Document:

Exhibit 10.4

 

TRANSACTION
FEE agreement

 

THIS
TRANSACTION FEE AGREEMENT (this “Agreement”), dated
as of April 6, 2006, is by and between TransCan Northwest Border Ltd. (“TCNB”), a corporation incorporated under
the laws of Delaware and TC PipeLines, LP (“TCLP”),
a limited partnership formed under the laws of Delaware. TCNB and TCLP are
sometimes referred to herein individually as a “Party” and, collectively, as the “Parties”.

 

RECITALS

 

WHEREAS:

 

A.                                   TCLP, through its intermediate limited
partnership, TC Intermediate Limited Partnership (“TCILP”),
has agreed to purchase from Northern Border Intermediate Limited Partnership (“NBILP”), and NBILP has agreed to sell to TCILP, a 20%
general partnership interest in Northern Border Pipeline Company (the “Partnership”) upon the conditions set forth in the purchase
and sale agreement (the “NBPC  Purchase and Sale Agreement”) between TCILP
and NBILP dated February 14, 2006;

 

B.                                     Concurrent with the above transaction, TCNB, an
affiliate of TCLP, has agreed to sell 100% of the stock in its subsidiary,
Northwest Border Pipeline Company, to Northern Plains Natural Gas Company, LLC
(“Northern Plains”), a general partner of
NBILP and the current operator of the Partnership, upon the conditions set
forth in the purchase and sale agreement (the “NWB Purchase
and Sale Agreement”) between TCNB and Northern Plains dated February
14, 2006;

 

C.                                     It is a condition to the completion of the
transactions contemplated by the NBPC Purchase and Sale Agreement that an
operating agreement be entered into by TCNB and the Partnership in
substantially the form appended as Exhibit B to the NBPC Purchase and Sale
Agreement;

 

D.                                    In recognition of the benefits to TCLP of its
affiliate, TCNB, assuming the duties and responsibilities of becoming the
operator of the Partnership, TCLP has agreed to pay TCNB a fee in connection
with transaction costs incurred by TCNB for the assumption of operatorship (“Transaction Fee”) and as such the Parties desire to enter into this Agreement for the purpose of describing the
terms and payment of such Transaction Fee.

 

NOW THEREFORE, in consideration of the mutual covenants and
agreements in this Agreement and other good and valuable consideration, the
sufficiency of which is hereby acknowledged, the Parties agree as follows.

 

ARTICLE
1

TRANSACTION FEE

 

1.1                               Terms
of Payment and Adjustment.

 

(a)                                  Upon the Closing of the transactions under the
NBPC Purchase and Sale Agreement (as such term is defined in such agreement),
TCLP shall make a cash payment to TCNB of $10,000,000 (the “Transaction Fee Estimated Payment”).

 

(b)                                 During the period from February 14, 2006 until
180 calender days from the date that TCNB or an affiliate commences its
responsibilities as operator under the Operating Agreement (the “Term”), TCNB shall keep a written record of account of all
costs and expenses incurred by it in relation to the assumption of operatorship
that would not have otherwise been incurred by TCNB had the operatorship of the
Partnership not been transferred. As soon as practicable from the end of the

 

 

(c)                                  Term, TCNB shall total the aggregate amount of
such costs and expenses (the “Actual Transaction Fee”)
and promptly provide an itemized breakdown of such amount to TCLP.

 

(d)                                 If the Transaction Fee Estimated Payment
exceeds the aggregate amount of Actual Transaction Fee, then TCNB shall
promptly refund the difference to TCLP. To the extent that the Actual
Transaction Fee exceeds the Transaction Fee Estimated Payment then no further
payment shall be made to or by either Party. For greater certainty, in no event
shall TCLP’s aggregate liability under this Agreement exceed $10,000,000
regardless of the aggregate amount of the Actual Transaction Fee.

 

1.2                               Audit Rights

 

TCLP shall have the right, for ninety (90) calendar
days after delivery by TCNB of the itemized breakdown of the Actual Transaction
Fee,  to audit (at its own expense) all
items considered by TCNB to be included in the Actual Transaction Fee and TCNB
shall cooperate reasonably with the party performing such audit.

 

1.3                               Dispute
Resolution

 

At the end of the ninety (90) calendar day period
specified in Section 1.2, in the event that there is a disagreement by TCLP
regarding the determination of whether an item should be included in the Actual
Transaction Fee, it shall provide written notice to TCNB setting forth the
description of the item(s) forming the basis of the disagreement (a “Dispute”).
The Parties will endeavor to reach a satisfactory solution by referring the
Dispute to senior management of each of the disputing Parties. The senior
management of the Disputing Parties will meet, and negotiate in good faith with
a view to reaching a satisfactory solution of the Dispute as soon as possible,
but not more than seven (7) calendar days’ following delivery of written notice
of any Dispute unless specifically agreed otherwise. Should senior management
of the disputing Parties be unable to resolve the Dispute within twenty-one
(21) calender days following delivery of written notice of any Dispute, any
Disputing Party may avail itself of any other remedy or remedies available to
it at law or in equity.

 

ARTICLE
2

 

OTHER
PROVISIONS

 

2.1                               Counterparts.

 

This Agreement may be executed
and delivered (including by facsimile or otherwise) in one or more
counterparts, all of which, taken together, shall be considered one and the
same agreement, and shall become effective when one or more counterparts have
been signed by each of the Parties and delivered to the other Party.

 

2.2                               Governing
Law and Jurisdiction.

 

This Agreement and the rights
and obligations of the parties hereunder and the transactions contemplated
hereby shall be governed by, enforced, and interpreted in accordance with the
laws of the state of Delaware, excluding (to the greatest extent permissible by
law) any rule of law that would cause the application of the laws of any
jurisdiction other than the state of Delaware. The Parties submit to the
exclusive jurisdiction of the state or federal court of Delaware.

 

 

2.3                               Entire
Agreement.

 

This Agreement contains the
entire agreement between the Parties with respect to the subject matter hereof
and supersedes any prior agreements, understandings, representations or
warranties, both written and oral, between the Parties.

 

2.4                               Successors
and Assigns.

 

Except for an assignment from
TCNB to an affiliate, the rights and obligations of the Parties shall not be
assigned or delegated by either Party without the written consent of the other
Party. Subject to the preceding sentence, this Agreement shall be binding upon
and inure to the benefit of the Parties and their successors and assigns.

 

2.5                               Amendments
and Waivers.

 

This Agreement may not be
modified or amended except by an instrument or instruments in writing signed by
all Parties. A Party may, only by an instrument in writing, waive compliance by
the other Party with any term or provision of this Agreement on the part of
such other Party to be performed or complied with. The waiver by a Party of a
breach of any term or provision of this Agreement shall not be construed as a
waiver of any subsequent breach.

 

2.6                               Severability.

 

If any term or other provision
of this Agreement is invalid, illegal, or incapable of being enforced by any
applicable law or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to a Party. Upon such determination
that any term or other provision is invalid, illegal, or incapable of being
enforced, the Parties shall negotiate in good faith to modify this Agreement so
as to give effect to the original intent of the Parties as closely as possible
in an acceptable manner to the end that the transactions contemplated hereby
are fulfilled to the extent possible.

 

IN WITNESS
WHEREOF this Agreement
has been signed by or on behalf of each of the Parties as of the day first
above written.

 

	
  TransCan
  Northwest Border Ltd.

  	
  TC
  PipeLines, LP, by its general partner, TC

  PipeLines GP, Inc.

  
	
   

  	
   

  
	
  By:

  	
  /s/ Paul E. Miller

  	
   

  	
  By:

  	
  /s/ Max Feldman

  	
   

  
	
  Name:

  	
  Paul E. Miller

  	
  Name:

  	
  Max Feldman

  
	
  Title:

  	
  President

  	
  Title:

  	
  Vice-President

  
	
   

  	
   

  
	
  By:

  	
  /s/ Rhondda E.S. Grant

  	
   

  	
  By: 

  	
  /s/ Amy Leong

  	
   

  
	
  Name:

  	
  Rhondda E.S. Grant

  	
  Name:

  	
  Amy Leong

  
	
  Title:

  	
  Secretary

  	
  Title:

  	
  ControllerExhibit 10.5

 

CREDIT AGREEMENT

 

Dated as of March 31, 2006

 

Among

 

TC PIPELINES, LP

 

as Borrower

 

(By its
General Partner TC PipeLines GP, Inc.)

and

 

THE INITIAL LENDERS NAMED HEREIN

 

as
Initial  Lenders

 

and

 

CITICORP NORTH AMERICA, INC.

 

as
Administrative  Agent

 

and

 

MIZUHO CORPORATE BANK, LTD.

 

and

 

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD., HOUSTON AGENCY

 

as
Co-Documentation  Agents

 

and

 

CITICORP NORTH AMERICA, INC.

 

as
Administrative  Agent

 

and

 

CITIGROUP GLOBAL MARKETS INC.

 

and

 

UBS LOAN FINANCE LLC

 

as
Joint  Lead  Arrangers  and  Joint  Book  Managers

 

 

TABLE OF CONTENTS

 

	
  ARTICLE I

  	
   

  
	
  SECTION 1.01. Certain
  Defined Terms

  	
  1

  
	
   

  	
   

  
	
  SECTION 1.02. Computation
  of Time Periods

  	
  10

  
	
   

  	
   

  
	
  SECTION 1.03. Accounting
  Terms

  	
  10

  
	
   

  	
   

  
	
  ARTICLE II

  	
   

  
	
  SECTION 2.01. The
  Advances

  	
  10

  
	
   

  	
   

  
	
  SECTION 2.02. Making
  the Advances

  	
  10

  
	
   

  	
   

  
	
  SECTION 2.03. Fees

  	
  11

  
	
   

  	
   

  
	
  SECTION 2.04. Optional
  Termination or Reduction of the Commitments

  	
  11

  
	
   

  	
   

  
	
  SECTION 2.05. Repayment

  	
  11

  
	
   

  	
   

  
	
  SECTION 2.06. Interest
  on Advances

  	
  11

  
	
   

  	
   

  
	
  SECTION 2.07. Interest
  Rate Determination

  	
  12

  
	
   

  	
   

  
	
  SECTION 2.08. Optional
  Conversion of Advances

  	
  13

  
	
   

  	
   

  
	
  SECTION 2.09. Prepayments
  of Advances

  	
  13

  
	
   

  	
   

  
	
  SECTION 2.10. Increased
  Costs

  	
  14

  
	
   

  	
   

  
	
  SECTION 2.11. Illegality

  	
  14

  
	
   

  	
   

  
	
  SECTION 2.12. Payments
  and Computations

  	
  14

  
	
   

  	
   

  
	
  SECTION 2.13. Taxes

  	
  15

  
	
   

  	
   

  
	
  SECTION 2.14. Sharing
  of Payments, Etc.

  	
  17

  
	
   

  	
   

  
	
  SECTION 2.15. Evidence
  of Debt

  	
  17

  
	
   

  	
   

  
	
  SECTION 2.16. Use of
  Proceeds

  	
  18

  
	
   

  	
   

  
	
  SECTION 2.17. Change
  of Lending Office

  	
  18

  
	
   

  	
   

  
	
  ARTICLE III

  	
   

  
	
  SECTION 3.01. Conditions
  Precedent to Effectiveness of Section 2.01

  	
  18

  
	
   

  	
   

  
	
  SECTION 3.02. Conditions
  Precedent to Each Borrowing

  	
  20

  
	
   

  	
   

  
	
  SECTION 3.03. Determinations
  Under Section 3.01

  	
  20

  

 

 

	
  ARTICLE IV

  	
   

  
	
  SECTION 4.01. Representations
  and Warranties of the Borrower

  	
  20

  
	
   

  	
   

  
	
  ARTICLE V

  	
   

  
	
  SECTION 5.01. Affirmative Covenants

  	
  21

  
	
   

  	
   

  
	
  SECTION 5.02. Negative
  Covenants

  	
  24

  
	
   

  	
   

  
	
  SECTION 5.03. Financial Covenants

  	
  25

  
	
   

  	
   

  
	
  ARTICLE VI

  	
   

  
	
  SECTION 6.01. Events
  of Default

  	
  25

  
	
   

  	
   

  
	
  ARTICLE VII

  	
   

  
	
  SECTION 7.01. Authorization
  and Action

  	
  27

  
	
   

  	
   

  
	
  SECTION 7.02. Agent’s
  Reliance, Etc.

  	
  27

  
	
   

  	
   

  
	
  SECTION 7.03. CNAI
  and Affiliates

  	
  28

  
	
   

  	
   

  
	
  SECTION 7.04. Lender
  Credit Decision

  	
  28

  
	
   

  	
   

  
	
  SECTION 7.05. Indemnification

  	
  28

  
	
   

  	
   

  
	
  SECTION 7.06. Successor
  Agent

  	
  28

  
	
   

  	
   

  
	
  SECTION 7.07. Other
  Agents

  	
  29

  
	
   

  	
   

  
	
  ARTICLE VIII

  	
   

  
	
  SECTION 8.01. Amendments, Etc.

  	
  29

  
	
   

  	
   

  
	
  SECTION 8.02. Notices, Etc.

  	
  29

  
	
   

  	
   

  
	
  SECTION 8.03. No
  Waiver; Remedies

  	
  30

  
	
   

  	
   

  
	
  SECTION 8.04. Costs
  and Expenses

  	
  30

  
	
   

  	
   

  
	
  SECTION 8.05. Right
  of Set-off

  	
  31

  
	
   

  	
   

  
	
  SECTION 8.06. Binding
  Effect

  	
  31

  
	
   

  	
   

  
	
  SECTION 8.07. Assignments
  and Participations

  	
  31

  
	
   

  	
   

  
	
  SECTION 8.08. Confidentiality

  	
  33

  
	
   

  	
   

  
	
  SECTION 8.09. Governing
  Law

  	
  33

  
	
   

  	
   

  
	
  SECTION 8.10. Execution
  in Counterparts

  	
  33

  
	
   

  	
   

  
	
  SECTION 8.11. Jurisdiction, Etc.

  	
  33

  

 

 

	
  SECTION 8.12. Patriot
  Act Notice

  	
  34

  
	
   

  	
   

  
	
  SECTION 8.13. Judgment

  	
  34

  
	
   

  	
   

  
	
  SECTION 8.14. Non-Recourse
  to the General Partner and Associated Persons

  	
  34

  
	
   

  	
   

  
	
  SECTION 8.15. Waiver
  of Jury Trial

  	
  35

  

 

 

Schedules

 

Schedule I - List of Applicable Lending Offices

 

[Schedule 3.01(b) - Disclosed Litigation]

 

Schedule 5.02(a) - Existing Liens

 

Exhibits

 

	
  Exhibit A-1

  	
  -

  	
  Form of Note

  
	
   

  	
   

  	
   

  
	
  Exhibit B-1

  	
  -

  	
  Form of
  Notice of Borrowing

  
	
   

  	
   

  	
   

  
	
  Exhibit C

  	
  -

  	
  Form of
  Assignment and Acceptance

  
	
   

  	
   

  	
   

  
	
  Exhibit D

  	
  -

  	
  Form of
  Opinion of Counsel for the Borrower

  

 

 

CREDIT AGREEMENT

 

Dated as of March 31, 2006

 

TC PIPELINES, LP, a Delaware limited partnership (the “Borrower”),
by its General Partner TC PipeLines GP, Inc., the banks, financial
institutions and other institutional lenders (the “Initial Lenders”)
listed on the signature pages hereof, and CITICORP NORTH AMERICA, INC. (“CNAI”),
as agent (the “Agent”) for the Lenders (as hereinafter defined), agree
as follows:

 

ARTICLE I

 

DEFINITIONS AND ACCOUNTING
TERMS

 

SECTION 1.01.  Certain
Defined Terms.  As used in this
Agreement, the following terms shall have the following meanings (such meanings
to be equally applicable to both the singular and plural forms of the terms
defined):

 

“Acquisition”
means the Borrower’s acquisition of an additional 20% interest in the Northern
Border Pipeline Company.

 

“Adjusted
Cash Flow” means, with reference to any period (i) the net income (or loss)
of the Borrower and its consolidated Subsidiaries for such period calculated on
a consolidated basis in accordance with GAAP, plus
(ii) to the extent taken into account in determining such net income (or loss),
the sum of interest expense, expense for taxes paid or accrued, depreciation,
amortization and extraordinary losses incurred other than in the ordinary
course of business, minus (iii) to
the extent taken into account in determining such net income (or loss),
extraordinary gains realized other than in the ordinary course of business, minus (iv) to the extent taken into account in determining
such net income (or loss), equity earnings of any Person in which the Borrower
or any of its consolidated Subsidiaries has an interest (which interest does
not cause the net income of such Person to be consolidated with the net income
of the Borrower and its consolidated Subsidiaries in accordance with GAAP), plus (v) the aggregate amount of all cash dividends and
other distributions of cash actually received by the Borrower or any of its
consolidated Subsidiaries during such period from any Person in which the
Borrower or any of its consolidated Subsidiaries has an interest (which
interest does not cause the net income of such other Person to be consolidated
with the net income of the Borrower and its consolidated Subsidiaries in
accordance with GAAP).

 

“Advance”
means an advance by a Lender to the Borrower as part of a Borrowing under
Section 2.01 and refers to a Base Rate Advance or a Eurodollar Rate Advance
(each of which shall be a “Type” of Advance).

 

“Affiliate”
means, as to any Person, any other Person that, directly or indirectly,
controls, is controlled by or is under common control with such Person or is a
director or officer of such Person. For purposes of this definition the term “control”
(including the terms “controlling”, “controlled by” and “under common control
with”) of a Person means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person, whether
through the ownership of Voting Stock, by contract or otherwise, provided,
that, for purposes of Section 5.01(h), each of Northern Border and Tuscarora
shall be deemed to be an Affiliate of the Borrower as long as it qualifies as a
Significant Subsidiary.

 

“Agent”
has the meaning specified in the recitals hereto.

 

 

“Agent’s
Account” means the account of the Agent maintained by the Agent at Citibank
at its office at 388 Greenwich Street, New York, New York 10013, Account
No. 36852248, Attention:  Bank Loan
Syndications.

 

“Applicable
Lending Office” means, with respect to each Lender, such Lender’s Domestic
Lending Office in the case of a Base Rate Advance and such Lender’s Eurodollar
Lending Office in the case of a Eurodollar Rate Advance.

 

“Applicable
Margin” means as of any date, a percentage per annum determined by
reference to the Leverage Ratio in effect on such date as set forth below:

 

 

	
  Leverage Ratio

  	
   

  	
  Applicable Margin for

  Base Rate Advances

  	
   

  	
  Applicable Margin for

  Eurodollar Rate Advances

  	
   

  
	
  £
  2.50 to 1.00

  	
   

  	
  0.000

  	
  %

  	
  0.875

  	
  %

  
	
  > 2.50 to 1.00 but £
  4.50 to 1.00

  	
   

  	
  0.125

  	
  %

  	
  0.950

  	
  %

  
	
  > 4.50 to 1.00

  	
   

  	
  0.250

  	
  %

  	
  1.250

  	
  %

  

 

provided, that the
Applicable Margin will be increased by 0.125% per annum on the date that is 12
months after the Effective Date and will be further increased by 0.25% per
annum on the date that is 18 months after the Effective Date. The Applicable
Margin shall be determined by reference to the Leverage Ratio in effect from
time to time; provided, that no reduction in the Applicable Margin shall
be effective until three Business Days after the date on which the Agent
receives the financial statements required to be delivered pursuant to Section
5.01(i)(i) or (ii), as the case may be, and a certificate of the Chief
Financial Officer or Controller of the General Partner of the Borrower
demonstrating such ratio.

 

“Applicable
Percentage” means, as of any date, a percentage per annum determined by
reference to the Leverage Ratio in effect on such date as set forth below:

 

 

	
  Leverage Ratio

  	
   

  	
  Applicable

  Percentage

  	
   

  
	
  £
  2.50 to 1.00

  	
   

  	
  0.175

  	
  %

  
	
  > 2.50 to 1.00 but £
  4.50 to 1.00

  	
   

  	
  0.225

  	
  %

  
	
  > 4.50 to 1.00

  	
   

  	
  0.275

  	
  %

  

 

The Applicable Percentage shall be determined by
reference to the Leverage Ratio in effect from time to time; provided,
that no reduction in the Applicable Percentage shall be effective until three
Business Days after the date on which the Agent receives the financial
statements required to be delivered pursuant to Section 5.01(i)(i) or (ii), as
the case may be, and a certificate of the Chief Financial Officer of the
Borrower demonstrating such ratio.

