SUBORDINATED LOAN AGREEMENT
dated as of February13, 2007
TC PIPELINES, LP
This instrument and the rights and obligations evidenced hereby are subordinate in the manner and to the extent set forth in that certain Subordination and Intercreditor Agreement (the “ Subordination Agreement ”) dated as of February 13, 2007 among, TRANSCANADA PIPELINES LIMITED, a Canada corporation (together with its successors and any permitted assigns, the “ Subordinated Creditor ”), TC PIPELINES, LP (the “ Borrower ”) and SunTrust Bank (“ Administrative Agent ”), to the indebtedness (including interest) owed by the Borrower pursuant to that certain Amended and Restated Revolving Credit and Term Loan Agreement dated as of February 13, 2007, among the Borrower, Administrative Agent and the lenders from time to time party thereto, as suchAmended and Restated Revolving Credit and Term Loan Agreement has been and hereafter may be amended, supplemented or otherwise modified from time to time and to indebtedness refinancing the indebtedness under that agreement as contemplated by the Subordination Agreement; and each holder of this instrument, by its acceptance hereof, irrevocably agrees to be bound by the provisions of the Subordination Agreement.
SUBORDINATED LOAN AGREEMENT
THIS SUBORDINATED LOAN AGREEMENT (this “ Agreement ”) is made and entered into as of February 13, 2007, by and between TRANSCANADA PIPELINES LIMITED, a Canada corporation (the “ Lender ”) and TC PIPELINES, LP, a Delaware limited partnership (the “ Borrower ”).
W I T N E S S E T H:
WHEREAS , the Borrower has requested that the Lender make subordinated loans in an aggregate principal amount of up to $300,000,000 to the Borrower; and
WHEREAS , subject to the terms and conditions of this Agreement, the Lender is willing to make the requested subordinated loans to the Borrower.
NOW, THEREFORE , in consideration of the premises and the mutual covenants herein contained, the Borrower and the Lender agree as follows:
Section 1.1. Definitions . Any capitalized term used herein without definition shall have the meaning specified in the Senior Credit Agreement. In addition to the other terms defined herein, the following terms used herein shall have the meanings herein specified (to be equally applicable to both the singular and plural forms of the terms defined):
“ 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. For purposes of this Agreement, the Borrower will not be considered an Affiliate of the Lender.
“ Borrower ” shall have the meaning in the introductory paragraph hereof.
“ Borrowing ” shall mean a borrowing consisting of a Subordinated Loan.
“ Business Day ” shall mean any day other than a Saturday, Sunday or other day on which commercial banks in Calgary, Canada and New York, New York are authorized or required by law to close.
“ Closing Date ” shall mean the date on which the conditions precedent set forth in Section 3.1 have been satisfied or waived in accordance with Section 8.2 .
“ Default Interest ” shall have the meaning set forth in Section 2.4(c) .
“ Deferred Interest ” shall mean the amount of any accrued interest in excess of interest accrued at the Subordinated Loan Cash-Pay Interest Rate that, but for the terms of the Subordination Agreement and Section 2.4(d) , would be payable by the Borrower under this Agreement (including any Default Interest).
“ Event of Default ” shall have the meaning provided in Article VI .
“ General Partner ” shall mean TC PipeLines GP, Inc. a Delaware corporation.
“ GAAP ” shall mean generally accepted accounting principles in the United States applied on a consistent basis.
“ Great Lakes ” means Great Lakes Gas Transmission Company, a Delaware corporation.
“ Great Lakes Acquisition ” shall mean that acquisition described in detail in the Purchase and Sale Agreement dated as of December 22, 2006 among El Paso Great Lakes Company, L.L.C., as Seller and TC GL Intermediate Limited Partnership and TransCanada PipeLine USA Ltd., as Buyers.
“ Lender ” shall have the meaning assigned to such term in the opening paragraph of this Agreement.
“ Material Adverse Effect ” shall mean, with respect to any event, act, condition or occurrence of whatever nature (including any adverse determination in any litigation, arbitration, or governmental investigation or proceeding), whether singularly or in conjunction with any other event or events, act or acts, condition or conditions, occurrence or occurrences whether or not related, a material adverse change in, or a material adverse effect on, (i) the business, results of operations, financial condition, assets, or liabilities of the Borrower, its Subsidiaries, Northern Border, Tuscarora and Great Lakes taken as a whole, (ii) the ability of the Borrower to perform any of its obligations under the Subordinated Loan Documents, (iii) the rights and remedies of the Lender under any of the Subordinated Loan Documents or (iv) the legality, validity or enforceability of any of the Subordinated Loan Documents.
“ Material Indebtedness ” shall mean (i) Senior Debt and (ii) any other Indebtedness (other than the Subordinated Loans) of the Borrower or any of its Subsidiaries, individually or in an aggregate principal amount exceeding $15,000,000.
