UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________
FORM 6-K
_________________________
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the quarterly period ended September 30, 2017
Commission file number 1- 33198
 
_________________________
TEEKAY OFFSHORE PARTNERS L.P.
(Exact name of Registrant as specified in its charter)
_________________________
4th Floor, Belvedere Building, 69 Pitts Bay Road, Hamilton, HM 08, Bermuda
(Address of principal executive office)
_________________________
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F    ý               Form 40- F    ¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1). Yes    ¨              No    ý
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7). Yes    ¨              No    ý









 



TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
REPORT ON FORM 6-K FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2017
INDEX

PAGE
 




ITEM 1 - FINANCIAL STATEMENTS
TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF (LOSS) INCOME
(in thousands of U.S. Dollars, except unit and per unit data)

Three Months Ended
September 30,
 
Nine Months Ended
September 30,

2017
 
2016
 
2017
 
2016

$
 
$
 
$
 
$
Revenues (note 6)
273,626

 
286,298

 
814,556

 
877,470

Voyage expenses
(25,102
)
 
(21,495
)
 
(70,439
)
 
(57,427
)
Vessel operating expenses (note 6)
(86,769
)
 
(94,008
)
 
(255,464
)
 
(280,121
)
Time-charter hire expenses
(20,677
)
 
(18,894
)
 
(61,940
)
 
(53,045
)
Depreciation and amortization
(75,304
)
 
(74,159
)
 
(224,317
)
 
(223,138
)
General and administrative (notes 6 and 11)
(19,870
)
 
(15,201
)
 
(47,866
)
 
(43,491
)
Write-down of vessels (note 14)
(316,726
)
 
—

 
(318,226
)
 
(43,650
)
Restructuring charge  (note 13)
(2,885
)
 
(802
)
 
(3,335
)
 
(2,289
)
(Loss) income from vessel operations
(273,707
)
 
61,739

 
(167,031
)
 
174,309




 


 


 


Interest expense (notes 5, 6 and 7)
(38,819
)
 
(35,379
)
 
(111,525
)
 
(104,752
)
Interest income
710

 
298

 
1,462

 
995

Realized and unrealized (loss) gain on derivative instruments (note 7)
(19,232
)
 
20,247

 
(47,561
)
 
(102,280
)
Equity income
4,416

 
4,937

 
12,316

 
13,846

Foreign currency exchange (loss) gain (note 7)
(6,526
)
 
817

 
(13,313
)
 
(15,108
)
Other income (expense) - net (notes 3 and 9c)
15,174

 
(195
)
 
14,262

 
(21,472
)
(Loss) income before income tax (expense) recovery
(317,984
)
 
52,464

 
(311,390
)
 
(54,462
)
Income tax (expense) recovery (note 8)
(2,292
)
 
(1,603
)
 
(4,089
)
 
2,671

Net (loss) income
(320,276
)
 
50,861

 
(315,479
)
 
(51,791
)



 


 


 


Non-controlling interests in net (loss) income
(2,785
)
 
3,161

 
3,126

 
7,545

Preferred unitholders' interest in net (loss) income  (note 10)
11,917

 
12,386

 
36,689

 
33,449

General Partner’s interest in net (loss) income
(6,373
)
 
706

 
(7,057
)
 
(1,857
)
Limited partners' interest in net (loss) income
(323,035
)
 
34,608

 
(348,237
)
 
(90,928
)
Limited partners' interest in net (loss) income for basic net (loss) income per common unit (note 10)
(302,720
)
 
33,782

 
(329,543
)
 
(108,484
)
Limited partner's interest in net (loss) income per common unit


 


 


 


- basic  (note 10)
(1.77
)
 
0.24

 
(2.10
)
 
(0.92
)
- diluted  (note 10)
(1.79
)
 
0.24

 
(2.10
)
 
(0.92
)
Weighted-average number of common units outstanding:


 


 


 


- basic
170,657,562

 
139,057,659

 
156,966,145

 
118,046,087

- diluted
182,393,904

 
157,914,277

 
156,966,145

 
118,046,087

Cash distributions declared per unit
0.0100

 
0.1100

 
0.1300

 
0.3300

Related party transactions (note 6 )
The accompanying notes are an integral part of the unaudited consolidated financial statements.

Page 1 of 50

TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(in thousands of U.S. Dollars)


Three Months Ended
September 30,
 
Nine Months Ended
September 30,

2017
 
2016
 
2017
 
2016

$
 
$
 
$
 
$
Net (loss) income
(320,276
)
 
50,861

 
(315,479
)
 
(51,791
)
Other comprehensive income (loss)


 


 


 


Other comprehensive (income) loss before reclassifications
 
 
 
 
 
 
 
Unrealized (loss) gain on qualifying cash flow hedging instruments (note 7)
(272
)
 
2,182

 
(3,150
)
 
(17,705
)
Amounts reclassified from accumulated other comprehensive loss
 
 
 
 
 
 
 
To interest expense:
 
 
 
 
 
 
 
Realized loss on qualifying cash flow hedging instruments (note 7)
424

 
—

 
1,186

 
—

Other comprehensive income (loss)
152

 
2,182

 
(1,964
)
 
(17,705
)
Comprehensive (loss) income
(320,124
)
 
53,043

 
(317,443
)
 
(69,496
)
Non-controlling interests in comprehensive (loss) income
(2,785
)
 
3,161

 
3,126

 
7,545

Preferred unitholders' interest in comprehensive (loss) income
11,917

 
12,386

 
36,689

 
33,449

General and limited partners' interest in comprehensive (loss) income
(329,256
)
 
37,496

 
(357,258
)
 
(110,490
)
The accompanying notes are an integral part of the unaudited consolidated financial statements.


Page 2 of 50


TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(in thousands of U.S. Dollars)
 
As at
September 30,
 
As at
December 31,
 
2017
 
2016
 
$
 
$
ASSETS
 
 
 
Current
 
 
 
Cash and cash equivalents
416,346

 
227,378

Restricted cash (notes 5, 7 and 9e)
27,470

 
92,265

Accounts receivable, including non-trade of $19,868 (December 31, 2016 - $13,032)
138,462

 
114,576

Vessels held for sale (note 14)
12,400

 
6,900

Net investments in direct financing leases - current (note 3b)
6,004

 
4,417

Prepaid expenses
26,308

 
25,187

Due from affiliates  (note 6c)
44,765

 
77,811

Other current assets  (note 7)
17,110

 
21,282

Total current assets
688,865

 
569,816

Restricted cash - long-term  (note 7)
—

 
22,644

Vessels and equipment
 
 
 
At cost, less accumulated depreciation of $1,476,563 (December 31, 2016 - $1,494,038)
3,825,666

 
4,084,803

Advances on newbuilding contracts and conversion costs (notes 9a,9b,9e,9f and 9k)
689,252

 
632,130

Net investments in direct financing leases  (note 3b)
12,769

 
13,169

Investment in equity accounted joint ventures (notes 9d and 12)
168,852

 
141,819

Deferred tax asset
23,760

 
24,659

Other assets (note 7)
86,037

 
100,435

Goodwill
129,145

 
129,145

Total assets
5,624,346

 
5,718,620

LIABILITIES AND EQUITY
 
 
 
Current
 
 
 
Accounts payable
37,362

 
8,946

Accrued liabilities  (notes 7 and 11)
210,434

 
150,281

Deferred revenues
58,484

 
57,373

Due to affiliates  (note 6c)
124,711

 
96,555

Current portion of derivative instruments (note 7)
53,646

 
55,002

Current portion of long-term debt (note 5)
731,326

 
586,892

Current portion of in-process revenue contracts
10,290

 
12,744

Other current liabilities
1,480

 
—

Total current liabilities
1,227,733

 
967,793

Long-term debt (note 5)
2,346,227

 
2,596,002

Derivative instruments (note 7)
194,354

 
282,138

Due to affiliates (notes 6b, 6c, 6g, and 6h)
160,757

 
200,000

In-process revenue contracts
43,204

 
50,281

Other long-term liabilities
181,420

 
211,611

Total liabilities
4,153,695

 
4,307,825

Commitments and contingencies   (notes 5, 7 and 9)

 

Redeemable non-controlling interest
(34
)
 
962

Convertible Preferred Units (nil and 12.5 million units issued and outstanding at September 30, 2017 and December 31, 2016, respectively)  (note 10)
—

 
271,237

Equity
 
 
 
Limited partners - common units (410.0 million and 147.5 million units issued and outstanding at September 30, 2017 and December 31, 2016, respectively) (notes 10 and 11)
999,616

 
784,056

Limited partners - preferred units (11.0 million units issued and outstanding at September 30, 2017 and December 31, 2016)  (note 10)
266,925

 
266,925

General Partner
14,910

 
20,658

Warrants  (note 10)
132,320

 
13,797

Accumulated other comprehensive loss
(2,768
)
 
(804
)
Non-controlling interests
59,682

 
53,964

Total equity
1,470,685

 
1,138,596

Total liabilities and total equity
5,624,346

 
5,718,620

Subsequent events (note 15)
The accompanying notes are an integral part of the unaudited consolidated financial statements.

Page 3 of 50


TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of U.S. Dollars)
 
 
Nine Months Ended September 30,
 
2017
 
2016
 
$
 
$
Cash and cash equivalents provided by (used for)

 

OPERATING ACTIVITIES

 

Net loss
(315,479
)
 
(51,791
)
Non-cash items:

 

Unrealized gain on derivative instruments (note 7)
(88,706
)
 
(4,353
)
Equity income, net of dividends received of $7,000 (2016 - $3,472)
(5,316
)
 
(10,374
)
Depreciation and amortization
224,317

 
223,138

Write-down of vessels  (note 14)
318,226

 
43,650

Deferred income tax expense (recovery)  (note 8)
2,677

 
(6,013
)
 Amortization of in-process revenue contracts
(9,531
)
 
(9,567
)
Unrealized foreign currency exchange loss and other
14,260

 
43,536

Change in non-cash working capital items related to operating activities
64,084

 
68,277

Expenditures for dry docking
(11,875
)
 
(22,343
)
Net operating cash flow
192,657

 
274,160

FINANCING ACTIVITIES

 

Proceeds from long-term debt  (note 5)
307,004

 
283,828

Scheduled repayments of long-term debt (note 5)
(419,064
)
 
(314,653
)
Prepayments of long-term debt (note 5)
(24,687
)
 
(197,776
)
Debt issuance costs (note 5)
(5,696
)
 
(10,988
)
Equity contribution from joint venture partners
6,000

 
750

Proceeds from issuance of common units and warrants  (note 10)
640,595

 
124,879

Proceeds from issuance of preferred units and warrants  (note 10)
—

 
100,000

Repurchase of preferred units (note 10)
(250,022
)
 
—

Expenses relating to equity offerings
(11,564
)
 
(5,911
)
Decrease in restricted cash (note 7)
87,439

 
13,890

Cash distributions paid by the Partnership
(51,087
)
 
(61,827
)
Cash distributions paid by subsidiaries to non-controlling interests
(4,404
)
 
(4,610
)
Other
(483
)
 
(90
)
Net financing cash flow
274,031

 
(72,508
)
INVESTING ACTIVITIES


 


Net payments for vessels and equipment, including advances on newbuilding contracts and conversion costs
(257,897
)
 
(238,349
)
Proceeds from sale of vessels and equipment
—

 
55,450

Investment in equity accounted joint ventures
(24,101
)
 
(52,873
)
Direct financing lease payments received (investments)
4,278

 
(1,481
)
Net investing cash flow
(277,720
)
 
(237,253
)
Increase (decrease) in cash and cash equivalents
188,968

 
(35,601
)
Cash and cash equivalents, beginning of the period
227,378

 
258,473

Cash and cash equivalents, end of the period
416,346

 
222,872

The accompanying notes are an integral part of the unaudited consolidated financial statements.