 

“Assignment
and Acceptance” means an assignment and acceptance entered into by a Lender
and an Eligible Assignee, and accepted by the Agent, in substantially the form
of Exhibit C hereto.

 

“Base Rate”
means a fluctuating interest rate per annum in effect from time to time, which
rate per annum shall at all times be equal to the higher of:

 

(a)           the
rate of interest announced publicly by Citibank in New York,
New York, from time to time, as Citibank’s base rate; and

 

 

(b)           1⁄2
of one percent per annum above the Federal Funds Rate.

 

“Base Rate
Advance” means an Advance that bears interest as provided in
Section 2.06(a)(i).

 

“Borrower”
has the meaning specified in the recitals hereto.

 

“Borrower
Information” has the meaning specified in Section 8.08.

 

“Borrowing”
means a borrowing consisting of simultaneous Advances of the same Type made by
the Lenders.

 

“Business
Day” means a day of the year on which banks are not required or authorized
by law to close in New York City, Calgary, Canada and, if the applicable
Business Day relates to any Eurodollar Rate Advances, on which dealings are
carried on in the London interbank market.

 

“Change in
Accounting Principles” means changes in accounting principles required by
the promulgation of any rule, regulation, pronouncement or opinion by the
Financial Accounting Standards Board of the American Institute of Certified
Public Accountants or any successor thereto, the SEC or, if applicable, the
Public Company Accounting Oversight Board.

 

“Citibank”
means Citibank, N.A.

 

“Commitment”
means as to any Lender (a) the amount set forth opposite such Lender’s
name on Schedule I hereto as such Lender’s “Commitment” or (b) if such Lender
has entered into any Assignment and Acceptance, the amount set forth for such
Lender in the Register maintained by the Agent pursuant to
Section 8.07(d), as such amount may be reduced pursuant to
Section 2.04.

 

“Consolidated”
refers to the consolidation of accounts in accordance with GAAP.

 

“Convert”,
“Conversion” and “Converted” each refers to a conversion of
Advances of one Type into Advances of the other Type pursuant to
Section 2.07 or 2.08.

 

“Covenant
Indebtedness” of any Person means all items that, in accordance with GAAP,
would be classified as indebtedness on a Consolidated balance sheet of such
Person.

 

“Debt”
of any Person means, without duplication, (a) all indebtedness of such
Person for borrowed money, (b) all obligations of such Person for the
deferred purchase price of property or services (other than trade payables
incurred in the ordinary course of such Person’s business), (c) all
obligations of such Person evidenced by notes, bonds, debentures or other
similar instruments, (d) all obligations of such Person created or arising
under any conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the rights and remedies of the
seller or lender under such agreement in the event of default are limited to
repossession or sale of such property), (e) all obligations of such Person
as lessee under leases that have been or should be, in accordance with GAAP,
recorded as capital leases, (f) all obligations, contingent or otherwise,
of such Person in respect of acceptances, letters of credit or similar
extensions of credit, (g) all Debt of others referred to in
clauses (a) through (f) above or clause (h) below and other payment
obligations (collectively, “Guaranteed Debt”) guaranteed directly or
indirectly in any manner by such Person, or in effect guaranteed directly or
indirectly by such Person through an agreement (1) to pay or purchase such
Guaranteed Debt or to advance or supply funds for the payment or purchase of
such Guaranteed Debt, (2) to purchase, sell or lease (as lessee or lessor)
property, or to purchase or sell services, primarily for the purpose of
enabling the debtor to make payment of such Guaranteed Debt or to assure the
holder of such Guaranteed Debt against loss, (3) to supply funds to or in
any other manner invest in the debtor (including any agreement to pay for
property or services irrespective of whether such property is received or such
services are rendered) or (4) otherwise to assure a creditor against loss,
and (h) all Debt referred to in clauses (a) through (g) above (including
Guaranteed Debt)

 

 

secured by (or for which the holder of such
Debt has an existing right, contingent or otherwise, to be secured by) any Lien
on property (including, without limitation, accounts and contract rights) owned
by such Person, even though such Person has not assumed or become liable for
the payment of such Debt, provided, that if such Person is not liable
for such obligation, the amount of such Person’s Debt with respect thereto
shall be deemed to be the lesser of the stated amount of such obligation and
the value of the property subject to such Lien.

 

“Default”
means any Event of Default or any event that would constitute an Event of
Default but for the requirement that notice be given or time elapse or both.

 

“Disclosed
Litigation” has the meaning specified in Section 3.01(b).

 

“Domestic
Lending Office” means, with respect to any Lender, the office of such
Lender specified as its “Domestic Lending Office” opposite its name on
Schedule I hereto or in the Assignment and Acceptance pursuant to which it
became a Lender, or such other office of such Lender as such Lender may from
time to time specify to the Borrower and the Agent.

 

“Effective
Date” has the meaning specified in Section 3.01.

 

“Eligible
Assignee” means (i) a Lender; (ii) an Affiliate of a Lender; and
(iii) any other Person approved by the Agent and, unless an Event of
Default has occurred and is continuing at the time any assignment is effected
in accordance with Section 8.07, the Borrower, such approval not to be unreasonably
withheld or delayed; provided, however, that neither the Borrower
nor an Affiliate of the Borrower shall qualify as an Eligible Assignee.

 

“Environmental
Action” means any action, suit, demand, demand letter, claim, notice of non-compliance
or violation, notice of liability or potential liability, investigation,
proceeding, consent order or consent agreement relating in any way to any
Environmental Law, Environmental Permit or Hazardous Materials or arising from
alleged injury or threat of injury to health, safety or the environment,
including, without limitation, (a) by any governmental or regulatory
authority for enforcement, cleanup, removal, response, remedial or other
actions or damages and (b) by any governmental or regulatory authority or
any third party for damages, contribution, indemnification, cost recovery,
compensation or injunctive relief.

 

“Environmental
Law” means any federal, state, local or foreign statute, law, ordinance,
rule, regulation, code, order, judgment, decree or judicial or agency
interpretation, policy or guidance relating to pollution or protection of the
environment, health, safety or natural resources, including, without
limitation, those relating to the use, handling, transportation, treatment,
storage, disposal, release or discharge of Hazardous Materials.

 

“Environmental
Permit” means any permit, approval, identification number, license or other
authorization required under any Environmental Law.

 

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

 

“ERISA
Affiliate” means any Person that for purposes of Title IV of ERISA is
a member of the Borrower’s controlled group, or under common control with the
Borrower, within the meaning of Section 414 of the Internal Revenue Code.

 

“ERISA
Event” means (a) (i) the occurrence of a reportable event, within the
meaning of Section 4043 of ERISA, with respect to any Plan unless the 30-day
notice requirement with respect to such event has been waived by the PBGC, or
(ii) the requirements of subsection (1) of Section 4043(b) of ERISA (without
regard to subsection (2) of such Section) are met with respect to a
contributing sponsor, as

 

 

defined in Section 4001(a)(13) of ERISA, of a
Plan, and an event described in paragraph (9), (10), (11), (12) or (13) of
Section 4043(c) of ERISA is reasonably expected to occur with respect to such
Plan within the following 30 days; (b) the application for a minimum
funding waiver with respect to a Plan; (c) the provision by the
administrator of any Plan of a notice of intent to terminate such Plan pursuant
to Section 4041(a)(2) of ERISA (including any such notice with respect to
a plan amendment referred to in Section 4041(e) of ERISA); (d) the
cessation of operations at a facility of the Borrower or any ERISA Affiliate in
the circumstances described in Section 4062(e) of ERISA; (e) the
withdrawal by the Borrower or any ERISA Affiliate from a Multiple Employer Plan
during a plan year for which it was a substantial employer, as defined in
Section 4001(a)(2) of ERISA; (f)  the conditions for the imposition
of a lien under Section 302(f) of ERISA shall have been met with respect
to any Plan; (g) the adoption of an amendment to a Plan requiring the
provision of security to such Plan pursuant to Section 307 of ERISA; or
(h) the institution by the PBGC of proceedings to terminate a Plan
pursuant to Section 4042 of ERISA, or the occurrence of any event or
condition described in Section 4042 of ERISA that constitutes grounds for
the termination of, or the appointment of a trustee to administer, a Plan.

 

“Eurocurrency
Liabilities” has the meaning assigned to that term in Regulation D of
the Board of Governors of the Federal Reserve System, as in effect from time to
time.

 

“Eurodollar
Lending Office” means, with respect to any Lender, the office of such
Lender specified as its “Eurodollar Lending Office” opposite its name on
Schedule I hereto or in the Assignment and Acceptance pursuant to which it
became a Lender (or, if no such office is specified, its Domestic Lending
Office), or such other office of such Lender as such Lender may from time to
time specify to the Borrower and the Agent.

 

“Eurodollar
Rate” means, for any Interest Period for each Eurodollar Rate Advance
comprising part of the same Borrowing, an interest rate per annum equal to the
rate per annum obtained by dividing (a) the rate per annum (rounded upward to
the nearest whole multiple of 1/16 of 1% per annum) appearing on Moneyline
Telerate Markets Page 3750 (or any successor page) as the London interbank
offered rate for deposits in U.S. dollars at approximately 11:00 A.M. (London
time) two Business Days prior to the first day of such Interest Period for a
term comparable to such Interest Period or, if for any reason such rate is not
available, the average (rounded upward to the nearest whole multiple of
1/16 of 1% per annum, if such average is not such a multiple) of the rate per
annum at which deposits in U.S. dollars are offered by the principal office of
each of the Reference Banks in London, England to prime banks in the London
interbank market at 11:00 A.M. (London time) two Business Days before the
first day of such Interest Period in an amount substantially equal to such
Reference Bank’s Eurodollar Rate Advance comprising part of such Borrowing to
be outstanding during such Interest Period and for a period equal to such
Interest Period by (b) a percentage equal to 100% minus the Eurodollar
Rate Reserve Percentage for such Interest Period. If the Moneyline Telerate
Markets Page 3750 (or any successor page) is unavailable, the Eurodollar Rate
for any Interest Period for each Eurodollar Rate Advance comprising part of the
same Borrowing shall be determined by the Agent on the basis of applicable rates
furnished to and received by the Agent from the Reference Banks two Business
Days before the first day of such Interest Period, subject, however,
to the provisions of Section 2.07.

 

“Eurodollar
Rate Advance” means an Advance that bears interest as provided in
Section 2.06(a)(ii).

 

“Eurodollar
Rate Reserve Percentage” for any Interest Period for all Eurodollar Rate
Advances comprising part of the same Borrowing means the reserve percentage
applicable two Business Days before the first day of such Interest Period under
regulations issued from time to time by the Board of Governors of the Federal
Reserve System (or any successor) for determining the maximum reserve
requirement (including, without limitation, any emergency, supplemental or
other marginal reserve requirement) for a member bank of the Federal Reserve
System in New York City with respect to liabilities or assets consisting
of or including Eurocurrency Liabilities (or with respect to any other category
of liabilities that

 

 

includes deposits by reference to which the
interest rate on Eurodollar Rate Advances is determined) having a term equal to
such Interest Period.

 

“Events of
Default” has the meaning specified in Section 6.01.

 

“Federal
Funds Rate” means, for any period, a fluctuating interest rate per annum
equal for each day during such period to the weighted average of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published for such day (or, if such day
is not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day
that is a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it.

 

“GAAP”
has the meaning specified in Section 1.03.

 

“General
Partner” means TC PipeLines GP, Inc.

 

“Hazardous
Materials” means (a) petroleum and petroleum products, byproducts or
breakdown products, radioactive materials, asbestos-containing materials,
polychlorinated biphenyls and radon gas and (b) any other chemicals, materials
or substances designated, classified or regulated as hazardous or toxic or as a
pollutant or contaminant under any Environmental Law.

 

“Hedge
Agreements” means interest rate swap, cap or collar agreements, interest
rate future or option contracts, currency swap agreements, currency future or
option contracts and other similar agreements.

 

“Hedge
Termination Value” means, in respect of any one or more Hedge Agreements,
after taking into account the effect of any legally enforceable netting
agreement relating to such Hedge Agreements, (a) for any date on or after
the date such Hedge Agreements have been closed out and termination value(s)
determined in accordance therewith, such termination value(s), and (b) for any
date prior to the date referenced in clause (a) the amount(s) determined as the
mark-to-market value(s) for such Hedge Agreements, as determined based upon one
or more mid-market or other readily available quotations provided by any
recognized dealer in such Hedge Agreements (which may include any Lender).

 

“Information
Memorandum” means the confidential information memorandum dated March 13,
2006 used by the Agent in connection with the syndication of the Commitments.

 

“Initial
Lenders” has the meaning specified in the recitals hereto.

 

“Interest
Expense” means, for any period, total interest expense determined in
accordance with GAAP.

 

“Interest
Period” means, for each Eurodollar Rate Advance comprising part of the same
Borrowing, the period commencing on the date of such Eurodollar Rate Advance or
the date of the Conversion of any Base Rate Advance into such Eurodollar Rate
Advance and ending on the last day of the period selected by the Borrower
pursuant to the provisions below and, thereafter, each subsequent period
commencing on the last day of the immediately preceding Interest Period and
ending on the last day of the period selected by the Borrower pursuant to the
provisions below. The duration of each such Interest Period shall be one, two,
three or six months, and subject to clause (c) of this definition, nine or
twelve months, as the Borrower may, upon notice received by the Agent not later
than 11:00 A.M. (New York City time) on the third Business Day prior
to the first day of such Interest Period, select; provided, however,
that:

 

 

(a)           the
Borrower may not select any Interest Period that ends after the Termination
Date;

 

(b)           Interest
Periods commencing on the same date for Eurodollar Rate Advances comprising
part of the same Borrowing shall be of the same duration;

 

(c)           the
Borrower shall not be entitled to select an Interest Period having duration of
nine or twelve months unless, by 2:00 P.M. (New York City time) on the third
Business Day prior to the first day of such Interest Period, each Lender
notifies the Agent that such Lender will be providing funding for such
Borrowing with such Interest Period (the failure of any Lender to so respond by
such time being deemed for all purposes of this Agreement as an objection by
such Lender to the requested duration of such Interest Period); provided that,
if any or all of the Lenders object to the requested duration of such Interest
Period, the duration of the Interest Period for such Borrowing shall be one,
two, three or six months, as specified by the Borrower requesting such
Borrowing in the applicable Notice of Borrowing as the desired alternative to
an Interest Period of nine or twelve months;

 

(d)           whenever
the last day of any Interest Period would otherwise occur on a day other than a
Business Day, the last day of such Interest Period shall be extended to occur
on the next succeeding Business Day, provided, however, that, if
such extension would cause the last day of such Interest Period to occur in the
next following calendar month, the last day of such Interest Period shall occur
on the next preceding Business Day; and

 

(e)           whenever
the first day of any Interest Period occurs on a day of an initial calendar
month for which there is no numerically corresponding day in the calendar month
that succeeds such initial calendar month by the number of months equal to the
number of months in such Interest Period, such Interest Period shall end on the
last Business Day of such succeeding calendar month.

 

“Internal
Revenue Code” means the Internal Revenue Code of 1986, as amended from time
to time, and the regulations promulgated and rulings issued thereunder.

 

“Lenders”
means the Initial Lenders and each Person that shall become a party hereto
pursuant to Section 8.07.

 

“Leverage
Ratio” means, as of any date, the ratio of Covenant Indebtedness of the
Borrower on such date to Adjusted Cash Flow of the Borrower for the period of
four fiscal quarters most recently ended on or immediately prior to such date.

 

“Lien”
means any lien, security interest or other charge or encumbrance of any kind,
or any other type of preferential arrangement, including, without limitation,
the lien or retained security title of a conditional vendor and any easement,
right of way or other encumbrance on title to real property.

 

“Material
Adverse Change” means any material adverse change in the business,
condition (financial or otherwise), operations, performance or properties of
the Borrower, its Subsidiaries, Northern Border and Tuscarora taken as a whole.

 

“Material
Adverse Effect” means a material adverse effect on (a) the business,
condition (financial or otherwise), operations, performance or properties of
the Borrower, its Subsidiaries, Northern Border and Tuscarora taken as a whole,
(b) the rights and remedies of the Agent or any Lender under this
Agreement or any Note or (c) the ability of the Borrower to perform its
obligations under this Agreement or any Note.

 

“Maturity
Date” means the second anniversary of the Effective Date.

 

 

“Multiemployer
Plan” means a multiemployer plan, as defined in Section 4001(a)(3) of
ERISA, to which the Borrower or any ERISA Affiliate is making or accruing an
obligation to make contributions, or has within any of the preceding five plan
years made or accrued an obligation to make contributions.

 

“Multiple
Employer Plan” means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, that (a) is maintained for employees of
the Borrower or any ERISA Affiliate and at least one Person other than the
Borrower and the ERISA Affiliates or (b) was so maintained and in respect
of which the Borrower or any ERISA Affiliate could have liability under
Section 4064 or 4069 of ERISA in the event such plan has been or were to
be terminated.

 

“Net Cash
Proceeds” means, with respect to any sale, lease, transfer or other
disposition of any asset or the incurrence or issuance of any Debt or the sale
or issuance of any equity by the Borrower, the aggregate amount of cash
received from time to time (whether as initial consideration or through payment
or disposition of deferred consideration) by or on behalf of such Person in
connection with such transaction after deducting therefrom only (without
duplication) (a) reasonable and customary brokerage commissions,
underwriting fees and discounts, legal and accounting fees, filing fees, finder’s
fees and other similar fees and commissions, (b) the amount of taxes
estimated in good faith by the Borrower to be payable by the Borrower or any of
its Subsidiaries in connection with or as a result of such transaction,
(c) the amount of any Debt secured by a Lien on such asset, (d) in the
case of any receipt of proceeds by a Subsidiary of the Borrower, any amount
required to be distributed to the holders of any minority equity interest in
the respective Subsidiary (or in any other Subsidiary which directly or
indirectly holds capital stock or equivalent interests in such Subsidiary), and
(e) with respect to any sale, lease, transfer or other disposition of any
asset, any amount of such Net Cash Proceeds set aside as a reserve established
in good faith by the Borrower or such Subsidiary for indemnity or other
potential claims in connection therewith until any unused reserves are no longer
maintained in connection therewith, in each case to the extent, but only to the
extent, that the amounts so deducted are at the time of receipt of such cash,
actually paid to a Person that is not an Affiliate of the Borrower and are
properly attributable to such transaction or to the asset that is the subject
thereof, provided, that for purposes of determining the date of receipt
of Net Cash Proceeds from the sale, lease, transfer or other disposition of any
asset, such Net Cash Proceeds shall be deemed to have been received on the date
that is six months after the date of such disposition.

 

“Northern
Border” means Northern Border Pipeline Company, a Texas general
partnership.

 

“Note”
means a promissory note of the Borrower payable to the order of any Lender,
delivered pursuant to a request made under Section 2.15 and in
substantially the form of Exhibit A hereto, evidencing the aggregate
indebtedness of the Borrower to such Lender resulting from the Advance made by
such Lender.

 

“Notice of
Borrowing” has the meaning specified in Section 2.02(a).

 

“Patriot
Act” means the Uniting and Strengthening America by Providing Appropriate
Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L. 107-56,
signed into law October 26, 2001.

 

“PBGC”
means the Pension Benefit Guaranty Corporation (or any successor).

 

“Permitted
Liens” means such of the following as to which no enforcement, collection,
execution, levy or foreclosure proceeding shall have been commenced:  (a) Liens for taxes, assessments and governmental
charges or levies to the extent not required to be paid under
Section 5.01(b) hereof; (b) Liens imposed by law, such as materialmen’s,
mechanics’, carriers’, workmen’s and repairmen’s Liens and other similar Liens
arising in the ordinary course of business securing obligations that are not
overdue for a period of more than 30 days unless being contested in good faith,
provided that adequate reserves for the payment thereof have been established
in accordance with GAAP and no property of the Borrower or any Subsidiary is
subject to impending risk of loss or forfeiture by reason of nonpayment of the
obligations

 

 

secured by such Liens; (c) pledges or
deposits to secure obligations under workers’ compensation laws or similar
legislation or to secure public or statutory obligations; and
(d) easements, rights of way and other encumbrances on title to real
property that do not render title to the property encumbered thereby
unmarketable or materially adversely affect the use of such property for its
present purposes.