“ Maturity Date ” shall mean the earlier of (i) February 13, 2014 or (ii) the date on which the outstanding principal amount of all Subordinated Loans has been declared, or automatically has become, due and payable (whether by acceleration or otherwise).
“ Northern Border ” shall mean Northern Border Pipeline Company, a Texas general partnership.
“ Notice of Borrowing ” shall have the meaning assigned to such term in Section 2.2 .
“ Obligations ” shall mean all amounts owing by the Borrower to the Lender pursuant to or in connection with this Agreement or any other Subordinated Loan Document, including without limitation, all principal, interest (including any interest accruing after the filing of any petition in bankruptcy or the commencement of any insolvency, reorganization or like proceeding relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), all reimbursement obligations, expenses, indemnification and reimbursement payments, costs and expenses (including all reasonable fees and expenses of counsel to the Lender incurred pursuant to this Agreement or any other Subordinated Loan Document), whether direct or indirect, absolute or contingent, liquidated or unliquidated, now existing or hereafter arising hereunder or thereunder, and all obligations and liabilities incurred in connection with collecting and enforcing the foregoing, together with all renewals, extensions, modifications or refinancings thereof.
“ Payment Office ” shall mean the office of the Lender located at 450 1st Street SW, Calgary, Alberta T2P 5H1, or such other location as to which the Lender shall have given written notice to the Borrower.
“ Responsible Officer ” shall mean any of the president, the chief executive officer, the chief operating officer, the chief financial officer, the treasurer or a vice president of the Borrower or such other representative of the Borrower as may be designated in writing by any one of the foregoing with the consent of the Lender; and, with respect to the financial covenants only incorporated by reference pursuant to Section 5.2 , the chief financial officer, treasurer, vice president of finance or controller of the Borrower
“ Senior Agent ” shall mean SunTrust Bank, in its capacity as Administrative Agent under the Senior Credit Agreement, and any successor Administrative Agent under the Senior Credit Agreement.
“ Senior Credit Agreement ” shall mean that certain Amended and Restated Revolving Credit and Term Loan Agreement, dated as of February 13, 2007, by and among the Borrower, the lenders from time to time party thereto, and the Senior Agent.
“ Senior Debt ” shall mean the “Obligations”, as such term is defined in the Senior Credit Agreement.
“ Senior Lenders ” shall mean the “Lenders”, as such term is defined in the Senior Credit Agreement.
“ Senior Loan Documents ” shall mean the “Loan Documents”, as such term is defined in the Senior Credit Agreement.
“ Senior Term Loan Commitment Availability Period ” shall mean the “Term Loan Commitment Availability Period”, as such term is defined in the Senior Credit Agreement.
“ Subordinated Loan ” has the meaning set forth in Section 2.1.
“ Subordinated Loan Cash-Pay Interest Rate ” shall mean 6.00% per annum.
“ Subordinated Loan Commitment ” shall mean the obligation of the Lender to make Subordinated Loans hereunder in an aggregate principal amount not exceeding $300,000,000.
“ Subordinated Loan Commitment Availability Period ” shall mean the period from the Closing Date through the last day of the Senior Term Loan Commitment Availability Period.
“ Subordinated Loan Documents ” shall mean, collectively, this Agreement and the Subordinated Note.
“ Subordinated Loan Interest Rate ” shall mean 7.50% per annum.
“ Subordinated Note ” shall mean a promissory note of the Borrower payable to the order of the Lender in the principal amount of the Subordinated Loan Commitment, in substantially the form of Exhibit A .
“ Subordination Agreement ” shall mean that certain Subordination and Intercreditor Agreement, dated as of February 13, 2007, among the Borrower, the Lender and the Senior Agent.
“ TC GL Intermediate Limited Partnership ” means TC GL Intermediate Limited Partnership, a Delaware limited partnership.
“ TC PipeLines ILP ” means TC PipeLines Intermediate Limited Partnership, a Delaware limited partnership.
“ TC PipeLines ILP Agreement ” means that certain Amended and Restated Agreement of Limited Partnership relating to the formation of TC PipeLines ILP effective as of May 28, 1999, as amended, supplemented, restated or otherwise modified from time to time.
“ Termination Date ” the date that no portion of any Subordinated Loan remains outstanding and unpaid, no other amount is owing to the Lender hereunder or under any of the other Subordinated Loan Documents and the Subordinated Loan Commitment has terminated.
“ Tuscarora ” shall mean Tuscarora Gas Transmission Company, a Nevada general partnership.
