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Exhibit 10.1
TAX INDEMNIFICATION AGREEMENT
This TAX INDEMNIFICATION AGREEMENT (the "Agreement") dated as of October
17, 2002 is entered into between Enbridge Inc., an Alberta, Canada corporation
("Enbridge"), and Enbridge Energy Management, L.L.C., a Delaware limited
liability company ("Management").
RECITALS
WHEREAS, Management was formed pursuant to the Limited Liability Company
Agreement of Enbridge Energy Management, L.L.C. effective as of May 14, 2002
which was amended by the Amended and Restated Limited Liability Company
Agreement of Enbridge Energy Management, L.L.C. dated as of the date hereof (the
"Management L.L.C. Agreement").
WHEREAS, Management authorized the issuance of two classes of limited
liability company interests consisting of the "Listed Shares" and the "Voting
Shares," the rights and obligations of which are more specifically described in
the Management L.L.C. Agreement.
WHEREAS, Enbridge Energy Partners, L.P., a Delaware limited partnership
(the "MLP"), pursuant to the Third Amended and Restated Agreement of Limited
Partnership of Enbridge Energy Partners, L.P. dated as of the date hereof (the
"MLP Partnership Agreement"), authorized the issuance of the new class of
partnership interest hereinafter referred to as the "I-Units."
WHEREAS, Management issued one Voting Share to EECI (as defined herein) in
exchange for $1,000.
WHEREAS, Management issued and sold Listed Shares to the public and EECI.
WHEREAS, Management applied the net proceeds from the issuance and sale of
such Voting Share and Listed Shares to acquire I-Units from the MLP in exchange
for $336,472,500. In addition, Management purchased the Purchase Rights (as
defined herein) and its rights under this Agreement from Enbridge for $500,000.
WHEREAS, Enbridge has agreed to indemnify Management for certain tax
consequences attributable to the Indemnifiable Events described below.
NOW, THEREFORE, in consideration of the mutual agreements and covenants
herein contained and other good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the parties hereto do hereby agree
as follows:
AGREEMENT
1. DEFINITIONS. For purposes of this Agreement, the following terms shall
have the following meanings. Any reference to any person shall include such
person and its permitted successors and assigns. Except where expressly stated
otherwise, any agreement referred to in this Agreement shall mean such agreement
as amended, supplemented or modified from time to time in accordance with the
applicable provisions thereof. Capitalized terms not otherwise
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defined herein have the meaning assigned them in the Management L.L.C. Agreement
(including Annex A thereof).
"After-Tax Basis" means in respect of any amount received or accrued by
any Person (or in the case of a payee which is a pass-through or disregarded
entity for the relevant Tax purposes, the Persons who are required to take into
account any items of income, gain, loss or deduction with respect to such
entity) (the "base amount"), the base amount supplemented by a further payment,
if necessary, to such Person such that, after reduction for all Taxes actually
imposed on such Person as a result of the receipt or accrual of the base amount
and such further payment (after giving effect to all deductions and credits, if
any, actually utilized by such Person arising from the event or circumstance
giving rise to the base amount), the net amount received by such Person shall be
equal to the base amount.
"Business Day" means Monday through Friday of each week, except that a
legal holiday recognized as such by the government of the United States or
Canada or the states of New York or Texas or the province of Alberta shall not
be regarded as a Business Day.
"Change in Law" means the occurrence after the date hereof of (i) the
enactment of, or amendment to, any provision of the Code, Treasury Regulations
thereunder or any administrative pronouncement, (ii) the enactment of, or
amendment to, any provision of the Tax law of any state (or political
subdivision thereof) in which Management is subject to Tax, or (iii) the
issuance of a Final Determination of the United States Supreme Court or the
United States Court of Appeals for the federal judicial circuit to which appeal
would lie from a case concerning Indemnifiable Events relating to Management;
PROVIDED, THAT (x) a change in the rate of any Tax shall not be treated as a
Change in Law, and (y) an administrative pronouncement shall be treated as a
Change in Law only if Management provides Enbridge a written opinion of
independent, nationally-recognized tax counsel selected by Management (such
counsel and form of opinion to be reasonably satisfactory to Enbridge) to the
effect that such counsel is unable to conclude that a Reasonable Basis exists to
take a position contrary to such administrative pronouncement.