Page 4 of 50


TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY
(in thousands of U.S. Dollars and units)

 
PARTNERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
 
Limited Partners
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common
Units
#
 
Common
Units and
Additional
Paid-in Capital
$
 
Preferred
Units
#
 
Preferred
Units
$
 

Warrants
$
 
General
Partner
$
 
Accumulated Other Comprehensive Loss
$
 
Non-
controlling
Interests
$
 
Total
Equity
$
 
Convertible Preferred Units
#
 
Convertible Preferred Units
$
 
Redeemable
Non-
controlling
Interest
$
Balance as at December 31, 2016
147,514

 
784,056

 
11,000

 
266,925

 
13,797

 
20,658

 
(804
)
 
53,964

 
1,138,596

 
12,517

 
271,237

 
962

Net (loss) income
—

 
(348,237
)
 
—

 
16,125

 
—

 
(7,057
)
 
—

 
3,078

 
(336,091
)
 
—

 
20,564

 
48

Other comprehensive loss (note 7)
—

 
—

 
—

 
—

 
—

 
—

 
(1,964
)
 
—

 
(1,964
)
 
—

 
—

 
—

Cash distributions
—

 
(24,757
)
 
—

 
(16,125
)
 
—

 
—

 
—

 
—

 
(40,882
)
 
—

 
(10,205
)
 
—

Payment-in-kind distributions (note 10)
6,391

 
19,687

 
—

 
—

 
—

 
(699
)
 
—

 
—

 
18,988

 
—

 
(14,022
)
 
—

Distribution to non-controlling interests
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(3,360
)
 
(3,360
)
 
—

 
—

 
(1,044
)
Contribution of capital from joint venture partner
—

 
—

 
—

 
—

 
—

 
—

 
—

 
6,000

 
6,000

 
—

 
—

 
—

Contribution of capital from Teekay Corporation  (notes 6i and 10)
—

 
44,442

 
—

 
—

 
—

 
873

 
—

 
—

 
45,315

 
—

 
—

 
—

Proceeds from equity offerings, net of offering costs (note 10)
256,000

 
505,347

 
—

 
—

 
120,043

 
588

 
—

 
—

 
625,978

 
—

 
—

 
—

Repurchase of Convertible Preferred Units  (note 10)
—

 
19,588

 
—

 
—

 
—

 
383

 
—

 
—

 
19,971

 
(12,517
)
 
(269,993
)
 
—

Equity based compensation and other (note 11)
140

 
(510
)
 
—

 
—

 
(1,520
)
 
164

 
—

 
—

 
(1,866
)
 
—

 
2,419

 
—

Balance as at September 30, 2017
410,045

 
999,616

 
11,000

 
266,925

 
132,320

 
14,910

 
(2,768
)
 
59,682

 
1,470,685

 
—

 
—

 
(34
)
The accompanying notes are an integral part of the unaudited consolidated financial statements.

Page 5 of 50


TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)


1. Basis of Presentation

The unaudited interim consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (or GAAP ). These financial statements include the accounts of Teekay Offshore Partners L.P., which is a limited partnership organized under the laws of the Republic of The Marshall Islands, and its wholly-owned or controlled subsidiaries (collectively, the Partnership ).

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Certain information and footnote disclosures required by GAAP for complete annual financial statements have been omitted and, therefore, these interim financial statements should be read in conjunction with the Partnership’s audited consolidated financial statements for the year ended December 31, 2016, which are included in the Partnership’s Annual Report on Form 20-F, filed with the U.S. Securities and Exchange Commission (or SEC ) on April 12, 2017. In the opinion of management of the Partnership’s general partner, Teekay Offshore GP L.L.C. (or the general partner ), these interim unaudited consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary to present fairly, in all material respects, the Partnership’s consolidated financial position, results of operations, changes in total equity and cash flows for the interim periods presented. The results of operations for the interim periods presented are not necessarily indicative of those for a full fiscal year. Historically, the utilization of shuttle tankers in the North Sea is higher in the winter months as favorable weather conditions in the summer months provide opportunities for repairs and maintenance to the Partnership’s vessels and the offshore oil platforms. Downtime for repairs and maintenance generally reduces oil production and, thus, transportation requirements. Intercompany balances and transactions have been eliminated upon consolidation.

In September 2017, the Partnership entered into a strategic partnership (the Brookfield Transaction ) with Brookfield Business Partners L.P., together with its institutional partners (or Brookfield ). As part of this transaction, Brookfield and Teekay Corporation invested $610.0 million and $30.0 million respectively, in exchange for 244.0 million and 12.0 million common units, respectively, of the Partnership and 62.4 million and 3.1 million warrants, respectively, exercisable for common units of the Partnership (see note 10 ). As part of the Brookfield Transaction, Brookfield acquired from a subsidiary of Teekay Corporation a $200.0 million subordinated promissory note of the Partnership (the 2016 Teekay Corporation Promissory Not e) in exchange for $140 million in cash and 11.4 million warrants to purchase common units of the Partnership, and the Partnership, Teekay Corporation and Brookfield amended the promissory note to, among other things, extend the maturity date to January 1, 2022 (as amended, the Brookfield Promissory Note ) (see note 6h ).
2.
Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (or FASB ) issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (or ASU 2014-09 ). ASU 2014-09 will require an entity to recognize revenue when it transfers promised goods or services to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This update creates a five-step model that requires entities to exercise judgment when considering the terms of the contract(s) which include (i) identifying the contract(s) with the customer, (ii) identifying the separate performance obligations in the contract, (iii) determining the transaction price, (iv) allocating the transaction price to the separate performance obligations, and (v) recognizing revenue as each performance obligation is satisfied. ASU 2014-09 is effective for the Partnership January 1, 2018 and will be applied as a cumulative-effect adjustment as of this date. The Partnership expects that the adoption of ASU 2014-09 will result in a change in the method of recognizing revenue from contracts of affreightments (or CoA s) whereby revenue will be recognized over the voyage until discharge is complete, instead of over the voyage until tendering notice for the next voyage. This will result in all revenue being fully recognized upon discharge of cargo whereas currently revenue recognition extends into the period the vessel returns to the oil field. This change may result in revenue being recognized earlier which may cause additional volatility in revenue and earnings between periods. In addition, the Partnership expects that the adoption of ASU 2014-09 will result in a change in the method of recognizing revenue for voyage charters, whereby the Partnership’s method of determining proportional performance will change from discharge-to-discharge to load-to-discharge. This will result in no revenue being recognized from discharge of the prior voyage to loading of the current voyage and all revenue being recognized from loading of the current voyage to discharge of the current voyage. This change will result in revenue being recognized later in the voyage which may cause additional volatility in revenue and earnings between periods. The Partnership is in the final stages of completing its assessment of ASU 2014-09, and is focused on developing process changes, determining the transitional impact and completing other items required for the adoption of ASU 2014-09.

In February 2016, the FASB issued Accounting Standards Update 2016-02, Leases (or ASU 2016-02 ). ASU 2016-02 establishes a right-of-use model that requires a lessee to record a right of use asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The Partnership expects to adopt ASU 2016-02 effective January 1, 2018. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Partnership expects that the adoption of ASU 2016-02 will result in a change in accounting method for the lease portion of the daily charter hire for the Partnership's chartered-in vessels accounted for as operating leases with firm periods of greater than one year. Under ASU 2016-02, the Partnership will recognize a right-of-use asset and a lease liability on the balance sheet for these charters, whereas currently no right-of-use asset or lease liability is recognized. This will have the result of increasing the Partnership’s assets and liabilities. Based on the lease agreements the Partnership has entered into on or prior to September 30, 2017, the expected increase to the Partnership's assets and liabilities is not expected to be material. The pattern of expense recognition of chartered-in vessels is expected to remain substantially unchanged, unless the right of use asset becomes impaired. The Partnership is in the final stages of completing its assessment of ASU 2016-02, and is focused on developing process changes, determining the transitional impact and completing other items required for the adoption of ASU 2016-02.

Page 6 of 50


TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)


In March 2016, the FASB issued Accounting Standards Update 2016-09, Improvements to Employee Share-Based Payment Accounting (or ASU 2016-09 ). ASU 2016-09 simplifies aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statements of cash flows. ASU 2016-09 became effective for the Partnership January 1, 2017. The impact of adopting this new accounting guidance is a change in the Partnership's presentation of cash payments for tax withholdings on share settled equity awards from an operating cash outflow to a financing cash outflow on the Partnership's statements of cash flows.

In June 2016, the FASB issued Accounting Standards Update 2016-13,  Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (or ASU 2016-13 ). ASU 2016-13 replaces the incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This update is effective for the Partnership January 1, 2020, with a modified-retrospective approach. The Partnership is currently evaluating the effect of adopting this new guidance.

In August 2016, the FASB issued Accounting Standards Update 2016-15,  Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments (or ASU 2016-15 ), which, among other things, provides guidance on two acceptable approaches of classifying distributions received from equity method investees in the statements of cash flows. ASU 2016-15 is effective for the Partnership January 1, 2018, with a retrospective approach. The Partnership is currently evaluating the effect of adopting this new guidance.

In November 2016, the FASB issued Accounting Standards Update 2016-18, Statement of Cash Flows: Restricted Cash (or ASU 2016-18 ). ASU 2016-18 requires that the statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Entities will also be required to reconcile such total to amounts on the balance sheet and disclose the nature of the restrictions. ASU 2016-18 is effective for the Partnership January 1, 2018. Adoption of ASU 2016-18 will result in the Partnership’s statements of cash flows being modified to include changes in restricted cash in addition to changes in cash and cash equivalents.