Section 1.2. Accounting Terms and Determination . Unless otherwise defined or specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared, in accordance with GAAP as in effect from time to time, applied on a basis consistent with the most recent audited consolidated financial statement of the Borrower delivered pursuant to Section 5.1(a) of the Senior Credit Agreement; provided , that if the Borrower has notified the Senior Agent that the Borrower wishes to amend any covenant in Article VI of the Senior Credit Agreement to eliminate the effect of any change in GAAP on the operation of such covenant (or if the Senior Agent has notified the Borrower that the Required Lenders (as defined in the Senior Credit Agreement) wish to amend Article VI of the Senior Credit Agreement for such purpose), then the Borrower’s compliance with such covenant (as
incorporated herein by reference pursuant to Section 5.2 , including after giving effect to any applicable proviso in Section 5.2 ) shall be determined on the basis of GAAP in effect immediately before the relevant change in GAAP became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Borrower and the Required Lenders.
Section 1.3. Terms Generally . The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. 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 word “to” means “to but excluding”. Unless the context requires otherwise (i) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as it was originally executed or as it may from time to time be amended, restated, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (ii) any reference herein to any Person shall be construed to include such Person’s successors and permitted assigns, (iii) the words “hereof”, “herein” and “hereunder” and words of similar import shall be construed to refer to this Agreement as a whole and not to any particular provision hereof, (iv) all references to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles, Sections, Exhibits and Schedules to this Agreement and (v) all references to a specific time shall be construed to refer to the time in the city and province or state of the Lender’s principal office, unless otherwise indicated. All actions required to be undertaken by the Borrower under the Subordinated Loan Documents shall be undertaken by the Borrower through the General Partner.
AMOUNT AND TERMS OF THE SUBORDINATED LOANS
Section 2.1. Subordinated Loan Commitment . Subject to the terms and conditions set forth herein, the Lender agrees to make subordinated term loans (each, a “ Subordinated Loan ” and, collectively, the “ Subordinated Loans ”) to the Borrower during theSubordinated Loan CommitmentAvailability Period in an aggregate principal amount outstanding at any time that will not result in the aggregate Subordinated Loans exceeding the Subordinated Loan Commitment. During the Subordinated Loan Commitment Availability Period, the Borrower shall be entitled to borrow and, subject to the terms and conditions of the Subordination Agreement, prepay the Subordinated Loans in accordance with the provisions hereof, but once repaid or prepaid, Subordinated Loans may not be reborrowed.
Section 2.2. Borrowing Procedure . The Borrower shall give the Lender written notice (or telephonic notice promptly confirmed in writing) of each Borrowing substantially in the form of Exhibit 2.2 (a “ Notice of Borrowing ”), each such Notice of Borrowing to be delivered prior to 3:00 p.m. (Calgary time) on the requested date of each Borrowing. Each Notice of Borrowing shall be revocable and shall specify: (i) the aggregate principal amount of such Borrowing and (ii) the date of such Borrowing (which shall be a Business Day).
Section 2.3. Optional Reduction and Termination of Subordinated Loan Commitment .
(a) Unless previously terminated, the Subordinated Loan Commitment shall terminate on the last day of the Subordinated Loan Commitment Availability Period.
(b) By written notice (or telephonic notice promptly confirmed in writing) to the Lender, the Borrower may reduce the Subordinated Loan Commitment in part or terminate the Subordinated Loan Commitment in whole.
Section 2.4. Repayment of Subordinated Loan . The outstanding balance of all Subordinated Loans will be due and payable (together with accrued and unpaid interest thereon) on the Maturity Date.
Section 2.5. Optional Prepayments . Subject to the terms and conditions of the Subordination Agreement, the Borrower shall have the right at any time and from time to time to prepay any Subordinated Loan, in whole or in part, without premium or penalty, by giving irrevocable written notice (or telephonic notice promptly confirmed in writing) to the Lender not less than two (2) Business Days prior to the date of such prepayment. Each such notice shall be irrevocable and shall specify the proposed date of such prepayment and the amount to be prepaid. If such notice is given, the amount specified in such notice will be due and payable on the date designated in such notice, together with accrued interest to such date on the amount so prepaid in accordance with Section 2.6 .
Section 2.6. Interest on Subordinated Loans .
(a) Subject to the Subordination Agreement and paragraph (d) of this Section 2.6 , the Borrower shall pay interest on each Subordinated Loan at the Subordinated Loan Interest Rate.
(b) While an Event of Default exists or after acceleration, at the option of the Lender, the Borrower shall, subject to the Subordination Agreement and paragraph (d) of this Section 2.6 , pay interest (“ Default Interest ”) at the Subordinated Loan Interest Rate, plus an additional 2% per annum.