"Code" means the Internal Revenue Code of 1986, as amended and in effect
from time to time. Any reference herein to a specific section or sections of the
Code shall be deemed to include a reference to any corresponding provision of
successor law.
"Common Unit" has the meaning set forth in the MLP Partnership Agreement.
"EECI" means Enbridge Energy Company, Inc., a Delaware corporation, the
sole general partner of the MLP and the owner of the Voting Shares.
"Enbridge" is defined in the introduction to this Agreement.
"Final Determination," in respect of Enbridge, the MLP or Management
means: (i) a decision, judgment, decree or other order by any court of competent
jurisdiction, which decision, judgment, decree or other order has become final
after all appeals allowable by law as of right and hereunder by either party to
the action have been exhausted or the time for filing such appeals has expired;
(ii) a closing agreement entered into under section 7121 of the Code or any
other settlement agreement entered into with the applicable taxing authority in
connection with
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an administrative or judicial proceeding (including a state or local
proceeding); (iii) the expiration of the time for instituting a suit with
respect to a claimed deficiency; or (iv) the expiration of the time for
instituting a claim for refund, or if such a claim were filed, the expiration of
the time for instituting a suit with respect thereto.
"Indemnifiable Event" means either (i) an increase, as a result of a
Change in Law, an audit by the applicable taxing authority or any action taken
by Enbridge or EECI that is inconsistent with the Tax Assumptions, in the sum of
Taxes imposed on, payable by, or withheld from payments to Management, over the
sum of Taxes, if any, Management would have paid or incurred in such year or
shorter tax period with respect thereto based on the Tax Assumptions, computed
in each case as provided in Section 4, (ii) any insufficiency or inadequacy of
cash to pay Taxes as contemplated by the definition of "Tax Assumptions" (which
insufficiency or inadequacy shall be treated as additional Tax for purposes of
Section 3(a)(1)), or (iii) any of the situations described in the last sentence
of Section 3(a)(3).
"Indemnity Amount" has the meaning set forth in Section 3(a)(1).
"Interest Rate" means the applicable federal rate (within the meaning of
section 1274(d) of the Code).
"IRS" means the United States Internal Revenue Service.
"I-Unit" is defined in the recitals to this Agreement. The terms and
provisions of the I-Units are more specifically set forth in the MLP Partnership
Agreement.
"Listed Shares" means the ownership interests in Management described in
the recitals to this Agreement, the rights and obligations of which are more
specifically described in the Management L.L.C. Agreement.
"Management" is defined in the introduction to this Agreement.
"Management L.L.C. Agreement" is defined in the recitals to this
Agreement.
"Management Subsidiary" means any limited liability company, partnership,
corporation, joint venture or other entity that is, directly or indirectly,
wholly-owned by Management.
"MLP" is defined in the recitals to this Agreement.
"MLP Partnership Agreement" is defined in the recitals to this Agreement.
"Non-Taxable" means in respect of any transaction, event or circumstance,
not causing or giving rise to the realization or recognition of any taxable
income or other basis for the imposition of Tax.
"Purchase Rights" means the rights and obligations associated with the
purchase of Listed Shares by Enbridge, the terms and provisions of which are
more specifically set forth in Annex A of the Management L.L.C. Agreement.
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"Realized Tax Savings" shall have the meaning set forth in Section
3(a)(3).
"Reasonable Basis" for a position exists if tax counsel may properly
advise reporting such position on a Tax return in accordance with Formal Opinion
85-352 of the American Bar Association or any successor thereto.
"Revenue Agent's Report" means a report sent to a taxpayer under cover of
a transmittal (30 day) letter relating to proposed adjustments in such
taxpayer's United States federal income tax liability referred to in Treasury
Regulation Section 601.105(c)(2)(i).
"Tax" or "Taxes" means any and all present or future taxes, duties,
levies, imposts, deductions or withholdings (including, without limitation,
income, franchise, gross receipts, sales, rental, use, turnover, value added,
property (tangible and intangible), excise and stamp taxes) of any nature
whatsoever, together with any and all assessments, penalties, fines, additions
and interest relating thereto; provided, however, that the term "Tax" or "Taxes"
does not include any Texas franchise taxes or capital based state taxes, or any
assessments, penalties, fines, additions or interest relating thereto.