In August 2017, the FASB issued Accounting Standards Update 2017-12,  Derivatives and Hedging - Targeted Improvements to Accounting for Hedging Activities (or ASU 2017-12 ). ASU 2017-12 eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires, for qualifying hedges, the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item. The guidance also modifies the accounting for components excluded from the assessment of hedge effectiveness, eases documentation and assessment requirements and modifies certain disclosure requirements. ASU 2017-12 will be effective for the Partnership January 1, 2019. The Partnership is currently evaluating the effect of adopting this new guidance.
3.
Financial Instruments

a)
Fair Value Measurements

For a description of how the Partnership estimates fair value and for a description of the fair value hierarchy levels, see Item 18: Financial Statements: Note 4 in the Partnership’s audited consolidated financial statements filed with its Annual Report on Form 20-F for the year ended December 31, 2016 . The following table includes the estimated fair value and carrying value of those assets and liabilities that are measured at fair value on a recurring and non-recurring basis, as well as the estimated fair value of the Partnership’s financial instruments that are not accounted for at fair value on a recurring basis.

Page 7 of 50


TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)

 
 
 
September 30, 2017
 
December 31, 2016
 
Fair Value
Hierarchy
Level
 
Carrying
Amount
Asset
 (Liability)
$
 
Fair Value
Asset 
(Liability)
$
 
Carrying
Amount
Asset 
(Liability)
$
 
Fair Value
Asset 
(Liability)
$
Recurring:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents and restricted cash
Level 1
 
443,816

 
443,816

 
342,287

 
342,287

Derivative instruments (note 7)

 
 
 
 
 
 
 
 
Interest rate swap agreements
Level 2
 
(185,229
)
 
(185,229
)
 
(203,106
)
 
(203,106
)
Cross currency swap agreements
Level 2
 
(69,547
)
 
(69,547
)
 
(137,379
)
 
(137,379
)
Foreign currency forward contracts
Level 2
 
852

 
852

 
(1,786
)
 
(1,786
)


 
 
 
 
 
 
 
 
Non-Recurring:

 
 
 
 
 
 
 
 
Vessels held for sale (note 14)
Level 2
 
5,500

 
5,500

 
6,900

 
6,900

Vessels and equipment (note 14)
Level 2
 
47,798

 
47,798

 
11,300

 
11,300

Vessels and equipment and advances on newbuilding contracts and conversion costs (note 14)
Level 3
 
226,327


226,327


—


—



 
 
 
 
 
 
 
 
Other:

 
 
 
 
 
 
 
 
Long-term debt - public (note 5)
Level 1
 
(575,966
)
 
(575,666
)
 
(550,525
)
 
(480,710
)
Long-term debt - non-public (note 5)
Level 2
 
(2,501,587
)
 
(2,472,852
)
 
(2,632,369
)
 
(2,551,697
)
Due to affiliates - long term  (notes 6g and 6h)
Level 2
 
(160,757
)
 
(210,618
)
 
(200,000
)
 
(192,982
)
Vessels and equipment and advances on newbuilding contracts and conversion costs – In September 2017, as a result of cost overruns and liquidated damages due to the delayed delivery of the Petrojarl I FPSO unit, the Partnership determined that the unit was impaired and wrote down the carrying value of the unit to its estimated fair value based on a discounted cash flow approach. The Partnership determined the discounted cash flows using the expected remaining costs to complete the conversion, the current contracted and projected time charter rates and costs, and estimated residual value, discounted at an estimated market participant rate of 10% . The projected future use takes into consideration the Partnership’s projected time charter rates that could be contracted in future periods. In establishing these estimates, the Partnership has considered current discussions with potential customers, available field expansions and historical experience redeploying FPSOs. The actual carrying value of the completed unit will include the estimated fair value and any remaining costs to complete, which are currently estimated to be $69.0 million , net of recoveries.
In the third quarter of 2017, the Partnership received notice from the charterer, Petrobras, that they plan to redeliver the Cidade de Rio das Ostras FPSO upon completion of the unit's firm charter contract in January 2018. As a result of the change in expected cash flows, the Partnership determined that the unit was impaired and wrote down the carrying value of the unit to its estimated fair value based on a discounted cash flow approach. The Partnership determined the discounted cash flows using the current contract’s time charter rates and operating costs, projected future use on another field, and estimated residual value, discounted at an estimated market participant rate of 10% . The projected future use takes into consideration the Partnership’s projected time charter rates that could be contracted in future periods. In establishing these estimates, the Partnership has considered current discussions with potential customers, available field expansions and historical experience redeploying FPSOs.
In September 2017, as a result of a change in expectations for future opportunities for the HiLoad DP unit, the Partnership determined that the unit was impaired and wrote down the carrying value of the unit to its estimated fair value based on a discounted cash flow approach. The Partnership determined the discounted cash flows using projected future uses and costs, discounted at an estimated market participant rate of 8.2% . The projected future use takes into consideration the recovery, if any, from the unit's terminated contract with Petrobras and the expected costs to place the unit into cold lay-up. In establishing these estimates, the Partnership has considered discussions with potential customers and projected lay-up costs.
As a result of the above, the three units were written down to their respective fair values, which in aggregate totaled $226.3 million .
Contingent consideration liability – In August 2014, the Partnership acquired 100% of the outstanding shares of Logitel Offshore Holding AS (or Logitel ), a Norway-based company focused on high-end Units for Maintenance and Safety (or UMS ), from CeFront Technology AS (or CeFront ) for $4.0 million . The Partnership paid the purchase price in cash at closing, plus a commitment to pay an additional amount of up to $27.6 million , depending on certain performance criteria. For a description of the performance criteria, please refer to Item 18: Financial Statements: Note 4 in the Partnership’s audited consolidated financial statements filed with its Annual Report on Form 20-F for the year ended December 31, 2015.

Page 8 of 50


TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)

The Arendal Spirit UMS was delivered to the Partnership on February 16, 2015. During the second quarter of 2016, the Partnership canceled the UMS construction contracts for its two remaining UMS newbuildings. This was expected to eliminate any future purchase price contingent consideration payments. Consequently, the contingent liability associated with the UMS newbuildings was reversed in the second quarter of 2016. The gain associated with this reversal is included in Other income (expense) - net on the Partnership's consolidated statements of loss for the three and nine months ended September 30, 2016 . In September 2017, CeFront and subsidiaries of the Partnership entered into a settlement agreement relating to this contingent liability (see note 9c ).
Changes in the estimated fair value of the Partnership’s contingent consideration liability relating to the acquisition of Logitel, which is measured at fair value on a recurring basis using significant unobservable inputs (Level 3), during the three and nine months ended September 30, 2017 and September 30, 2016 are as follows:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
 
Asset (Liability)
 
Asset (Liability)
 
$
 
$
 
$
 
$
Balance at beginning of period
—

 
—

 
—

 
(14,830
)
Gain included in Other expense - net
—

 
—

 
—

 
14,830

Balance at end of period
—

 
—

 
—

 
—

b)
Financing Receivables
The following table contains a summary of the Partnership’s financing receivables by type of borrower and the method by which the Partnership monitors the credit quality of its financing receivables on a quarterly basis:
 
Credit Quality
Indicator
 
Grade
 
September 30,
2017
 
December 31,
2016
 
 
 
$
 
$
Direct financing leases
Payment activity
 
Performing
 
18,773

 
17,586

4.
Segment Reporting
The following tables include results for the Partnership’s floating production storage and offloading (or FPSO ) unit segment; shuttle tanker segment; floating storage and off-take (or FSO ) unit segment; UMS segment; towage segment; and conventional tanker segment for the periods presented in these consolidated financial statements.
Three Months Ended September 30, 2017
FPSO Segment

Shuttle Tanker Segment

FSO
Segment

UMS Segment

Towage
Segment

Conventional Tanker Segment

Eliminations (2)
 
Total
Revenues
116,611

 
135,549

 
10,205

 
—

 
11,431

 
3,181

 
(3,351
)
 
273,626

Voyage expenses
—

 
(20,018
)
 
(258
)
 
—

 
(6,191
)
 
(45
)
 
1,410

 
(25,102
)
Vessel operating expenses
(40,816
)
 
(31,007
)
 
(5,132
)
 
(4,509
)
 
(5,825
)
 
—

 
520

 
(86,769
)
Time-charter hire expenses
—

 
(16,415
)
 
—

 
—

 
—

 
(4,262
)
 
—

 
(20,677
)
Depreciation and amortization
(36,497
)
 
(31,049
)
 
(2,589
)
 
(1,640
)
 
(4,111
)
 
—

 
582

 
(75,304
)
General and administrative (1)
(11,004
)
 
(6,060
)
 
(446
)
 
(1,019
)
 
(1,251
)
 
(90
)
 
—

 
(19,870
)
Write-down of vessels
(265,229
)
 
(51,497
)
 
—

 
—

 
—

 
—

 
—

 
(316,726
)
Restructuring charge
—

 
—

 
—

 
(2,885
)
 
—

 
—

 
—

 
(2,885
)
(Loss) income from vessel operations
(236,935
)
 
(20,497
)
 
1,780

 
(10,053
)
 
(5,947
)
 
(1,216
)
 
(839
)
 
(273,707
)

Page 9 of 50


TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)

Three Months Ended September 30, 2016
FPSO Segment
 
Shuttle Tanker Segment
 
FSO
Segment
 
UMS Segment
 
Towage
Segment
 
Conventional Tanker Segment
 
Eliminations
 
Total
Revenues
121,294

 
128,482

 
14,251

 
13,395

 
5,345

 
3,531

 
—

 
286,298

Voyage expenses
—

 
(18,898
)
 
(96
)
 
—

 
(2,440
)
 
(61
)
 
—

 
(21,495
)
Vessel operating expenses
(42,353
)
 
(33,062
)
 
(6,056
)
 
(8,331
)
 
(4,206
)
 
—

 
—

 
(94,008
)
Time-charter hire expenses
—

 
(14,723
)
 
—

 
—

 
—

 
(4,171
)
 
—

 
(18,894
)
Depreciation and amortization
(37,180
)
 
(30,166
)
 
(2,205
)
 
(1,647
)
 
(2,961
)
 
—

 
—

 
(74,159
)
General and administrative (1)
(10,235
)
 
(1,147
)
 
(230
)
 
(2,640
)
 
(859
)
 
(90
)
 
—

 
(15,201
)
Restructuring charge
(597
)

(205
)

—


—


—


—


—

 
(802
)
Income (loss) from vessel operations
30,929

 
30,281

 
5,664

 
777

 
(5,121
)
 
(791
)
 
—

 
61,739


Nine Months Ended September 30, 2017
FPSO Segment

Shuttle Tanker Segment

FSO
Segment

UMS Segment

Towage
Segment

Conventional Tanker Segment

Eliminations (2)
 
