable transaction” within the meaning of Treasury Regulations Section 1.6011-4(b) (and all predecessor regulations); and

 

(o) PNGTS is, and has been since inception, properly classified as a partnership for U.S. federal income tax purposes.  PNGTS has a valid Section 754 election in effect with respect to its taxable year that includes the Closing Date.

 

Section 2.11 Title to Real and Personal Property.

 

Except as set forth in Schedule 2.13, PNGTS has good title in fee simple to, or has valid and enforceable rights to lease or use, by easement, license, Contract or otherwise, all items of real and personal property used in the ordinary course of the Business, in each case free and clear of all Liens, except those that (a) do not materially interfere with the current use of such property by PNGTS  or (b) constitute Permitted Encumbrances.

 

Section 2.12 Permits; Intellectual Property.

 

(a) PNGTS owns or possesses all Permits, patents, copyrights, service marks, trademarks and trade names, or rights thereto, necessary (i) for the operation, ownership and maintenance of the PNGTS Pipeline and (ii) for the conduct of the Business, except in each case where the failure to own or possess the same would not reasonably be expected to have a Material Adverse Effect.  PNGTS has not received any written notice of any revocation or modification of any such Permit, patent, copyright, service mark, trademark or trade name nor has it received any written notice that such Permit, patent, copyright, service mark, trademark or trade name will not be renewed in the ordinary course of business.

 

(b) PNGTS has made all declarations and filings with the appropriate Governmental Authorities that are necessary for the ownership, maintenance or lease of its properties and the conduct of the Business, except where the failure to make the same would not reasonably be expected to have a Material Adverse Effect.  To Seller’s Knowledge, PNGTS has complied with all terms and conditions of the Permits, except as would not reasonably be expected to have a Material Adverse Effect, and no proceeding is pending or threatened with respect to any alleged failure by PNGTS to have any Material Permit necessary for the conduct of the Business.

 

Section 2.13 Condition of Assets.

 

(a) The PNGTS Pipeline and all other tangible Material property owned by PNGTS have been maintained in all Material respects to prevailing industry standards for similar

 

  

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(b) assets and, except as set forth on Schedule 2.15(a), are in satisfactory operating condition and repair, ordinary wear and tear excepted.

 

(c) There are no capital expenditures currently required in order to preserve the satisfactory operating condition of the PNGTS Pipeline or other tangible Material property owned by PNGTS, other than (i) as reflected in the PNGTS Budget and (ii) normal maintenance expenditures that are incurred or expected to be incurred in the ordinary course of operating the Business.

 

Section 2.14 Employee Matters.

 

(a) PNGTS does not have any employees, and there are no employee or employee-benefit related liabilities, including plans subject to ERISA, to which PNGTS is subject.

 

(a) The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby do not involve any transaction that, absent an applicable exemption, is subject to the prohibitions of Section 406(b) of ERISA or in connection with which, absent an applicable exemption, a Tax could be imposed pursuant to Section 4975(c)(1)(A)-(D) of the Code.

 

Section 2.15 No Violation or Default.

 

Except as set forth on Schedule 2.17, to the Knowledge of Seller, PNGTS is not (a) in violation of the PNGTS Partnership Agreement; (b) in default, and no event has occurred that, with notice or lapse of time or both, would constitute such a default, under any Contract to which PNGTS  is a party or by which it is bound or to which any of its property or assets are subject; or (c) in violation of any Applicable Law or any judgment or order of any court or arbitrator or Governmental Authority, except, in the case of clauses (b) and (c) above, for any such default or violation that, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect.  Notwithstanding the foregoing, it is understood and agreed that the representations and warranties set forth in this Section 2.17 shall not apply to (i) matters relating to Taxes (as the sole and exclusive representations and warranties regarding Taxes  are set forth in Section 2.12), (ii) Permits, declarations and filings (as the sole and exclusive representations and warranties regarding Permits, declarations and filings are set forth in Section 2.14), (iii) employee matters (as the sole and exclusive representations and warranties regarding employee matters are set forth in Section 2.16) or (iv) environmental matters (as the sole and exclusive representations and warranties regarding environmental matters are set forth in Section 2.20).

 

Section 2.16 Material Agreements.

 

The Contracts set forth on Schedule 2.18 (collectively, the “Material Agreements”) constitute all Material gas transportation contracts, operation and maintenance agreements, construction contracts and other Material Contracts to which either PNGTS or OpCo  is a party or by which either PNGTS or OpCo is bound or to which any of their respective properties or assets are subject.  The Material Agreements have been duly authorized, executed and delivered by PNGTS or OpCo as applicable and constitute valid and legally binding agreements of PNGTS or OpCo, as the case may be, enforceable against PNGTS or OpCo in accordance with their

 

  

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terms, except that such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally and general equitable principles (whether considered in a proceeding in equity or at law). To Seller’s Knowledge, none of PNGTS or OpCo or any applicable counterparty thereto is in breach or default of any Material Agreement.

 

Section 2.17 Insurance.

 

  Schedule 2.19 sets forth a list of the Material insurance policies that PNGTS holds with respect to PNGTS and the PNGTS Interests. PNGTS  has insurance with Reputable Insurers covering its properties against loss or damage of the kinds customarily insured against by companies similarly situated in the industry in which PNGTS  conducts the Business, in such amounts and with such deductibles as is customary of similarly situated companies and PNGTS  has not received written notice from any insurer or agent of such insurer that capital improvements or other expenditures are required or necessary to be made in order to continue such insurance. Such policies are in full force and effect, and all premiums due and payable under such policies have been paid. PNGTS has received no written notice of any pending or threatened termination of, or indication of an intention not to renew, such policies.

 

Section 2.18 Compliance With Environmental Laws.

 

Except as set forth on Schedule 2.20, PNGTS; (a) has been and is currently operated in compliance with any and all Environmental Laws; (b) has received and is in compliance with all Permits required under applicable Environmental Laws to own, operate, and maintain the PNGTS Pipeline and to otherwise conduct the Business; (c) has not been the subject of any outstanding notice, order, agreement or judgment from a Governmental Authority under applicable Environmental Laws requiring remediation or payment of a fine; and (d) has not received any written notice of any actual or potential liability for the violation of, or noncompliance with any Environmental Law or any Permit required under any Environmental Law; and (e) has not received any written notice of any actual or potential liability in connection with any release or threatened release into the environment of any Hazardous Material, except in the case of the foregoing clauses (a) and (b) for any such noncompliance as would not reasonably be expected to have a Material Adverse Effect.  Except for actions and conditions which have not had and would not reasonably be expected to have a Material Adverse Effect, to the Knowledge of Seller, no condition exists on any property currently owned or leased by PNGTS which would subject PNGTS or such property to any remedial obligations or liabilities.

 

  

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No Conflict; Required Filings and Consents Applicable.

 

(a) Except as set forth on Schedule 2.21(a), neither the execution and delivery by Seller of this Agreement or the Transaction Agreements, nor the performance by Seller of the obligations hereunder or thereunder, nor the consummation of the transactions contemplated hereby or thereby, will result in a Violation of any Contract (i) to which either PNGTS or OpCo is a party, (ii) by which PNGTS or OpCo or any of their respective assets or properties are bound or affected or (iii) pursuant to which either PNGTS or OpCo is entitled to any rights or benefits, except for such Violations which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect.

 

(b) Except as set forth on Schedule 2.21(b), no consent, approval, authorization, exemption or waiver of or permit from, or declaration, filing or registration with, any Governmental Authority or any other Person is required to be made or obtained by PNGTS  in connection with the execution, delivery and performance by Seller of this Agreement or the Transaction Agreements or the consummation of the transactions contemplated hereby or thereby, except where the failure to obtain such consent, approval, authorization, permit or declaration or to make such filing or registration would not reasonably be expected to have a Material Adverse Effect.

 

Section 2.19 Intercompany Matters.

 

Except for the Transaction Documents or as set forth in Schedule 2.22, there are no intercompany contracts or other arrangements between PNGTS, on the one hand, and Seller or its other Affiliates, on the other hand, that (a) cannot be terminated by PNGTS upon notice of thirty (30) days or less and (b) would subject PNGTS to any obligations or liabilities, or otherwise bind PNGTS subsequent to the Closing.

 

	
  

	
ARTICLE III

 

	
  

	
REPRESENTATIONS AND WARRANTIES OF BUYER

 

Buyer hereby represents and warrants to Seller as follows:

 

Section 3.01 Organization and Qualification of Buyer.