"Tax Assumptions" means the following assumptions with respect to the
basis of taxation of Management and its capability to pay Taxes to which it may
be subject relative to the cash which it has available to pay such Taxes:
(1) The formation and capitalization of Management and all transactions
related or incidental thereto (including, without limitation, this
Agreement), its issuance of Listed Shares and Voting Shares and its
acquisition of I-Units will be Non-Taxable to Management.
(2) Any receipt by Management of the Purchase Rights from Enbridge will
be Non-Taxable to Management.
(3) Any transfer by Management of the Purchase Rights to the holders of
Listed Shares will be Non-Taxable to Management.
(4) Management is treated as a corporation for United States federal,
state and local income Tax purposes.
(5) Each Listed Share and Voting Share is treated as an ownership
interest in Management, and each owner of a Listed Share or a Voting
Share is treated as a shareholder of Management, for United States
federal, state and local income Tax purposes.
(6) The MLP is treated as a partnership for United States federal, state
and local income Tax purposes.
(7) Management, by virtue of its ownership of I-Units, is treated as a
partner in the MLP for United States federal, state and local income
Tax purposes.
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(8) The allocation of MLP Tax Items, as set forth in the MLP Partnership
Agreement, is respected for United States federal, state and local
income Tax purposes.
(9) Management's ownership of additional I-Units following cash
distributions to holders of Common Units, occurring pursuant to the
MLP Partnership Agreement, is Non-Taxable to Management.
(10) Distributions of additional Listed Shares and Voting Shares by
Management to holders of Listed Shares and Voting Shares, made
pursuant to the Management L.L.C. Agreement, are Non-Taxable to
Management.
(11) To the extent that Management engages in the management and control
of, or provides services to, the MLP, any reimbursement of
Management by the MLP or EECI (or Affiliates of either) in respect
of its services and other expenses incurred by Management will,
after the payment by Management of any fees or expenses incurred by
Management in respect of the management and control of, or services
provided to, the MLP, be adequate to pay all Taxes, if any, payable
by Management by virtue of either (i) its management and control of,
or services provided to, the MLP or (ii) the receipt of such
reimbursement from the MLP or EECI (or Affiliates of either), after
taking into account all related deductions and credits.
(12) Management does not own any assets other than I-Units, the Purchase
Rights, its rights under this Agreement and agreements related to
the management and control of or the provision of services to the
MLP or its Affiliates, cash, deposits and short-term securities or
evidences of indebtedness, and any other assets permitted to be
owned by it under the Management L.L.C. Agreement.
(13) If there is a sale, exchange, redemption or other disposition of
I-Units owned by Management or a complete or partial liquidation of
the MLP, the cash received by Management pursuant thereto will be
sufficient to satisfy any Tax payable by Management as a result of
such sale, exchange, redemption, liquidation or other disposition.
"Tax Items" means items of income, gain, loss, deduction and credit for
income Tax purposes.
"Treasury Regulations" means temporary or final United States Treasury
regulations.
"Voting Shares" means the ownership interest in Management described in
the recitals to this Agreement, the rights and obligations of which are more
specifically set forth in the Management L.L.C. Agreement.
2. TAX REPRESENTATIONS. Management represents, warrants and covenants to
Enbridge, and Enbridge represents, warrants and covenants to Management that,
for all United States federal, state and local income Tax purposes:
(a) It will treat Management as a corporation.
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(b) It will treat the owners of Listed Shares and Voting Shares as
shareholders of Management.
(c) It will treat the distributions by Management of additional
Listed Shares and Voting Shares to holders of Listed Shares and Voting
Shares made pursuant to the Management L.L.C. Agreement as Non-Taxable to
Management.
(d) It will treat the MLP as a partnership and will treat Management
as a partner of the MLP with respect to its ownership of I-Units.
(e) It will respect the allocation of Tax Items made with respect to
the I-Units owned by Management as provided in the MLP Partnership
Agreement.
(f) It will prepare and file all Tax elections, Tax returns and
information returns on a basis consistent with the treatment described in
(a) through (e) and will not take any contrary position on any Tax return
or information return or take any other action that is inconsistent with
such treatment.