 

“Person”
means an individual, partnership, corporation (including a business trust),
joint stock company, trust, unincorporated association, joint venture, limited
liability company or other entity, or a government or any political subdivision
or agency thereof.

 

“Plan”
means a Single Employer Plan or a Multiple Employer Plan.

 

“Reference
Banks” means CNAI, UBS Loan Finance LLC and Mizuho Corporate Bank, Ltd.

 

“Register”
has the meaning specified in Section 8.07(d).

 

“Required
Lenders” means at any time Lenders owed or holding at least a majority in
interest of the Advances outstanding at such time or, if no Advances are then
outstanding, Lenders holding at least a majority of the Commitments at such
time.

 

“SEC”
means the Securities and Exchange Commission, any successor thereto and any
analogous governmental authority.

 

“Significant Subsidiary”
has the meaning specified in Article 1, Rule 1-02(w) of Regulation S-X of the
Securities Exchange Act of 1934 as of the Effective Date, provided, that,
even if Northern Border and Tuscarora would not otherwise constitute a
Subsidiary of the Borrower, each of Northern Border and Tuscarora shall be
deemed to be a Significant Subsidiary of the Borrower if it would otherwise
qualify as a Significant Subsidiary under Article 1, Rule 1-02(w) of Regulation
S-X as of the Effective Date.

 

“Single
Employer Plan” means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, that (a) is maintained for employees of
the Borrower or any  ERISA Affiliate and
no Person other than the Borrower and the ERISA Affiliates or (b) was so
maintained and in respect of which the Borrower or any ERISA Affiliate could
have liability under Section 4069 of ERISA in the event such plan has been
or were to be terminated.

 

“Solvent” and “Solvency”
mean, with respect to any Person on a particular date, that on such date
(a) the fair value of the property of such Person is greater than the
total amount of liabilities, including, without limitation, contingent
liabilities, of such Person, (b) the present fair salable value of the
assets of such Person is not less than the amount that will be required to pay
the probable liability of such Person on its debts as they become absolute and
matured, (c) such Person does not intend to, and does not believe that it
will, incur debts or liabilities beyond such Person’s ability to pay such debts
and liabilities as they mature and (d) such Person is not engaged in
business or a transaction, and is not about to engage in business or a transaction,
for which such Person’s property would constitute an unreasonably small capital.
The amount of contingent liabilities at any time shall be computed as the
amount that, in the light of all the facts and circumstances existing at such
time, represents the amount that can reasonably be expected to become an actual
or matured liability.

 

“Subsidiary”
of any Person means any corporation, partnership, joint venture, limited
liability company, trust or estate of which (or in which) more than 50% of
(a) the issued and outstanding capital stock having ordinary voting power
to elect a majority of the Board of Directors of such corporation (irrespective
of whether at the time capital stock of any other class or classes of such
corporation shall or might have voting power upon the occurrence of any
contingency), (b) the interest in the capital or profits of such limited
liability company, partnership or joint venture or (c) the beneficial
interest in such trust or estate is at the time directly or indirectly owned or
controlled by such Person, by such Person and one or more of its other
Subsidiaries or by one or more of such Person’s other Subsidiaries.

 

 

“Termination
Date” means the earlier of (a) March 31, 2008 and (b) the date of
termination in whole of the Commitments pursuant to Section 2.04 or 6.01.

 

“Tuscarora”
means Tuscarora Gas Transmission Company, a Nevada general partnership.

 

“Voting
Stock” means capital stock issued by a corporation, or equivalent interests
in any other Person, the holders of which are ordinarily, in the absence of
contingencies, entitled to vote for the election of directors (or persons
performing similar functions) of such Person, even if the right so to vote has
been suspended by the happening of such a contingency.

 

SECTION 1.02.  Computation
of Time Periods.  In this Agreement
in the computation of periods of time from a specified date to a later
specified date, the word “from” means “from and including” and the words “to”
and “until” each mean “to but excluding”.

 

SECTION 1.03.  Accounting
Terms.  All accounting terms not
specifically defined herein shall be construed in accordance with generally
accepted accounting principles consistent with those applied in the preparation
of the financial statements referred to in Section 4.01(e) (“GAAP”).
In the event that any Change in Accounting Principles shall occur and such
change results in a change in the method of calculation of financial covenants,
standards or terms in this Agreement, then, upon the request of the Borrower or
the Required Lenders, the Borrower and the Agent agree to enter into
negotiations in order to amend such provisions of this Agreement so as to
reflect equitably such Change in Accounting Principles with the desired result
that the criteria for evaluating the Borrower’s financial condition shall be
the same after such Change in Accounting Principles as if such Change in
Accounting Principles had not been made. Until such time as such an amendment
shall have been executed and delivered by the Borrower, the Agent and the
Required Lenders, all financial covenants, standards and terms in this
Agreement shall continue to be calculated or construed as if such Change in
Accounting Principles had not occurred.

 

ARTICLE II

 

AMOUNTS AND TERMS OF THE
ADVANCES

 

SECTION 2.01.  The
Advances.  Each Lender severally
agrees, on the terms and conditions hereinafter set forth, to make an advance
(its “Advance”)
to the Borrower on the Effective Date in an amount not to exceed such Lender’s
Commitment at such time. The Borrowing shall consist of Advances made
simultaneously by the Lenders ratably according to their Commitments. Amounts
borrowed under this Section 2.01 and repaid or prepaid may not be
reborrowed.

 

SECTION 2.02.  Making
the Advances.  (a)  Each Borrowing shall be made on notice, given
not later than (x) 11:00 A.M. (New York City time) on the third
Business Day prior to the date of the proposed Borrowing in the case of a
Borrowing consisting of Eurodollar Rate Advances or (y) 11:00 A.M. (New York
City time) on the date of the proposed Borrowing in the case of a Borrowing
consisting of Base Rate Advances, by the Borrower to the Agent, which shall
give to each Lender prompt notice thereof by telecopier. Each such notice of a
Borrowing (a “Notice of Borrowing”) shall be by telephone, confirmed
promptly in writing, or telecopier in substantially the form of Exhibit B
hereto, specifying therein the requested (i) date of such Borrowing,
(ii) Type of Advances comprising such Borrowing, (iii) aggregate
amount of such Borrowing, and (iv) in the case of a Borrowing consisting
of Eurodollar Rate Advances, initial Interest Period for each such Advance. Each
Lender shall, before 1:00 P.M. (New York City time) on the date of
such Borrowing, make available for the account of its Applicable Lending Office
to the Agent at the Agent’s Account, in same day funds, such Lender’s ratable
portion of such Borrowing. After the Agent’s receipt of such funds and upon
fulfillment of the applicable conditions set forth in Article III, the
Agent will make such funds available to the Borrower at the Agent’s address
referred to in Section 8.02.

 

(b)           Anything
in subsection (a) above to the contrary notwithstanding, (i) the
Borrower may not select Eurodollar Rate Advances for any Borrowing if the
aggregate amount of such Borrowing is less than $5,000,000 or if the obligation
of the Lenders to make Eurodollar Rate Advances shall then be suspended
pursuant

 

 

to Section 2.07 or
2.11 and (ii) the Eurodollar Rate Advances may not be outstanding as part
of more than six separate Borrowings.

 

(c)           Each
Notice of Borrowing shall be irrevocable and binding on the Borrower. In the
case of any Borrowing that the related Notice of Borrowing specifies is to be
comprised of Eurodollar Rate Advances, the Borrower shall indemnify each Lender
as a result of any failure to fulfill on or before the date specified in such
Notice of Borrowing for such Borrowing the applicable conditions set forth in
Article III, including, without limitation, any loss (including loss of
anticipated profits), cost or expense incurred by reason of the liquidation or
reemployment of deposits or other acquired by such Lender to fund the Advance
to be made by such Lender as part of such Borrowing when such Advance, as a
result of such failure, is not made on such date.

 

(d)           Unless the
Agent shall have received notice from a Lender prior to the time of any
Borrowing that such Lender will not make available to the Agent such Lender’s
ratable portion of such Borrowing, the Agent may assume that such Lender has
made such portion available to the Agent on the date of such Borrowing in
accordance with subsection (a) of this Section 2.02 and the Agent
may, in reliance upon such assumption, make available to the Borrower on such
date a corresponding amount. If and to the extent that such Lender shall not
have so made such ratable portion available to the Agent, such Lender and the
Borrower severally agree to repay to the Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the date
such amount is made available to the Borrower until the date such amount is
repaid to the Agent, at (i) in the case of the Borrower, the interest rate
applicable at the time to Advances comprising such Borrowing and (ii) in
the case of such Lender, the Federal Funds Rate. If such Lender shall repay to
the Agent such corresponding amount, such amount so repaid shall constitute
such Lender’s Advance as part of such Borrowing for purposes of this Agreement.

 

(e)           The
failure of any Lender to make the Advance to be made by it as part of any
Borrowing shall not relieve any other Lender of its obligation, if any,
hereunder to make its Advance on the date of such Borrowing, but no Lender
shall be responsible for the failure of any other Lender to make the Advance to
be made by such other Lender on the date of any Borrowing.

 

SECTION 2.03.  Fees.
 (a) 
Commitment Fee. The Borrower agrees to pay to the Agent for the
account of each Lender a commitment fee on the aggregate amount of such Lender’s
unused Commitment from the date hereof until the Effective Date at a rate per
annum equal to the Applicable Percentage in effect from time to time, payable
in arrears quarterly on the last day of each March, June, September and
December, commencing June 30, 2006, and on the Effective Date.

 

(b)           Agent’s
Fees. The Borrower shall pay to the Agent for its own account such fees as
may from time to time be agreed between the Borrower and the Agent.

 

SECTION 2.04.  Termination
or Reduction of the Commitments.  (a)  Optional. The Borrower shall have the
right, upon at least three Business Days’ notice to the Agent, to terminate in
whole or permanently reduce ratably in part the unused portions of the
Commitments, provided that each partial reduction shall be in the
aggregate amount of $1,000,000 or an integral multiple of $1,000,000 in excess
thereof .

 

(b)           Mandatory.
On the Effective Date, after giving effect to any Borrowing made on such date,
and from time to time thereafter upon prepayment of the Advances, the aggregate
Commitments shall be automatically and permanently reduced, on a pro rata
basis, by an amount equal to the amount by which (i) the aggregate Commitments
immediately prior to such reduction exceed (ii) the aggregate unpaid principal
amount of the Advances then outstanding.

 

SECTION 2.05.  Repayment.
 The Borrower shall repay to the Agent
for the ratable account of the Lenders on the Maturity Date the aggregate
principal amount of the Advances then outstanding.

 

SECTION 2.06.  Interest
on Advances.  (a)  Scheduled Interest. The Borrower shall
pay interest on the unpaid principal amount of each Advance owing to each
Lender from the date of such Advance until such principal amount shall be paid
in full, at the following rates per annum:

 

 

(i)            Base
Rate Advances. During such periods as such Advance is a Base Rate Advance,
a rate per annum equal at all times to the sum of (x) the Base Rate in
effect from time to time plus (y) the Applicable Margin in effect
from time to time, payable in arrears quarterly on the last day of each March,
June, September and December during such periods and on the date such Base Rate
Advance shall be Converted or paid in full.

 

(ii)           Eurodollar
Rate Advances. During such periods as such Advance is a Eurodollar Rate
Advance, a rate per annum equal at all times during each Interest Period for
such Advance to the sum of (x) the Eurodollar Rate for such Interest
Period for such Advance plus (y) the Applicable Margin in effect
from time to time, payable in arrears on the last day of such Interest Period
and, if such Interest Period has a duration of more than three months, on each
day that occurs during such Interest Period every three months from the first
day of such Interest Period and on the date such Eurodollar Rate Advance shall
be Converted or paid in full.

 

(b)           Default Interest. Upon the occurrence and during the
continuance of an Event of Default under Section 6.01(a), the Agent may,
and upon the request of the Required Lenders shall, require the Borrower to pay
interest (“Default Interest”) on (i) the unpaid principal amount of
each Advance owing to each Lender, payable in arrears on the dates referred to
in clause (a)(i) or (a)(ii) above, at a rate per annum equal at all times
to 2% per annum above the rate per annum required to be paid on such Advance
pursuant to clause (a)(i) or (a)(ii) above and (ii) to the fullest
extent permitted by law, the amount of any interest, fee or other amount
payable hereunder that is not paid when due, from the date such amount shall be
due until such amount shall be paid in full, payable in arrears on the date
such amount shall be paid in full and on demand, at a rate per annum equal at
all times to 2% per annum above the rate per annum required to be paid on Base
Rate Advances pursuant to clause (a)(i) above, provided, however,
that following acceleration of the Advances pursuant to Section 6.01, Default
Interest shall accrue and be payable hereunder whether or not previously
required by the Agent.

 

SECTION 2.07.  Interest
Rate Determination.  (a)  Each Reference Bank agrees to furnish to the
Agent timely information for the purpose of determining each Eurodollar Rate. If
any one or more of the Reference Banks shall not furnish such timely
information to the Agent for the purpose of determining any such interest rate,
the Agent shall determine such interest rate on the basis of timely information
furnished by the remaining Reference Banks. The Agent shall give prompt notice
to the Borrower and the Lenders of the applicable interest rate determined by
the Agent for purposes of Section 2.06(a)(i) or (ii), and the rate, if
any, furnished by each Reference Bank for the purpose of determining the
interest rate under Section 2.06(a)(ii).

 

(b)           If, with
respect to any Eurodollar Rate Advances, the Required Lenders notify the Agent
that the Eurodollar Rate for any Interest Period for such Advances will not
adequately reflect the cost to such Required Lenders of making, funding or
maintaining their respective Eurodollar Rate Advances for such Interest Period,
the Agent shall forthwith so notify the Borrower and the Lenders, whereupon (i)
each Eurodollar Rate Advance will automatically, on the last day of the then
existing Interest Period therefor, Convert into a Base Rate Advance, and (ii)
the obligation of the Lenders to make, or to Convert Advances into, Eurodollar
Rate Advances shall be suspended until the Agent shall notify the Borrower that
such Lenders have determined that the circumstances causing such suspension no
longer exist.

 

(c)           If the
Borrower shall fail to select the duration of any Interest Period for any
Eurodollar Rate Advances in accordance with the provisions contained in the
definition of “Interest Period” in Section 1.01, the Agent will forthwith
so notify the Borrower and the Lenders and such Advances will automatically, on
the last day of the then existing Interest Period therefor, Convert into a
Eurodollar Rate Borrowing having an Interest Period of one month.

 

(d)           On the
date on which the aggregate unpaid principal amount of Eurodollar Rate Advances
comprising any Borrowing shall be reduced, by payment or prepayment or
otherwise, to less than $1,000,000, such Advances shall automatically Convert
into Base Rate Advances.

 

(e)           Upon the
occurrence and during the continuance of any Event of Default, (i) each
Eurodollar Rate Advance will automatically, on the last day of the then
existing Interest Period therefor, Convert

 

 

into a Base Rate Advance
and (ii) the obligation of the Lenders to make, or to Convert Advances
into, Eurodollar Rate Advances shall be suspended.

 

(f)            If
Moneyline Telerate Markets Page 3750 is unavailable and fewer than two
Reference Banks furnish timely information to the Agent for determining the
Eurodollar Rate for any Eurodollar Rate Advances,

 

(i)            the
Agent shall forthwith notify the Borrower and the Lenders that the interest
rate cannot be determined for such Eurodollar Rate Advances,

 

(ii)           each
such Advance will automatically, on the last day of the then existing Interest
Period therefor, Convert into a Base Rate Advance (or if such Advance is then a
Base Rate Advance, will continue as a Base Rate Advance), and

 

(iii)          the
obligation of the Lenders to make Eurodollar Rate Advances or to Convert
Advances into Eurodollar Rate Advances shall be suspended until the Agent shall
notify the Borrower and the Lenders that the circumstances causing such
suspension no longer exist.

 

SECTION 2.08.  Optional
Conversion of Advances.  The Borrower
may on any Business Day, upon notice given to the Agent not later than
11:00 A.M. (New York City time) on the third Business Day prior to
the date of the proposed Conversion and subject to the provisions of
Sections 2.07 and 2.11, Convert all or any portion of Advances of one Type
comprising the same Borrowing into Advances of the other Type; provided,
however, that any Conversion of Base Rate Advances into Eurodollar Rate
Advances shall be in an amount not less than the minimum amount specified in
Section 2.02(b), no Conversion of any Advances shall result in more
separate Borrowings than permitted under Section 2.02(b) and each
Conversion of Advances comprising part of the same Borrowing shall be made
ratably among the Lenders in accordance with their Commitments and provided,
further that for any Conversion of Eurodollar Rate Advances into Base
Rate Advances made other than on the last day of an Interest Period for such
Eurodollar Rate Advances the Borrower shall be obligated to reimburse the
Lenders in respect thereof pursuant to Section 8.04(c). Each such notice of a
Conversion shall, within the restrictions specified above, specify (i) the
date of such Conversion, (ii) the Advances to be Converted, and
(iii) if such Conversion is into Eurodollar Rate Advances, the duration of
the initial Interest Period for each such Advance. Each notice of Conversion shall
be irrevocable and binding on the Borrower.

 

SECTION 2.09.  Prepayments
of Advances.  The Borrower may, upon
notice at least two Business Days’ prior to the date of such prepayment, in the
case of Eurodollar Rate Advances, and not later than 11:00 A.M. (New York City
time) on the date of such prepayment, in the case of Base Rate Advances, to the
Agent stating the proposed date and aggregate principal amount of the
prepayment, and if such notice is given the Borrower shall, prepay the
outstanding principal amount of the Advances comprising part of the same
Borrowing in whole or ratably in part, together with accrued interest to the
date of such prepayment on the principal amount prepaid; provided, however,
that (x) each partial prepayment shall be in an aggregate principal amount of
$10,000,000 or an integral multiple of $1,000,000 in excess thereof  and (y) in the event of any such
prepayment of a Eurodollar Rate Advance made other than on the last day of an Interest
Period for such Eurodollar Rate Advances, the Borrower shall be obligated to
reimburse the Lenders in respect thereof pursuant to Section 8.04(c).

 

(b)           Mandatory.
(i)  If the Borrower and its Subsidiaries
shall have received Net Cash Proceeds in excess of $10,000,000 from (A) the
sale, lease, transfer or other disposition of any assets of the Borrower (other
than any sale, lease, transfer or other disposition of assets (1) in the
ordinary course of business or (2) to the extent that the Net Cash Proceeds
thereof are reinvested in similar assets within six months after the receipt of
such Net Cash Proceeds), (B) the incurrence of or issuance by the Borrower or
any of its Subsidiaries of any indebtedness for borrowed money, including
indebtedness evidenced by notes, bonds, debentures or other similar instruments
or (C) the sale or issuance by the Borrower of any of its equity interests, the
Borrower shall be required to make a mandatory prepayment of Advances
comprising a part of the same Borrowings in an aggregate amount equal to such
Net Cash Proceeds. Any mandatory prepayment of Advances required to be made
pursuant to this Section 2.09(b) shall be made on the earlier of (1) the last
day of the Interest Period for any Advance ending after the date of receipt of
such Net Cash Proceeds (until all such Net Cash Proceeds have been prepaid) and
(2) the

 

 

30th calendar
day after the receipt thereof; provided, that, all such Net Cash
Proceeds shall have been applied to prepay Advances not later than the 30th
calendar day after the date that such Net Cash Proceeds exceed $10,000,000.

 

(ii)           Each
prepayment made pursuant to this Section 2.09(b) shall be made together with
any interest accrued to the date of such prepayment on the principal amounts
prepaid and, in the case of any prepayment of a Eurodollar Rate Advance on a
date other than the last day of an Interest Period or at its maturity, any
additional amounts which the Borrower shall be obligated to reimburse to the
Lenders in respect thereof pursuant to Section 8.04(c).