 

Buyer is a limited partnership duly organized, validly existing and in good standing under the laws of Delaware.  Buyer has all requisite limited partnership power and authority to own and operate its business as presently conducted.  Buyer is duly qualified as a foreign limited partnership and is in good standing in each jurisdiction where the character of its properties owned or held under lease or the nature of its activities makes such qualification necessary, except for such failures to be so qualified as would not reasonably be expected to have a material adverse effect on Buyer.

 

Section 3.02 Authorization; Validity and Effect of Transaction Agreements.

 

Buyer has the requisite limited partnership power and authority to execute, deliver and perform its obligations under this Agreement and the other Transaction Agreements to which it is a party and to consummate the transactions contemplated hereby and thereby.  The execution and

 

  

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delivery of this Agreement and the other Transaction Agreements by Buyer and the performance by it of its obligations hereunder and thereunder and the consummation of all of the transactions contemplated hereby and thereby have been (or, with respect to those Transaction Agreements to be delivered at the Closing, will, at or prior to the Closing, be) duly authorized by Buyer’s general partner and by all other necessary corporate and limited partnership action on the part of Buyer and its general partner, and no other proceedings are (or will be) necessary for Buyer to authorize this Agreement or the other Transaction Agreements and the transactions contemplated hereby and thereby.  This Agreement and the other Transaction Agreements to which Buyer is a party have been (or, with respect to those Transaction Agreements to be delivered at the Closing, will, at or prior to the Closing, be) duly and validly executed and delivered by Buyer and constitute (or will constitute) legal, valid and binding obligations of Buyer, enforceable against Buyer in accordance with their terms, except that such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally and general equitable principles (whether considered in a proceeding in equity or at law).

 

Section 3.03 No Conflict; Required Filings and Consents Applicable to Buyer.

 

(a) Neither the execution and delivery by Buyer of this Agreement or the other Transaction Agreements to which it is a party, nor the performance by Buyer of its obligations hereunder or thereunder, nor the consummation of the transactions contemplated hereby or thereby, will: (i) conflict with, or result in the breach of, any provision of its certificate of limited partnership or limited partnership agreement or any other governing or organizational document of Buyer, or the certificate of incorporation or bylaws of its general partner; (ii) violate any Applicable Law; or (iii) conflict with or result in any Violation of any Contract (A) to which Buyer is a party, (B) by which Buyer or any of its assets or properties is bound or affected or (C) pursuant to which Buyer is entitled to any rights or benefits, except for such Violations which would not reasonably be expected to have a material adverse effect on Buyer.

 

(b) No consent, approval, authorization, exemption or waiver of or permit from, or declaration, filing or registration with, any Governmental Authority or any other Person is required to be made or obtained by Buyer in connection with the execution, delivery and performance of this Agreement or the other Transaction Agreements or the consummation of the transactions contemplated hereby or thereby, except where the failure to obtain such consent, approval, authorization, permit or declaration or to make such filing or registration would not reasonably be expected to have a material adverse effect on Buyer.

 

Section 3.04 No Brokers.

 

Buyer has no liability to pay any compensation to any broker, finder or agent with respect to the transactions contemplated hereby based upon arrangements made by or on behalf of Buyer for which Seller or PNGTS could be liable.

 

Section 3.05 Legal Proceedings Relating to Buyer.

 

There are no actions or proceedings pending or, to Buyer’s knowledge, threatened against Buyer before any court or Governmental Authority acting in an adjudicative capacity, which, if

 

  

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adversely determined, would prohibit or restrain the execution, delivery or performance of this Agreement or the other Transaction Agreements or any of the transactions contemplated hereby or thereby.  Buyer is not subject to any outstanding judgments, rules, orders, writs, injunctions or decrees of any court or Governmental Authority which would prohibit or restrain the execution, delivery or performance of this Agreement, the other Transaction Agreements or any of the transactions contemplated hereby or thereby.

 

Section 3.06 Acquisition for Investment.

 

Buyer has such knowledge and experience in financial and business matters that Buyer is capable of evaluating the merits and risks of the investment contemplated by this Agreement and making an informed investment decision with respect thereto. Buyer is acquiring the PNGTS Interest for Buyer’s own account for investment only and not with a view to, or any present intention of, effecting a distribution of the PNGTS Interest in violation of the Securities Act.  Buyer acknowledges that the PNGTS Interest has not been registered under the Securities Act or the securities laws of any state or other jurisdiction and cannot be disposed of except in accordance with the Securities Act and any applicable state laws.  Buyer is an accredited investor (within the meaning of Regulation D promulgated under the Securities Act).

 

Section 3.07 No Other Representations; Waiver of Implied Warranties.

 

Except as provided in Article II of this Agreement, Seller has not made and does not make any other representations or warranties as to the PNGTS Interest, PNGTS, the Business or any matter or thing affecting or relating to PNGTS  or its business, operations, assets, properties, liabilities, financial condition, results of operation or other affairs.  Buyer hereby waives, to the extent permitted by law, any implied warranty applicable to the transactions contemplated hereby (including any implied warranty of merchantability or fitness for a particular purpose).  Buyer acknowledges that it has had the opportunity to conduct its own independent investigation, analysis and evaluation of the PNGTS Interest, PNGTS and the Business.

 

	
  

	
ARTICLE IV

 

	
  

	
COVENANTS OF THE PARTIES

 

Section 4.01 Expenses.

 

Except as otherwise provided in this Agreement, Buyer and Seller shall be solely responsible for their respective expenses and costs incurred in connection with the execution and performance of this Agreement, the other Transaction Agreements and the transactions contemplated hereby and thereby.

 

Section 4.02 Access to Information by Buyer.

 

Seller shall grant Buyer reasonable access during normal business hours to all books and records concerning PNGTS which Seller has in its possession or control, as Buyer deems reasonably necessary or advisable in connection with the consummation of the transactions contemplated hereby; provided that such access shall not materially interfere with normal operations of Seller, PNGTS or any of their respective Affiliates.

 

  

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Conduct of the Business Pending the Closing Date.

 

(a) Except as required or permitted by this Agreement, as set forth on Schedule 4.03, or otherwise approved in writing by Buyer (which approval shall not be unreasonably withheld, conditioned or delayed), during the period commencing on the date hereof and ending on the Closing Date, Seller will, and will, to the extent possible having regard to the provisions of the PNGTS Partnership Agreement, cause PNGTS to:

 

(i) operate and maintain the Business in all material respects in the usual, regular and ordinary manner consistent with past practices, and to the extent consistent with such operation and maintenance, preserve the present business organization of the Business;

 

(ii) maintain its books, accounts and records relating to the Business in the usual, regular and ordinary manner, on a basis consistent with past practice, comply in all Material respects with all laws, rules or regulations of any Governmental Authority and contractual obligations applicable to the Business or to the conduct of the Business and perform all of its Material obligations relating to the Business;

 

(iii) not waive any Material claims or rights relating to the Business;

 

(iv) after obtaining Knowledge thereof, give notice to Buyer of any claim or litigation (threatened or instituted) or any other event or occurrence which would reasonably be expected to have a Material Adverse Effect, or which would reasonably be expected to cause Seller to breach any representation, warranty or covenant of Seller contained in this Agreement;

 

(v) not (i) file an election to have PNGTS  classified as an association taxable as a corporation for U.S. federal, state or local income tax purposes or change any Tax election or Tax method of accounting or make any new Tax election or adopt any new Tax method of accounting, (ii) make any settlement of or compromise any Tax liability, (iii) surrender any right to claim a refund of Taxes, (iv) consent to any extension or waiver of the limitation period applicable to any Tax claim or assessment, or (v) take any other action outside the ordinary course of business that would have the effect of increasing the Tax liability of PNGTS or its direct or indirect owners for any period after the Closing Date; and

 

(vi) not agree, whether in writing or otherwise, to take any action which is inconsistent with this Section 4.03(a).

 

(b) Notwithstanding anything to the contrary in this Section 4.03, prior to the Closing Date, Buyer, on the one hand, and Seller, on the other hand, will act independently of each other in making decisions as to their respective businesses, other than with respect to their current interests in the Business.

 

  

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Section 4.03 [INTENTIONALLY OMITTED]

 

Section 4.04 Disputes.

 

In the event of a Dispute, upon the written request (a “Request”) of any Party to this Agreement, the matter shall immediately be referred to senior officers of each Party designated by such Party for resolution.  The designated senior officers shall meet immediately and attempt in good faith to negotiate a resolution of the Dispute.  If the Parties are unable to resolve the Dispute within fifteen (15) Business Days after receipt by a Party of a Request, then either Party may seek any legal avenue available under this Agreement to resolve the Dispute.