Notwithstanding anything to the contrary herein, neither Enbridge nor Management
shall be obligated to take a position subsequent to (i) a Final Determination to
the contrary or (ii) the receipt of a written opinion of independent,
nationally-recognized tax counsel selected by Management (such counsel and form
of opinion to be reasonably satisfactory to Enbridge) to the effect that, due
solely to a Change in Law, such counsel is unable to conclude that a Reasonable
Basis exists to take such position.
In addition to the foregoing, Management agrees that it shall otherwise use its
reasonable best efforts, consistent with applicable Tax Law, to minimize the
amount of Taxes for which indemnification may be available hereunder.
3. INDEMNIFICATION AND REIMBURSEMENTS.
(a) INDEMNITY OBLIGATION; REIMBURSEMENT FOR REALIZED TAX SAVINGS.
(1) IN GENERAL. Upon the occurrence of an Indemnifiable Event,
Enbridge shall become obligated, in accordance with the terms of
this Agreement, to pay as an indemnity such amounts as, on an
After-Tax Basis, shall be equal to the amount of the additional
Taxes incurred by Management as a result of such Indemnifiable Event
(the "Indemnity Amount"). In addition, the Indemnity Amount shall be
increased, on an After-Tax Basis, by the amount of all reasonable
out-of-pocket expenses incurred by Management that would not
otherwise have been incurred by Management, and that have not
otherwise been previously paid by Enbridge to Management as result
of: (i) any Indemnifiable Event or (ii) any determination by
Management of the existence or amount of any Realized Tax Savings.
(2) INCREASE FOR INTEREST. The Indemnity Amount shall be
increased by an amount equal to interest accrued at the Interest
Rate on the amount of indemnified Taxes that have actually been paid
to the IRS or other applicable
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taxing authority by Management from the assumed date of payment of
such Taxes (as provided in Section 4(b)), provided that (x) a
payment of Taxes in respect of which Enbridge has advanced funds to
Management pursuant to Section 5(d) shall not accrue interest and
(y) such interest shall cease to accrue if the payment date of the
Indemnity Amount is delayed as a result of the failure of Management
to provide notice and computations to Enbridge within a reasonable
time pursuant to Section 3(b).
(3) REIMBURSEMENT FOR REALIZED TAX SAVINGS. To the extent that
any Indemnity Amount is paid pursuant to this Section 3 in respect
of an Indemnifiable Event, Management shall reimburse Enbridge for
any Tax savings (i) which are realized and which Management would
not have realized but for such Indemnifiable Event (including,
without limitation, in the case of an Indemnifiable Event premised
on clause (11) of the definition of Tax Assumptions, Tax savings
resulting from deductions associated with the management and control
of, or the provision of services to, the MLP to the extent such
deductions are not taken into account for the taxable year of the
Indemnifiable Event) and (ii) which are actually received or
recognized by Management in the form of cash or a cash savings at a
time when such cash or cash savings is not otherwise required by
Management to pay its legal obligations, including, without
limitation, its Taxes, and excluding the obligation created by this
Section 3(a)(3) ("Realized Tax Savings"). Management shall pay any
Realized Tax Savings within 15 days of the earlier of (i) Management
determining that such Realized Tax Savings exist or (ii) any final
determination, pursuant to Section 6, that any such Realized Tax
Savings exist and are available for payment pursuant to this Section
3(a)(3). Notwithstanding the foregoing, Management shall not be
required to make any payment pursuant to this Section 3(a)(3) to the
extent that the amount of such payment would exceed (i) the amount
of all prior payments by Enbridge to Management pursuant to Section
3(a)(1) with respect to the Indemnifiable Event which gave rise to
the Realized Tax Savings, less (ii) the amount of all prior payments
by Management pursuant to this Section 3(a)(3) with respect to such
Indemnifiable Event. If for any reason any Realized Tax Savings paid
to Enbridge pursuant to this Section 3(a)(3) or taken into account
in computing the amount of any indemnity payable hereunder pursuant
to Section 3(a)(1) shall, as a result of a Final Determination or
otherwise, be unavailable, such unavailability shall be treated as
an Indemnifiable Event subject to indemnification by Enbridge
pursuant to Section 3(a)(1), above.