 

SECTION 2.10.  Increased
Costs.  (a)  If, due to either (i) the introduction
of or any change in or in the interpretation of any law or regulation after the
Effective Date or (ii) the compliance with any guideline or request
adopted after the Effective Date from any central bank or other governmental
authority (whether or not having the force of law), there shall be any increase
in the cost to any Lender of agreeing to make or making, funding or maintaining
Eurodollar Rate Advances (excluding for purposes of this Section 2.10 any  such increased costs resulting from (i) Taxes
or Other Taxes (as to which Section 2.13 shall govern) and (ii) changes in the
basis of taxation of overall net income or overall gross income by the United
States or by the foreign jurisdiction or state under the laws of which such
Lender is organized or has its Applicable Lending Office or any political
subdivision thereof), then the Borrower shall from time to time, upon demand by
such Lender (with a copy of such demand to the Agent), pay to the Agent for the
account of such Lender additional amounts sufficient to compensate such Lender
for such increased cost. A certificate as to the amount of such increased cost,
submitted to the Borrower and the Agent by such Lender, shall be conclusive and
binding for all purposes, absent manifest error.

 

(b)           If any
Lender determines that compliance with any law or regulation or any guideline
or request from any central bank or other governmental authority (whether or
not having the force of law) adopted or issued after the Effective Date affects
or would affect the amount of capital required or expected to be maintained by
such Lender or any corporation controlling such Lender and that the amount of
such capital is increased by or based upon the existence of such Lender’s commitment
to lend hereunder and other commitments of this type, then, upon demand by such
Lender (with a copy of such demand to the Agent), the Borrower shall pay to the
Agent for the account of such Lender, from time to time as specified by such
Lender, additional amounts sufficient to compensate such Lender or such
corporation in the light of such circumstances, to the extent that such Lender
reasonably determines such increase in capital to be allocable to the existence
of such Lender’s commitment to lend hereunder. A certificate as to such amounts
submitted to the Borrower and the Agent by such Lender shall be conclusive and
binding for all purposes, absent manifest error.

 

(c)           Notwithstanding
anything to the contrary in this Section 2.10, the Borrower shall not be
required to compensate a Lender pursuant to this Section 2.10 for any amounts
incurred more than six months prior to the date that such Lender notifies the
Borrower of such Lender’s intention to claim compensation therefor; provided
that, if the circumstances giving rise to such claim have a retroactive effect,
then such six-month period shall be extended to include the period of such
retroactive effect.

 

SECTION 2.11.  Illegality.
 Notwithstanding any other provision of
this Agreement, if any Lender shall notify the Agent that the introduction of
or any change in or in the interpretation of any law or regulation makes it
unlawful, or any central bank or other governmental authority asserts that it
is unlawful, for any Lender or its Eurodollar Lending Office to perform its
obligations hereunder to make Eurodollar Rate Advances or to fund or maintain
Eurodollar Rate Advances hereunder, (a) each Eurodollar Rate Advance will
automatically, upon the last day of the applicable Interest Period or, if required
by applicable law, immediately upon such demand, Convert into a Base Rate
Advance and (b) the obligation of the Lenders to make Eurodollar Rate
Advances or to Convert Advances into Eurodollar Rate Advances shall be
suspended until the Agent shall notify the Borrower that such Lender has
determined that the circumstances causing such suspension no longer exist.

 

SECTION 2.12.  Payments
and Computations.  (a)  The Borrower shall make each payment
hereunder, irrespective of any right of counterclaim or set-off,  not later than 11:00 A.M. (New York City
time) on the day when due in U.S. dollars to the Agent at the Agent’s Account
in same day funds. The Agent will promptly thereafter cause to be distributed
like funds relating to the payment of principal or interest or fees ratably
(other than amounts payable pursuant to Section 2.10, 2.13 or 8.04(c)) to
the Lenders for the account of their respective Applicable Lending Offices, and
like funds relating to the payment of any other amount payable to any Lender to

 

 

such Lender for the
account of its Applicable Lending Office, in each case to be applied in
accordance with the terms of this Agreement. Upon its acceptance of an
Assignment and Acceptance and recording of the information contained therein in
the Register pursuant to Section 8.07(c), from and after the effective
date specified in such Assignment and Acceptance, the Agent shall make all
payments hereunder and under the Notes in respect of the interest assigned
thereby to the Lender assignee thereunder, and the parties to such Assignment
and Acceptance shall make all appropriate adjustments in such payments for
periods prior to such effective date directly between themselves.

 

(b)           The
Borrower hereby authorizes each Lender, if and to the extent payment owed to
such Lender is not made when due hereunder or under the Note held by such
Lender, to charge from time to time against any or all of the Borrower’s
accounts with such Lender any amount so due.

 

(c)           All
computations of interest based on the Base Rate shall be made by the Agent on
the basis of a year of 365 or 366 days, as the case may be, and all
computations of interest based on the Eurodollar Rate or the Federal Funds Rate
and of fees shall be made by the Agent on the basis of a year of 360 days, in each
case for the actual number of days (including the first day but excluding the
last day) occurring in the period for which such interest or fees are payable. Each
determination by the Agent of an interest rate hereunder shall be conclusive
and binding for all purposes, absent manifest error.

 

(d)           Whenever
any payment hereunder or under the Notes shall be stated to be due on a day
other than a Business Day, such payment shall be made on the next succeeding
Business Day, and such extension of time shall in such case be included in the
computation of payment of interest or fee, as the case may be; provided,
however, that, if such extension would cause payment of interest on or
principal of Eurodollar Rate Advances to be made in the next following calendar
month, such payment shall be made on the next preceding Business Day.

 

(e)           Unless the
Agent shall have received notice from the Borrower prior to the date on which
any payment is due to the Lenders hereunder that the Borrower will not make
such payment in full, the Agent may assume that the Borrower has made such
payment in full to the Agent on such date and the Agent may, in reliance upon
such assumption, cause to be distributed to each Lender on such due date an
amount equal to the amount then due such Lender. If and to the extent the
Borrower shall not have so made such payment in full to the Agent, each Lender
shall repay to the Agent forthwith on demand such amount distributed to such
Lender together with interest thereon, for each day from the date such amount
is distributed to such Lender until the date such Lender repays such amount to
the Agent, at the Federal Funds Rate.

 

SECTION 2.13.  Taxes.
 (a) 
Any and all payments by the Borrower to or for the account of any Lender
or the Agent hereunder or under the Notes or any other documents to be
delivered hereunder shall be made, in accordance with Section 2.12 or the
applicable provisions of such other documents, free and clear of and without
deduction for any and all present or future taxes, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect thereto, excluding,
in the case of each Lender and the Agent, any branch profits tax imposed by the
United States and taxes imposed on its overall net income, and franchise taxes
imposed on it in lieu of net income taxes, by the jurisdiction under the laws
of which such Lender or the Agent (as the case may be) is organized or any
political subdivision thereof and, in the case of each Lender, taxes imposed on
its overall net income, and franchise taxes imposed on it in lieu of net income
taxes, by the jurisdiction of such Lender’s Applicable Lending Office or any
political subdivision thereof (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings and liabilities in respect of payments
hereunder or under the Notes being hereinafter referred to as “Taxes”). If
the Borrower shall be required by law to deduct any Taxes from or in respect of
any sum payable hereunder or under any Note or any other documents to be delivered
hereunder to any Lender or the Agent, (i) the sum payable shall be
increased as may be necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this
Section 2.13) such Lender or the Agent (as the case may be) receives an
amount equal to the sum it would have received had no such deductions been
made, (ii) the Borrower shall make such deductions and (iii) the
Borrower shall pay the full amount deducted to the relevant taxation authority or
other authority in accordance with applicable law.

 

(b)           In
addition, the Borrower shall pay any present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies that
arise from any payment made hereunder or under the Notes or any other documents
to be delivered hereunder or from the execution, delivery or registration of,

 

 

performing under, or
otherwise with respect to, this Agreement or the Notes or any other documents
to be delivered hereunder (hereinafter referred to as “Other Taxes”).

 

(c)           The
Borrower shall indemnify each Lender and the Agent for and hold it harmless
against the full amount of Taxes or Other Taxes (including, without limitation,
taxes of any kind imposed or asserted by any jurisdiction on amounts payable
under this Section 2.13) imposed on or paid by such Lender or the Agent
(as the case may be) and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto. This indemnification shall
be made within 30 days from the date such Lender or the Agent (as the case may
be) makes written demand therefor.

 

(d)           Within 30
days after the date of any payment of Taxes, the Borrower shall furnish to the
Agent, at its address referred to in Section 8.02, the original or a
certified copy of a receipt evidencing such payment to the extent such a
receipt is issued therefor, or other written proof of payment thereof that is
reasonably satisfactory to the Agent. In the case of any payment hereunder or
under the Notes or any other documents to be delivered hereunder by or on
behalf of the Borrower through an account or branch outside the United States
or by or on behalf of the Borrower by a payor that is not a United States
person, if the Borrower determines that no Taxes are payable in respect
thereof, the Borrower shall furnish, or shall cause such payor to furnish, to
the Agent, at such address, an opinion of counsel acceptable to the Agent
stating that such payment is exempt from Taxes. For purposes of this subsection
(d) and subsection (e), the terms “United States” and “United States
person” shall have the meanings specified in Section 7701 of the
Internal Revenue Code.

 

(e)           Each
Lender organized under the laws of a jurisdiction outside the United States, on
or prior to the date of its execution and delivery of this Agreement in the
case of each Initial Lender and on the date of the Assignment and Acceptance
pursuant to which it becomes a Lender in the case of each other Lender, and
from time to time thereafter as reasonably requested in writing by the Borrower
(but only so long as such Lender remains lawfully able to do so), shall provide
each of the Agent and the Borrower with two original Internal Revenue Service
Forms W-8BEN or W-8ECI, as appropriate, or any successor or other form
prescribed by the Internal Revenue Service, certifying that such Lender is
exempt from or entitled to a reduced rate of United States withholding tax on
payments pursuant to this Agreement or the Notes and, in the case of any Lender
claiming the benefits of the exemption for portfolio interest under section
881(c) of the Internal Revenue Code, a certificate to the effect that such
Lender is not (A) a “bank” described in section 881(c)(3)(A) of the Internal
Revenue Code, (B) a “10 percent shareholder” of the Borrower described in
section 881(c)(3)(B) of the Internal Revenue Code, or (C) a “controlled foreign
corporation” described in section 881(c)(3)(C) of the Internal Revenue Code. Each
such Lender shall promptly notify the Borrower at any time it determines that
it is no longer in a position to provide any previously delivered certificate
to the Borrower (or any other form of certification adopted by the U.S. taxing
authorities for such purpose). If the form provided by a Lender at the time
such Lender first becomes a party to this Agreement indicates a United States
interest withholding tax rate in excess of zero, withholding tax at such rate
shall be considered excluded from Taxes unless and until such Lender provides
the appropriate forms certifying that a lesser rate applies, whereupon
withholding tax at such lesser rate only shall be considered excluded from
Taxes for periods governed by such form; provided, however, that,
if at the date of the Assignment and Acceptance pursuant to which a Lender
assignee becomes a party to this Agreement, the Lender assignor was entitled to
payments under subsection (a) in respect of United States withholding tax
with respect to interest paid at such date, then, to such extent, the term
Taxes shall include (in addition to withholding taxes that may be imposed in
the future or other amounts otherwise includable in Taxes) United States
withholding tax, if any, applicable with respect to the Lender assignee on such
date. If any form or document referred to in this subsection (e) requires
the disclosure of information, other than information necessary to compute the
tax payable and information required on the date hereof by Internal Revenue
Service Form W-8BEN or W-8ECI, that the Lender reasonably considers to be
confidential, the Lender shall give notice thereof to the Borrower and shall
not be obligated to include in such form or document such confidential
information. If requested by the Borrower in order to obtain an exemption from
or reduction from non-U.S. withholding taxes, a Lender shall deliver to the
Borrower (with a copy to the Agent) at the time or times prescribed by
applicable law, such properly completed and executed documentation prescribed
by applicable law as will permit such payments to be made without withholding
or at a reduced rate, provided that such Lender is legally entitled to
complete, execute and deliver such documentation and in such Lender’s judgment
such completion, execution or submission would not materially prejudice the
legal position of such Lender.

 

 

(f)            For any
period with respect to which a Lender has failed to provide the Borrower with
the appropriate form, certificate or other document described in
Section 2.13(e) (other  than if such failure is due to a
change in law, or in the interpretation or application thereof, occurring
subsequent to the date on which a form, certificate or other document
originally was required to be provided, or if such form, certificate or other
document otherwise is not required under subsection (e) above), such
Lender shall not be entitled to the additional payment or indemnification under
Section 2.13(a) or (c) with respect to Taxes imposed by the United States
by reason of such failure; provided, however, that should a
Lender become subject to Taxes because of its failure to deliver a form,
certificate or other document required hereunder, the Borrower shall take such
steps as the Lender shall reasonably request to assist the Lender to recover
such Taxes.

 

(g)           If the
Agent or any Lender determines, in its sole discretion, that it has received a
refund of any Taxes or Other Taxes as to which it has been indemnified by the
Borrower or with respect to which the Borrower has paid amounts pursuant to
this Section 2.13, it shall pay over such refund to the Borrower (but only to
the extent of indemnity payments made, or additional amounts paid, by the
Borrower under this Section 2.13 with respect to the Taxes or Other Taxes
giving rise to such refund), net of all out-of-pocket expenses of the Agent or
such Lender and without interest (other than any interest paid by the relevant
governmental authority with respect to such refund); provided, that the
Borrower, upon the request of the Agent or such Lender, agrees to repay the
amount paid over to the Borrower (plus any penalties, interest or other charges
imposed by the relevant governmental authority) to the Agent or such Lender in
the event the Agent or such Lender is required to repay such refund to such
governmental authority. This paragraph shall not be construed to require the
Agent or any Lender to make available its tax returns (or any other information
relating to its taxes which it deems confidential) to the Borrower or any other
Person.

 

SECTION 2.14.  Sharing
of Payments, Etc.  If any Lender
shall obtain any payment (whether voluntary, involuntary, through the exercise
of any right of set-off, or otherwise) on account of the Advances owing to it
(other than pursuant to Section 2.10, 2.13 or 8.04(c)) in excess of its
ratable share of payments on account of the Advances obtained by all the
Lenders, such Lender shall forthwith purchase from the other Lenders such
participations in the Advances owing to them as shall be necessary to cause
such purchasing Lender to share the excess payment ratably with each of them; provided,
however, that if all or any portion of such excess payment is thereafter
recovered from such purchasing Lender, such purchase from each Lender shall be
rescinded and such Lender shall repay to the purchasing Lender the purchase
price to the extent of such recovery together with an amount equal to such
Lender’s ratable share (according to the proportion of (i) the amount of
such Lender’s required repayment to (ii) the total amount so recovered
from the purchasing Lender) of any interest or other amount paid or payable by
the purchasing Lender in respect of the total amount so recovered. The Borrower
agrees that any Lender so purchasing a participation from another Lender
pursuant to this Section 2.14 may, to the fullest extent permitted by law,
exercise all its rights of payment (including the right of set-off) with
respect to such participation as fully as if such Lender were the direct
creditor of the Borrower in the amount of such participation.

 

SECTION 2.15.  Evidence
of Debt.  (a)  Each Lender shall maintain in accordance with
its usual practice an account or accounts evidencing the indebtedness of the
Borrower to such Lender resulting from each Advance owing to such Lender from
time to time, including the amounts of principal and interest payable and paid
to such Lender from time to time hereunder in respect of Advances. The Borrower
agrees that upon notice by any Lender to the Borrower (with a copy of such
notice to the Agent) to the effect that a Note is required or appropriate in
order for such Lender to evidence (whether for purposes of pledge, enforcement
or otherwise) the Advances owing to, or to be made by, such Lender, the
Borrower shall promptly execute and deliver to such Lender a Note, in
substantially the form of Exhibit A hereto, respectively, payable to the order
of such Lender in a principal amount equal to the Commitment of such Lender.

 

(b)           The
Register maintained by the Agent pursuant to Section 8.07(d) shall include a
control account, and a subsidiary account for each Lender, in which accounts
(taken together) shall be recorded (i) the date and amount of each Borrowing
made hereunder, the Type of Advances comprising such Borrowing and, if
appropriate, the Interest Period applicable thereto, (ii) the terms of each Assignment
and Acceptance delivered to and accepted by it, (iii) the amount of any
principal or interest due and payable or to become due and payable from the
Borrower to each Lender hereunder and (iv) the amount of any sum received by
the Agent from the Borrower hereunder and each Lender’s share thereof.

 

 

(c)           Entries
made in good faith by the Agent in the Register pursuant to subsection (b)
above, and by each Lender in its account or accounts pursuant to subsection (a)
above, shall be prima  facie evidence of the amount of principal
and interest due and payable or to become due and payable from the Borrower to,
in the case of the Register, each Lender and, in the case of such account or
accounts, such Lender, under this Agreement, absent manifest error; provided,
however, that the failure of the Agent or such Lender to make an entry,
or any finding that an entry is incorrect, in the Register or such account or
accounts shall not limit or otherwise affect the obligations of the Borrower
under this Agreement.

 

SECTION 2.16.  Use
of Proceeds.  The proceeds of the
Advances shall be available (and the Borrower agrees that it shall use such
proceeds) solely for payment of the cash consideration of the Acquisition and
the transaction fee related to the Acquisition.

 

SECTION 2.17  Change
of Lending Office.  Each Lender
agrees that, upon the occurrence of any event giving rise to the operation of
Section 2.10 or 2.13(a) with respect to such Lender, it will, if requested by
the Borrower, use reasonable efforts (consistent with its internal policy and
legal and regulatory restrictions) to designate another lending office for any
Advances affected by such event with the object of avoiding the consequences of
such event; provided, that such designation would not, in the reasonable
judgment of such Lender, be otherwise disadvantageous to such Lender, and provided,
further, that nothing in this Section 2.18 shall affect or postpone any
of the obligations of the Borrower or the rights of any Lender pursuant to
Section 2.10 or 2.13(a).

 

ARTICLE III

 

CONDITIONS TO EFFECTIVENESS AND
LENDING

 

SECTION 3.01.  Conditions
Precedent to Effectiveness of Section 2.01.  Section 2.01 of this Agreement shall
become effective on and as of the first date (the “Effective Date”) on
which the following conditions precedent have been satisfied:

 

(a)           There
shall have occurred no Material Adverse Change since December 31, 2005.

 

(b)           There
shall exist no action, suit, investigation, litigation or proceeding affecting
the General Partner, the Borrower or any of its Subsidiaries pending or
threatened before any court, governmental agency or arbitrator that
(i) would be reasonably likely to have a Material Adverse Effect other
than the matters described on Schedule 3.01(b) hereto (the “Disclosed
Litigation”) or (ii) purports to affect the legality, validity or
enforceability of this Agreement or any Note or the consummation of the
transactions contemplated hereby, and there shall have been no adverse change
in the status, or financial effect on the Borrower or any of its Subsidiaries,
of the Disclosed Litigation from that described on Schedule 3.01(b)
hereto.

 

(c)           Nothing
shall have come to the attention of the Lenders during the course of their due
diligence investigation to lead them to believe that the Information Memorandum
was or has become misleading, incorrect or incomplete in any material respect;
without limiting the generality of the foregoing, the Lenders shall have been
given such access to the management, records, books of account, contracts and properties
of the Borrower and its Subsidiaries as they shall have reasonably requested.

 

(d)           All
governmental and third party consents and approvals necessary in connection
with the transactions contemplated hereby 
and the Acquisition shall have been obtained (without the imposition of
any conditions that are not acceptable to the Lenders) and shall remain in
effect, and no law or regulation shall be applicable in the reasonable judgment
of the Lenders that restrains, prevents or imposes materially adverse
conditions upon the transactions contemplated hereby.

 

(e)           The
Borrower shall have notified each Lender and the Agent in writing as to the
proposed Effective Date.

 

 

(f)            The
Borrower shall have paid all accrued fees and expenses of the Agent and the Lenders
(including the accrued reasonable  fees
and expenses of counsel to the Agent).