 

Section 4.05 Commercially Reasonable Efforts.

 

Each Party shall use commercially reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things reasonably necessary, proper or advisable to consummate and make effective the transactions contemplated by this Agreement and the other Transaction Agreements as soon as reasonably practicable, including such actions or things as any Party hereto may reasonably request in order to cause any of the conditions to any other Party’s obligation to consummate such transactions specified in Article V to be fully satisfied, and as promptly as is reasonably practicable cooperate with and furnish information to each other in connection with any requirements imposed upon any of them with respect thereto.

 

Section 4.06 Regulatory Approvals

 

As promptly as practicable, the Seller and Buyer shall make all filings and notifications with all Governmental Authorities, if any, that may be or may become reasonably necessary, proper or advisable under this Agreement and Applicable Laws to consummate and make effective the transactions contemplated under this Agreement.  Buyer and Seller shall equally share the filing fees and associated costs, including legal fees in connection with the foregoing.

 

Section 4.07 Schedules.

 

(a) Any information disclosed by any Party hereto pursuant to any Schedule hereto shall be deemed to be disclosed to the other Party for all purposes of this Agreement and the Transaction Agreements.  Neither the specification of any dollar amount or any item or matter in any provision of this Agreement or any Transaction Agreement nor the inclusion of any specific item or matter in any Schedule hereto or thereto is intended to imply that such amount, or higher or lower amounts, or the item or matter so specified or included, or other items or matters, are or are not Material, and no Party shall use the fact of the specification of any such amount or the specification or inclusion of any such item or matter in any dispute or controversy between the Parties as to whether any item or matter is or is not Material for purposes of this Agreement or any Transaction Agreement.  Neither the specification of any item or matter in any provision of the Agreement or any Transaction Agreement nor the inclusion of any specific item or matter in any Schedule hereto or thereto is intended to imply that such item or matter, or other items or matters, are or are not in the ordinary course of business, and no Party shall use the fact of the specification or the inclusion of any such item or matter in any dispute or controversy between the Parties as to whether any item or matter is or is not in the ordinary course of business for purposes of this Agreement or any Transaction Agreement.

 

  

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(b) Each Party shall from time to time prior to or at the Closing, supplement or amend any Schedule hereto to correct any matter which would constitute a breach of any representation, warranty, covenant or obligation contained herein.  No such supplement or amendment shall be deemed to cure any breach for purposes of Section 5.02(a) or Section 5.03(a) (as applicable).  If, however, the Closing occurs, any such supplement and amendment relating to matters arising after the date hereof will be effective to cure and correct for all purposes any inaccuracy in or breach of any representation, warranty, covenant or obligation which would have existed if such Party had not made such supplement or amendment, and all references to any Schedule hereto which is supplemented or amended as provided in this Section 4.07 shall for all purposes after the Closing be deemed to be a reference to such Schedule as so supplemented or amended.

 

	
  

	
ARTICLE V

 

	
  

	
CONDITIONS PRECEDENT

 

Section 5.01 Conditions to Obligation of Each Party to Close.

 

The respective obligations of each Party to effect the transactions contemplated hereby shall be subject to the satisfaction or waiver at or prior to the Closing Date of all of the following conditions:

 

(a) No Orders.  No statute, rule, regulation, executive order, decree, ruling, permanent injunction or other permanent order shall have become effective (and final and nonappealable) permanently restraining, enjoining or otherwise prohibiting or making illegal the consummation of the transactions contemplated by this Agreement or the other Transaction Agreements.

 

Section 5.02 Conditions to Seller’s Obligation to Close.

 

Seller’s obligation to effect the transactions contemplated hereby shall be subject to the satisfaction or waiver on or prior to the Closing Date of all of the following conditions:

 

(a) Representations and Warranties; Covenants. The representations and warranties of Buyer contained in Article III shall be true and correct in all material respects (except where such representations and warranties are already modified by materiality, in which case, such representations and warranties shall be true and correct in all respects) on and as of the date of execution of this Agreement and on and as of the Closing Date, with the same force and effect as though such representations and warranties had been made on, as of and with reference to such time, and Buyer shall have performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by Buyer at or prior to the Closing Date.  Buyer shall have delivered a certificate to Seller at Closing attesting to these matters.

 

(b) Delivery of Closing Documents. Buyer shall have delivered to Seller each of the agreements and documents specified in Section 1.07.

 

  

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Section 5.03 Conditions to Buyer’s Obligation to Close.

 

Buyer’s obligation to effect the transactions contemplated hereby shall be subject to the satisfaction or waiver on or prior to the Closing Date of all of the following conditions:

 

(a) Representations and Warranties; Covenants.  The representations and warranties of Seller contained in Article II shall be true and correct in all material respects (except where such representations and warranties are already modified by materiality, in which case, such representations and warranties shall be true and correct in all respects) on and as of the date of execution of this Agreement and on and as of the Closing Date, with the same force and effect as though such representations and warranties had been made by Seller on, as of and with reference to such time, and Seller shall have performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by Seller at or prior to the Closing Date.  Seller shall have delivered a certificate to Buyer at Closing attesting to these matters.

 

(b) No Material Adverse Effect.  No Material Adverse Effect shall have occurred since the date hereof.

 

(c) Consents.  Buyer shall have received evidence satisfactory to the Buyer acting reasonably of the receipt of the consents described on Schedule 2.03(b).

 

(d) Delivery of Closing Documents. Seller shall have delivered to Buyer each of the agreements and documents specified in Section 1.06.

 

	
  

	
ARTICLE VI

 

	
  

	
SURVIVAL; INDEMNIFICATION

 

Section 6.01 Survival.

 

The representations, warranties, covenants, agreements and indemnification obligations of the Parties contained in this Agreement shall survive the Closing until eighteen (18) months from the Closing Date and shall thereafter terminate and expire on the first Business Day following the date that is eighteen (18) months from the Closing Date; provided, however, that the representations and warranties of the Parties set forth in (a) Section 2.12 (Tax) (and the indemnification obligations of the Parties with respect thereto) shall expire after all applicable statutes of limitation (giving effect to any waiver, mitigation or extension thereof), and (b) in Section 2.02 (Authorization; Validity and Effect of Transaction Agreements), Section 2.04 (Ownership), Section 2.05 (No Brokers-Seller), Section 3.02 (Authorization; Validity and Effect of Transaction Agreements) and Section 3.04 (No Brokers-Buyer), (collectively, the “Identified Representations”) (and the indemnification obligations of the Parties with respect thereto) shall survive indefinitely.  Notwithstanding anything to the contrary in the preceding sentence, (i) any claim for indemnification which shall have been asserted pursuant to Section 6.04 prior to the expiration of the survival period applicable to such claim shall survive until the final resolution of such claim in accordance with the provisions of this Article VI; and (ii) in the event that (A) a Party provides written notice to the other Party that the first Party may seek indemnification under this Article VI for a potential Loss and Expense prior to the expiration period applicable to the potential claim described in such notice, (B) such written notice describes in reasonable

 

  

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detail the specific factual basis for such potential Loss and Expense and (C) such first Party asserts an actual claim for indemnification pursuant to Section 6.04 within sixty (60) days of such notice, then the potential indemnification claim described in such notice shall survive until the final resolution of such claim in accordance with the provisions of this Article VI.

 

Section 6.02 Indemnification of Buyer.

 

(a) From and after the Closing Date, but subject to the limitations set forth in this Article VI, Seller shall indemnify and hold harmless Buyer and its officers, directors, employees, agents and representatives (the “Buyer Indemnified Parties”) from and against any damage, loss, claim, obligation, liability, cost (including reasonable attorneys’ fees and expenses), expense or deficiency (collectively, “Loss and Expense”) suffered or incurred by any of the Buyer Indemnified Parties (including, solely with respect to the representations and warranties contained in Section 2.12(o), their direct or indirect owners) in connection with (i) the transactions contemplated in this Agreement by reason of, arising out of, or resulting from any breach of any representation, warranty, covenant or agreement of Seller contained in this Agreement, the other Transaction Agreements or any certificate or document required to be delivered by Seller to Buyer pursuant to this Agreement or any other Transaction Agreement, (ii) any claim based upon, resulting from or arising out of the Business or obligations of PNGTS conducted, existing or arising on or prior to the Closing Date and (iii) any and all Seller Taxes.