Total
Revenues  
339,713


404,746


32,492


3,916


26,558


10,482


(3,351
)
 
814,556

Voyage expenses
—


(58,615
)

(1,013
)

—


(12,110
)

(111
)

1,410

 
(70,439
)
Vessel operating (expenses) recoveries
(110,988
)

(86,846
)

(14,904
)

(28,327
)

(14,929
)

10


520

 
(255,464
)
Time-charter hire expenses
—


(48,500
)

—


—


(925
)

(12,515
)

—

 
(61,940
)
Depreciation and amortization
(109,496
)

(91,711
)

(7,729
)

(4,907
)

(11,056
)

—


582

 
(224,317
)
General and administrative (1)
(25,904
)

(12,709
)

(1,356
)

(4,183
)

(3,444
)

(270
)

—

 
(47,866
)
Write-down of vessels
(265,229
)

(51,497
)

(1,500
)

—


—


—


—

 
(318,226
)
Restructuring charge
(450
)

—


—


(2,885
)

—


—


—

 
(3,335
)
(Loss) income from vessel operations
(172,354
)

54,868


5,990


(36,386
)

(15,906
)

(2,404
)

(839
)
 
(167,031
)

Nine Months Ended September 30, 2016
FPSO Segment
 
Shuttle Tanker Segment
 
FSO
Segment
 
UMS Segment
 
Towage
Segment
 
Conventional Tanker Segment
 
Eliminations
 
Total
Revenues (3)
378,793

 
380,505

 
42,403

 
30,612

 
28,158

 
16,999

 
—

 
877,470

Voyage expenses
—

 
(45,409
)
 
(431
)
 
—

 
(10,239
)
 
(1,348
)
 
—

 
(57,427
)
Vessel operating expenses
(130,632
)
 
(91,735
)
 
(17,724
)
 
(25,576
)
 
(13,015
)
 
(1,439
)
 
—

 
(280,121
)
Time-charter hire expenses
—

 
(44,298
)
 
—

 
—

 
—

 
(8,747
)
 
—

 
(53,045
)
Depreciation and amortization
(111,998
)
 
(90,903
)
 
(6,586
)
 
(5,037
)
 
(8,614
)
 
—

 
—

 
(223,138
)
General and administrative (1)
(27,126
)
 
(8,975
)
 
(612
)
 
(4,166
)
 
(2,350
)
 
(262
)
 
—

 
(43,491
)
Write-down of vessels
—

 
—

 
—

 
(43,650
)
 
—

 
—

 
—

 
(43,650
)
Restructuring charge
(2,084
)
 
(205
)
 
—

 
—

 
—

 
—

 
—

 
(2,289
)
Income (loss) from vessel operations
106,953

 
98,980

 
17,050

 
(47,817
)
 
(6,060
)
 
5,203

 
—

 
174,309

 
(1)
Includes direct general and administrative expenses and indirect general and administrative expenses (allocated to each segment based on estimated use of corporate resources).
(2)
Includes revenues and expenses earned and incurred between segments of the Partnership, during the three and nine months ended September 30, 2017 .

Page 10 of 50


TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)

(3)
Revenues includes a $4.0 million early termination fee received from Teekay Corporation during the nine months ended September 30, 2016 , which is included in the Partnership's conventional tanker segment.

A reconciliation of total segment assets to total assets presented in the accompanying consolidated balance sheets is as follows:
 
September 30, 2017
 
December 31, 2016
 
$
 
$
FPSO segment
2,463,547

 
2,672,100

Shuttle tanker segment
1,604,134

 
1,673,348

FSO segment
533,112

 
407,634

UMS segment
192,642

 
213,829

Towage segment
377,291

 
382,973

Conventional tanker segment
5,871

 
4,818

Unallocated:
 
 
 
Cash and cash equivalents and restricted cash
443,816

 
342,287

Other assets
3,933

 
21,631

Consolidated total assets
5,624,346

 
5,718,620

5. Long-Term Debt
 
September 30, 2017
 
December 31, 2016
 
$
 
$
U.S. Dollar-denominated Revolving Credit Facilities due through 2019
222,414

 
291,764

Norwegian Kroner Bonds due through 2019
278,803

 
256,927

U.S. Dollar-denominated Term Loans due through 2021
88,810

 
112,406

U.S. Dollar-denominated Term Loans due through 2028
2,070,215

 
2,109,926

U.S. Dollar Non-Public Bonds due through 2024
162,659

 
166,680

U.S. Dollar Bonds due through 2019
300,000

 
300,000

Total principal
3,122,901

 
3,237,703

Less debt issuance costs and other
(45,348
)
 
(54,809
)
Total debt
3,077,553

 
3,182,894

Less current portion
(731,326
)
 
(586,892
)
Long-term portion
2,346,227

 
2,596,002


As at September 30, 2017 , the Partnership had four revolving credit facilities (December 31, 2016 - five ), which, as at such date, provided for total borrowings of up to $222.4 million (December 31, 2016 - $325.1 million ), and were fully drawn (December 31, 2016 - undrawn balance of $33.3 million ). The total amount available under the revolving credit facilities reduces by $71.3 million (remainder of 2017 ), $144.7 million ( 2018 ) and $6.4 million ( 2019 ). The four revolving credit facilities are guaranteed by the Partnership and certain of its subsidiaries for all outstanding amounts and contain covenants that require the Partnership to maintain a minimum liquidity (cash, cash equivalents and undrawn committed revolving credit lines with at least six months to maturity) in an amount equal to the greater of $75.0 million and 5.0% of the Partnership’s total consolidated debt. One revolving credit facility that, as at December 31, 2016, was guaranteed by Teekay Corporation, matured during the nine months ended September 30, 2017 . The revolving credit facilities are collateralized by first-priority mortgages granted on 20 of the Partnership’s vessels, together with other related security. In October 2017, six of the Partnership's existing debt facilities were refinanced with a new $600 million revolving credit facility with Teekay Shuttle Tankers L.L.C., as part of the formation of Teekay Shuttle Tankers L.L.C. (see note 15 ).

As at September 30, 2017 , the Partnership had the following outstanding Norwegian Kroner (or NOK ) senior unsecured bonds listed on the Oslo Stock Exchange:

a)
NOK 1,000 million in senior unsecured bonds that mature in January 2019. As at September 30, 2017 , the carrying amount of the bonds was $125.6 million . The interest payments on the bonds are based on NIBOR plus a margin of 4.25% . The Partnership has entered into cross currency swaps to swap all interest and principal payments into U.S. Dollars, with the interest payments fixed at a rate of 7.45% , and the transfer of the principal amount fixed at $162.2 million upon maturity in exchange for NOK 1,000 million (see note 7 ).


Page 11 of 50


TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)

b)
NOK 800 million in senior unsecured bonds, of which NOK 160 million was repayable in January 2018, and the remaining balance of NOK 640 million was repayable in December 2018 at 103% of the amount outstanding. The Partnership was granted a call option, exercisable at any time, to prepay the bonds in amounts ranging from 101% to 103% of the amount of bonds outstanding depending on the timing of settlement. Interest payments on the bonds were based on NIBOR plus a margin of 5.75% . As at September 30, 2017 , the carrying amount of the bonds was $100.5 million . During the three months ended September 30, 2017 , the holders of these bonds were provided the opportunity to elect to sell to the Partnership their interests in the NOK 800 million senior unsecured bonds and reinvest the proceeds in new $250 million senior unsecured bonds of Teekay Shuttle Tankers L.L.C.. Following this election, in October 2017, the Partnership exercised its call option and refinanced the remaining outstanding balances of the bonds and terminated the associated cross currency swaps (see note 15 ).

c)
NOK 420 million in senior unsecured bonds, of which NOK 180 million was repaid in October 2017 and NOK 240 million is repayable in November 2018 at 103% of the amount outstanding. The Partnership was granted a call option, exercisable at any time, to prepay the bonds in amounts ranging from 101% to 103% of the amount of bonds outstanding depending on the timing of settlement. Interest payments on the bonds were based on NIBOR plus a margin of 5.75% . As at September 30, 2017 , the carrying amount of the bonds was $52.7 million . During the three months ended September 30, 2017 , the holders of these bonds were provided the opportunity to elect to sell to the Partnership their interests in the NOK 420 million senior unsecured bonds and reinvest the proceeds in new $250 million senior unsecured bonds of Teekay Shuttle Tankers L.L.C.. Following the election, in October 2017, the Partnership exercised its call option and refinanced the remaining outstanding balances of the bonds and terminated the associated cross currency swaps (see note 15 ).

As at September 30, 2017 , three of the Partnership’s 50% -owned subsidiaries had a total of two outstanding term loans ( December 31, 2016 - three), which in the aggregate totaled $88.8 million . During the three months ended September 30, 2017 , two of the original term loan facilities were refinanced into a single facility and the maturity date was extended from 2018 to 2021. The term loans reduce over time with quarterly and semi-annual payments and have varying maturities through 2021. These term loans are collateralized by first-priority mortgages on the three shuttle tankers to which the loans relate, together with other related security. As at September 30, 2017 , the Partnership had guaranteed $44.4 million of the term loans, which represents its 50% share of the outstanding term loans, and the other owner had guaranteed the remaining $44.4 million of the term loans.

As at September 30, 2017 , the Partnership had term loans outstanding for eight shuttle tankers , three East Coast of Canada shuttle tanker newbuildings, three FSO units, four FPSO units, ten towing and offshore installation vessels and vessel newbuildings, and for the Arendal Spirit UMS, which totaled $2.1 billion in the aggregate. For the term loan for two shuttle tankers, one tranche reduces in semi-annual payments while another tranche correspondingly is drawn up every six months with final bullet payments of $29.0 million due in 2022 and $29.1 million due in 2023, respectively. The other term loans reduce over time with quarterly or semi-annual payments. These term loans have varying maturities through 2028 and are collateralized by first-priority mortgages on the vessels to which the loans relate, together with other related security. As at September 30, 2017 , the Partnership had guaranteed $1.9 billion of these term loans and Teekay Corporation had guaranteed $219.7 million . In April 2017, Petroleo Netherlands B.V. notified Logitel Offshore Norway AS, a subsidiary of the Partnership, of its termination of the charter contract for the Arendal Spirit UMS. The Partnership has disputed the grounds for termination and is reviewing its legal options, including the initiation of a claim for unpaid standby fees and damages for wrongful termination of the time-charter contract. The term loan outstanding for the Arendal Spirit UMS, which as at September 30, 2017 had a balance of $112.5 million , was payable within 180 days of the charter cancellation unless a replacement contract was obtained or a lender waiver was received. As of September 30, 2017 , the Partnership had reached an agreement with the lenders of the Arendal Spirit UMS debt facility to extend the waiver period to September 30, 2018, in exchange for a principal prepayment of $30.0 million , which was paid in October 2017.