 

(g)           On
the Effective Date, the following statements shall be true and the Agent shall
have received for the account of each Lender a certificate of the Borrower, or
on its behalf by the General Partner of the Borrower, signed on behalf of such
Person by its President or a Vice President and its Secretary or any Assistant
Secretary (or persons performing similar functions), dated the Effective Date,
stating that:

 

(i)            The
representations and warranties contained in Section 4.01 are correct on
and as of the Effective Date,

 

(ii)           No
event has occurred and is continuing that constitutes a Default,

 

(iii)          All
governmental and third party consents and approvals necessary in connection
with the transactions contemplated hereby have been obtained (without the
imposition of any conditions that are not acceptable to the Lenders) and shall
remain in effect, all applicable waiting periods in connection with the
Acquisition shall have expired without any action being taken by any competent
authority, and no law or regulation shall be applicable in the reasonable
judgment of the Lenders, in each case that restrains, prevents or imposes
materially adverse conditions upon the transactions contemplated hereby, and

 

(iv)          All
conditions precedent to the consummation of the Acquisition (other than the
payment of cash consideration from, among other sources, the proceeds of the
initial Borrowing hereunder) have been satisfied substantially in accordance
with the terms of the Partnership Interest Purchase and Sale Agreement dated as
of December 31, 2005 between Northern Border Intermediate Limited Partnership,
a Delaware limited partnership, and TC PipeLines Intermediate Limited
Partnership, a Delaware limited partnership, without any waiver or amendment
not consented to by the Required Lenders of any material term, provision or
condition set forth therein, and in compliance with all applicable laws.

 

(h)           The
Agent shall have received on or before the Effective Date the following, each
dated such day, in form and substance satisfactory to the Agent and (except for
the Notes) in sufficient copies for each Lender:

 

(i)            The
Notes to the order of the Lenders to the extent requested by any Lender
pursuant to Section 2.15.

 

(ii)           Certified
copies of the resolutions of or on behalf of the Borrower approving this
Agreement and the Notes, and/or authorizing the General Partner or officers, as
applicable, to act on behalf of the Borrower, and of all documents evidencing
other necessary action (including, without limitation, all necessary General
Partner, board of directors or other similar action) and governmental and other
third party approvals and consents, if any, with respect to this Agreement and
the Notes.

 

(iii)          A
certificate of the Secretary or an Assistant Secretary of the General Partner
of the Borrower certifying the names and true signatures of the officers of
such Person authorized to sign this Agreement and the Notes and the other
documents to be delivered hereunder.

 

(iv)          A
favorable opinion of Orrick, Herrington & Sutcliffe LLP, counsel for the
Borrower, substantially in the form of Exhibit D hereto and as to such
other matters as any Lender through the Agent may reasonably request.

 

 

(v)           A
favorable opinion of Shearman & Sterling LLP, counsel for the Agent, in
form and substance satisfactory to the Agent.

 

SECTION 3.02.  Conditions
Precedent to Each Borrowing.  The
obligation of each Lender to make an Advance on the occasion of each Borrowing
shall be subject to the conditions precedent that the Effective Date shall have
occurred and on the date of such Borrowing (a) the following statements
shall be true (and each of the giving of the applicable Notice of Borrowing and
the acceptance by the Borrower of the proceeds of such Borrowing shall
constitute a representation and warranty by the Borrower that on the date of
such Borrowing such statements are true):

 

(i)            the
representations and warranties contained in Section 4.01 (other than the
representation set forth in Section 4.01(f)) are correct on and as of such
date, before and after giving effect to such Borrowing,  and to the
application of the proceeds therefrom, as though made on and as of such date,
and

 

(ii)           no
event has occurred and is continuing, or would result from such Borrowing or
from the application of the proceeds therefrom, that constitutes a Default;

 

and (b) the Agent shall have received such other
approvals, opinions or documents as any Lender through the Agent may reasonably
request.

 

SECTION 3.03.  Determinations
Under Section 3.01.  For purposes of
determining compliance with the conditions specified in Section 3.01, each
Lender shall be deemed to have consented to, approved or accepted or to be
satisfied with each document or other matter required thereunder to be
consented to or approved by or acceptable or satisfactory to the Lenders unless
an officer of the Agent responsible for the transactions contemplated by this
Agreement shall have received notice from such Lender prior to the date that
the Borrower, by notice to the Lenders, designates as the proposed Effective
Date, specifying its objection thereto. The Agent shall promptly notify the
Lenders of the occurrence of the Effective Date.

 

ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES

 

SECTION 4.01.  Representations
and Warranties of the Borrower.  The
Borrower represents and warrants as follows:

 

(a)           The
Borrower is a limited partnership duly organized, validly existing and in good
standing under the laws of the State of Delaware. The General Partner is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware.

 

(b)           The
execution, delivery and performance by the Borrower of this Agreement and the
Notes to be delivered by it, and the consummation of the transactions
contemplated hereby, are within the Borrower’s partnership or the General
Partner’s general corporate powers, have been duly authorized by all necessary
action by or on behalf of the General Partner or the Borrower (including,
without limitation, all necessary partner, managing member or other similar
action), and do not contravene (i) the Borrower’s or the General Partner’s
organizational documents or (ii) any material law or any material
contractual restriction binding on or affecting the Borrower.

 

(c)           No
material authorization or approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body or any other third
party is required for the due execution, delivery and performance by the
Borrower or any general partner or managing member of the Borrower of this
Agreement or the Notes to be delivered by it.

 

 

(d)           This
Agreement has been, and each of the Notes to be delivered by it when delivered
hereunder will have been, duly executed and delivered by the Borrower. This
Agreement is, and each of the Notes when delivered hereunder will be, the
legal, valid and binding obligation of the Borrower enforceable against the
Borrower in accordance with their respective terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the enforcement of creditors’ rights generally and by
general equitable principles (whether enforcement is sought by proceedings in
equity or at law).

 

(e)           The
Consolidated balance sheet of the Borrower and its Subsidiaries as at
December 31, 2005, and the related Consolidated statements of
comprehensive income and cash flows of the Borrower and its Subsidiaries for
the fiscal year then ended, accompanied by an opinion of KPMG LLP, independent
public accountants, copies of which have been furnished to each Lender, fairly
present the Consolidated financial condition of the Borrower and its
Subsidiaries as at such date and the Consolidated results of the operations of
the Borrower and its Subsidiaries for the period ended on such date, all in
accordance with generally accepted accounting principles in the United States
of America consistently applied.

 

(f)            Since
December 31, 2005, there has been no Material Adverse Change.

 

(g)           There
is no pending or, to the knowledge of the Borrower, threatened action, suit,
investigation, litigation or proceeding, including, without limitation, any
Environmental Action, against the General Partner, the Borrower or any of its
Subsidiaries (other than the Disclosed Litigation) before any court,
governmental agency or arbitrator that (i) is reasonably likely to have a
Material Adverse Effect or (ii) purports to affect the legality, validity
or enforceability of this Agreement or any Note or the consummation of the
transactions contemplated hereby.

 

(h)           The
Borrower is not engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulation U
issued by the Board of Governors of the Federal Reserve System), and no
proceeds of any Advance will be used to purchase or carry any margin stock or
to extend credit to others for the purpose of purchasing or carrying any margin
stock.

 

(i)            The
Borrower is not an “investment company”, or a company “controlled” by an “investment
company”, within the meaning of the Investment Company Act of 1940, as amended.

 

(j)            Neither
the Information Memorandum nor any other information, exhibit or report
furnished by or on behalf of the Borrower to the Agent or any Lender in
connection with the negotiation and syndication of this Agreement or pursuant
to the terms of this Agreement (other than projections, if any, and pro forma
information) contained any untrue statement of a material fact or omitted to
state a material fact necessary to make the statements made therein not
materially misleading. The projections, if any, and pro forma financial
information contained in the materials referenced above are based upon good
faith estimates and assumptions believed by management of the Borrower to be
reasonable at the time made, it being recognized by the Lenders that such
financial information as it relates to future events is not to be viewed as
fact and that actual results during the period or periods covered by such
financial information may differ from the projected results set forth therein
by a material amount.

 

(k)           The
Borrower is, individually and together with its Subsidiaries, Solvent.

 

ARTICLE V

 

COVENANTS OF THE BORROWER

 

SECTION 5.01.  Affirmative Covenants.  So long as any Advance shall remain
unpaid or any Lender shall have any Commitment hereunder, the Borrower will:

 

 

 

(a)           Compliance
with Laws, Etc. Comply, and cause each of its Subsidiaries to comply with
all applicable laws, rules, regulations and orders, such compliance to include,
without limitation, compliance with ERISA, Environmental Laws and the Patriot
Act except to the extent that failure to comply therewith would not reasonably
be expected, individually or in the aggregate, to result in a Material Adverse
Effect.

 

(b)           Payment
of Taxes, Etc. Pay and discharge, and cause each of its Subsidiaries to pay
and discharge, before the same shall become delinquent, (i) all taxes,
assessments and governmental charges or levies imposed upon it or upon its
property and (ii) all lawful claims that, if unpaid, might by law become a
Lien upon its property; provided, however, that neither the
Borrower nor any of its Subsidiaries shall be required to pay or discharge any
such tax, assessment, charge or claim if (i) it is being contested in good
faith and by proper proceedings and as to which appropriate reserves are being
maintained or (ii) the nonpayment of all such taxes, assessments, charges or
claims in the aggregate would not reasonably be expected, individually or in
the aggregate, to result in a Material Adverse Effect.

 

(c)           Maintenance
of Insurance. Maintain, and cause each of its Subsidiaries to maintain,
insurance with responsible and reputable insurance companies or associations in
such amounts and covering such risks as is usually carried by companies of
comparable size and financial strength engaged in similar businesses and owning
similar properties in the same general areas in which the Borrower or such
Subsidiary operates, which may include self-insurance, if determined by the
Borrower to be reasonably prudent and consistent with business practices as in
effect on the date hereof.

 

(d)           Preservation
of Existence, Etc. Preserve and maintain, and cause each of its
Subsidiaries to preserve and maintain, its (i) legal existence; provided,
however, that the Borrower and its Subsidiaries may consummate any merger
or consolidation permitted under Section 5.02(b) and (ii) rights (charter
and statutory) and franchises; provided  further that neither the
Borrower nor any of its Subsidiaries shall be required to preserve any right or
franchise if the Board of Directors (or persons performing similar functions)
of or on behalf of the Borrower or such Subsidiary shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Borrower or such Subsidiary, as the case may be, and that the loss thereof
is not reasonably likely to have a Material Adverse Effect.

 

(e)           Visitation
Rights. At any reasonable time and from time to time and upon reasonable
notice, permit the Agent or any of its agents or representatives, to (i) permit
the Agent or any representatives thereof to examine and make copies of and
abstracts from the records and books of account of, and visit the properties
of, the Borrower and any of its Subsidiaries, and to discuss the affairs,
finances and accounts of the Borrower and any of its Subsidiaries with any of
their officers or directors and (ii) use commercially reasonable efforts to
provide for the Agent or any representatives thereof (in the presence of
representatives of the Borrower) to meet with the independent certified public
accountants of the Borrower and its Subsidiaries; provided, that any
such visits or inspections shall be subject to such conditions as the Borrower
and each of its Subsidiaries shall deem necessary based on reasonable
considerations of safety and security; and provided, further, that neither the
Borrower nor any Subsidiary shall be required to disclose to the Agent or any
representatives thereof any information which is subject to the attorney-client
privilege or attorney work-product privilege properly asserted by the
applicable Person to prevent the loss of such privilege in connection with such
information or which is prevented from disclosure pursuant to a confidentiality
agreement with third parties.

 

(f)            Keeping
of Books. Keep, and cause each of its Subsidiaries to keep, proper books of
record and account, in which full and correct entries shall be made of all
financial transactions and the assets and business of the Borrower and each
such Subsidiary in accordance with generally accepted accounting principles in
effect from time to time.

 

(g)           Maintenance
of Properties, Etc. Maintain and preserve, and cause each of its
Subsidiaries to maintain and preserve, all of its properties that are used or
useful in the conduct of its business in good

 

 

working order and condition, ordinary wear
and tear excepted, except to the extent that failure to do so would not, in the
aggregate, reasonably be expected to have a Material Adverse Effect.

 

(h)           Transactions
with Affiliates. Conduct, and cause each of its Subsidiaries to conduct,
all transactions otherwise permitted under this Agreement with any of their
Affiliates on terms that are fair and reasonable and no less favorable to the
Borrower or such Subsidiary than it would obtain in a comparable arm’s-length
transaction with a Person not an Affiliate.

 

(i)            Reporting
Requirements. Furnish to the Lenders:

 

(i)            as
soon as available and in any event within 45 days after the end of each of the
first three quarters of each fiscal year of the Borrower, the unaudited
Consolidated balance sheet of the Borrower and its Subsidiaries as of the end
of such quarter and unaudited Consolidated statements of income and cash flows
of the Borrower and its Subsidiaries for the period commencing at the end of
the previous fiscal year and ending with the end of such quarter, duly
certified (subject to year-end audit adjustments) by the chief financial
officer (or person performing similar functions) of the General Partner as
having been prepared in accordance with generally accepted accounting
principles and certificates of the chief executive officer, chief financial
officer or controller of the Borrower (or the General Partner) as to compliance
with the terms of this Agreement and setting forth in reasonable detail the calculations
necessary to demonstrate compliance with Section 5.03, provided
that in the event of any change in generally accepted accounting principles
used in the preparation of such financial statements, the Borrower shall also
provide, if necessary for the determination of compliance with
Section 5.03, a statement of reconciliation conforming such financial
statements to GAAP;

 

(ii)           as
soon as available and in any event within 105 days after the end of each fiscal
year of the Borrower, a copy of the annual audit report for such year for the
Borrower and its Subsidiaries, containing the Consolidated balance sheet of the
Borrower and its Subsidiaries as of the end of such fiscal year and
Consolidated statements of income and cash flows of the Borrower and its
Subsidiaries for such fiscal year, in each case accompanied by an opinion,
without a “going concern” or like qualification or exception, or qualification
arising out of the scope of the audit, by KPMG LLP or other independent public
accountants of nationally recognized standing and certificates of the chief
financial officer (or person performing similar functions) of the Borrower (or
the General Partner) as to compliance with the terms of this Agreement and
setting forth in reasonable detail the calculations necessary to demonstrate
compliance with Section 5.03, provided that in the event of any
change in generally accepted accounting principles used in the preparation of
such financial statements, the Borrower shall also provide, if necessary for
the determination of compliance with Section 5.03, a statement of
reconciliation conforming such financial statements to GAAP;

 

(iii)          as
soon as possible and in any event within five Business Days after the
occurrence of each Default continuing on the date of such statement, a
statement of the chief financial officer (or person performing similar
functions) of the Borrower (or the General Partner) setting forth details of
such Default and the action that the Borrower has taken and proposes to take
with respect thereto;

 

(iv)          promptly
after the sending or filing thereof, copies of all reports that the Borrower
sends to any of its securityholders, and copies of all reports and registration
statements that the Borrower or any Subsidiary files with the SEC;

 

(v)           promptly
after the commencement thereof, notice of all actions and proceedings before
any court, governmental agency or arbitrator affecting the General Partner, the
Borrower or any of its Subsidiaries of the type described in
Section 4.01(g); and

 

 

(vi)          such
other information respecting the Borrower or any of its Subsidiaries as any
Lender through the Agent may from time to time reasonably request.

 

Notwithstanding the foregoing, the Borrower shall be deemed to have
delivered the reports and registration statements required to be delivered
pursuant to the foregoing clause (iv) upon the filing of such financial
statements, reports and registration statements by the Borrower through the SEC’s
EDGAR system.

 

SECTION 5.02.  Negative
Covenants.  So long as any Advance
shall remain unpaid or any Lender shall have any Commitment hereunder, the
Borrower will not:

 

(a)           Liens, Etc. Create or suffer to exist, or permit
any of its Subsidiaries to create or suffer to exist, any Lien on or with
respect to any of its properties, whether now owned or hereafter acquired, or
assign, or permit any of its Subsidiaries to assign, any right to receive
income, other than:

 

(i)            Permitted
Liens,

 

(ii)           purchase
money Liens upon or in any real property or equipment acquired or held by the Borrower
or any Subsidiary in the ordinary course of business to secure the purchase
price of such property or equipment or to secure Debt incurred solely for the
purpose of financing the acquisition of such property or equipment, or Liens
existing on such property or equipment at the time of its acquisition (other
than any such Liens created in contemplation of such acquisition that were not
incurred to finance the acquisition of such property) or extensions, renewals
or replacements of any of the foregoing for the same or a lesser amount, provided,
however, that no such Lien shall extend to or cover any properties of
any character other than the real property or equipment being acquired, and no
such extension, renewal or replacement shall extend to or cover any properties
not theretofore subject to the Lien being extended, renewed or replaced, provided
further that the aggregate principal amount of the indebtedness secured
by the Liens referred to in this clause (ii) shall not exceed $10,000,000
at any time outstanding,

 

(iii)          the
Liens existing on the Effective Date and described on Schedule 5.02(a)
hereto,

 

(iv)          Liens
on property of a Person existing at the time such Person is merged into or
consolidated with the Borrower or any Subsidiary of the Borrower or becomes a
Subsidiary of the Borrower; provided that such Liens were not created in
contemplation of such merger, consolidation or acquisition and do not extend to
any assets other than those of the Person so merged into or consolidated with
the Borrower or such Subsidiary or acquired by the Borrower or such Subsidiary,

 

(v)           attachment
or judgment Liens not constituting an Event of Default,

 

(vi)          banker’s
liens, rights of setoff and similar Liens with respect to cash and cash
equivalents on deposit in one or more bank accounts in the ordinary course of
business,

 

(vii)         Liens
in favor of collecting banks pursuant to Section 4-208 and Liens in favor of a
buyer of goods arising pursuant to Section 2-711 of the applicable Uniform
Commercial Code,

 

(viii)        Liens
solely on any cash earnest money deposits made by the Borrower or any of its
Subsidiaries in connection with any letter of intent or purchase agreement,

 

(ix)           other
Liens securing Debt or Hedge Agreements in an aggregate principal amount not to
exceed $5,000,000 at any time outstanding, and

 

 

(i)            the  replacement, extension or renewal of any Lien
permitted by clause (iii) or (iv) above upon or in the same property
theretofore subject thereto or the replacement, extension or renewal (without
increase in the amount or change in any direct or contingent obligor) of the
Debt secured thereby.

 

(b)           Mergers, Etc. Merge or consolidate with or into, or
convey, transfer, lease or otherwise dispose of (whether in one transaction or
in a series of transactions) all or substantially all of its assets (whether
now owned or hereafter acquired) to, any Person, or permit any of its
Subsidiaries to do so, except that any Subsidiary of the Borrower may merge or
consolidate with or into, or dispose of assets to, any other Subsidiary of the
Borrower, and except that any Subsidiary of the Borrower may merge into or
dispose of assets to the Borrower and the Borrower may merge with any other
Person so long as the Borrower is the surviving corporation, provided,
in each case, that no Default shall have occurred and be continuing at the time
of such proposed transaction or would result therefrom.

 

(c)           Change
in Nature of Business. Engage, or permit any of its Subsidiaries to engage,
in any business other than those businesses in which the Borrower and its
Subsidiaries are engaged on the Effective Date or a business reasonably related
thereto or such other lines of business as may be consented to by the Required
Lenders.

 

SECTION 5.03.  Financial Covenants.  So long as any Advance shall remain
unpaid or any Lender shall have any Commitment hereunder, the Borrower will:

 

(a)           Coverage
Ratio. Maintain as of the last day of any fiscal quarter a ratio of
Adjusted Cash Flow to Interest Expense, in each case, by the Borrower and its
Subsidiaries for the period of four fiscal quarters then ended, of not less
than 3.50 to 1.00.

 

(b)           Leverage
Ratio. Maintain at all times a Leverage Ratio of not greater than 4.50 to
1.00.