 

(b) Subject to the terms and conditions of this Agreement, any Loss and Expense suffered by the Buyer Indemnified Parties (including, solely with respect to the representations and warranties contained in Section 2.12(o), their direct or indirect owners) for which the Buyer Indemnified Parties (including, solely with respect to the representations and warranties contained in Section 2.12(o), their direct or indirect owners) are to be indemnified by Seller pursuant to this Article VI or Section 7.04 shall be paid by Seller to the Buyer Indemnified Parties in U.S. Dollars.

 

Section 6.03 Indemnification of Seller.

 

(a) From and after the Closing, but subject to the limitations set forth in this Article VI, Buyer shall indemnify and hold harmless Seller and its officers, directors, employees, agents and representatives (the “Seller Indemnified Parties”) from and against any Loss and Expense suffered or incurred by reason of, arising out of or resulting from any breach of any representation, warranty, covenant or agreement of Buyer contained in this Agreement or any certificate or document required to be delivered by Buyer to Seller pursuant to this Agreement.

 

(b) Subject to the terms and conditions of this Agreement, any Loss and Expense suffered by the Seller Indemnified Parties for which the Seller Indemnified Parties are to be indemnified by Buyer pursuant to this Section 6.03 shall be paid by Buyer to the Seller Indemnified Parties in U.S. Dollars.

 

Section 6.04 Indemnification Procedures.

 

(a) Terms.  As used herein, the term “Indemnified Party” shall mean the Buyer Indemnified Parties or Seller Indemnified Parties, as applicable, the term “Notifying

 

  

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(b) Party” shall mean the Party entitled to indemnification hereunder, and the “Indemnifying Party” shall refer to the Party obligated to indemnify such Notifying Party’s Indemnified Parties.

 

(c) Claims.  An Indemnified Party that seeks indemnification under this Article VI for a Loss and Expense that does not arise out of a Third Party Claim (such claim for indemnification being referred to herein as a “Claim”) shall promptly notify the Indemnifying Party of such Claim in writing.  Such notice shall be a condition precedent to any liability of the Indemnifying Party for such Claim under this Article VI, and such notice shall describe the Claim in reasonable detail and shall indicate the amount (estimated if necessary) of the Loss and Expense that has been or may be sustained by the Indemnified Party.

 

(d) Third Party Claims.  In the event that any of the Indemnified Parties is made or threatened to be made a defendant in or party to any action or proceeding, judicial or administrative, instituted by any third party, the liabilities for which, or the costs or expenses of which, are or would be a Loss and Expense for which the Indemnified Party is entitled to indemnification hereunder (any such third party action or proceeding being referred to herein as a “Third Party Claim”), the Notifying Party shall give the Indemnifying Party notice in writing, within ten (10) calendar days after learning of such Third Party Claim.  The failure to timely give such notice shall not affect any Indemnified Party’s ability to seek reimbursement except to the extent such failure adversely affects the Indemnifying Party’s ability to defend successfully a Third Party Claim or such notice is given after the expiration of the applicable survival period set forth in Section 6.01.  The Indemnifying Party shall be entitled to contest and defend such Third Party Claim; provided, that the Indemnifying Party diligently contests and defends such Third Party Claim.  Notice of the intention to contest and defend shall be given by the Indemnifying Party to the Notifying Party within ten (10) Business Days after the Notifying Party’s notice of such Third Party Claim (but in all events as soon as possible prior to the date an answer or other defense to such Third Party Claim is due to be filed).  Such contest and defense shall be conducted by competent counsel employed by the Indemnifying Party and reasonably acceptable to the Notifying Party.  The Notifying Party shall be entitled at any time, at its own cost and expense (which expense shall not constitute a Loss and Expense) to participate in such contest and defense and to be represented by attorneys of its or their own choosing.  If the Notifying Party elects to participate in such defense, the Notifying Party shall cooperate with the Indemnifying Party in the conduct of such defense.  Neither the Notifying Party nor the Indemnifying Party may concede, settle or compromise any Third Party Claim without the consent of the other Party, which consent shall not be unreasonably withheld or delayed.  Subject to the preceding sentence, in the event the Indemnifying Party fails to contest and defend a Third Party Claim, the Notifying Party shall be entitled to contest and defend such Third Party Claim in such manner and on such terms as the Notifying Party may deem appropriate, and the Indemnifying Party shall be liable for the Loss and Expense of the Notifying Party in accordance with the provisions of this Article VI.

 

Section 6.05 Limitations.

 

(a) Excluded Losses and Basket.  Notwithstanding anything herein to the contrary, Seller shall have no obligation or liability to indemnify a Buyer  Indemnified Party under this Article VI: (i) with respect to any claim or series of related claims, unless in the

 

  

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(b) reasonable estimate of the Notifying Party, the amount of indemnifiable Loss and Expense in respect of such claims is greater than or equal to $100,000.00 (a “Qualifying Claim”); and (ii) unless and until the aggregate indemnifiable Loss and Expense suffered by the applicable Buyer Indemnified Parties arising out of Qualifying Claims exceeds one percent (1%) of the Purchase Price, in which event only the Losses and Expenses in excess of such amount shall be paid in accordance with the terms of this Article VI.  The foregoing limitations shall not apply to any Loss and Expense (A) resulting from or arising out of a breach of an Identified Representation, or (B) relating to any and all Seller Taxes.

 

(c) Multiple Indemnification.  Notwithstanding anything to the contrary herein, to the extent that an Indemnified Party has multiple rights of indemnification pursuant to this Article VI, such Indemnified Party may only, consistent with the limitations set forth herein, recover such Loss and Expense one time.

 

(d) Maximum Indemnification Liability of Seller.  Notwithstanding anything herein to the contrary, the maximum aggregate liability of Seller to the Buyer Indemnified Parties pursuant to Section 6.02 shall be an amount equal to fifteen percent (15%) of the Purchase Price; provided, however, that the foregoing limitation shall not apply to (i) any Loss and Expense resulting from or arising out of a breach of an Identified Representation, in which case the maximum aggregate liability of Seller to the applicable Buyer Indemnified Parties pursuant to Section 6.02 shall in no event exceed an amount equal to the Purchase Price or (ii) any Loss and Expense resulting from or arising out of Taxes, in which case the maximum aggregate liability of Seller to the applicable Buyer Indemnified Parties (including, solely with respect to the representations and warranties contained in Section 2.12(o), their direct or indirect owners) shall not be limited.

 

(e) Adjustment for Tax Benefit and Insurance Coverage.  The Parties shall make all appropriate adjustments for net Tax benefits and insurance coverage in determining the amount of any Loss and Expense for purposes of this Article VI, the intent being that Losses and Expenses recoverable by an Indemnified Party from an Indemnifying Party shall be net of any net Tax benefits and insurance proceeds recovered by the Indemnified Party, taking into account any Tax costs (or reduction in Tax benefits) resulting from the indemnity payments and insurance proceeds.

 

(f) Certain Matters Affecting Indemnification.  Notwithstanding anything to the contrary set forth herein, for purposes of determining the amount of the Losses and Expenses resulting from a breach or inaccuracy of a representation, warranty, covenant or agreement of either Party (but not for purposes of determining the existence of such inaccuracy), any “Material”, “materiality” or “Material Adverse Effect” qualifier or words of similar import contained in such representation, warranty, covenant or agreement giving rise to the claim of indemnity hereunder shall in each case be disregarded and without effect (as if such standard or qualification were deleted from such representation, warranty, covenant or agreement).

 

Section 6.06 Exclusive Remedy.

 

The indemnification rights provided to the Parties pursuant to this Article VI, as limited by and subject to the provisions of this Article VI, shall be the Parties’ sole and exclusive remedy

 

  

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with respect to this Agreement and the other Transaction Agreements, including with respect to any breach of any representation or warranty by, or covenant or obligation of, the other Party under this Agreement and the other Transaction Agreements, other than with respect to: (i) a breach of the covenant contained in Section 9.05; or (ii) any action or inaction by a Party that constitutes fraud.

 

Section 6.07 Exclusion.

 

Notwithstanding anything to the contrary in this Article VI, Seller shall not be obligated under this Article VI to indemnify any Buyer Indemnified Party for any Loss and Expense that directly arises out of or results directly from any event, occurrence or state of facts disclosed in the Schedules to this Agreement.

 

Section 6.08 Purchase Price Adjustment.

 

For all Tax purposes, the Parties agree to treat (and will cause each of their respective Affiliates to treat) (a) any indemnification payment made under this Article VI and (b) any adjustment pursuant to Section 1.3 as an adjustment to the Purchase Price.