In February 2015, the Partnership issued $30.0 million in senior bonds that mature in June 2024 in a U.S. private placement. As at September 30, 2017 , the carrying amount of the bonds was $22.0 million . The interest payments on the bonds are fixed at a rate of 4.27% . The bonds are collateralized by a first-priority mortgage on the Dampier Spirit FSO unit, together with other related security, and are guaranteed by the Partnership.

In September 2013 and November 2013, the Partnership issued, in a U.S. private placement, a total of $174.2 million of ten -year senior bonds that mature in December 2023 to finance the Bossa Nova Spirit and Sertanejo Spirit shuttle tankers. The bonds accrue interest at a fixed combined rate of 4.96% . The bonds are collateralized by first-priority mortgages on the two vessels to which the bonds relate, together with other related security. The Partnership makes semi-annual repayments on the bonds and as at September 30, 2017 , the carrying amount of the bonds was $140.7 million .

In May 2014, the Partnership issued $300.0 million in five -year senior unsecured bonds that mature in July 2019 in the U.S. bond market. As at September 30, 2017 , the carrying amount of the bonds was $300.0 million . The bonds are listed on the New York Stock Exchange. The interest payments on the bonds are fixed at a rate of 6.00% .

Interest payments on the revolving credit facilities and the term loans are based on LIBOR plus margins, except for $66.6 million of one tranche of the term loan for the ALP Maritime Services (or ALP ) newbuilding towing and offshore installation vessels, which is fixed at 2.93% . At September 30, 2017 , the margins ranged between 0.30% and 4.75% ( December 31, 2016 - 0.30% and 4.00% ). The weighted-average interest rate on the Partnership’s U.S. Dollar variable rate long-term debt as at September 30, 2017 was 3.5% ( December 31, 2016 - 3.0% ). This rate does not include the effect of the Partnership’s interest rate swaps (see note 7 ) or fixed rate facilities.

The aggregate annual long-term debt principal repayments required to be made subsequent to September 30, 2017 are $220.9 million (remainder of 2017 ), $615.4 million ( 2018 ), $781.3 million ( 2019 ), $350.9 million ( 2020 ),  $304.9 million ( 2021 ), and $849.5 million (thereafter).


Page 12 of 50


TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)

Obligations under the Partnership’s credit facilities are secured by certain vessels, and if the Partnership is unable to repay debt under the credit facilities, the lenders could seek to foreclose on those assets. The Partnership has two revolving credit facilities and six term loans that require the Partnership to maintain vessel values to drawn principal balance ratios of a minimum range of 113% to 125% . Such requirement is assessed either on a semi-annual or annual basis, with reference to vessel valuations compiled by one or more agreed upon third parties. Should the ratio drop below the required amount, the lender may request the Partnership to either prepay a portion of the loan in the amount of the shortfall or provide additional collateral in the amount of the shortfall, at the Partnership's option. As at September 30, 2017 , these ratios were estimated to range from 117% to 382% and the Partnership was in compliance with the minimum ratios required. The vessel values used in calculating these ratios are the appraised values provided by third parties where available, or prepared by the Partnership based on second-hand sale and purchase market data. Changes in the shuttle tanker, towing and offshore installation, UMS, FPSO or FSO markets could negatively affect these ratios.

Please read Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Liquidity and Capital Needs for a description of certain covenants contained in the Partnership’s credit facilities and loan agreements. As at September 30, 2017 , the Partnership was in compliance with all covenants related to the credit facilities and consolidated long-term debt.
6. Related Party Transactions and Balances
a)
During the three and nine months ended September 30, 2017 , two shuttle tankers and three FSO units of the Partnership were employed on long-term time-charter-out or bareboat contracts with subsidiaries of Teekay Corporation.
b)
Teekay Corporation and its wholly-owned subsidiaries directly and indirectly provide substantially all of the Partnership’s commercial, technical, crew training, strategic, business development and administrative service needs. In addition, the Partnership reimburses the general partner for expenses incurred by the general partner that are necessary or appropriate for the conduct of the Partnership’s business. Prior to September 25, 2017, Teekay Corporation owned all of the general partner; as part of the Brookfield Transaction, Teekay Corporation sold to Brookfield 49% of the general partner ownership interests. The Partnership's related party transactions were as follows for the periods indicated:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
 
$
 
$
 
$
 
$
Revenues  (1)
10,446

 
13,733

 
34,664

 
38,651

Vessel operating expenses (2)
(8,108
)
 
(8,889
)
 
(23,741
)
 
(26,951
)
General and administrative  (3)
(9,809
)
 
(7,469
)
 
(24,189
)
 
(22,817
)
Interest expense (4)(5)(6)(7)(8)
(6,946
)
 
(6,927
)
 
(20,840
)
 
(15,409
)
 
_______________
(1)
Includes revenue from time-charter-out or bareboat contracts with subsidiaries of Teekay Corporation, including management fees from ship management services provided by the Partnership to a subsidiary of Teekay Corporation. The nine months ended September 30, 2016 includes an early termination fee received by the Partnership from Teekay Corporation of $4.0 million .
(2)
Includes ship management and crew training services provided by Teekay Corporation.
(3)
Includes commercial, technical, strategic, business development and administrative management fees charged by Teekay Corporation and reimbursements to Teekay Corporation and the general partner for costs incurred on the Partnership’s behalf.
(4)
Includes a guarantee fee related to the final bullet payment of the Piranema Spirit FPSO debt facility, which was repaid in March 2017, and for the Partnership's liabilities associated with the long-term debt financing relating to the East Coast of Canada shuttle tanker newbuildings and certain of the Partnership's interest rate swaps and cross currency swaps (see notes 6i and 7 ).
(5)
Includes interest expense of $4.7 million and $14.6 million , respectively, for the three and nine months ended September 30, 2017 , incurred on the 2016 Teekay Corporation Promissory Note (see note 6g ), which bore interest at an annual rate of 10.00% on the outstanding principal balance of $200.0 million , which was acquired by Brookfield on September 25, 2017 (see note 6h ).
(6)
Includes interest expense of $0.3 million for the three and nine months ended September 30, 2017 , incurred on the Brookfield Promissory Note (see note 6h ). The subordinated promissory note bears interest at an annual rate of 10.00% on the outstanding principal balance, which as at September 30, 2017 , was $200.0 million . The Brookfield Promissory Note was recorded at the relative fair value at its acquisition date of $163.6 million . The Brookfield Promissory Note is recorded net of debt issuance costs on the Partnership's unaudited consolidated balance sheet as at September 30, 2017 . The outstanding principal balance, together with accrued interest, is payable in full on January 1, 2022.
(7)
Includes interest expense of $3.2 million for the nine months ended September 30, 2016 , incurred on a $100.0 million convertible promissory note issued to Teekay Corporation, which bore interest at an annual rate of 6.50% on the outstanding principal balance. The convertible promissory note was refinanced on July 1, 2016 under the 2016 Teekay Corporation Promissory Note.
(8)
Includes interest expense of $5.0 million for the nine months ended September 30, 2016 , incurred on a $100.0 million , six-month loan made by Teekay Corporation to the Partnership on January 1, 2016, which bore interest at an annual rate of 10.00% on the outstanding principal balance. The loan was refinanced on July 1, 2016 under the 2016 Teekay Corporation Promissory Note.

Page 13 of 50


TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)

c)
At September 30, 2017 , the carrying value of due from affiliates totaled $44.8 million ( December 31, 2016 - $77.8 million ) and of due to affiliates totaled $285.5 million ( December 31, 2016 - $296.6 million ). Amounts due to and from affiliates, other than the Brookfield Promissory Note, are non-interest bearing and unsecured, and all current due to and from affiliates balances are expected to be settled within the next fiscal year in the normal course of operations or from financings.
d)
In May 2013, the Partnership entered into an agreement with Statoil ASA (or Statoil ), on behalf of the field license partners, to provide an FSO unit for the Gina Krog oil and gas field located in the North Sea. The contract has been serviced since early-October 2017 by a new FSO unit that was converted from the Randgrid shuttle tanker, which conversion commenced during the second quarter of 2015 (see note 9a ). The Partnership received project management and engineering services from certain subsidiaries of Teekay Corporation relating to this FSO unit conversion. These costs are capitalized and included as part of advances on newbuilding contracts and conversion costs and are reclassified to vessels and equipment upon commencement of operations during the fourth quarter of 2017. Cumulative project management and engineering costs paid to Teekay Corporation subsidiaries were $16.9 million as at September 30, 2017 ( December 31, 2016 - $13.8 million ).
e)
In December 2014, the Partnership entered into an agreement with a consortium led by Queiroz Galvão Exploração e Produção SA (or QGEP ) to provide an FPSO unit for the Atlanta field located in the Santos Basin offshore Brazil. In connection with the contract with QGEP, the Partnership acquired the Petrojarl I FPSO from Teekay Corporation for a purchase price of $57 million (see note 9e ). The Partnership has received project management and engineering services from certain subsidiaries of Teekay Corporation relating to this FPSO unit upgrade. These costs are capitalized and included as part of advances on newbuilding contracts and conversion costs and are reclassified to vessels and equipment upon commencement of operations of the unit, which is expected in early-2018. Cumulative project management and engineering costs paid to Teekay Corporation subsidiaries were $3.7 million as at September 30, 2017 ( December 31, 2016 - $2.8 million ).
f)
In June 2015, the Partnership entered into 15 -year contracts, plus extension options, with a group of oil companies to provide shuttle tanker services for oil production on the East Coast of Canada. The Partnership entered into contracts to construct three Suezmax DP2 shuttle tanker newbuildings. These vessels will replace the existing vessels servicing the East Coast of Canada. Two of the three newbuildings delivered in October and November 2017, respectively, and the third newbuilding is expected to be delivered in early-2018 (see note 9f ). The Partnership has received project management and engineering services from certain subsidiaries of Teekay Corporation relating to the construction of these shuttle tankers. These costs are capitalized and included as part of advances on newbuilding contracts and conversion costs and are reclassified to vessels and equipment upon delivery of the vessels. Cumulative project management and engineering costs paid to Teekay Corporation subsidiaries were $3.4 million as at September 30, 2017 ( December 31, 2016 - $2.2 million ).
g)
Effective July 1, 2016, the Partnership issued the 2016 Teekay Corporation Promissory Note to a subsidiary of Teekay Corporation. The 2016 Teekay Corporation Promissory Note bore interest at an annual rate of 10.00% on the outstanding principal balance, which was payable quarterly, and of which (a) 5.00% was payable in cash and (b) 5.00% was payable in common units of the Partnership or in cash, at the election of Teekay Corporation. If the Partnership paid cash for the second 5.00% of interest, the Partnership was required to raise at least an equal amount of cash proceeds from the issuance of common units in advance of or within six months of the applicable interest payment date. The outstanding principal balance of the 2016 Teekay Corporation Promissory Note, together with accrued interest, was payable in full on January 1, 2019. During the three and nine months ended September 30, 2017 , the Partnership incurred $4.7 million and $14.6 million , respectively, of interest expense (three and nine months ended September 30, 2016 - $5.0 million ), of which $9.6 million was paid in cash and the remainder was settled through the issuance of 1.7 million common units of the Partnership under the terms of the 2016 Teekay Corporation Promissory Note. On September 25, 2017, the Partnership, Teekay Corporation and Brookfield entered into an agreement to amend and restate this subordinated promissory note (see note 6h ) .
h)
Effective September 25, 2017, the Partnership, Teekay Corporation and Brookfield amended and restated the 2016 Teekay Corporation Promissory Note to create the Brookfield Promissory Note, concurrently with Brookfield’s acquisition of the promissory note from a subsidiary of Teekay Corporation. The amendments, among other things, extended the maturity date of the promissory note to January 1, 2022 . The Brookfield Promissory Note bears interest at an annual rate of 10.00% on the outstanding principal balance, which is payable quarterly, and of which (a) 5.00% is payable in cash and (b) 5.00% is payable in common units of the Partnership, or in cash, at the election of Brookfield. If the Partnership pays cash for the second 5.00% of interest, the Partnership must raise at least an equal amount of cash proceeds from the issuance of common units in advance of or within six months of the applicable interest payment date, until certain of the Partnership's NOK senior unsecured bonds are repaid in full, which occurred in November 2017 (see note 15 ). The outstanding principal balance of the Brookfield Promissory Note, which as at September 30, 2017 , was $200.0 million , together with accrued interest, is payable in full on January 1, 2022. During the three and nine months ended September 30, 2017 , the Partnership incurred $0.3 million of interest expense under the terms of the Brookfield Promissory Note.
i)
In June 2016, as part of various other financing initiatives, Teekay Corporation agreed to provide financial guarantees for the Partnership's liabilities associated with the long-term debt financing relating to the East Coast of Canada newbuilding shuttle tankers until their deliveries (which was October and November 2017, respectively, for the first two newbuildings, and which is expected for early-2018 for the third newbuilding) (see note 9f ), and for certain of the Partnership's interest rate swaps and cross currency swaps until early-2019. The guarantees covered liabilities totaling up to a maximum amount of $495 million . During the three and nine months ended September 30, 2017 , guarantee fees of $1.9 million and $5.8 million , respectively ( three and nine months ended September 30, 2016 - $1.8 million ) were recognized in interest expense on the Partnership's consolidated statements of loss , which represents the estimated fee a third party would charge to provide such financial guarantees. The guarantee fee was accounted for as an equity contribution by Teekay Corporation in the Partnership's consolidated statement of changes in total equity, as Teekay Corporation has provided such financial guarantees at no cost to the Partnership. Effective September 25, 2017, the Partnership secured the release of all of these financial guarantees provided by Teekay Corporation relating to the Partnership's interest rate swap and cross currency swap agreements.