(b) DATE FOR PAYMENT. The amount payable by Enbridge pursuant to
Section 3(a) shall be paid upon the occurrence of the latest of:
(1) subject to Section 6 and the next sentence, 15 Business
Days after the receipt by Enbridge of a notice from Management
accompanied by its computations in accordance with Section 6;
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(2) if any such indemnity payment relates to an Indemnifiable
Event that is contested pursuant to Section 5, 15 Business Days
after the date of a Final Determination with respect to such
Indemnifiable Event; and
(3) in the case of, and to the extent such amount payable by
Enbridge pursuant to Section 3(a) relates to, the redemption or
other disposition of the I-Units, and subject to Section 6 and the
next sentence, 15 Business Days after the redemption or other
disposition of the I-Units.
The date required for payment pursuant to the preceding sentence shall be
delayed until 15 Business Days after delivery to Enbridge of any
verification requested pursuant to Section 6.
4. COMPUTATIONAL ASSUMPTIONS.
(a) IN GENERAL. Management shall provide Enbridge with a calculation
of the actual amount of any additional Taxes incurred by Management as a
result of an Indemnifiable Event (including, as necessary, the actual
amounts of any Taxes necessary to determine the After-Tax Basis of any
item). Management's calculation shall be subject to the verification
procedures described in Section 6.
(b) DUE DATE FOR TAXES; DATE OF REALIZED TAX SAVINGS. Taxes will be
assumed to be payable on the later of (i) the due date, without
extensions, of the Tax return on which such Taxes are reported or (ii) the
date on which such Taxes are actually paid to the IRS or other applicable
taxing authority. Realized Tax Savings pursuant to Section 3(a)(3) will be
assumed to be realized on the date when the cash or cash savings from such
Realized Tax Savings is realized by Management and is not otherwise
required by Management to pay its legal obligations.
5. CONTESTS; RECORDS.
(a) NOTICE OF CLAIM. If Management receives written notice
(including in the form of a proposed Revenue Agent's Report) of any action
by the IRS or other taxing authority that, if successful, would result in
an Indemnifiable Event for which Enbridge may be required to indemnify
Management hereunder, Management hereby agrees promptly to notify Enbridge
in writing of such claim (but a failure to do so will not diminish
Enbridge's obligations under this Agreement except to the extent that (i)
Enbridge is damaged by such failure and (ii) at the time such notification
should have been provided, either (A) Enbridge and its Affiliates
collectively were not the Record Holders of a majority of the Voting
Shares then outstanding or (B) a majority of the members of the Board of
Directors of Management consisted of independent directors as required by
the principal National Securities Exchange on which Listed Shares were
listed or admitted to trading, the Securities and Exchange Commission or
applicable Law); PROVIDED, -------- however, that if EECI receives any
such notice as the tax matters partner of the MLP, Enbridge shall be
deemed to have received notice under this Section 5(a).
(b) AGREEMENT TO CONTEST. Provided the conditions set forth in
Section 5(c) are satisfied, (i) Management agrees to contest (or join in
contesting) in good faith such
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claim and agrees not to settle such claim without the written approval of
Enbridge, (ii) subject to clause (iii) of this Section 5(b), the conduct
of the contest shall be controlled by Management (or such other person as
Management shall have designated), subject to Enbridge's right of
involvement set forth in this Section 5 and (iii) Enbridge shall have the
right, upon its election in writing to Management and at its sole expense,
to control the contest of such claim (including the defense, prosecution,
settlement or compromise thereof), and Management shall take such action
in connection with contesting such claim as Enbridge shall reasonably
request in writing from time to time, including the selection of counsel
and experts and the execution of powers of attorney.
(c) CONDITIONS TO INDEMNIFIED PARTY'S OBLIGATION TO CONTEST AND NOT
SETTLE.
(1) Prior to taking any action to contest the claim described
in Section 5(a), and again prior to any appeal of an adverse
judicial decision, Enbridge shall have delivered to Management a
written opinion of independent, nationally-recognized tax counsel
selected by Enbridge (such counsel and form of opinion to be
reasonably satisfactory to Management) to the effect that there is a
Reasonable Basis for contesting such action or proposed action by
the IRS or other taxing authority;
(2) Enbridge shall have agreed to pay, on an After-Tax Basis
as verified under Section 6, and shall be currently paying for
Management, all reasonable out-of-pocket expenses (including
reasonable attorneys fees of legal counsel reasonably selected by
Management or Enbridge, as applicable) that Management shall incur
in connection with contesting such action or proposed action; and
(3) the amount of the indemnity that would be payable
hereunder (which shall include prospective exposure in future tax
years attributable to the position being challenged) shall exceed
U.S. $5,000.