 

    ARTICLE VII

 

TAX MATTERS

 

Section 7.01 Tax Returns; Payment of Taxes.

 

(a) Pre-Closing Tax Returns.  Seller shall prepare or cause to be prepared all Tax Returns of PNGTS for all Pre-Closing Periods and Straddle Periods (“Pre-Closing Tax Returns”).  Such Tax Returns shall be prepared on a basis consistent with past practice except to the extent otherwise required by Applicable Law.  Not later than thirty (30) days prior to the due date for filing any such Tax Return Seller shall deliver a copy of such Tax Return, together with all supporting documentation and workpapers, to Buyer for its review and reasonable comment.  Seller will cause such Tax Return (as revised to incorporate Buyer’s reasonable comments) to be timely filed and will provide a copy to Seller.  Not later than five days prior to the due date for payment of Taxes with respect to any Pre-Closing Tax Return, Seller shall pay to Buyer the amount of any Seller Taxes with respect to such Tax Return.

 

(b) Proration of Straddle Period Taxes.  In the case of Taxes that are payable with respect to any Straddle Period, the portion of any such Taxes that is attributable to the portion of the period ending on the Closing Date shall be:

 

	
(i)  

	
in the case of Income Taxes, Seller shall be liable for an amount equal to the amount that would be payable if the taxable year ended on the Closing Date; and

 

	
(ii)  

	
in the case of Taxes other than Income Taxes, Seller shall be liable for an amount equal to the amount of such Taxes multiplied by a fraction the numerator of which is the number of calendar days in the period ending on and including the Closing Date and the

 

  

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(iii)  

	
denominator of which is the number of calendar days in the Straddle Period.

 

(c) Buyer shall not file an amended Tax Return for PNGTS for any period ending on or prior to the Closing Date, without the consent of Seller, which consent shall not be unreasonably withheld, conditioned or delayed. 

 

Section 7.02 Transfer Taxes.

 

The Parties acknowledge and agree that neither Party has identified any Transfer Taxes that would result from the transactions contemplated by this Agreement.  However, if any Transfer Taxes are owed by either Party on account of the transactions contemplated by this Agreement, they shall be borne equally by Buyer and Seller.

 

Section 7.03 Controversies; Cooperation.

 

(a) Seller, or the Seller’s representative, at its sole expense, shall have the authority to represent the interests of PNGTS with respect to any inquiries, claims, assessments, audits or similar events (each, a “Tax Matter”) relating to any Pre-Closing Period before the U.S. Internal Revenue Service, any other taxing authority, any other governmental agency or authority or any court and shall have the sole right to control the defense, compromise or other resolution of any Tax Matter, including responding to inquiries, filing Tax Returns and contesting, defending against and resolving any assessment for additional Taxes or notice of Tax deficiency or other adjustment of Taxes of, or relating to, such Tax Matter; provided, however, that neither Seller nor any of its Affiliates shall enter into any settlement of or otherwise compromise any Tax Matter that adversely affects or may adversely affect the Tax liability of Buyer (or its direct or indirect owners), PNGTS or any Affiliate of the foregoing for any period ending after the Closing Date, including the portion of any Straddle Period, which begins on and ends after the Closing Date, without the prior written consent of Buyer, which consent shall not be unreasonably withheld, conditioned or delayed.  Seller or the Seller’s representative shall keep Buyer fully and timely informed with respect to the commencement, status and nature of any Tax Matter and shall provide Buyer with a copy of all correspondence, notices and filings received or sent by Seller in connection with such proceedings.  Seller shall, in good faith, allow Buyer, at its sole expense, to make comments to Seller or Seller’s representative, regarding the conduct of or positions taken in any such proceeding and to participate in such proceeding.  Notwithstanding the above, the control and conduct of any Tax Matter that is a Third Party Claim shall be governed by Section 6.04(c).

 

(b) Except as otherwise provided in this Article VII, from and after the Closing, Tax Matters will be handled in accordance with the PNGTS Partnership Agreement.

 

(c) Buyer and Seller shall cooperate fully as and to the extent reasonably requested by the other party, in connection with the filing of Tax Returns and any Tax Matter.  Such cooperation shall include the retention and (upon the other party’s request) the provision of records and information which are reasonably relevant to any such Tax Return or Tax Matter and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder.  Seller further agrees, upon request, to use

 

  

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(d) commercially reasonable efforts to obtain any certificate or other document from any Governmental Authority or any other Person as may be necessary to mitigate, reduce or eliminate any Tax that could be imposed on Buyer or PNGTS (including, but not limited to, with respect to the transactions contemplated hereby).

 

Section 7.04 Seller Taxes.

 

“Seller Taxes” means any and all Loss and Expense suffered or incurred by any of the Buyer Indemnified Parties (including, solely with respect to the representations and warranties contained in Section 2.12(o), their direct or indirect owners) with respect to any and all: (i) breaches of any representation or warranty made pursuant to Section 2.12 of this Agreement as of the Closing Date (determined without regard to any materiality, Materiality, or Knowledge or similar qualifiers or any scheduled items) or covenants set forth in this Article VII; (ii) Taxes imposed on or asserted against the properties, income or operations of PNGTS or for which PNGTS may otherwise be liable, for all Pre-Closing Periods or Straddle Periods ending on the Closing Date (determined in accordance with Section 7.01(b)); (iii) Taxes, except for Transfer Taxes which are the responsibility of Buyer pursuant to Section 7.02, imposed on PNGTS or for which PNGTS may be liable, as a result of any transaction contemplated by this Agreement; (iv) Taxes imposed on PNGTS as a result of the provisions of Treasury Regulations Section 1.1502-6 or the analogous provisions of any state, local or foreign law) or the Taxes of any other Person for which PNGTS is or has been liable as a transferee or successor, by contract or otherwise; and (v) Income Taxes for which PNGTS is liable as a result of any election for PNGTS to be treated as other than a partnership for U.S. federal, state or local income tax purposes that is filed at any time on or prior to the Closing Date (other than any election by or at the behest of Buyer); provided, however, that no such Tax shall constitute a Seller Tax to the extent such Tax was included as a Current Liability in the determination of Working Capital.  For the avoidance of doubt, the determination of Seller Taxes shall take into account the fact that Buyer is only acquiring a 49.9% interest in PNGTS.

 

Section 7.05 Tax Refunds.

 

To the extent PNGTS receives any refund of Taxes with respect to any Pre-Closing Period or Straddle Period, Buyer shall pay Seller within ten (10) Business Days 49.9% of the amount of such refund of Taxes; provided, however that no refund of Taxes shall be payable to Seller to the extent such refund was included as a Current Asset in the determination of Working Capital.  All other Tax refunds attributable to PNGTS shall be the property of PNGTS.

 

     ARTICLE VIII

 

TERMINATION

 

Section 8.01 Termination.

 

This Agreement may be terminated at any time prior to the Closing:

 

(a) by mutual written consent of the Parties;

 

(c) by either Party by written notice to the other Party if the Closing shall not have occurred before March 31, 2016; provided, that the right to terminate this Agreement

 

  

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(d) pursuant to this Section 8.01(b) shall not be available to a Party whose failure to fulfill any obligation under this Agreement shall have been the cause of, or shall have resulted in, the failure of the Closing to occur prior to such date; or

 

(b) by either Party by written notice to the other Party if there shall have been a material breach or default of any of the representations, warranties, covenants or agreements of such other Party hereunder that reasonably cannot be or have not been cured within thirty (30) calendar days after delivery of written notification thereof by the terminating Party and which material breach or default would result in a failure to satisfy the conditions to Closing set forth in Section 5.02 or Section 5.03, as the case may be.

 

Section 8.02 Effect of Termination.

 

If this Agreement is terminated in accordance with this Article VIII, all further obligations of the Parties hereunder shall terminate.  In the event of a termination contemplated hereby by any Party pursuant to this Article VIII, the transactions contemplated hereby shall be abandoned without further action by any Party hereto, and there shall be no obligation of or liability under this Agreement to any Party hereto, or their respective shareholders, directors, officers, employees, representatives or agents, except that this Section 8.02 and Article IX shall survive termination of this Agreement.

 

   ARTICLE IX

 

MISCELLANEOUS

 

Section 9.01 Modification.

 

This Agreement may be amended or modified only by a written instrument executed by the Parties.

 

Section 9.02 Notices.