Page 14 of 50


TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)

7. Derivative Instruments and Hedging Activities

The Partnership uses derivatives to manage certain risks in accordance with its overall risk management policies.

Foreign Exchange Risk

The Partnership economically hedges portions of its forecasted expenditures denominated in foreign currencies with foreign currency forward contracts. The Partnership has not designated, for accounting purposes, any of the foreign currency forward contracts held during the nine months ended September 30, 2017 as cash flow hedges.

As at September 30, 2017 , the Partnership was committed to the following foreign currency forward contracts:
 
Contract Amount
in Foreign
Currency
(thousands)
 
Fair Value / Carrying
Amount of Asset (Liability)
(in thousands of U.S. Dollars)
Non-hedge
 

Average
Forward
Rate (1)
Expected Maturity
 
 
 
 
2017
2018
 
 
 
 
(in thousands of U.S. Dollars)
Norwegian Kroner
165,000

 
532

 
8.20

 
12,289

 
7,829

Euro
3,750

 
320

 
0.92

 
4,087

 
—

 
 
 
852

 
 
 
16,376

 
7,829

(1) Average forward rate represents the contracted amount of foreign currency one U.S. Dollar will buy.
In connection with its issuance of NOK bonds, the Partnership has entered into cross currency swaps pursuant to which it receives the principal amount in NOK on the repayment and maturity dates, in exchange for payments of a fixed U.S. Dollar amount. In addition, the cross currency swaps exchange a receipt of floating interest in NOK based on NIBOR plus a margin for a payment of U.S. Dollar fixed interest. The purpose of the cross currency swaps is to economically hedge the foreign currency exposure on the payment of interest and repayments of principal amounts of the Partnership’s NOK bonds due through 2019 (see note 5 ). In addition, the cross currency swaps economically hedge the interest rate exposure on the NOK bonds. The Partnership has not designated, for accounting purposes, these cross currency swaps as cash flow hedges of its NOK bonds. In September 2017, the Partnership partially settled certain of these cross currency swaps and incurred a realized loss during the three and nine months ended September 30, 2017 , which is included in foreign currency exchange (loss) gain in the consolidated statements of (loss) income .
As at September 30, 2017 , the Partnership was committed to the following cross currency swaps:
Notional
Amount
NOK
(thousands)
 
Principal
Amount
USD
(thousands)
 
Floating Rate Receivable
 
Fixed Rate
Payable
 
Fair Value /
Asset (Liability)
$
 
Remaining
Term
(years)
 
 
Reference
Rate
 
Margin
 
 
 
 
 
224,970 (1)(2)(3)
 
38,002

 
NIBOR
 
5.75
%
 
8.84
%
 
(10,731
)
 
1.2
283,100 (1)(2)(4)
 
50,794

 
NIBOR
 
5.75
%
 
7.58
%
 
(16,402
)
 
1.3
1,000,000
 
162,200

 
NIBOR
 
4.25
%
 
7.45
%
 
(42,414
)
 
1.3
 
 
 
 
 
 
 
 
 
 
(69,547
)
 
 
(1) Notional amount reduces equally with NOK bond repayments (see note 5 ).
(2) These swaps were partially settled during the three months ended September 30, 2017 . The remaining amounts of the swaps were settled in October 2017 (see note 15 ).
(3)
Excludes an economic hedge on the foreign currency exposure for a three percent premium upon maturity of the NOK bonds which exchanges NOK 3.9 million for $0.7 million (see note 5 ).
(4) Excludes an economic hedge on the foreign currency exposure for a three percent premium upon maturity of the NOK bonds which exchanges NOK 6.8 million for $1.2 million (see note 5 ).

Interest Rate Risk
The Partnership enters into interest rate swaps, which exchange a receipt of floating interest for a payment of fixed interest, to reduce the Partnership’s exposure to interest rate variability on its outstanding floating-rate debt. Certain interest rate swaps are designated and accounted for as hedges within the Partnership's equity-accounted for investments (see note 12 ). As at September 30, 2017 , the Partnership has not designated, for accounting purposes, its interest rate swaps as hedges in the consolidated financial statements.
As at September 30, 2017 , the Partnership was committed to the following interest rate swap agreements:

Page 15 of 50


TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)

 
Interest
Rate
Index
 
Notional
Amount
$
 
Fair Value /
Carrying
Amount of
Asset (Liability)
$
 
Weighted-
Average
Remaining
Term
(years)
 
Fixed
Interest
Rate
(%)   (1)
U.S. Dollar-denominated interest rate swaps  (2)
LIBOR
 
600,000

 
(134,087
)
 
8.2
 
4.8
%
U.S. Dollar-denominated interest rate swaps  (3) (4)
LIBOR
 
1,080,298

 
(51,142
)
 
4.4
 
2.8
%
 
 
 
1,680,298

 
(185,229
)
 
 
 
 
(1)
Excludes the margin the Partnership pays on its variable-rate debt, which as at September 30, 2017 , ranged between 0.30% and 4.75%
(2)
Notional amount remains constant over the term of the swap.
(3)
Principal amount reduces quarterly or semi-annually.
(4)
During the three and nine months ended September 30, 2017 the Partnership and the applicable financial institutions agreed to lower the fixed interest rate on certain of the swaps, extend the termination option of such swaps by two years to 2021, and eliminate the related financial guarantee and security package currently provided by Teekay Corporation in return for a prepayment amount and fees.
For the periods indicated, the following tables present the effective and ineffective portion of the gain (loss) on interest rate swap agreements designated and qualifying as cash flow hedges. The following tables exclude any interest rate swap agreements designated and qualifying as cash flow hedges in the Partnership’s equity accounted joint ventures.
Three Months Ended September 30, 2017
 
Three Months Ended September 30, 2016
Effective
 
Effective
 

 
 
 
Effective
 
Effective
 

 
Portion
 
Portion
 

 
 
 
Portion
 
Portion
 

 
Recognized
 
Reclassified
 
Ineffective
 
 
 
Recognized
 
Reclassified
 
Ineffective
 
in AOCI (1)
 
from AOCI (2)
 
Portion (3)
 
 
 
in AOCI (1)
 
from AOCI (2)
 
Portion (3)
 
—

 
(424
)
 
—

 
Interest expense
 
640

 
—

 
126

Interest expense
—

 
(424
)
 
—

 
 
 
640

 
—

 
126

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2017
 
Nine Months Ended September 30, 2016
Effective
 
Effective
 

 
 
 
Effective
 
Effective
 

 
Portion
 
Portion
 

 
 
 
Portion
 
Portion
 

 
Recognized
 
Reclassified
 
Ineffective
 
 
 
Recognized
 
Reclassified
 
Ineffective
 
in AOCI  (1)
 
from AOCI (2)
 
Portion (3)
 
 
 
in AOCI (1)
 
from AOCI (2)
 
Portion (3)
 
(460
)
 
(1,186
)
 
(7
)
 
Interest expense
 
(3,870
)
 
—

 
984

Interest expense
(460
)
 
(1,186
)
 
(7
)
 
 
 
(3,870
)
 
—

 
984

 

(1)
Effective portion of designated and qualifying cash flow hedges recognized in accumulated other comprehensive income (or AOCI ).
(2)
Effective portion of designated and qualifying cash flow hedges recorded in AOCI during the term of the hedging relationship and reclassified to earnings.
(3)
Ineffective portion of designated and qualifying cash flow hedges.
As at September 30, 2017 , the Partnership had multiple interest rate swaps, cross currency swaps and foreign currency forward contracts governed by the same master agreement. Each of the master agreements provide for the net settlement of all derivatives subject to that master agreement through a single payment in the event of default or termination of any one derivative. The fair value of these derivatives is presented on a gross basis in the Partnership’s consolidated balance sheets. As at September 30, 2017 , these derivatives had an aggregate fair value asset amount of $0.9 million and an aggregate fair value liability amount of $204.0 million (December 31, 2016 - an aggregate fair value asset amount of $0.1 million and an aggregate fair value liability amount of $216.7 million ). As at September 30, 2017 , the Partnership had $3.2 million on deposit with the relevant counterparties as security for cross currency swap liabilities under certain master agreements (December 31, 2016 - $30.2 million ). The deposit is presented in Restricted cash and Restricted cash - long-term on the consolidated balance sheets.