 

ARTICLE VI

 

EVENTS OF DEFAULT

 

SECTION 6.01.  Events
of Default.  If any of the following
events (“Events of Default”) shall occur and be continuing:

 

(a)           The
Borrower shall fail to pay any principal of any Advance when the same becomes
due and payable; or the Borrower shall fail to pay any interest on any Advance
or make any other payment of fees or other amounts payable under this Agreement
or any Note within five Business Days after the same becomes due and payable;
or

 

(b)           Any
representation or warranty made by the Borrower herein or by the Borrower (or
any of its officers (or persons performing similar functions)) in connection
with this Agreement shall prove to have been incorrect in any material respect
when made; or

 

(c)           (i) The
Borrower shall fail to perform or observe any term, covenant or agreement
contained in Section 5.01(d)(i), (e) or (i), 5.02 or 5.03, or
(ii) the Borrower shall fail to perform or observe any other term,
covenant or agreement contained in this Agreement on its part to be performed
or observed if such failure shall remain unremedied for 30 days after written
notice thereof shall have been given to the Borrower by the Agent or any
Lender; or

 

(d)           (i)
The Borrower or any of its Significant Subsidiaries shall fail to pay any
principal of or premium or interest on any Debt that is outstanding in a
principal or notional amount of at least $15,000,000 in the aggregate (but
excluding Debt outstanding hereunder) of the Borrower or such Significant
Subsidiary (as the case may be), when the same becomes due and payable (whether
by

 

 

scheduled maturity, required prepayment,
acceleration, demand or otherwise), and such failure shall continue after the
applicable grace period, if any, specified in the agreement or instrument
relating to such Debt; or any other event shall occur or condition shall exist
under any agreement or instrument relating to any such Debt and shall continue
after the applicable grace period, if any, specified in such agreement or
instrument, if the effect of such event or condition is to accelerate, or to
permit the acceleration of, the maturity of such Debt; or any such Debt shall
be declared to be due and payable, or required to be prepaid or redeemed (other
than by a regularly scheduled required prepayment or redemption), purchased or
defeased, or an offer to prepay, redeem, purchase or defease such Debt shall be
required to be made, in each case prior to the stated maturity thereof; or (ii)
(A) there occurs under any Hedge Agreement an Early Termination Date (as
defined in such Hedge Agreement) resulting from any event of default under such
Hedge Agreement as to which the Borrower or any of its Significant Subsidiaries
is the Defaulting Party (as defined in such Hedge Agreement) and the Hedge
Termination Value owed by the Borrower or any of its Significant Subsidiaries
as a result thereof is greater than (individually or collectively) $15,000,000,
or (B) there occurs under any Hedge Agreement an Early Termination Date (as
defined in such Hedge Agreement) resulting from any Termination Event (as so
defined) under such Hedge Agreement as to which the Borrower or any of its
Significant Subsidiaries is an Affected Party (as so defined) and the Swap
Termination Value owed by the Borrower or any of its Significant Subsidiaries
as a result thereof is greater than (individually or collectively) $15,000,000
and such amount is not paid when due under such Hedge Agreement; or

 

(e)           The
General Partner, the Borrower or any of its Significant Subsidiaries shall
generally not pay its debts as such debts become due, or shall admit in writing
its inability to pay its debts generally, or shall make a general assignment
for the benefit of creditors; or any proceeding shall be instituted by or
against the General Partner, the Borrower or any of its Significant
Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief, or composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry of an
order for relief or the appointment of a receiver, trustee, custodian or other
similar official for it or for any substantial part of its property and, in the
case of any such proceeding instituted against it (but not instituted by it),
either such proceeding shall remain undismissed or unstayed for a period of 60
days, or the entry of an order for relief against, or the appointment of a
receiver, trustee, custodian or other similar official for, it or for any
substantial part of its property shall occur; or the General Partner, the
Borrower or any of its Significant Subsidiaries shall take any corporate action
to authorize any of the actions set forth above in this subsection (e); or

 

(f)            Judgments
or orders for the payment of money in excess of $15,000,000 in the aggregate
shall be rendered against the Borrower or any of its Significant Subsidiaries
and either (i) enforcement proceedings shall have been commenced by any
creditor upon such judgment or order or (ii) there shall be any period of
30 consecutive days during which a stay of enforcement of such judgment or
order, by reason of a pending appeal or otherwise, shall not be in effect; provided,
however, that any such judgment or order shall not be an Event of
Default under this Section 6.01(f) if and for so long as (i) the
amount of such judgment or order is covered (subject to customary deductibles)
by a valid and binding policy of insurance between the defendant and the
insurer covering payment thereof and (ii) such insurer, which shall be
rated at least “A-” by A.M. Best Company, has been notified of, and has not
denied coverage of, the amount of such judgment or order; or

 

(g)           Any
non-monetary judgment or order shall be rendered against the Borrower or any of
its Significant Subsidiaries that is reasonably expected to have a Material
Adverse Effect, and there shall be any period of 30 consecutive days during
which a stay of enforcement of such judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect; or

 

(h)           (i) Any
Person or two or more Persons acting in concert (other than TransCanada
Corporation or any of its Subsidiaries) shall have acquired beneficial
ownership (within the meaning of Rule 13d-3 of the SEC under the
Securities Exchange Act of 1934), directly or indirectly, of Voting Stock of
the General Partner (or other securities convertible into such Voting Stock)
(A) representing 50% or

 

 

more of the combined voting power of all
Voting Stock of the General Partner or (B) representing the combined voting
power of all Voting Stock of the General Partner more than that owned, directly
or indirectly, by TransCanada Corporation; or (ii) any Person or two or
more Persons acting in concert (other than TransCanada Corporation or any of
its Subsidiaries or any other Person reasonably acceptable to the Required
Lenders) shall have acquired by contract or otherwise, or shall have entered
into a contract or arrangement that, upon consummation, will result in its or
their acquisition of the power to exercise, directly or indirectly, a
controlling influence over the management or policies of the General Partner;
or (iii) the General Partner shall for any reason cease to be the managing
general partner of the Borrower; or

 

(i)            The
Borrower or any of its ERISA Affiliates shall incur, or shall be reasonably
likely to incur liability in excess of $15,000,000 in the aggregate as a result
of one or more of the following: 
(i) the occurrence of any ERISA Event; (ii) the partial or
complete withdrawal of the Borrower or any of its ERISA Affiliates from a
Multiemployer Plan; or (iii) the reorganization or termination of a
Multiemployer Plan;

 

then, and in any such event, the Agent (i) shall
at the request, or may with the consent, of the Required Lenders, by notice to
the Borrower, declare the obligation of each Lender to make Advances to be
terminated, whereupon the same shall forthwith terminate, and (ii) shall
at the request, or may with the consent, of the Required Lenders, by notice to
the Borrower, declare the Advances, all interest thereon and all other amounts
payable under this Agreement to be forthwith due and payable, whereupon the
Advances, all such interest and all such amounts shall become and be forthwith
due and payable, without presentment, demand, protest or further notice of any
kind, all of which are hereby expressly waived by the Borrower; provided,
however, that in the event of an actual or deemed entry of an order for
relief with respect to the Borrower under the Federal Bankruptcy Code,
(A) the obligation of each Lender to make Advances shall automatically be
terminated and (B) the Advances, all such interest and all such amounts
shall automatically become and be due and payable, without presentment, demand,
protest or any notice of any kind, all of which are hereby expressly waived by
the Borrower.

 

ARTICLE VII

 

THE AGENT

 

SECTION 7.01.  Authorization
and Action.  Each Lender hereby
appoints and authorizes the Agent to take such action as agent on its behalf
and to exercise such powers and discretion under this Agreement as are
delegated to the Agent by the terms hereof, together with such powers and
discretion as are reasonably incidental thereto. As to any matters not
expressly provided for by this Agreement (including, without limitation,
enforcement or collection of the Notes), the Agent shall not be required to
exercise any discretion or take any action, but shall be required to act or to
refrain from acting (and shall be fully protected in so acting or refraining
from acting) upon the instructions of the Required Lenders, and such
instructions shall be binding upon all Lenders and all holders of Notes; provided,
however, that the Agent shall not be required to take any action that
exposes the Agent to personal liability or that is contrary to this Agreement
or applicable law. The Agent agrees to give to each Lender prompt notice of
each notice given to it by the Borrower pursuant to the terms of this
Agreement.

 

SECTION 7.02.  Agent’s
Reliance, Etc.  Neither the Agent nor
any of its directors, officers, agents or employees shall be liable for any
action taken or omitted to be taken by it or them under or in connection with
this Agreement, except for its or their own gross negligence or willful
misconduct. Without limitation of the generality of the foregoing, the
Agent:  (i) may treat the Lender
that made any Advance as the holder of the Debt resulting therefrom until the
Agent receives and accepts an Assignment and Acceptance entered into by such
Lender, as assignor, and an Eligible Assignee, as assignee, as provided in Section 8.07;
(ii) may consult with legal counsel (including counsel for the Borrower),
independent public accountants and other experts selected by it and shall not
be liable for any action taken or omitted to be taken in good faith by it in
accordance with  the advice of such
counsel, accountants or experts; (iii) makes no warranty or representation
to any Lender and shall not be responsible to any Lender for any statements,
warranties or representations (whether written or oral) made in or in
connection with this Agreement; (iv) shall not have any duty to ascertain
or to inquire as to the performance, observance or satisfaction of any of the
terms, covenants or conditions of this Agreement on the part of the Borrower
or  the existence at any time of any
Default or to inspect the property (including the books and records) of the
Borrower;

 

 

(v) shall not be
responsible to any Lender for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any
other instrument or document furnished pursuant hereto; and (vi) shall
incur no liability under or in respect of this Agreement by acting upon any
notice, consent, certificate or other instrument or writing (which may be by
telecopier) believed by it to be genuine and signed or sent by the proper party
or parties.

 

SECTION 7.03.  CNAI
and Affiliates.  With respect to its
Commitment, the Advances made by it and the Note issued to it, CNAI shall have
the same rights and powers under this Agreement as any other Lender and may
exercise the same as though it were not the Agent; and the term “Lender” or “Lenders”
shall, unless otherwise expressly indicated, include CNAI in its individual
capacity. CNAI and its Affiliates may accept deposits from, lend money to, act
as trustee under indentures of, accept investment banking engagements from and
generally engage in any kind of business with, the Borrower, any of its
Subsidiaries and any Person who may do business with or own securities of the
Borrower or any such Subsidiary, all as if CNAI were not the Agent and without
any duty to account therefor to the Lenders. The Agent shall have no duty to
disclose any information obtained or received by it or any of its Affiliates
relating to the Borrower or any of its Subsidiaries to the extent such
information was obtained or received in any capacity other than as Agent.

 

SECTION 7.04.  Lender
Credit Decision.  Each Lender
acknowledges that it has, independently and without reliance upon the Agent or
any other Lender and based on the financial statements referred to in
Section 4.01 and such other documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently and
without reliance upon the Agent or any other Lender and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Agreement.

 

SECTION 7.05.  Indemnification.
 The Lenders agree to indemnify the Agent
(to the extent not reimbursed by the Borrower), from and against such Lender’s
pro rata share (determined as provided below) of any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever that may be imposed
on, incurred by, or asserted against the Agent in any way relating to or
arising out of this Agreement or any action taken or omitted by the Agent under
this Agreement (collectively, the “Indemnified Costs”), provided
that no Lender shall be liable for any portion of the Indemnified Costs
resulting from the Agent’s gross negligence or willful misconduct. Without
limitation of the foregoing, each Lender agrees to reimburse the Agent promptly
upon demand for its ratable share of any out-of-pocket expenses (including
counsel fees) incurred by the Agent in connection with the preparation,
execution, delivery, administration, modification, amendment or enforcement
(whether through negotiations, legal proceedings or otherwise) of, or legal
advice in respect of rights or responsibilities under, this Agreement, to the
extent that the Agent is not reimbursed for such expenses by the Borrower. In
the case of any investigation, litigation or proceeding giving rise to any
Indemnified Costs, this Section 7.05 applies whether any such
investigation, litigation or proceeding is brought by the Agent, any Lender or
a third party. For purposes of this Section 7.05(a), the Lenders’ respective
pro rata shares of any amount shall be determined, at any time, according to
the aggregate principal amount of the Advances outstanding at such time and
owing to the respective Lenders.

 

SECTION 7.06.  Successor
Agent.  The Agent may resign at any
time by giving written notice thereof to the Lenders and the Borrower and may
be removed at any time with or without cause by the Required Lenders. Upon any
such resignation or removal, the Required Lenders shall have the right to
appoint a successor Agent, which successor Agent (unless an Event of Default
shall have occurred and be continuing) shall be subject to the approval of the
Borrower (which approval will not be unreasonably withheld or delayed). If no
successor Agent shall have been so appointed by the Required Lenders, and if no
successor Agent shall have accepted such appointment, within 30 days after the
retiring Agent’s giving of notice of resignation or the Required Lenders’
removal of the retiring Agent, then the retiring Agent may, on behalf of the
Lenders, appoint a successor Agent, which shall be a commercial bank organized
under the laws of the United States of America or of any State thereof and
having a combined capital and surplus of at least $500,000,000, which successor
Agent (unless an Event of Default shall have occurred and be continuing) shall
be subject to the approval of the Borrower (which approval will not be
unreasonably withheld or delayed). Upon the acceptance of any appointment as
Agent hereunder by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers, discretion,
privileges and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and 

 

 

 

obligations under this
Agreement. After any retiring Agent’s resignation or removal hereunder as
Agent, the provisions of this Article VII shall inure to its benefit as to
any actions taken or omitted to be taken by it while it was Agent under this
Agreement.

 

SECTION 7.07.  Other
Agents.  Each Lender hereby
acknowledges that neither the documentation agent nor any other Lender
designated as any “Agent” on the signature pages hereof has any liability
hereunder other than in its capacity as a Lender.

 

ARTICLE VIII

 

MISCELLANEOUS

 

SECTION 8.01.  Amendments, Etc.  No amendment or waiver of any
provision of this Agreement or the Notes, nor consent to any departure by the
Borrower therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Required Lenders, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given; provided, however, that (a) no amendment, waiver
or consent shall, unless in writing and signed by all the Lenders, do any of
the following:  (i) waive any of the
conditions specified in Section 3.01, (ii) change the percentage of the
Commitments or of the aggregate unpaid principal amount of the Advances, or the
number of Lenders, that shall be required for the Lenders or any of them to take
any action hereunder or (iii) amend this Section 8.01 and (b) no
amendment, waiver or consent shall, unless in writing and signed by the
Required Lenders and each Lender that is directly affected by such amendment,
waiver or consent, (i) reduce the principal of, or interest on, the
Advances or any fees or other amounts payable hereunder to such Lender or
(ii) postpone any date fixed for any payment of principal of, or interest
on, the Advances or any fees or other amounts payable hereunder to such Lender;
and provided  further that no amendment, waiver or consent shall,
unless in writing and signed by the Agent in addition to the Lenders required
above to take such action, affect the rights or duties of the Agent under this
Agreement or any Note.

 

SECTION 8.02.  Notices, Etc.  (a) 
All notices and other communications provided for hereunder shall be
either (x) in writing (including telecopier or telegraphic communication) and
mailed, telecopied, telegraphed or delivered or (y) as and to the extent set
forth in Section 8.02(b) and in the proviso to this Section 8.02(a), if to the
Borrower, at its address at 450 - 1 Street SW, Calgary, AB  T2P 5H1, Attention: Secretary, Fax No. 403
920-2467; if  to any Initial Lender, at
its Domestic Lending Office specified opposite its name on Schedule I
hereto; if to any other Lender, at its Domestic Lending Office specified in the
Assignment and Acceptance pursuant to which it became a Lender; and if to the
Agent, at its address at Two Penns Way, New Castle, Delaware 19720, Attention:
Bank Loan Syndications Department; or, as to the Borrower or the Agent, at such
other address as shall be designated by such party in a written notice to the
other parties and, as to each other party, at such other address as shall be
designated by such party in a written notice to the Borrower and the Agent, provided
that materials required to be delivered pursuant to Section 5.01(i)(i), (ii) or
(iv) shall be delivered to the Agent as specified in Section 8.02(b) or as
otherwise specified to the Borrower by the Agent. All such notices and
communications shall, when mailed, telecopied or e-mailed, be effective when
deposited in the mails, telecopied or confirmed by e-mail, respectively, except
that notices and communications to the Agent pursuant to Article II, III
or VII shall not be effective until received by the Agent. Delivery by
telecopier of an executed counterpart of any amendment or waiver of any
provision of this Agreement or the Notes or of any Exhibit hereto to be
executed and delivered hereunder shall be effective as delivery of a manually
executed counterpart thereof.

 

(b)           So long as CNAI or any of
its Affiliates is the Agent, materials required to be delivered pursuant to
Section 5.01(i)(i), (ii) and (iv) shall be delivered to the Agent in an
electronic medium in a format acceptable to the Agent and the Lenders by e-mail
at oploanswebadmin@citigroup.com. The Borrower agrees that the Agent may make
such materials, as well as any other written information, documents,
instruments and other material relating to the Borrower, any of its
Subsidiaries or any other materials or matters relating to this Agreement, the
Notes or any of the transactions contemplated hereby (collectively, the “Communications”)
available to the Lenders by posting such notices on Intralinks or a
substantially similar electronic system (the “Platform”). The Borrower
acknowledges that (i) the distribution of material through an electronic medium
is not necessarily secure and that there are confidentiality and other risks
associated with such distribution, (ii) the Platform is provided “as is” and “as
available” and (iii) neither the Agent nor any of its Affiliates warrants the
accuracy, adequacy or completeness of the Communications or the Platform and
each expressly disclaims liability for errors or omissions in the

 

 

Communications or the Platform. No warranty of any kind, express,
implied or statutory, including, without limitation, any warranty of
merchantability, fitness for a particular purpose, non-infringement of third
party rights or freedom from viruses or other code defects, is made by the
Agent or any of its Affiliates in connection with the Platform.

 

(c)           Each
Lender agrees that notice to it (as provided in the next sentence) (a “Notice”)
specifying that any Communications have been posted to the Platform shall
constitute effective delivery of such information, documents or other materials
to such Lender for purposes of this Agreement; provided that if
requested by any Lender the Agent shall deliver a copy of the Communications to
such Lender by email or telecopier. Each Lender agrees (i) to notify the Agent
in writing of such Lender’s e-mail address to which a Notice may be sent by
electronic transmission (including by electronic communication) on or before the
date such Lender becomes a party to this Agreement (and from time to time
thereafter to ensure that the Agent has on record an effective e-mail address
for such Lender) and (ii) that any Notice may be sent to such e-mail address.

 

SECTION 8.03.  No
Waiver; Remedies.  No failure on the
part of any Lender or the Agent to exercise, and no delay in exercising, any
right hereunder or under any Note shall operate as a waiver thereof; nor shall
any single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.

 

SECTION 8.04.  Costs
and Expenses.  (a)  The Borrower agrees to pay on demand all
reasonable costs and expenses of the Agent in connection with the preparation,
execution, delivery, administration, modification and amendment of this
Agreement, the Notes and the other documents to be delivered hereunder,
including, without limitation, (A) all due diligence, syndication
(including printing, distribution and bank meetings), transportation, computer,
duplication, appraisal, consultant, and audit expenses and (B) the
reasonable fees and expenses of counsel for the Agent with respect thereto and
with respect to advising the Agent as to its rights and responsibilities under
this Agreement. The Borrower further agrees to pay on demand all reasonable
costs and expenses of the Agent and the Lenders, if any (including, without
limitation, reasonable counsel fees and expenses), in connection with the
enforcement (whether through negotiations, legal proceedings or otherwise) of
this Agreement, the Notes and the other documents to be delivered hereunder,
including, without limitation, reasonable fees and expenses of counsel for the
Agent and each Lender in connection with the enforcement of rights under this
Section 8.04(a).