(d) REFUND CLAIMS. Subject to Enbridge's election pursuant to
Section 5(b)(iii), if Management or Enbridge, as applicable, shall
determine in its reasonable discretion that Management shall pay the Tax
claimed and sue for a refund, Enbridge must either, at its option and to
the extent necessary for the contest to proceed, (i) promptly advance to
Management on an interest-free basis sufficient funds to pay the Tax
payable with respect thereto or (ii) pay to Management the amount payable
pursuant to Section 3 (but without regard to the time of payment in
Section 3(b)) with respect to such claim.
(e) TIME AT WHICH OBLIGATIONS OPERATIVE. In any circumstance where
judicial review shall be unavailable, Enbridge's right to cause a contest
hereunder, and Management's obligation to contest hereunder, shall become
operative at the earliest time such a contest may, pursuant to law, be
initiated, provided that Enbridge has then satisfied all of the necessary
preconditions to the exercise of its contest rights.
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(f) DEFERRAL OF INDEMNIFICATION. If Enbridge shall have requested
Management to contest such claim as above provided and shall have duly
complied and remains in compliance with all the terms of this Section 5,
Enbridge's liability for indemnification shall be deferred (as provided in
Section 3) until a Final Determination of the liability of Management. At
such time, Enbridge shall become obligated for the payment of any
indemnification hereunder resulting from the outcome of such contest, and,
to the extent funds were advanced by Enbridge pursuant to Section 5(d),
Management shall become obligated to refund to Enbridge any amount
received as a refund by Management or credited to Management and fairly
attributable to advances by Enbridge, net of any Taxes attributable to the
receipt of such refund or credit. Within 15 Business Days following such
Final Determination, any amounts due hereunder shall be paid first by set
off against each other and then either:
(1) Enbridge shall pay to Management any excess of the full
amount due hereunder over the amount of any advances previously made
by Enbridge and applied against its indemnity obligation as
aforesaid; or
(2) Management shall repay to Enbridge any excess of such
advances, net of any Taxes attributable to Management's receipt of
such refund or credit, over such full amount due hereunder, together
with any interest received from the IRS or other taxing authority by
Management that is properly attributable to such advances during the
period such advances were outstanding and that is in excess of the
amount of any Taxes attributable to Management's receipt or accrual
of such interest.
(g) RECORDS AND PARTICIPATION.
(1) INDEMNIFIED PARTY. Management shall provide Enbridge with
all documents and information related to the contest as may be
reasonably requested by Enbridge, shall keep Enbridge fully
informed, shall afford Enbridge the opportunity to attend and
participate in any meetings or negotiations with the IRS or other
taxing authority regarding such contest and shall otherwise fully
cooperate with Enbridge in good faith in connection with such
contest. Management will consult in good faith with (and, in the
event that Enbridge has not exercised its contest control rights
under Section 5(b)(iii), consider in good faith suggestions by)
Enbridge and its counsel regarding relevant aspects of the progress
and nature of any such contest, PROVIDED that nothing in this
Agreement shall require Management to provide Enbridge with
proprietary information relating to the identity of Management's
shareholders, owners, members or lenders.
(2) ENBRIDGE. Within a reasonable time under the circumstances
after reasonable written request therefor from Management, Enbridge
shall provide such information and copies of records as are within
its control to enable Management to fulfill its Tax return filing,
audit and litigation obligations in connection with the transactions
contemplated by the Management L.L.C.
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Agreement, PROVIDED that nothing in this Agreement shall require
Enbridge to provide Management with its Tax returns.