Tabular disclosure

The following table presents the location and fair value amounts of derivative instruments, segregated by type of contract, on the Partnership’s balance sheets.

Page 16 of 50


TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)

 
Other Current Assets
$
 
Other Assets
$
 
Accrued
Liabilities
$
 
Current
Portion of
Derivative
Liabilities
$
 
Derivative
Liabilities
$
As at September 30, 2017
 
 

 
 
 
 
 
 
Foreign currency contracts
898

 
—

 
—

 
(46
)
 
—

Cross currency swaps
—

 
—

 
(1,521
)
 
(13,718
)
 
(54,308
)
Interest rate swaps
315

 
791

 
(6,407
)
 
(39,882
)
 
(140,046
)

1,213

 
791

 
(7,928
)
 
(53,646
)
 
(194,354
)
 
 
 
 
 
 
 
 
 
 
As at December 31, 2016

 

 

 

 

Foreign currency contracts
119

 
—

 
—

 
(1,634
)
 
(271
)
Cross currency swaps
—

 
—

 
(2,375
)
 
(20,281
)
 
(114,723
)
Interest rate swaps
181

 
2,597

 
(5,653
)
 
(33,087
)
 
(167,144
)
 
300

 
2,597

 
(8,028
)
 
(55,002
)
 
(282,138
)
Total realized and unrealized (loss) gain on interest rate swaps and foreign currency forward contracts that are not designated for accounting purposes as cash flow hedges are recognized in earnings and reported in realized and unrealized (loss) gain on derivative instruments in the consolidated statements of (loss) income . The effect of the (loss) gain on these derivatives in the consolidated statements of (loss) income for the three and nine months ended September 30, 2017 and 2016 is as follows:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
 
$
 
$
 
$
 
$
Realized (loss) gain on derivative instruments
 
 
 
 
 
 
 
Interest rate swaps
(48,974
)
 
(13,507
)
 
(69,936
)
 
(40,989
)
Foreign currency forward contracts
1,048

 
(1,764
)
 
640

 
(6,384
)

(47,926
)
 
(15,271
)
 
(69,296
)
 
(47,373
)
Unrealized gain (loss) on derivative instruments

 

 

 

Interest rate swaps
28,465

 
31,894

 
19,097

 
(67,845
)
Foreign currency forward contracts
229

 
3,624

 
2,638

 
12,938


28,694

 
35,518

 
21,735

 
(54,907
)
Total realized and unrealized (loss) gain on derivative instruments
(19,232
)
 
20,247

 
(47,561
)
 
(102,280
)

Total realized and unrealized gain on cross currency swaps are recognized in earnings and reported in foreign currency exchange (loss) gain in the consolidated statements of (loss) income . The effect of the gain on cross currency swaps in the consolidated statements of (loss) income for the three and nine months ended September 30, 2017 and 2016 is as follows:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
 
$
 
$
 
$
 
$
Realized loss
(42,987
)
 
(3,330
)
 
(49,501
)
 
(41,276
)
Unrealized gain
54,488

 
19,803

 
66,978

 
58,276

Total realized and unrealized gain on cross currency swaps
11,501

 
16,473

 
17,477

 
17,000

The Partnership is exposed to credit loss in the event of non-performance by the counterparties, all of which are financial institutions, to the foreign currency forward contracts and the interest rate swap agreements. In order to minimize counterparty risk, the Partnership only enters into derivative transactions with counterparties that are rated A- or better by Standard & Poor’s or A3 or better by Moody’s at the time of the transactions. In addition, to the extent possible and practical, interest rate swaps are entered into with different counterparties to reduce concentration risk.


Page 17 of 50


TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)

8.    Income Tax
The components of the provision for income tax are as follows:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
 
$
 
$
 
$
 
$
Current
(377
)
 
(2,180
)
 
(1,412
)
 
(3,342
)
Deferred
(1,915
)
 
577

 
(2,677
)
 
6,013

Income tax (expense) recovery
(2,292
)
 
(1,603
)
 
(4,089
)
 
2,671

9.    Commitments and Contingencies

a)
In May 2013, the Partnership entered into an agreement with Statoil, on behalf of the field license partners, to provide an FSO unit for the Gina Krog oil and gas field located in the North Sea. The contract commenced early-October 2017 and is being serviced by a new FSO unit that was converted from the Randgrid shuttle tanker, which the Partnership purchased in August 2015 from a 67% -owned subsidiary. The FSO conversion project cost approximately $383 million , including amounts reimbursable upon delivery of the unit relating to installation and mobilization. As at September 30, 2017 , payments made towards this commitment totaled $372.2 million and the remaining payments required to be made were approximately $10.6 million (remainder of 2017 ). The FSO unit commenced operations in early-October 2017 under a three -year time-charter contract to Statoil, which includes 12 additional one -year extension options. In December 2015, the Partnership secured a long-term debt facility providing total borrowings up to $230 million to finance the conversion project, which was fully drawn as at September 30, 2017 . In November 2017, the Partnership received a statement of claim from Sembcorp Marine Ltd. (or Sembcorp ), the shipyard which completed the conversion of the FSO unit, relating to disputed variation orders in the amount of approximately $100 million. As at September 30, 2017 , the Partnership has accrued its best estimate for the potential liability related to these disputes, which is included in the total FSO conversion project cost of approximately $383 million ; however, such estimate may change in future periods. The Partnership estimates that the range of possible losses in addition to what has already been accrued as of September 30, 2017 is between $nil and $15 million.
b)
In March 2014, the Partnership acquired 100% of the shares of ALP, a Netherlands-based provider of long-haul ocean towage and offshore installation services to the global offshore oil and gas industry. Concurrently with this transaction, the Partnership and ALP entered into an agreement with Niigata Shipbuilding & Repair of Japan for the construction of four state-of-the-art SX-157 Ulstein Design ultra-long distance towing and anchor handling vessel newbuildings. Three vessels have been delivered to the Partnership, in September 2016, June 2017 and October 2017, respectively. The remaining newbuilding is scheduled for delivery in early-2018 . The total cost to acquire these newbuildings is approximately $257 million . As at September 30, 2017 , payments made towards these commitments totaled $209.3 million . The remaining payments required to be made under these newbuilding contracts are $24.8 million (remainder of 2017 ) and $23.0 million ( 2018 ). During 2016 , the shipyard paid the partnership $7.0 million due to a delay in the delivery of the ALP Striker, and in April 2017, the shipyard paid the Partnership $24.3 million due to the delays in the delivery of the remaining three newbuildings that were yet to be delivered at that time. The Partnership secured a long-term debt facility of approximately $185 million to finance the newbuilding installments, of which $45.3 million was undrawn as at September 30, 2017 .
c)
In August 2014, the Partnership acquired 100% of the outstanding shares of Logitel, a Norway-based company focused on high-end UMS. As part of this transaction, the Partnership assumed three UMS newbuilding contracts ordered from the COSCO (Nantong) Shipyard (or COSCO ) in China. The Partnership took delivery of one of the UMS newbuildings, the Arendal Spirit, in February 2015.
In June 2016, the Partnership canceled the remaining UMS construction contracts for the two remaining UMS newbuildings, the Stavanger Spirit and the Nantong Spirit . As a result of this cancellation, during the second quarter of 2016, the Partnership wrote-off $43.7 million of assets related to these newbuildings and reversed contingent liabilities of $14.5 million associated with the delivery of these assets. An estimate of the potential damages for the cancellation of the Stavanger Spirit newbuilding contract is based on the amount due for the final yard installment of approximately $170 million less the estimated fair value of the Stavanger Spirit . Given the unique design of the vessel as well as the lack of recent sale and purchase transactions for this type of asset, the value of this vessel, and thus ultimately the amount of potential damages that may result from the cancellation, is uncertain. Pursuant to the Stavanger Spirit newbuilding contract and related agreements, COSCO only has recourse to the single-purpose subsidiary that was a party to the Stavanger Spirit newbuilding contract and its immediate parent company, Logitel Offshore Pte. Ltd., for damages incurred, although COSCO has commenced pre-action disclosure proceedings in Singapore against Logitel Offshore Pte. Ltd. and Logitel Offshore Rig II Pte. Ltd., seeking documentation to permit COSCO to review if there are potential claims against the Partnership and others for interference in the business of the subsidiaries.
The Partnership's estimate of potential damages for the cancellation of the Nantong Spirit newbuilding contract is based upon estimates of a number of factors, including accumulated costs incurred by COSCO, sub-supplier contract cancellation costs, as well as how such costs are treated under the termination provisions in the contract. The Partnership estimates that the amount of potential damages faced by it in relation to the cancellation of the Nantong Spirit contract could range between $10 million and $40 million . Pursuant to the Nantong Spirit newbuilding contract, COSCO only has recourse to the single-purpose subsidiary that was a party to the Nantong Spirit newbuilding contract, and subject to the pre-action disclosure proceedings referred to above. During June 2017, Logitel Offshore Rig III LLC, the single-purpose subsidiary relating to the Nantong Spirit , received a claim from COSCO for $51.9 million for the unpaid balance for work