 

All notices which are required or may be given pursuant to the terms of this Agreement shall be in writing and shall be deemed given: (i) the next Business Day after being sent by Federal Express or any other recognized overnight courier service providing delivery confirmation; (ii) three (3) Business Days after mailing by certified or registered mail, with postage prepaid and with return receipt requested; or (iii) when a confirmation is received after being sent by legible facsimile transmission, addressed as follows:

 

 

	 If to Seller to: 	 TCPL Portland Inc.
	 	 700 Louisiana Street
	 	 Suite 700
	 	 Houston, Texas 77002-2761
	 	 Attention:  Corporate Secretary
	 	 Fax:  (832) 320-6201

 

  

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	 	 with a copy (which shall not constitute notice) to:
	 	 
	 	 TransCanada PipeLines Limited
	 	 450 – 1st Street S.W.
	 	 Calgary, Alberta
	 	 Canada
	 	 T2P 5H1
	 	 Attention:  Executive Vice President, Law and General Counsel
	 	 Fax:  (403) 920-2411

 

 

 

 

	 If to Buyer to:	 TC PipeLines Intermediate Limited Partnership
	 	 c/o TC PipeLines GP, Inc.
	 	 700 Louisiana Street
	 	 Suite 700
	 	 Houston, TX 77002-2873
	 	 Attention: President
	 	 Fax: (832) 320-6488
	 	 
	 	 with a copy (which shall not constitute notice) to:
	 	 Gillian Hobson
	 	 Vinson & Elkins LLP
	 	 1001 Fannin Street, Suite 2500, Houston, TX 77002-6760
	 	 Fax: (713) 615-5794
	 	 

 

 

or to such other address or addresses as any Party shall have designated by notice in writing to the other Party in accordance with this Section 9.02.

 

Section 9.03 Entire Agreement.

 

The Transaction Agreements and all the other documents executed and delivered by the Parties pursuant hereto (or as contemplated hereby), contain the entire understanding of the Parties with respect to the subject matter of this Agreement, and there are no representations, warranties, covenants or agreements other than those expressly set forth herein or therein.  This Agreement supersedes all prior agreements and understandings between the Parties with respect to the subject matter of this Agreement.

 

Section 9.04 Successors and Assigns.

 

 This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns.

 

Section 9.05 Press Releases.

 

The initial press release or releases to be issued in connection with the execution of this Agreement shall be mutually agreed upon by the Parties prior to the issuance thereof.  Prior to

 

  

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the fifth (5th) Business Day prior to the Closing, the Parties shall consult with each other before they or any of their Affiliates issue any other press release or otherwise make any other public statement with respect to this Agreement or the transactions contemplated hereby.  Following any termination of this Agreement, the Parties shall consult with each other before they or any of their Affiliates issue any other press release or otherwise make any other public statement with respect to such termination.  Buyer and Seller and their Affiliates shall not issue any other press release or make any such other public statement prior to any consultation (but no approval thereof shall be required), except as maybe required by Applicable Law or stock exchange rule.

 

Section 9.06 Assignment.

 

This Agreement, and any right or obligation hereunder may be assigned or delegated (in whole or in part) only in accordance with this Section 9.06.  Upon the prior written consent of the other Party hereto, a Party may assign this Agreement or a right hereunder, or delegate an obligation hereunder, to another Person.

 

Section 9.07 Severability.

 

The terms of this Agreement are fully severable, and the decision or judgment of any court of competent jurisdiction rendering void or unenforceable any one or more of such terms shall not render void or unenforceable any of the other terms hereof.

 

Section 9.08 Captions; Article and Section References.

 

The caption at the heading of each Article and Section of this Agreement is for convenience of reference only and is not to be deemed a part of the Agreement itself and will not affect the meaning or interpretation of this Agreement.  Article and section references are to the articles and sections of this Agreement unless otherwise indicated.

 

Section 9.09 Choice of Law.

 

This Agreement shall be governed by and construed and interpreted in accordance with the Laws of the State of Delaware, without giving effect to the conflicts of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the Laws of any jurisdiction other than the State of Delaware.

 

Section 9.10 Counterparts.

 

This Agreement may be executed and delivered in one or more counterparts, including facsimile counterparts with originals to follow, each of which shall be deemed to be part of one and the same original document.

 

Section 9.11 Waiver.

 

Any of the terms and conditions of this Agreement may be waived in writing at any time on or prior to the Closing Date by the Party entitled to the benefits thereof.  No waiver by any

 

  

27

  

Party of any breach of this Agreement shall be deemed a waiver of any subsequent breach of the same or any other provision.

 

Section 9.12 Construction.

 

The Parties have participated jointly in the negotiation and drafting of this Agreement.  If an ambiguity or question of intent or interpretation arises, no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement.  Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. For the purposes hereof: (i) words in the singular shall be held to include the plural and vice versa and words of one gender shall be held to include the other gender as the context requires; (ii) the terms “hereof,” “herein,” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole (including all of the appendices and exhibits hereto) and not to any particular provision of this Agreement, and Article, Section, paragraph, appendix and exhibit references are to the Articles, Sections, paragraphs, appendices and exhibits to this Agreement unless otherwise specified; (iii) the word “including” and words of similar import when used in this Agreement shall mean “including without limitation” unless the context otherwise requires or unless otherwise specified; (iv) the phrase “ordinary course of business” or “normal course” or any similar phrase shall mean “ordinary course of business consistent with past practice” unless the context requires otherwise or unless otherwise specified; (v) all references to any period of days shall be deemed to be to the relevant number of calendar days unless otherwise specified; and (vi) all monies are deemed to be in U.S. dollars unless otherwise stated.

 

Section 9.13 Incorporation of Exhibits, Schedules and Appendices.

 

Any Exhibits, Schedules, and Appendices identified in this Agreement are incorporated herein by reference and made a part hereof.

 

Section 9.14 No Third-Party Beneficiaries.

 

This Agreement shall not confer any rights or remedies upon any Person other than the Parties, the Buyer Indemnified Parties, the Seller Indemnified Parties and their respective successors and permitted assigns.

 

Section 9.15 No Consequential or Punitive Damages.

 

No Party shall be liable to any other Party or Person for any consequential, exemplary, special or punitive damages in connection with this Agreement or the other Transaction Agreements unless such damages are awarded to a third party in connection with a Third Party Claim.

 

Section 9.16 Parent Guaranty.  Contemporaneous with the execution of this Agreement, Seller shall cause to be delivered to Buyer the Parent Guaranty in the form attached hereto as Exhibit F duly executed by TransCanada PipeLine USA Ltd.

 

Section 9.17 Time of Essence.

 

  

28

  

Section 9.18 Time is of the essence under this Agreement.

 

Section 9.19 Defined Terms.

 

For purposes of this Agreement, the terms set forth in Appendix A hereto shall have the meanings set forth therein.

 

 

 

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29

  

IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by duly authorized officers of the Parties as of the day and year first above written.

 

 

	 	 TCPL PORTLAND INC.
	 	 
	 	 By: /s/Laura M. Heckman
	 	 Name: Laura M. Heckman
	 	 Title: Vice President
	 	 
	 	 By: /s/Brandon M. Anderson
	 	 Name: Brandon M. Anderson
	 	 Title: President

 

 

	 	 TC PIPELINES INTERMEDIATE LIMITED 
	 	 PARTNERSHIP by TC PipeLines GP, Inc., its General Partner
	 	 
	 	 By: /s/Steven D. Becker
	 	 Name: Steven D. Becker
	 	 Title: President
	 	 
	 	 By: /s/Jon A. Dobson
	 	 Name: Jon A. Dobson
	 	 Title: Secretary

 

                            

                                                                                  

[Signature Page to Purchase Agreement]

 

 

 

SIGNATURE PAGE

 

  

30

  

APPENDIX A

 

DEFINITIONS

 

As used in this Agreement, the following terms shall have the following meanings:

 

“Affiliate” means, with respect to any Person, any other Person that, directly or indirectly controls (including all directors and officers of such Person), is controlled by, or through one or more intermediaries, under direct or indirect common control with, such Person.  A Person shall be deemed to control another Person if such Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of such other Person, whether through the ownership of voting securities, by contract or otherwise. Notwithstanding the foregoing, Buyer and Seller shall not be considered Affiliates of one another for the purposes of this Agreement.

 

“Agreement” has the meaning set forth in the preamble.

 

“Applicable Law” means, with respect to any Person, any statute, law, regulation, ordinance, rule, judgment, rule of common law, order or decree, directive, guideline, policy, requirement, or other governmental restriction or any similar form of decision of, or determination by, or any interpretation or administration of any of the foregoing by, any Governmental Authority, whether in effect as of the date hereof or thereafter, and in each case as amended, applicable to such Person or its subsidiaries or their respective assets.