6. VERIFICATION. The results of all computations to be made with respect
to Management under this Agreement, together with a statement describing in
reasonable detail the manner in which such computations were made, shall be
delivered to Enbridge in writing. Preparation and delivery of such computations
shall be pursued diligently, in a timely manner and in good faith, and notice of
an Indemnifiable Event and delivery of such computations to Enbridge shall be
made within a reasonable time under the circumstances. If Enbridge so requests
within 10 Business Days after receipt of such computations, any determination
shall be reviewed by the independent accounting firm who regularly audits
Management, who shall be asked to verify, after consulting with Enbridge and
Management, whether Management's computations are correct, and to report its
conclusions (within 20 Business Days upon being requested to verify and
determine the correct computation) to both Enbridge and Management. Enbridge
also may request that such accounting firm review Management's Tax returns for
any year to determine if Management is required to make any payment pursuant to
Section 3(a)(3). Management and Enbridge hereby agree to provide such
accountants with all information and materials as shall be reasonably necessary
or desirable in connection herewith. Any information provided to such
accountants by any person shall be and remain the exclusive property of such
person and shall be deemed by the parties to be (and the accountants shall
confirm in writing that they shall treat such information as) the private,
proprietary and confidential property of such person, and no person other than
such person and the accountants shall be entitled thereto, and all such
materials shall be returned to such person. The reasonable fees and expenses of
the accountants in verifying an amount pursuant to this Agreement shall be paid
by Enbridge; provided, that Management and not Enbridge shall be required to pay
such fees if the computations provided by Management were not prepared in good
faith. The parties hereto agree that the sole responsibility of the accountants
hereunder shall be to verify calculations hereunder and that all matters of
interpretation of this Agreement shall not be within the scope of the
accountant's responsibilities.
7. EXTENSION AND ADJUSTMENT OF AGREEMENT IN THE CASE OF MANAGEMENT
SUBSIDIARIES. To the extent that Management forms one or more Management
Subsidiaries to perform any activities or hold any assets (including I-Units)
which Management is permitted under the Management L.L.C. Agreement to perform
or hold directly, (i) the indemnity and other provisions of this Agreement shall
be automatically extended to include and take into account, in addition to
Management, any such Management Subsidiary, (ii) to the extent such Management
Subsidiary is recognized as an entity separate from Management for the
applicable Tax purpose, the Management Subsidiary shall be indemnified by
Enbridge to the same extent that Management would have been indemnified had it
performed such activities (and received any related reimbursements or payments)
or held such assets directly, and (iii) correlative adjustments to the terms and
definitions of this Agreement and their application shall be made, to the extent
appropriate to the context, to take into account the legal existence of such
Management Subsidiary, the actual ownership of assets and/or performance of
activities by the Management Subsidiary and the applicable tax status of the
Management Subsidiary (E.G., as a disregarded or recognized entity for the
applicable Tax purpose) and to avoid any duplication of payments made pursuant
to this Agreement.
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8. LATE PAYMENTS. Except as otherwise provided in this Agreement, any
amount payable to Management or Enbridge under this Agreement not paid when due
shall bear interest from the date due to the date paid at the Interest Rate.
9. NO DUPLICATION OF PAYMENTS. Nothing contained in this Agreement shall
be construed to permit Management to receive payment with respect to an
Indemnifiable Event hereunder more than once, to permit Management to receive
payment with respect to an Indemnifiable Event in duplication of any payment
with respect to such Indemnifiable Event previously received by any transferor
of Management's interest, to permit any third-party beneficiary hereof to
recover any amount hereunder or to require Management to pay any Realized Tax
Savings arising out of any Indemnifiable Event more than once.
10. NOTICES. All notices and other communications shall be given in the
manner, to the respective addresses, and shall become effective as provided in
the Management L.L.C. Agreement except to the extent otherwise expressly
provided herein, except that notices or communications shall be directed to
Enbridge at:
Enbridge Inc.
3000, 425-1st Street SW
Calgary, Alberta
Canada T2P 3L8
Attn: General Counsel
(403) 231-3900
11. ASSIGNMENT. The obligations and liabilities of Enbridge and Management
arising under this Agreement are expressly made for the benefit of, and shall be
enforceable by, Management and Enbridge and their respective successors and
permitted assigns. It is expressly provided that Enbridge may assign to Enbridge
(U.S.) Inc. or any other Affiliate of Enbridge, and such assignee may assume,
Enbridge's obligations, rights and/or liabilities under this Agreement. Any
assignment by Enbridge of any of its obligations or liabilities hereunder will
not relieve Enbridge of any such obligations or liabilities without the consent
of Management.