 

(b)           The Borrower agrees
to indemnify and hold harmless the Agent and each Lender and each of their
Affiliates and their officers, directors, employees, agents and advisors (each,
an “Indemnified Party”) from and against any and all claims, damages,
losses, liabilities and expenses (including, without limitation, reasonable
fees and expenses of counsel) incurred by or asserted or awarded against any
Indemnified Party, in each case arising out of or in connection with or by
reason of (including, without limitation, in connection with any investigation,
litigation or proceeding or preparation of a defense in connection therewith)
(i) the Notes, this Agreement, any of the transactions contemplated herein
or the actual or proposed use of the proceeds of the Advances or (ii) the
actual or alleged presence of Hazardous Materials on any property of the
Borrower or any of its Subsidiaries or any Environmental Action relating in any
way to the Borrower or any of its Subsidiaries, except to the extent such
claim, damage, loss, liability or expense is found in a final, non-appealable
judgment by a court of competent jurisdiction to have resulted from such Indemnified
Party’s gross negligence or willful misconduct. In the case of an
investigation, litigation or other proceeding to which the indemnity in this
Section 8.04(b) applies, such indemnity shall be effective whether or not such
investigation, litigation or proceeding is brought by the Borrower, its
directors, equityholders or creditors or an Indemnified Party or any other
Person, whether or not any Indemnified Party is otherwise a party thereto and
whether or not the transactions contemplated hereby are consummated. The
Borrower also agrees not to assert any claim for special, indirect,
consequential or punitive damages against the Agent, any Lender, any of their
Affiliates, or any of their respective directors, officers, employees,
attorneys and agents, on any theory of liability, arising out of or otherwise
relating to the Notes, this Agreement, any of the transactions contemplated
herein or the actual or proposed use of the proceeds of the Advances.

 

(c)           If any payment of
principal of, or Conversion of, any Eurodollar Rate Advance is made by the
Borrower to or for the account of a Lender other than on the last day of the
Interest Period for such Advance, as a result of a payment or Conversion
pursuant to Section 2.07(d) or (e), 2.09 or 2.11, acceleration of the
maturity of the Notes pursuant to Section 6.01 or for any other reason, or
by an Eligible Assignee to a Lender other than on

 

 

the last day of the
Interest Period for such Advance upon an assignment of rights and obligations
under this Agreement pursuant to Section 8.07 as a result of a demand by the
Borrower pursuant to Section 8.07(a), the Borrower shall, upon demand by such
Lender (with a copy of such demand to the Agent), pay to the Agent for the
account of such Lender any amounts required to compensate such Lender for any
additional losses, costs or expenses that it may reasonably incur as a result
of such payment or Conversion, including, without limitation, any loss
(including loss of anticipated profits), cost or expense incurred by reason of
the liquidation or reemployment of deposits or other funds acquired by any
Lender to fund or maintain such Advance.

 

(d)           Without prejudice
to the survival of any other agreement of the Borrower hereunder, the
agreements and obligations of the Borrower contained in Sections 2.10,
2.13 and 8.04 shall survive the payment in full of principal, interest and all
other amounts payable hereunder and under the Notes.

 

SECTION 8.05.  Right
of Set-off.  Upon (i) the
occurrence and during the continuance of any Event of Default and (ii) the
making of the request or the granting of the consent specified by
Section 6.01 to authorize the Agent to declare the Notes due and payable
pursuant to the provisions of Section 6.01, each Lender and each of its
Affiliates is hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by such Lender or such Affiliate to or for
the credit or the account of the Borrower against any and all of the
obligations of the Borrower now or hereafter existing under this Agreement and
the Note held by such Lender, whether or not such Lender shall have made any
demand under this Agreement or such Note and although such obligations may be
unmatured. Each Lender agrees promptly to notify the Borrower after any such
set-off and application, provided that the failure to give such notice
shall not affect the validity of such set-off and application. The rights of
each Lender and its Affiliates under this Section are in addition to other
rights and remedies (including, without limitation, other rights of set-off)
that such Lender and its Affiliates may have.

 

SECTION 8.06.  Binding
Effect.  This Agreement shall become
effective (other than Section 2.01, which shall only become effective upon
satisfaction of the conditions precedent set forth in Section 3.01) when
it shall have been executed by the Borrower and the Agent and when the Agent
shall have been notified by each Initial Lender that such Initial Lender has
executed it and thereafter shall be binding upon and inure to the benefit of
the Borrower, the Agent and each Lender and their respective successors and
assigns, except that the Borrower shall not have the right to assign its rights
hereunder or any interest herein without the prior written consent of the
Lenders.

 

SECTION 8.07.  Assignments
and Participations.  (a)  Each Lender may and, if demanded by the Borrower
(following a demand by such Lender pursuant to Section 2.10 or 2.13) upon
at least five Business Days’ notice to such Lender and the Agent, will assign
to one or more Persons all or a portion of its rights and obligations under
this Agreement (including, without limitation, all or a portion of its
Commitment, the Advances owing to it and the Note or Notes held by it); provided,
however, that (i) each such assignment shall be of a constant, and
not a varying, percentage of all rights and obligations under this Agreement,
(ii) except in the case of an assignment to a Person that, immediately
prior to such assignment, was a Lender or an assignment of all of a Lender’s
rights and obligations under this Agreement, the amount of the Commitment of
the assigning Lender being assigned pursuant to each such assignment
(determined as of the date of the Assignment and Acceptance with respect to
such assignment) shall in no event be less than $5,000,000 unless the Borrower
and the Agent otherwise agree, (iii) each such assignment shall be to an
Eligible Assignee, (iv) each such assignment made as a result of a demand by
the Borrower pursuant to this Section 8.07(a) shall be arranged by the
Borrower after consultation with the Agent and shall be either an assignment of
all of the rights and obligations of the assigning Lender under this Agreement
or an assignment of a portion of such rights and obligations made concurrently
with another such assignment or other such assignments that together cover all
of the rights and obligations of the assigning Lender under this Agreement,
(v) no Lender shall be obligated to make any such assignment as a result
of a demand by the Borrower pursuant to this Section 8.07(a) unless and
until such Lender shall have received one or more payments from either the
Borrower or one or more Eligible Assignees in an aggregate amount at least
equal to the aggregate outstanding principal amount of the Advances owing to
such Lender, together with accrued interest thereon to the date of payment of
such principal amount and all other amounts payable to such Lender under this
Agreement, and (vi) the parties to each such assignment shall execute and
deliver to the Agent, for its acceptance and recording in the Register, an
Assignment and Acceptance, together with any Note subject to such assignment
and a processing and recordation fee of $3,500 payable by the parties to each
such assignment, provided, however, that in the case of each

 

 

assignment made as a
result of a demand by the Borrower, such recordation fee shall be payable by
the Borrower except that no such recordation fee shall be payable in the case
of an assignment made at the request of the Borrower to an Eligible Assignee
that is an existing Lender. Upon such execution, delivery, acceptance and
recording, from and after the effective date specified in each Assignment and
Acceptance, (x) the assignee thereunder shall be a party hereto and, to
the extent that rights and obligations hereunder have been assigned to it
pursuant to such Assignment and Acceptance, have the rights and obligations of
a Lender hereunder and (y) the Lender assignor thereunder shall, to the
extent that rights and obligations hereunder have been assigned by it pursuant
to such Assignment and Acceptance, relinquish its rights (other than its rights
under Sections 2.10, 2.13 and 8.04 to the extent any claim thereunder relates
to an event arising prior to such assignment) and be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender’s
rights and obligations under this Agreement, such Lender shall cease to be a
party hereto).

 

(b)           By executing and
delivering an Assignment and Acceptance, the Lender assignor thereunder and the
assignee thereunder confirm to and agree with each other and the other parties
hereto as follows:  (i) other than
as provided in such Assignment and Acceptance, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other instrument or document
furnished pursuant hereto; (ii) such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of the General Partner or the Borrower or the performance
or observance by the Borrower of any of its obligations under this Agreement or
any other instrument or document furnished pursuant hereto; (iii) such
assignee confirms that it has received a copy of this Agreement, together with
copies of the financial statements referred to in Section 4.01 and such
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment and Acceptance;
(iv) such assignee will, independently and without reliance upon the
Agent, such assigning Lender or any other Lender and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Agreement;
(v) such assignee confirms that it is an Eligible Assignee; (vi) such
assignee appoints and authorizes the Agent to take such action as agent on its
behalf and to exercise such powers and discretion under this Agreement as are
delegated to the Agent by the terms hereof, together with such powers and
discretion as are reasonably incidental thereto; and (vii) such assignee
agrees that it will perform in accordance with their terms all of the
obligations that by the terms of this Agreement are required to be performed by
it as a Lender.

 

(c)           Upon its receipt of
an Assignment and Acceptance executed by an assigning Lender and an assignee
representing that it is an Eligible Assignee, together with any Note or Notes
subject to such assignment, the Agent shall, if such Assignment and Acceptance
has been completed and is in substantially the form of Exhibit C hereto,
(i) accept such Assignment and Acceptance, (ii) record the
information contained therein in the Register and (iii) give prompt notice
thereof to the Borrower.

 

(d)           The Agent shall
maintain at its address referred to in Section 8.02 a copy of each
Assignment and Acceptance delivered to and accepted by it and a register for
the recordation of the names and addresses of the Lenders and the Commitment
of, and principal amount of the Advances owing to, each Lender from time to
time (the “Register”). The entries in the Register shall be conclusive
and binding for all purposes, absent manifest error, and the Borrower, the
Agent and the Lenders may treat each Person whose name is recorded in the
Register as a Lender hereunder for all purposes of this Agreement. The Register
shall be available for inspection by the Borrower or any Lender at any
reasonable time and from time to time upon reasonable prior notice.

 

(e)           Each Lender may
sell participations to one or more banks or other entities (other than the
Borrower or any of its Affiliates) in or to all or a portion of its rights and
obligations under this Agreement (including, without limitation, all or a
portion of its Commitment, the Advances owing to it and any Note or Notes held
by it); provided, however, that (i) such Lender’s
obligations under this Agreement (including, without limitation, its Commitment
to the Borrower hereunder) shall remain unchanged, (ii) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations, (iii) such Lender shall remain the holder of any such
Note for all purposes of this Agreement, (iv) the Borrower, the Agent and
the other Lenders shall continue to deal solely and directly with such Lender
in connection with such Lender’s rights and obligations under this Agreement
and (v) no participant under any such participation shall have any right
to approve any amendment or waiver of any provision of this Agreement or any
Note, or any consent to any departure by the Borrower

 

 

therefrom, except to the
extent that such amendment, waiver or consent would reduce the principal of, or
interest on, the Notes or any fees or other amounts payable hereunder, in each
case to the extent subject to such participation, or postpone any date fixed
for any payment of principal of, or interest on, the Notes or any fees or other
amounts payable hereunder, in each case to the extent subject to such
participation. Notwithstanding anything to the contrary herein, a participant shall
not be entitled to receive any greater payment under Section 2.10 or 2.13 than
the applicable Lender would have been entitled to receive with respect to the
participation sold to such participant. Any participant that is Lender
organized under the laws of a jurisdiction outside the United States shall not
be entitled to the benefits of Section 2.13 unless such participant complies
with Section 2.13(e).

 

(f)            Any Lender may, in
connection with any assignment or participation or proposed assignment or participation
pursuant to this Section 8.07, disclose to the assignee or participant or
proposed assignee or participant, any information relating to the Borrower
furnished to such Lender by or on behalf of the Borrower; provided that,
prior to any such disclosure, the assignee or participant or proposed assignee
or participant shall agree to preserve the confidentiality of any Borrower
Information relating to the Borrower received by it from such Lender to the
standards set forth in Section 8.08.

 

(g)           Notwithstanding any
other provision set forth in this Agreement, any Lender may at any time create
a security interest in all or any portion of its rights under this Agreement
(including, without limitation, the Advances owing to it and any Note or Notes
held by it) in favor of any Federal Reserve Bank in accordance with Regulation
A of the Board of Governors of the Federal Reserve System.

 

SECTION 8.08.  Confidentiality.
 Neither the Agent nor any Lender may
disclose to any Person any confidential, proprietary or non-public information
of the Borrower furnished to the Agent or the Lenders by the Borrower (such
information being referred to collectively herein as the “Borrower Information”), except
that each of the Agent and each of the Lenders may disclose Borrower
Information (i) to its and its affiliates’ employees, officers, directors,
agents and advisors (it being understood that the Persons to whom such
disclosure is made will be informed of the confidential nature of such Borrower
Information and instructed to keep such Borrower Information confidential on
substantially the same terms as provided herein), (ii) to the extent
requested by any regulatory authority, (iii) to the extent required by
applicable laws or regulations or by any subpoena or similar legal process,
(iv) to any other party to this Agreement, (v) in connection with the
exercise of any remedies hereunder or any suit, action or proceeding relating
to this Agreement or the enforcement of rights hereunder, (vi) subject to
an agreement containing provisions substantially the same as those of this
Section 8.08, to any assignee, participant or swap counterparty or prospective
assignee, participant or swap counterparty, (vii) to the extent such Borrower
Information (A) is or becomes generally available to the public on a
non-confidential basis other than as a result of a breach of this Section 8.08
by the Agent or such Lender, or (B) is or becomes available to the Agent or
such Lender on a nonconfidential basis from a source other than the Borrower and
(viii) with the consent of the Borrower; provided that, in the case
of clauses (ii) or (iii), with the exception of disclosure to bank regulatory
authorities, the Agent and each Lender agree, to the extent  practicable and legally permissible, to give
the Borrower prompt prior notice so that it may seek a protective order or
other appropriate remedy.

 

SECTION 8.09.  Governing
Law.  This Agreement and the Notes
shall be governed by, and construed in accordance with, the laws of the State
of New York.

 

SECTION 8.10.  Execution
in Counterparts.  This Agreement may
be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.

 

SECTION 8.11.  Jurisdiction, Etc.  (a)  Each of the parties hereto hereby irrevocably
and unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of any New York State court or federal court of the United
States of America sitting in New York City, and any appellate court from
any thereof, in any action or proceeding arising out of or relating to this
Agreement or the Notes, or for recognition or enforcement of any judgment, and
each of the parties hereto hereby irrevocably and unconditionally agrees that
all claims in respect of any such action or proceeding may be heard and
determined in any such New York State court or, to the extent permitted by
law, in such federal court. The Borrower hereby agrees that service of process
in any such

 

 

action or proceeding brought
in the any such New York State court or in such federal court may be made upon
CT Corporation System at its offices at 1633 Broadway, New York, New York 10019
(the “Process Agent”) and the Borrower hereby irrevocably appoints the
Process Agent its authorized agent to accept such service of process, and
agrees that the failure of the Process Agent to give any notice of any such
service shall not impair or affect the validity of such service or of any
judgment rendered in any action or proceeding based thereon. The Borrower
hereby further irrevocably consents to the service of process in any action or
proceeding in such courts by the mailing thereof by any parties hereto by
registered or certified mail, postage prepaid, to the Borrower at its address
specified pursuant to Section 8.02. Each of the parties hereto agrees that a
final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any right that any
party may otherwise have to bring any action or proceeding relating to this
Agreement or the Notes in the courts of any jurisdiction.

 

(b)           Each of the parties
hereto irrevocably and unconditionally waives, to the fullest extent it may
legally and effectively do so, any objection that it may now or hereafter have
to the laying of venue of any suit, action or proceeding arising out of or
relating to this Agreement or the Notes in any New York State or federal
court. Each of the parties hereto hereby irrevocably waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.

 

SECTION 8.12.  Patriot
Act Notice.  Each Lender and the
Agent (for itself and not on behalf of any Lender) hereby notifies the Borrower
that pursuant to the requirements of the Patriot Act, it is required to obtain,
verify and record information that identifies the Borrower, which information
includes the name and address of the Borrower and other information that will
allow such Lender or the Agent, as applicable, to identify the Borrower in
accordance with the Patriot Act. The Borrower shall provide, to the extent
commercially reasonable, such information and take such actions as are
reasonably requested by the Agent or any Lenders in order to assist the Agent
and the Lenders in maintaining compliance with the Patriot Act.

 

SECTION 8.13.  Judgment.
(a)  If for the purposes of obtaining
judgment in any court it is necessary to convert a sum due hereunder in U.S.
dollars into another currency, the parties hereto agree, to the fullest extent
that they may effectively do so, that the rate of exchange used shall be that
at which in accordance with normal banking procedures the Agent could purchase
U.S. dollars with such other currency at Citibank’s principal office in London
at 11:00 A.M. (London time) on the Business Day preceding that on which final
judgment is given.

 

(b)           The obligation of
the Borrower in respect of any sum due from it in any currency (the “Primary
Currency”) to any Lender or the Agent hereunder shall, notwithstanding any
judgment in any other currency, be discharged only to the extent that on the
Business Day following receipt by such Lender or the Agent (as the case may
be), of any sum adjudged to be so due in such other currency, such Lender or
the Agent (as the case may be) may in accordance with normal banking procedures
purchase the applicable Primary Currency with such other currency; if the
amount of the applicable Primary Currency so purchased is less than such sum
due to such Lender or the Agent (as the case may be) in the applicable Primary
Currency, the Borrower agrees, as a separate obligation and notwithstanding any
such judgment, to indemnify such Lender or the Agent (as the case may be)
against such loss, and if the amount of the applicable Primary Currency so
purchased exceeds such sum due to any Lender or the Agent (as the case may be)
in the applicable Primary Currency, such Lender or the Agent (as the case may
be) agrees to remit to the Borrower such excess.

 

SECTION 8.14.  Non-Recourse
to the General Partner and Associated Persons.  The Agent and each Lender agrees on behalf of
itself and its successors, assigns and legal representatives, that neither the
General Partner nor any Person which is a partner, shareholder, member, owner,
officer, director, supervisor, trustee or other principal (collectively, “Associated Persons”)
of the Borrower, the General Partner, or any of their respective successors or
assigns, shall have any personal liability for the payment or performance of
any of the Borrower’s obligations hereunder or under any of the Notes and no
monetary or other judgment shall be sought or enforced against the General
Partner or any of such Associated Persons or any of their respective successors
or assigns. Notwithstanding the foregoing, neither the Agent nor any Lender
shall be deemed barred by this Section 8.14 from asserting any claim against
any Person based upon an allegation of fraud or misrepresentation.

 

 

SECTION 8.15.  Waiver
of Jury Trial.  Each of the Borrower,
the Agent and the Lenders hereby irrevocably waives all right to trial by jury
in any action, proceeding or counterclaim (whether based on contract, tort or
otherwise) arising out of or relating to this Agreement or the Notes or the
actions of the Agent or any Lender in the negotiation, administration,
performance or enforcement thereof.

 

IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by their respective officers thereunto duly
authorized, as of the date first above written.

 

	
   

  	
  TC PIPELINES, LP

  
	
   

  	
  By its General Partner TC PipeLines GP,
  Inc.

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  CITICORP NORTH AMERICA, INC.,

  
	
   

  	
  as Agent

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
  Syndication
  Agent

  
	
   

  	
   

  
	
   

  	
  UBS LOAN FINANCE LLC

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
  Co-Documentation
  Agents

  
	
   

  	
   

  
	
   

  	
  MIZUHO CORPORATE BANK, LTD.

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.,

  
	
   

  	
  HOUSTON AGENCY

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
  Lender

  
	
   

  	
   

  
	
   

  	
  SUNTRUST BANK

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
  Title:

  
							

 

 

SCHEDULE I

TC PIPELINES, LP

CREDIT AGREEMENT

APPLICABLE LENDING OFFICES

 

	
  Name of Initial Lender

  	
   

  	
  Commitment

  	
   

  	
  Domestic Lending Office

  	
   

  	
  Eurodollar Lending Office

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Citicorp
  North America, Inc.

  	
   

  	
  $

  	
  95,000,000

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  The Bank of
  Tokyo-Mitsubishi UFJ, Ltd., Houston Agency

  	
   

  	
  $

  	
  40,000,000

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Mizuho
  Corporate Bank, Ltd.

  	
   

  	
  $

  	
  40,000,000

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Suntrust
  Bank

  	
   

  	
  $

  	
  40,000,000

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  UBS Loan
  Finance LLC

  	
   

  	
  $

  	
  95,000,000

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total:

  	
   

  	
  $

  	
  310,000,000

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

Schedule 3.01(b)

 

Disclosed Litigation

 

On February 15, 2006, Northern Border Partners, L.P. (“Northern Border”)and
ONEOK, Inc. issued a joint press release announcing certain transactions
relating to (1) the sale of certain assets by ONEOK to Northern Border, (2) the
increase of ONEOK’s general partnership interest in Northern Border to 100% and
(3) the sale by Northern Border of 20% of its interest in Northern Border
Pipeline Company to TC PipeLines Intermediate Limited Partnership (collectively,
the “Transactions”).