 

“Assignment and Assumption Agreement” means the agreement attached as Exhibit B hereto.

 

“Base Purchase Price” means Two Hundred Twenty Three million dollars ($223,000,000) less 49.9% of all current and long term debt under the Debt Documents at Closing.

 

“Business” means PNGTS’ business of constructing, owning and operating the PNGTS Pipeline and transporting natural gas on its system pursuant to transportation contracts with shippers.

 

“Business Day” means any day on which banks are generally open to conduct business in New York, New York.

 

“Buyer” has the meaning set forth in the preamble.

 

“Buyer Indemnified Parties” has the meaning set forth in Section 6.02(a).

 

“Claim” has the meaning set forth in Section 6.04(b).

 

“Closing” has the meaning set forth in Section 1.04.

 

“Closing Date” has the meaning set forth in Section 1.04.

 

Appendix A

 

  

  

  

“Closing Payment” means the Estimated Purchase Price.

 

“Closing Statement” has the meaning set forth in Section 1.05(a).

 

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

 

“Contract” means any note, bond, indenture, mortgage, deed of trust, lease, franchise, permit, authorization, license, contract, instrument, employee benefit plan or practice, or other agreement, obligation or commitment or concession of any nature.

 

“Current Assets” means, as calculated under the consolidated unaudited financial statements of PNGTS, the aggregate of (i) cash, (ii) accounts receivable,  (iii) accounts receivable and advances receivable from affiliated companies, (iv) plant material and operating supplies, and (v) prepayments; but excluding deferred Income Tax assets.

 

“Current Liabilities” means, as calculated under the consolidated unaudited financial statements of PNGTS, the aggregate of (i) accounts payable, (ii) payables and advances to affiliated companies, (iii) accrued taxes other than Income Taxes, and (iv) other current and accrued liabilities due within a year. For the avoidance of doubt, Current Liabilities shall not include accrued Income Taxes, deferred Income Tax liabilities or the current portion of long term debt.

 

“Debt Documents” means the Note Purchase Agreement and all related agreements thereto, including any debt service guarantees, security agreements and collateral agency agreements.

 

“Debt Service Reserve Backup Guaranty” means either (i) a guarantee to be provided by the MLP to the “Collateral Agent” under the Debt Documents in substantially similar form to the existing “Debt Service Reserve Guaranty” currently provided by TransCanada PipeLines Limited under the Debt Documents or (ii) such other document mutually satisfactory to both Seller and Buyer, wherein the MLP provides a guarantee, indemnity or other arrangement having the effect of a guarantee, to TransCanada PipeLines Limited in support of PNGTS’s and TransCanada PipeLines Limited’s obligations under the Debt Documents, with such guarantee, indemnity or other arrangement covering an amount equal to Buyer’s pro rata 49.9% interest of the “Debt Service Reserve Requirement”, as such term is defined in the Debt Documents; provided however, that in the event Buyer is unable to effect a guarantee or other document under clauses (i) or (ii), then the “Debt Service Reserve Backup Guaranty” shall mean sufficient funds or a “Debt Service Reserve Letter of Credit” to be provided by Buyer to the Collateral Agent sufficient to satisfy the Buyer’s 49.9% pro rata interest of the “Debt Service Reserve Requirement,” as such terms are defined in the Debt Documents.

 

“Dispute” means any dispute, controversy or claim arising out or relating to this Agreement or the breach, termination or validity thereof.

 

“Effective Time” means 12:01 am Central Standard Time on the Closing Date.

 

Appendix A

 

 

 

  

  

  

“Environmental Laws” means any foreign, federal, state or local law, statute, ordinance, order, decree, judgment, code, rule or regulation, permit, or other legally enforceable requirement and rule of common law relating to releases, discharges, emissions or disposals to air, water, land or groundwater of Hazardous Materials; to the use, handling, transport, release or disposal of polychlorinated biphenyls, asbestos or urea formaldehyde or any other Hazardous Material; to the treatment, storage, disposal or management of Hazardous Materials; to exposure to toxic, hazardous or other controlled, prohibited or regulated substances; to health or safety in the workplace; and to the protection of the environment and natural resources, including the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. 9601, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. 6901, et seq., the Toxic Substances Control Act, 15 U.S.C. 2601, et seq., the Occupational Safety and Health Act, 29 U.S.C. 651, et seq., the Clean Air Act, 42 U.S.C. 7401, et seq., the Federal Water Pollution Control Act, 33 U.S.C. 1251, et seq., the Safe Drinking Water Act, 42 U.S.C. 300f, et seq., the Hazardous Materials Transportation Act, 49 U.S.C. 1501 et seq. and the Emergency Planning and Community Right to Know Act, 42 U.S.C. 11001 et seq., and other comparable foreign, state and local laws and all rules, regulations and guidance documents promulgated pursuant thereto or published hereunder.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time and the regulations promulgated and rulings issued hereunder.

 

“Estimated Purchase Price” means the Base Purchase Price, adjusted as follows: (x) if the Estimated Working Capital is in excess of the Reference Amount, the Base Purchase Price shall be increased by 49.9% of the amount of such excess in order to determine the Estimated Purchase Price and (y) if the Estimated Working Capital is less than the Reference Amount, the Base Purchase Price shall be decreased by 49.9% of the amount of the deficiency.

 

“Estimated Working Capital” means Seller’s good faith estimate of the Working Capital as of the Closing Date.

 

“Expansion” means the construction and bringing into service of new or incremental pipeline facilities as described below and having the effect of increasing PNGTS’ FERC Certificated Capacity.

 

An “Expansion” between 270,000 dth/d and 330,000 dth/d will:

 

	
a)  

	
Incorporate the addition or material alteration of pipeline compressor facilities on either PNGTS or TQ&M, as applicable,

 

	
b)  

	
Receive the approval of the Board of Directors of the General Partner;

 

and

 

	
c)  

	
Occur within 15 years of the Closing Date.

 

Appendix A

 

 

 

  

  

  

	
d)  

	
An “Expansion” between 331,000 dth/day and 400,000 dth/day will:

 

	
a)  

	
Incorporate the addition or material alteration of pipeline compressor facilities and/or more than five miles of pipeline looping on either or both of PNGTS or TQ&M;

 

	
b)  

	
Receive the approval of the Board of Directors of the General Partner;

 

and

 

	
c)  

	
Occur within 15 years of the Closing Date.

 

 An “Expansion” above 400,000 dth/day will:

 

	
a)  

	
Incorporate the addition or material alteration of pipeline compressor facilities and/or more than five miles of pipeline looping on any or all of PNGTS, TQ&M and the TransCanada Mainline;

 

	
b)  

	
Receive the approval of the Board of Directors of the General Partner;

 

and

 

	
c)  

	
Occur within 15 years of the Closing Date.

 

“Expansion Consideration” means the consideration to be paid by Buyer to Seller with respect to an Expansion, as more particularly described in Exhibit E hereto.

 

“FERC” means the Federal Energy Regulatory Commission and any successor entity thereto.

 

“Financial Statements” has the meaning set forth in Section 2.10.

 

“GAAP” means U.S. generally accepted accounting principles.  All references to GAAP shall mean GAAP as in effect on the date hereof, unless otherwise specified.

 

“General Partner” means TC PipeLines GP, Inc., the general partner of MLP.

 

“Governmental Authority” means any federal, state, county, municipal, regional or other governmental authority, agency, board, body, instrumentality, commission or political subdivision of any of the foregoing, or any court, arbitrator , tribunal, or individual having adjudicative, regulatory, judicial, quasi-judicial, administrative, or similar functions.

 

“Hazardous Material” means any substance, waste, pollutant, contaminant or material subject to regulation under any Environmental Law, including petroleum or petroleum products and any fractions thereof, and natural or synthetic gas.

 

“Identified Representation” has the meaning set forth in Section 6.01.

 

Appendix A

 

 

 

  

  

  

“Income Tax” means federal, state, local, or foreign income or franchise Taxes or other similar Taxes measured in whole or in part by income and any interest and penalties or additions thereon.

 

“Indemnified Party” has the meaning set forth in Section 6.04(a).

 

“Indemnifying Party” has the meaning set forth in Section 6.04(a).

 

“Independent Accounting Firm” means an independent nationally recognized accounting firm as mutually selected by Seller and Buyer.