12. SURVIVAL.
(a) The obligations, rights and liabilities of Enbridge and
Management hereunder shall continue in full force and effect
(notwithstanding the cancellation, sale, exchange, redemption or other
disposition of Listed Shares, or the dissolution, liquidation or
termination of Management, the MLP or Enbridge) until the 180th day
following the expiration of the relevant statute of limitations for all
relevant taxable years (taking into account all extensions thereof).
(b) Notwithstanding Section 12(a) or anything in this Agreement
to the contrary:
(i) if as a result of a change in the tax status of the MLP,
Management consummates a merger with or into the MLP or a subsidiary
of the MLP pursuant to Section 7.03 of the Management L.L.C.
Agreement, this Agreement shall terminate immediately following the
effective time of such merger and the
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obligations, rights and liabilities of Enbridge and Management
hereunder shall not continue in force or effect as of that time,
PROVIDED, however, that any obligations, rights and liabilities of
Enbridge and Management arising with respect to periods ending on or
before the effective time of such merger shall not terminate and
shall continue in full force and effect as provided in Section
12(a);
(ii) if a Special Event that is not a Special Purchase Event
occurs or the general partner of the MLP is removed by the limited
partners of the MLP, this Agreement shall terminate immediately
prior to the occurrence of such Special Event or upon such removal
and the obligations, rights and liabilities of Enbridge and
Management hereunder shall not continue in force or effect as of
that time, PROVIDED, HOWEVER, that any obligations, rights and
liabilities of Enbridge and Management arising with respect to
periods before that time shall not terminate and shall continue in
full force and effect as provided in Section 12(a); and
(iii) if Management is dissolved or liquidated pursuant to
Section 7.01(a)(iii) of the Management L.L.C. Agreement, this
Agreement shall terminate immediately prior to the Dissolution Event
associated with such dissolution or liquidation and the obligations,
rights and liabilities of Enbridge and Management shall not continue
in force or effect as of that time, PROVIDED, HOWEVER, that any
obligations, rights and liabilities of Enbridge and Management
arising with respect to periods before that time shall not terminate
and shall continue in full force and effect as provided in Section
12(a).
13. METHOD OF PAYMENT. All payments to be made to a party pursuant to this
Agreement shall be made in United States Dollars by wire transfer to such bank
account of such party as such party from time to time shall have directed in
writing at least two (2) Business Days prior to the due date thereof.
14. GOVERNING LAW. THIS TAX INDEMNIFICATION AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF TEXAS, APPLICABLE
TO CONTRACTS MADE AND PERFORMED IN SUCH STATE AND WITHOUT REGARD TO ANY CONFLICT
OF LAW PROVISIONS.
15. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original, and
such counterparts together shall constitute and be one and the same instrument.
16. MISCELLANEOUS.
(a) SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction, unless the provisions declared prohibited as unenforceable
are essential to effectuate the intent of the parties with respect to the
Agreement taken as a whole. To the extent permitted by
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applicable Law, each of the parties hereto hereby agrees that any
provision hereof that renders any other term or provision hereof invalid
or unenforceable in any respect shall be modified, but only to the extent
necessary to avoid rendering such other term or provision invalid or
unenforceable, and such modification shall be accomplished in a manner
that most nearly preserves the benefit of the parties' bargains hereunder.
(b) AMENDMENTS. Neither this Agreement nor any of the terms hereof
may be terminated, amended, supplemented, waived or modified orally, but
only by an instrument in writing signed by the party against which the
enforcement of the termination, amendment, supplement, waiver or
modification is sought.
(c) HEADINGS. The section and paragraph headings in this Agreement
are for convenience of reference only and shall not modify, define, expand
or limit any of the terms or provisions hereof.
(d) NO INTENDED THIRD PARTY BENEFICIARIES. Except as provided in
Section 7, there are no intended third party beneficiaries of this
Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.
ENBRIDGE INC.
By: /s/ AL MONACO
---------------------------------
Al Monaco
Vice President, Financial Services
ENBRIDGE ENERGY MANAGEMENT, L.L.C.
By: /s/ DEREK P. TRUSWELL
---------------------------------
Derek P. Truswell
Group Vice President & Chief
Financial Officer
[SIGNATURE PAGE TO TAX INDEMNIFICATION AGREEMENT]