 

On March 2, 2006, a holder of limited partnership units of Northern
Border filed a class action and derivative complaint, Civil Action No. 1973-N,
in the New Castle County Chancery Court in the State of Delaware, on behalf of
a putative class of all holders of limited partnership units against Northern
Border, ONEOK, Northern Plains Natural Gas Company, LLC, and related entities
involved in the Transactions. The plaintiff claims the Transactions will
constitute a breach of Northern Border’s partnership agreement and a breach of
defendants’ fiduciary duties. The plaintiff seeks to enjoin the Transactions or
to rescind the Transactions if the Transactions are completed prior to entry of
a final judgment in the case. The plaintiff also seeks to recover on behalf of
the class damages for the profits and any special benefits obtained by the
defendants, as well as interest, costs, and attorney and expert fees.

 

 

Schedule 5.02(a)

 

Existing Liens

 

None

 

 

EXHIBIT A - FORM OF

PROMISSORY NOTE

 

	
  $                        

  	
  Dated:
                           ,
  200   

  

 

FOR VALUE RECEIVED, the undersigned, TC PIPELINES, LP, a Delaware
limited partnership (the “Borrower”) by its General Partner TC PipeLines
GP, Inc., a Delaware corporation, HEREBY PROMISES TO PAY to                                            
or its registered assigns (the “Lender”) for the account of its
Applicable Lending Office (as defined in the Credit Agreement referred to
below) the aggregate principal amount of the Advances (as defined below) owing
to the Lender by the Borrower pursuant to the Credit Agreement dated as of
March 31, 2006 among the Borrower, the Lender and certain other lenders parties
thereto, and Citicorp North America, Inc., as Agent for the Lender and such
other lenders (as amended or modified from time to time, the “Credit
Agreement”); the terms defined therein being used herein as therein
defined) on the date specified in the Credit Agreement.

 

The Borrower promises to pay interest on the unpaid principal amount of
each Advance from the date of such Advance until such principal amount is paid
in full, at such interest rates, and payable at such times, as are specified in
the Credit Agreement.

 

Both principal and interest are payable in lawful money of the United
States of America to CNAI, as Agent, at 388 Greenwich Street, New York, New
York 10013, in same day funds. Each Advance owing to the Lender by the Borrower
and the maturity thereof, and all payments made on account of principal
thereof, shall be recorded by the Lender and, prior to any transfer hereof,
endorsed on the grid attached hereto, which is part of this Promissory Note.

 

This Promissory Note is one of the Notes referred to in, and is
entitled to the benefits of, the Credit Agreement. The Credit Agreement, among
other things, (i) provides for the making of advances (the “Advances”)
by the Lender to the Borrower in an amount not to exceed the U.S. dollar amount
first above mentioned, the indebtedness of the Borrower resulting from such
Advances being evidenced by this Promissory Note, and (ii) contains
provisions for acceleration of the maturity hereof upon the happening of
certain stated events and also for prepayments on account of principal hereof
prior to the maturity hereof upon the terms and conditions therein specified. Any
transfer of all or a portion of this Promissory Note shall be made only in
accordance with the terms and conditions of Section 8.07 of the Credit
Agreement and the Assignment and Acceptance attached to the Credit Agreement.

 

	
   

  	
  TC PIPELINES, LP

  
	
   

  	
  By its General Partner TC PipeLines GP,
  Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  

 

 

ADVANCES AND PAYMENTS OF
PRINCIPAL

 

	
  Date

  	
   

  	
  Amount of

  Advance

  	
   

  	
  Amount of

  Principal Paid

  or Prepaid

  	
   

  	
  Unpaid Principal

  Balance

  	
   

  	
  Notation

  Made By

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

EXHIBIT B - FORM OF NOTICE OF

BORROWING

 

Citicorp North America, Inc., as Agent

for the Lenders parties

to the Credit Agreement

referred to below

Two Penns Way

New Castle, Delaware 19720

 

[Date]

 

Attention: Bank Loan Syndications Department

 

Ladies and Gentlemen:

 

The undersigned, TC Pipelines, LP, by its
General Partner TC PipeLines GP, Inc., refers to the Credit Agreement, dated as
of March 31, 2006 (as amended or modified from time to time, the “Credit
Agreement”, the terms defined therein being used herein as therein
defined), among the undersigned, certain Lenders parties thereto and  Citicorp North America, Inc., as Agent for
said Lenders, and hereby gives you notice, irrevocably, pursuant to
Section 2.02 of the Credit Agreement that the undersigned hereby requests
a Borrowing under the Credit Agreement, and in that connection sets forth below
the information relating to such Borrowing (the “Proposed Borrowing”) as
required by Section 2.02(a) of the Credit Agreement:

 

(i)            The
Business Day of the Proposed Borrowing is
                            ,
200   .

 

(ii)           The
Type of Advances comprising the Proposed Borrowing is [Base Rate Advances]
[Eurodollar Rate Advances].

 

(iii)          The
aggregate amount of the Proposed Borrowing is $                              .

 

[(iv)         The
initial Interest Period for each Eurodollar Rate Advance made as part of the
Proposed Borrowing is                  
month[s].]

 

The undersigned hereby certifies that the
following statements are true on the date hereof, and will be true on the date
of the Proposed Borrowing:

 

(A)          the
representations and warranties contained in Section 4.01 of the Credit
Agreement are correct, before and after giving effect to the Proposed Borrowing
and to the application of the proceeds therefrom, as though made on and as of
such date; and

 

 

(B)           no
event has occurred and is continuing, or would result from such Proposed
Borrowing or from the application of the proceeds therefrom, that constitutes a
Default.

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  TC PIPELINES, LP

  
	
   

  	
  By its General Partner TC PipeLines GP,
  Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Title:.

  
					

 

 

EXHIBIT C - FORM OF

ASSIGNMENT AND ACCEPTANCE

 

Reference is made to the Credit Agreement
dated as of March 31, 2006 (as amended or modified from time to time, the “Credit
Agreement”) among TC Pipelines, LP, a Delaware limited partnership (the “Borrower”)
by its General Partner TC PipeLines GP, Inc., the Lenders (as defined in the
Credit Agreement) and Citicorp North America, Inc., as agent for the Lenders
(the “Agent”). Terms defined in the Credit Agreement are used herein
with the same meaning.

 

The “Assignor” and the “Assignee” referred to
on Schedule I hereto agree as follows:

 

1.             The
Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases
and assumes from the Assignor, an interest in and to the Assignor’s rights and
obligations under the Credit Agreement as of the date hereof equal to the
percentage interest specified on Schedule 1 hereto of all outstanding rights
and obligations under the Credit Agreement. After giving effect to such sale
and assignment, the Assignee’s Commitments and the amount of the Advances owing
to the Assignee will be as set forth on Schedule 1 hereto.

 

2.             The
Assignor (i) represents and warrants that it is the legal and beneficial
owner of the interest being assigned by it hereunder and that such interest is
free and clear of any adverse claim; (ii) makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Credit
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Credit Agreement or any other instrument or
document furnished pursuant thereto; (iii) makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of the Borrower or the performance or observance by the Borrower of any of its
obligations under the Credit Agreement or any other instrument or document furnished
pursuant thereto; and (iv) attaches the Note, if any held by the Assignor
and requests that the Agent exchange such Note for a new Note payable to the
order of the Assignee in an amount equal to the Commitment assumed by the
Assignee pursuant hereto or new Notes payable to the order of the Assignee in
an amount equal to the Commitment assumed by the Assignee pursuant hereto and
the Assignor in an amount equal to the Commitment retained by the Assignor
under the Credit Agreement, respectively, as specified on Schedule 1
hereto.

 

3.             The
Assignee (i) confirms that it has received a copy of the Credit Agreement,
together with copies of the financial statements referred to in
Section 4.01 thereof and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Assignment and Acceptance; (ii) agrees that it will, independently
and without reliance upon the Agent, the Assignor or any other Lender and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Credit Agreement; (iii) confirms that it is an Eligible Assignee;
(iv) appoints and authorizes the Agent to take such action as agent on its
behalf and to exercise such powers and discretion under the Credit Agreement as
are delegated to the Agent by the terms thereof, together with such powers and
discretion as are reasonably incidental thereto; (v) agrees that it will
perform in accordance with their terms all of the obligations that by the terms
of the Credit Agreement are required to be performed by it as a Lender; and
(vi) attaches any U.S. Internal Revenue Service forms required under
Section 2.13 of the Credit Agreement.

 

4.             Following
the execution of this Assignment and Acceptance, it will be delivered to the
Agent for acceptance and recording by the Agent. The effective date for this
Assignment and Acceptance (the “Effective Date”) shall be the date of
acceptance hereof by the Agent, unless otherwise specified on Schedule 1
hereto.

 

5.             Upon
such acceptance and recording by the Agent in the Register and, if applicable
issuance of a new Note to the Assignee pursuant to Section 2 hereof, as of the
Effective Date, (i) the Assignee shall be a party to the Credit Agreement
and, to the extent provided in this Assignment and Acceptance, have the rights

 

 

and obligations of a Lender thereunder and (ii) the Assignor
shall, to the extent provided in this Assignment and Acceptance, relinquish its
rights and be released from its obligations under the Credit Agreement.

 

6.             Upon
such acceptance and recording by the Agent, from and after the Effective Date,
the Agent shall make all payments under the Credit Agreement and the Notes in
respect of the interest assigned hereby (including, without limitation, all
payments of principal, interest and fees with respect thereto) to the Assignee.
The Assignor and Assignee shall make all appropriate adjustments in payments
under the Credit Agreement and the Notes for periods prior to the Effective
Date directly between themselves.

 

7.             This
Assignment and Acceptance shall be governed by, and construed in accordance
with, the laws of the State of New York.

 

8.             This
Assignment and Acceptance may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together
shall constitute one and the same agreement. Delivery of an executed counterpart
of Schedule 1 to this Assignment and Acceptance by telecopier shall be
effective as delivery of a manually executed counterpart of this Assignment and
Acceptance.

 

IN WITNESS WHEREOF, the Assignor and the
Assignee have caused Schedule 1 to this Assignment and Acceptance to be
executed by their officers thereunto duly authorized as of the date specified
thereon.

 

 

Schedule 1

to

Assignment and Acceptance

 

	
  Percentage interest assigned:

  	
   

  	
  %

  
	
   

  	
   

  	
   

  
	
  Assignee’s Commitment:

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Aggregate outstanding principal amount of
  Advances assigned:

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Principal amount of Note payable to
  Assignee:

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Principal amount of Note payable to
  Assignor:

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Effective Date*:
                         ,
  200   

  	
   

  	
   

  

 

	
   

  	
  [NAME OF ASSIGNOR], as Assignor

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Dated:
                               ,
  200   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [NAME OF ASSIGNEE], as Assignee

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  Dated:
                               ,
  200   

  
	
   

  	
   

  
	
   

  	
  Domestic Lending Office:

  
	
   

  	
  [Address]

  
	
   

  	
   

  
	
   

  	
  Eurodollar Lending Office:

  
	
   

  	
  [Address]

  
						

 

*              This
date should be no earlier than five Business Days after the delivery of this
Assignment and Acceptance to the Agent.

 

 

	
  Accepted [and Approved]** this

  
	
                       
  day of
                         ,
  200   

  
	
   

  
	
  CITICORP NORTH AMERICA, INC., as Agent

  
	
   

  
	
  By

  	
   

  	
   

  
	
  Title:

  
	
   

  
	
  [Approved this
                   
  day

  
	
  of
                         ,
  200   

  
	
   

  
	
  TC PIPELINES, LP

  
	
  By its General Partner TC PipeLines GP,
  Inc.

  
	
   

  
	
  By

  	
   

  	
  ]*

  
	
  Title:

  
				

 

	
  **

  	
  Required if
  the Assignee is an Eligible Assignee solely by reason of clause (iii) of
  the definition of “Eligible Assignee”.

  
	
  *

  	
  Required if
  the Assignee is an Eligible Assignee solely by reason of clause (iii) of
  the definition of “Eligible Assignee”.

  

 

 

EXHIBIT D - FORM OF

OPINION OF COUNSEL

FOR THE BORROWER

 

[Effective Date]

 

To each of the Lenders parties

to the Credit Agreement dated

as of March 31, 2006

among TC Pipelines, LP,

said Lenders and Citicorp North America,
Inc.,

as Agent for said Lenders, and

to Citicorp North America, Inc., as Agent

 

TC Pipelines,
LP

 

Ladies and Gentlemen:

 

Representation

 

This opinion is furnished to you pursuant to
Section 3.01(h)(iv) of the Credit Agreement, dated as of April
     , 2006 (the “Credit Agreement”), among TC
Pipelines, LP (the “Borrower”) by its General Partner TC PipeLines GP,
Inc. (the “GP”), the Lenders parties thereto and Citicorp North America,
Inc., as Agent for said Lenders. Terms defined in the Credit Agreement are used
herein as therein defined.

 

We have acted as special counsel for the
Borrower in connection with the preparation, execution and delivery of the
Credit Agreement.

 

Documents Reviewed

 

In that connection, we have examined:

 

(1)           The
Credit Agreement.

 

(2)           The
documents furnished by the Borrower pursuant to Article III of the Credit
Agreement.

 

(3)           The
Certificate of Limited Partnership and Amended and Restated Limited Partnership
Agreement of the Borrower and all amendments thereto (the “Charter”).

 

(4)           A
certificate of the Secretary of State of Delaware, dated April
     , 2006, attesting to the continued partnership
existence and good standing of the Borrower in that State (the “Good
Standing Certificate”).

 

We have also examined the originals, or copies certified to our
satisfaction, of the documents listed in a certificate of the President of the
GP on behalf of the Borrower, dated the date hereof (the “Certificate”),
certifying, among other things, that the documents listed in such certificate
are all of the indentures, loan or credit agreements, leases, guarantees,
mortgages, security agreements, bonds, notes and other agreements or
instruments, and all of the orders, writs, judgments, awards, injunctions and
decrees, that affect or purport to affect the Borrower’s right to borrow

 

 

money or the Borrower’s obligations under the Credit Agreement or the
Notes. In addition, we have examined the originals, or copies certified to our
satisfaction, of such other partnership records of the Borrower, certificates
of public officials and of officers of the Borrower, and agreements,
instruments and other documents, as we have deemed necessary as a basis for the
opinions expressed below. As to questions of fact material to such opinions, we
have relied upon certificates of the Borrower or its officers or of public
officials.

 

Opinion

 

Based on the foregoing, having regard for the
legal considerations that we deem relevant, and subject to the qualifications,
assumptions and exceptions stated herein, we are of the following opinion:

 

1.             The
Borrower is a limited partnership duly formed, validly existing and in good
standing under the laws of the State of Delaware. The Borrower has taken all
necessary partnership action to authorize the execution, delivery and
performance by the Borrower of the Credit Agreement and the Notes
(collectively, the “Credit Documents”).

 

2.             The
execution, delivery and performance by the Borrower of the Credit Documents,
and the consummation of the transactions contemplated thereby, are within the
Borrower’s partnership powers, have been duly authorized by all necessary
partnership action, and do not violate (i) the Charter or
(ii) assuming that the proceeds of extensions of credit will be used in
accordance with the terms of the Credit Agreement, any United States federal or
State of New York law, rule or regulation applicable to the Borrower
(including, without limitation, Regulation X of the Board of Governors of
the Federal Reserve System) or (iii) any contractual or legal restriction
contained in any document listed in the Certificate.

 

3.             No
authorization, approval or other action by, and no notice to or filing with,
any United States federal or State of New York governmental authority or
regulatory body is required for the due execution, delivery and performance by
the Borrower of the Credit Documents.

 

4.             The
Credit Agreement is, and after giving effect to the initial Borrowing, the
Notes will be, valid and binding obligations of the Borrower enforceable
against the Borrower in accordance with their respective terms.

 

Negative Assurance

 

In addition, we advise you supplementally as
a matter of fact and not opinion that based solely upon certifications
contained in the Certificate, except to the extent set forth in the
Certificate, to our knowledge, there are no pending or overtly threatened
actions or proceedings against the Borrower or any of its Subsidiaries before
any court, governmental agency or arbitrator that purport to affect the
legality, validity, binding effect or enforceability of the Credit Agreement or
any of the Notes or the consummation of the transactions contemplated thereby
or that are likely to have a materially adverse effect upon the financial
condition or operations of the Borrower or any of its Subsidiaries.

 

Assumptions, Qualifications and Exceptions

 

In rendering these opinions, we have, with
your permission, assumed the following: (i) the authenticity of original
documents and the genuineness of all signatures, and the conformity to the
originals of all documents submitted to us as copies; (ii) the truth, accuracy
and completeness of the information, representations and warranties contained
in the records, documents, instruments and certificates we have reviewed; (iii)
your due organization, valid existence and good standing; (iv) your due
authorization, execution and delivery of the Credit Agreement; (v) the valid
and binding effect of the Credit Agreement on, and the enforceability of the
Credit Agreement against, you; (vi) the absence of any evidence extrinsic to
the provisions of the written agreements among the parties that the parties
intended a meaning contrary to that expressed by those provisions; and (vii)
there has not been any mutual mistake of fact, fraud, duress or undue
influence.

 

 

Our opinion in paragraph 1 that the Borrower
is in good standing is based solely upon our review of the Good Standing Certificate.
In rendering our opinions with respect to contractual obligations, we have
assumed that the governing law of each contractual obligation is New York; and
we have not reviewed the covenants in the contractual obligations that contain
financial ratios or other similar financial restrictions, and no opinion is
provided with respect thereto.

 

Certain Limitations and Qualifications

 

Whenever a statement herein is qualified by
the phrases “known to us” or “to our knowledge,” it is intended to indicate
that, during the course of our representation on behalf of the Borrower in this
transaction, no information that would give us current actual knowledge of the
inaccuracy of such statement has come to the attention of the attorneys
presently in the firm who have rendered legal service in connection with our
representation of the Borrower in this transaction. However, we have not
undertaken any independent investigation or review to determine the accuracy of
any such statement, and any limited inquiry undertaken by us during the
preparation of this opinion letter should not be regarded as such an
investigation or review; no inference as to our knowledge of any matters
bearing on the accuracy of any such statement should be drawn from the fact of
our representation on behalf of the Borrower in this transaction.

 

Our opinions are limited to the laws of the
State of New York, the Delaware Revised Uniform Partnership Act and the federal
laws of the United States. We express no opinion as to whether the laws of any
particular jurisdiction apply, and no opinion to the extent that the laws of
any jurisdiction other than those identified above are applicable to the Credit
Agreement or the Notes or the transactions contemplated thereby. As you know,
we are not licensed to practice law in the State of Delaware, and our opinions
herein with respect to the partnership law of Delaware are based solely on our
review of the Delaware Revised Uniform Partnership Act as found in a standard
compilation of the official statutes of the State of Delaware.

 

Our opinion that any document is valid,
binding or enforceable in accordance with its terms is qualified as to:

 

(a)           limitations
imposed by bankruptcy, insolvency, reorganization, arrangement, fraudulent
conveyance, moratorium, or other laws relating to or affecting the rights of
creditors generally;

 

(b)           the
unenforceability under certain circumstances of provisions imposing penalties,
forfeiture, late payment charges, or an increase in interest rate upon
delinquency in payment or the occurrence of any event of default; and

 

(c)           general
principles of equity, including without limitation concepts of materiality,
reasonableness, good faith and fair dealing, and the possible unavailability of
specific performance or injunctive relief, regardless of whether such
enforceability is considered in a proceeding in equity or at law.

 

Use of Opinion

 

This opinion letter is rendered to you solely
for your benefit and the benefit of your permitted successors and assigns
pursuant to the Credit Agreement in connection with the transaction covered in
the first paragraph of this opinion letter and may not be relied upon or used
by, circulated, quoted or referred to, nor may copies hereof be delivered to,
any other person without our prior written approval, except that copies of this
opinion letter may be furnished to your independent auditors and legal counsel
in connection with their providing advice to you regarding such transaction and
to your appropriate regulatory authorities or pursuant to an order or legal
process of any relevant governmental authority and to your permitted successors
and assigns and prospective successors and assigns. We disclaim any obligation
to update this opinion letter for events occurring or coming to our attention
after the date hereof.

 

Very truly yours,

ORRICK, HERRINGTON & SUTCLIFFE LLP

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