 

“Knowledge” means the actual knowledge of Don Bell and Lauri Newton after reasonable inquiry and investigation of those persons employed by Seller whom such individuals reasonably believe in good faith to be generally responsible for the information, facts, or events with respect to which such representation applies.

 

“Lien” means any lien, pledge, charge, claim, security interest, purchase agreement, option, restriction on transfer or other recorded encumbrance of any nature whatsoever, whether consensual, statutory or otherwise.

 

“Loss and Expense” has the meaning set forth in Section 6.02(a).

 

“Material” means material in relation to the business or operations of PNGTS, taken as a whole.

 

“Material Adverse Effect” means any circumstance, change or effect that is materially adverse to the financial condition or results of operations of PNGTS, taken as a whole, or that impedes or delays the ability of Seller to perform its obligations under this Agreement or to consummate the transactions contemplated hereby, other than (i) any adverse circumstance, change, or effect arising from or relating to general business or economic conditions in the industries or markets in which PNGTS  operates not having a materially disproportionate affect on PNGTS  as compared to other participants in such industry or market, including (A) changes in national or regional gathering, pipeline or storage facilities or (B) rules, regulations or decisions of FERC or the courts affecting the natural gas transportation industry as a whole or the natural gas storage industry as a whole, (ii) any adverse circumstance, change or effect arising from weather conditions, including unexpected or harsh weather conditions, (iii) seasonal reductions in revenues or earnings of PNGTS  in the ordinary course of business consistent with past periods, (iv) national or international political, diplomatic or military conditions (including any engagement in hostilities, whether or not pursuant to a declaration of war, or the occurrence of any military or terrorist attack) not disproportionately affecting PNGTS  as compared to other participants in the industries or markets in which PNGTS  operates, (v) changes in GAAP, (vi) changes in Applicable Laws not disproportionately affecting PNGTS as compared to other participants in the industries or markets in which PNGTS  operates, (vii) the failure of Seller to take any action for which Seller in good faith requests Buyer’s written consent under Section 4.03 and Buyer refuses to provide such consent, (viii) any changes in prices for commodities, goods, or services, or the availability or costs of hedges or other derivatives, including fluctuations in interest rates, (ix) any matter that is expressly disclosed in the

 

Appendix A

 

 

 

  

  

  

Schedules as of the date of execution of this Agreement, and (x) the execution and delivery or announcement of this Agreement.  The Parties agree that any determination as to whether a change, effect, event, or occurrence is a Material Adverse Effect shall be made after taking into account and considering all matters relevant to such analysis, including (y) all amounts, if any, recognized by the Person and its Affiliates, as applicable, under insurance or third-party indemnifications or similar agreements, and (z) all Tax benefits with respect to such change, effect, event, or occurrence.

 

“Material Agreements” has the meaning set forth in Section 2.18.

 

“MLP” has the meaning set forth in the recitals.

 

“Note Purchase Agreement” means the note purchase agreement dated as of April 10, 2003 between PNGTS as issuer and the “Initial Noteholders” thereto.

 

“Notifying Party” has the meaning set forth in Section 6.04(a).

 

“PNGTS’ FERC Certificated Capacity” means the capability of PNGTS to transport quantities of natural gas at East Hereford, Maine on a given day, based on a specific set of flowing parameters (e.g. operating pressures, temperature, etc.) as stated in the Exhibits G through-G-II filed with the FERC in support of PNGTS’s certificate(s) of public convenience and necessity and the Forms 567 filed annual with the FERC. Such certificated capacity represents a minimum level of service that can be maintained over an extended period of time and does not represent the maximum throughput capability of PNGTS on any given day.

 

“PNGTS Partnership Agreement” means that certain Amended and Restated General Partnership Agreement of PNGTS  dated as of March 1, 1996, as amended.

 

“PNGTS ” has the meaning set forth in the recitals.

 

“PNGTS  Budget” means the budget of PNGTS  attached hereto as Exhibit C.

 

“PNGTS Interest” has the meaning set forth in the recitals.

 

“PNGTS Pipeline” means, collectively with all associated laterals and meter stations, a natural gas pipeline system extending between East Hereford, Maine and Dracut, Massachusetts, consisting of the PNGTS pipeline, plus any expansions or improvements undertaken, in whole or in part, by PNGTS.

 

“Party” has the meaning set forth in the preamble.

 

“Permit” means any permit, license, approval or other authorization required or granted by any Governmental Authority.

 

“Permitted Encumbrances” means (i) defects, imperfections or irregularities in title (including easements, rights-of-way, covenants, conditions, restrictions, and other matters affecting title to real property) that are not material in character, amount, extent with respect to

 

Appendix A

 

 

 

  

  

  

the asset or assets to which they relate or, together with any other such defects, imperfections or irregularities, in the aggregate; (ii) encumbrances created by or referenced in any of the Material Agreements; (iii) encumbrances, created by Buyer, or its successors and assigns, (iv) Liens for current Taxes not yet due and payable, and (v) statutory Liens (including materialmen’s, mechanic’s, repairmen’s, landlord’s and other similar Liens) arising in connection with the ordinary course of business securing payments not yet due and payable.

 

“Person” means a person, corporation, partnership, limited liability company, joint venture, trust or other entity or organization.

 

“Pre-Closing Period” means any Tax period ending on or before the Closing Date.

 

“Pre-Closing Tax Return” has the meaning set forth in Section 7.01(a).

 

“Prime Rate” means the prime interest rate reported in The Wall Street Journal.

 

“Promissory Note” has the meaning set out in Section 1.05(b).

 

“Purchase Price” has the meaning set out in Section 1.02.

 

“Qualifying Claim” has the meaning set forth in Section 6.05(a).

 

“Reference Amount” means One Million Nine Hundred Eighty Five Thousand Seven Hundred Forty Nine dollars ($1,985,749).

 

“Reputable Insurer” means any financially sound and responsible insurance provider rated “A-X” or better by A.M. Best Company (or if such ratings cease to be published generally for the insurance industry, meeting comparable financial standards then applicable to the insurance industry).

 

“Request” has the meaning set forth in Section 4.04.

 

“Securities Act” means the federal Securities Act of 1933, as amended.

 

“Seller” has the meaning set forth in preamble.

 

“Seller Indemnified Parties” has the meaning set forth in Section 6.03(a).

 

“Seller Taxes” has the meaning set forth in Section 7.04.

 

“Straddle Period” means any Tax period beginning on or before and ending after the Closing Date.

 

“Tax” or “Taxes” means all income, gross receipts, profits, franchise, sales, use, ad valorem, occupation, property (including in lieu-of-taxes), capital, environmental, employment, severance, excise, workers' compensation, social security, withholding or similar taxes, unclaimed property or escheat obligations or other governmental fees or charges of a similar nature, however denominated, imposed by any federal, state, local, foreign or other political

 

Appendix A

 

 

 

  

  

  

subdivision taxing authority, whether imposed directly on a person or resulting under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign law), as a transferee or successor, by contract or otherwise, and including any interest and penalties (civil or criminal) on or additions to any such taxes or in respect of a failure to comply with any requirement relating to any Tax Return and any expenses incurred in connection with the determination, settlement or litigation of any tax liability.

 

“Tax Matter” has the meaning set forth in Section 7.03(a).

 

“Tax Return” means any return, declaration, report, claim for refund, statement, information or other document, including any schedule or attachment thereto and including amendment thereto, filed or to be filed or required to be filed or supplied to any federal, state, local or foreign Tax authority or any other Governmental Authority with respect to Taxes, including, where permitted or required, combined, consolidated, unitary or any similar returns for any group of entities.

 

“Third Party Claim” has the meaning set forth in Section 6.04(c).

 

“TQ&M” means the Trans-Quebec and Maritimes Pipeline System partly owned by an Affiliate of Seller.

 

“Transaction Agreements” means this Agreement, the Assignment and Assumption Agreement and any documents or certificates to be provided pursuant thereto.

 

“Transfer Taxes” means any and all transfer Taxes, including sales taxes, use, excise, stock, stamp, documentary, filing, recording, permit, license, authorization, and similar Taxes fees, duties, levies, customs, tariffs, imposts, assessments, obligations and charges.

 

“Violation” has the meaning set forth in Section 2.03(a).

 

“Working Capital” means (i) Current Assets, minus (ii) Current Liabilities.  For the avoidance of doubt, Working Capital may be a negative number.

 

“Working Capital Adjustment Statement” means the statement provided pursuant to Section 1.03(a).

 

 

 

 

 

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Appendix A

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