(c) Interest on the principal amount of all Subordinated Loans will accrue from and including the date such Subordinated Loans are made but excluding the date of any repayment thereof. Subject to the Subordination Agreement and paragraph (d) of this Section 2.6 , interest on all Subordinated Loans will be payable quarterly on the last day of each March, June, September and December. Subject to the Subordination Agreement and paragraph (d) of this Section 2.6 , all Default Interest will be payable on demand.
(d) Notwithstanding anything to the contrary in this Agreement, so long as any Senior Debt is outstanding, the Borrower shall, subject to the Subordination Agreement, pay interest in cash on all Subordinated Loans at the Subordinated Loan Cash-Pay Interest Rate. Such interest payments shall be made on the 16th calendar day of each May, August, November and February. All accrued and unpaid Deferred Interest will be payable upon the earlier to occur
of (i) the Maturity Date and (ii) the date that is six (6) months following the date on which the Senior Debt is paid in full.
Section 2.7. Computation of Interest and Fees . All computations of interest shall be made by the Lender on the basis of a year of 365 days. Each determination by the Lender of an interest amount hereunder shall be made in good faith and, except for manifest error, shall be final, conclusive and binding for all purposes.
Section 2.8. Payments Generally .
(a) All payments to be made by the Borrower to the Lender hereunder shall be made to the Lender at the Payment Office. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be made payable for the period of such extension. All payments hereunder shall be made in Dollars.
(b) If at any time insufficient funds are received by and available to the Lender to pay fully all amounts of principal, interest and fees then due hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due hereunder, ratably in accordance with the amounts of interest and fees then due hereunder and (ii) second, towards payment of principal then due hereunder.
CONDITIONS PRECEDENT TO SUBORDINATED LOANS
Section 3.1. Conditions to Effectiveness . The obligations hereunder of the Lender to make the Subordinated Loans shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 8.2 ):
(a) The Lender shall have received amounts due, including reimbursement or payment of all out-of-pocket expenses (including reasonable fees, charges and disbursements of counsel to the Lender) required to be reimbursed or paid by the Borrower hereunder or under any other Subordinated Loan Document.
(b) The Lender (or its counsel) shall have received the following:
(i) a counterpart of this Agreement signed by or on behalf of the Borrower or written evidence satisfactory to the Lender (which may include telecopy transmission of a signed signature page of this Agreement) that the Borrower has signed a counterpart of this Agreement;
(ii) a duly executed Subordinated Note payable to the Lender; and
(iii) a duly executed Notice of Borrowing.
Section 3.2. Conditions to Subordinated Loans . The obligation of the Lender to make each Subordinated Loan is subject to the satisfaction of the following conditions:
(A) at the time of and immediately after giving effect to such Subordinated Loan, no Default or Event of Default shall exist;
(B) at the time of and immediately after giving effect to such Borrowing, all representations and warranties of the Borrower set forth in the Subordinated Loan Documents (other than the representation and warranty set forth in Section 4.4(b)) shall be true and correct in all material respects on and as of the date of such Borrowing before and after giving effect thereto;
(C) the Borrower shall have delivered the required Notice of Borrowing; and
(D) the proceeds of such Borrowing shall be used solely to finance the Great Lakes Acquisition.
Each Subordinated Loan shall be deemed to constitute a representation and warranty by the Borrower on the date thereof as to the matters specified in paragraphs (a), (b) and (c) of this Section 3.2 .
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lender as follows:
Section 4.1. Existence; Power . The Borrower and each of its Subsidiaries (i) is duly organized, validly existing and in good standing as a corporation, partnership or limited liability company under the laws of the jurisdiction of its organization, (ii) has all requisite power and authority to carry on its business as now conducted, and (iii) is duly qualified to do business, and is in good standing, in each jurisdiction where such qualification is required, except where a failure to be so qualified could not reasonably be expected to result in a Material Adverse Effect.
Section 4.2. Organizational Power; Authorization . The execution, delivery and performance by the Borrower of the Subordinated Loan Documents to which it is a party are within the Borrower’s organizational powers and have been duly authorized by all necessary organizational, and if required, general partner action. This Agreement has been duly executed and delivered by the Borrower, and constitutes, and each other Subordinated Loan Document to which the Borrower is a party, when executed and delivered by the Borrower, will constitute, valid and binding obligations of the Borrower, enforceable against it in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity.
Section 4.3. Governmental Approvals; No Conflicts . The execution, delivery and performance by the Borrower of this Agreement, and of the other Subordinated Loan Documents to which it is a party (a) do not require any consent or approval of, registration or filing with, or any action by, any Governmental Authority, except those as have been obtained or made and are in full force and effect, (b) will not violate any Requirements of Law applicable to the Borrower
or any of its Subsidiaries or any judgment, order or ruling of any Governmental Authority, (c) will not violate or result in a default under any indenture, material agreement or other material instrument binding on the Borrower or any of its Subsidiaries or any of its assets or give ri