Page 18 of 50


TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)

completed, cancellation costs and damages, and during the third quarter of 2017, COSCO commenced arbitration against Logitel Offshore Rig III LLC. Logitel Offshore Rig III LLC is disputing this claim.
As at September 30, 2017 , the Partnership's subsidiaries have accrued $50.5 million in the aggregate related to the above claims and potential claims related to Logitel from COSCO.
During September 2016, Sevan Marine ASA (or Sevan ) commenced an action against Logitel in the Oslo District Court. The action relates to the agreements between Sevan and CeFront, related to the 2013 transfer by Sevan to Logitel Offshore Pte. Ltd. or its wholly-owned subsidiaries (collectively, Logitel Offshore ), which was then owned by CeFront, of two hulls to be converted into UMS, including a $60 million bond loan (of which $41 million was a vendor credit and $19 million was a cash loan, and of which $50 million remains outstanding) granted by a Sevan affiliate to Logitel (or the 2013 Transaction ). The action also relates to agreements between Sevan and the Partnership entered into in connection with the Partnership's acquisition of Logitel from CeFront in 2014 (or the 2014 Transaction ). Sevan has claimed that the $60 million bond loan to Logitel contravened certain provisions of Norwegian corporate law and that, Sevan is entitled to the remaining payment of $50 million plus interest set at the court’s discretion. Logitel is disputing these claims. In October 2017, the court dismissed Sevan’s claim in its entirety and awarded Logitel costs. In November 2017, Sevan appealed this judgment. The Partnership reversed the accrual it had in place regarding the bond loan previously granted by Sevan to Logitel, as the likelihood of an adverse decision from the appeal of the judgment was no longer considered probable. In addition, Sevan presented Logitel Offshore with a formal notice of claim and request for arbitration seeking in excess of $11 million for license and service fees, which Sevan claimed was payable in connection with the delivery of the Arendal Spirit UMS, for which liability may have arose with subsidiaries of the Partnership. In October 2017, Logitel Offshore and Sevan settled this claim, with the Partnership paying $4.5 million to Sevan in full and final settlement of the disputes. As part of the settlement, Logitel Offshore also obtained a transferable worldwide license for the Arendal Spirit UMS .
In addition, in September 2016, CeFront commenced an action against subsidiaries of the Partnership in the Oslo District Court, claiming that $3.8 million was due under a management agreement. CeFront also claimed that $3.3 million was due under the earn-out provisions of the contracts related to the Arendal Spirit and that $20.2 million was due or would have become due related to the earn-out provisions of the contracts for the Stavanger Spirit and Nantong Spirit . In September 2017, CeFront and subsidiaries of the Partnership settled these claims for $10.0 million , of which $7.3 million was paid and the balance is to be paid in quarterly installments through June 1, 2020.
d)
In October 2014, the Partnership sold a 1995-built shuttle tanker, the Navion Norvegia, to a 50 /50 joint venture of the Partnership and Odebrecht Oil and Gas S.A. (or OOG ) on behalf of its field license partners. The vessel was converted into a new FPSO for the Libra field located in the Santos Basin offshore Brazil. The conversion project has been completed at Sembcorp Marine’s Jurong Shipyard in Singapore and the FPSO unit is scheduled to commence operations in the fourth quarter of 2017 under a 12 -year fixed-rate contract with a consortium led by Petroleo Brasileiro S.A (or Petrobras ). The estimated cost of the FPSO conversion is approximately $1.0 billion . As at September 30, 2017 , payments made by the joint venture towards these commitments totaled $908.8 million and the remaining payments required to be made by the joint venture are $95.9 million ( 2017 ). The joint venture secured a long-term debt facility in 2015 providing total borrowings of up to $804 million for the FPSO conversion (see note 12 ), of which $87.1 million was undrawn as at September 30, 2017 .
e)
In December 2014, the Partnership acquired the Petrojarl I FPSO unit from Teekay Corporation for $57 million . The Petrojarl I underwent upgrades at the Damen Shipyard Group’s DSR Schiedam Shipyard (or Damen ) in the Netherlands prior to being moved to the Aibel AS shipyard in Norway for completion of upgrades. The estimated total cost of the upgrades is approximately $489 million , which includes the cost of acquiring the unit. The FPSO is scheduled to commence operations in early-2018 under a five -year charter contract with QGEP . As at September 30, 2017 , payments made towards these commitments, including the acquisition of the Petrojarl I FPSO unit from Teekay Corporation, totaled $385.3 million and the remaining payments required to be made are estimated to be approximately $97.3 million (remainder of 2017 ) and $6.0 million ( 2018 ). The Partnership has financed $171.2 million of the Petrojarl I FPSO upgrade cost through a fully-drawn long-term loan.
During the three months ended September 30, 2017 , the carrying value of the Petrojarl I FPSO unit was written down to its estimated fair value as a result of increasing costs associated with required additional upgrade work and estimated liquidated damages, payable to the charterer, associated with the delay in the commencement of the unit's operations (see note 14 ). Due to project delays in the delivery of the unit resulting from shipyard delays, an increased scope of work relating to field-specific requirements and the age of the unit, in July 2017 the Partnership agreed with QGEP to a revised delivery date of late-2017, a revised charter acceptance date of early-2018 and other amendments to the terms of the charter agreement. The Partnership is currently in discussions with Damen as to the settlement of the shipyard costs. The lenders under the credit facility financing the upgrades agreed to extend the availability date of the loan for successive periods up to December 15, 2017, as the loan was subject to a mandatory prepayment provision, initially in early October 2016, if the unit was not accepted at that time by QGEP. These interim extensions provided additional time for the Partnership to complete the FPSO upgrades and thereafter, amend the loan facility to reflect the revised delivery schedule. As at September 30, 2017 and December 31, 2016 , the Partnership had $24.3 million and $60.0 million , respectively, held in escrow to fund the final upgrade costs. This amount is presented in Restricted Cash - current on the consolidated balance sheet.
f)
In June 2015, the Partnership entered into 15 -year contracts, plus extension options, with a group of oil companies to provide shuttle tanker services for oil production on the East Coast of Canada. These contracts were initially being serviced by three third party-owned shuttle tankers operating on the East Coast of Canada, which were chartered-in to the Partnership. One of these vessels was replaced by one of the Partnership’s existing shuttle tankers, the Navion Hispania , during the third quarter of 2015. The Partnership entered into contracts to construct three Suezmax DP2 shuttle tanker newbuildings for an aggregate fully built-up cost of approximately $370 million . These vessels will replace the existing vessels servicing the East Coast of Canada. Two of the three vessels, the Beothuk Spirit and the Norse Spirit , were delivered to the Partnership in October 2017 and November 2017, respectively, and the remaining vessel is scheduled for delivery in early-2018 . As at September 30, 2017 , payments made towards these commitments totaled $137.1 million and the remaining

Page 19 of 50


TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)

payments required to be made under these newbuilding contracts were $162.3 million (remainder of 2017 ) and $70.4 million ( 2018 ). The Partnership secured long-term debt financing of $250 million to finance the newbuilding installments, of which $154.1 million was undrawn as at September 30, 2017 .
g)
In March 2016, Petrobras claimed that the Partnership’s November 2011 cessation of paying certain agency fees with respect to the Piranema Spirit FPSO unit’s charter contract should have resulted in a corresponding 2% rate reduction on the FPSO contract with Petrobras. The Partnership has estimated the maximum amount of the claim at $10.9 million . As at September 30, 2017 , the Partnership had accrued $9.8 million ( $5.4 million as at December 31, 2016 ), representing 2% of the charter hire previously paid by Petrobras on the charter contract for the period from October 2007 up to September 30, 2017 . The remaining $1.1 million will be accrued as a 2% reduction of future charter hire to the end of the term of the FPSO contract with Petrobras.
h)
In October 2016, the Partnership received a claim from Royal Dutch Shell Plc (or Shell ) for liquidated damages of $23.6 million based on Shell's allegation that the Petrojarl Knarr FPSO unit did not meet the completion milestone on time. In August 2017, Shell served the Partnership a notice of arbitration. Shell is also claiming that the Partnership's inability to meet the completion milestone within the specified grace period in effect resulted in a 20% reduction in the price Shell may purchase the Petrojarl Knarr FPSO unit from the Partnership pursuant to a purchase option agreement. In a counterclaim, the Partnership has alleged that the completion milestone was met within the grace period and that Shell caused delays due to certain defaults in Shell’s specifications, as well as other events. The Partnership claims that, due to delays caused by Shell, the Partnership is entitled to the daily lease rate under the contract for the unit commencing prior to when Shell actually started paying such rate and that Shell is not entitled to a reduction in the purchase option price. The duration of the period that the Partnership claims to be entitled to receive additional daily lease payments is in dispute. However, the Partnership expects that the amount of its claim relating to the counterclaim will exceed Shell's claim for liquidated damages. Uncertainty exists as to the resolution of the various claims, and the Partnership is in commercial negotiations with Shell and is unable to provide an estimate of the possible net loss or range of net loss at this time. As of September 30, 2017 , the Partnership had not accrued for any potential liability relating to these claims.

i)
In early-November 2016, the Arendal Spirit UMS experienced an operational incident relating to its dynamic positioning system. As a result of this operational incident, and a gangway incident that occurred in April 2016, the charterer, Petroleo Netherlands B.V. , initiated an operational review and suspended its charter hire payments beginning in November 2016. The Partnership has completed an investigation to identify the cause of such incidents and implemented corrective actions. In April 2017, Petroleo Netherlands B.V. notified Logitel Offshore Norway AS, a subsidiary of the Partnership, that Petroleo Netherlands B.V. was terminating the charter contract for the Arendal Spirit UMS and would not pay the charter hire payments from November 2016. The Partnership has disputed the grounds for termination and is reviewing its legal options, including the initiation of a claim for unpaid standby fees and damages for wrongful termination of the time-charter contract. The unit is currently proceeding into lay-up.
j)
In February 2017, the Partnership received a notice from Transocean Offshore International Ventures Limited (or Transocean ) that it intends to file a claim against the Partnership arising from the towage of the Transocean Winner oil rig by one of the Partnerships towage vessels, the ALP Forward . Transocean intends to file a claim to recover losses it claims to have incurred relating to the grounding of the Transocean Winner in August 2016, including the costs associated with the salvage and replacement tow and other costs payable by Transocean as a result of this incident. The Partnership intends to dispute these claims, and also believes that any such claims would be covered by insurance. As of September 30, 2017 , the Partnership had accrued a potential liability of $1.8 million and an expected insurance recovery of $1.7 million relating to these claims.
k)
In July, 2017, the Partnership entered into shipbuilding contracts with Samsung Heavy Industries Co., Ltd. to construct two Suezmax DP2 shuttle tanker newbuildings, for an aggregate fully built-up cost of approximately $294 million , with options to order up to two additional vessels. These newbuilding vessels will be constructed based on the Partnership's new Shuttle Spirit design which incorporates technologies to increase fuel efficiency and reduce emissions, including LNG propulsion technology. Upon delivery in late-2019 and early-2020, these vessels will provide shuttle tanker services in the North Sea under the Partnership’s existing master agreement with Statoil, which will add vessel capacity to service the Partnership’s CoA portfolio in the North Sea. As at September 30, 2017 , no payments had been made towards these commitments and the payments required to be made under these newbuilding contracts were $14.1 million (remainder of 2017 ), $52.5 million ( 2018 ), $136.3 million ( 2019 ) and $91.0 million ( 2020 ). The Partnership expects to secure long-term debt financing related to these shuttle tanker newbuildings.
l)
As of December 31, 2016 , the Partnership adopted ASC-205-40, Presentation of Financial Statements - Going Concern , which requires management to assess if the Partnership will have sufficient liquidity to continue as a going concern for the one-year period following the issuance of its financial statements. Despite generating $193 million of cash flows from operating activities during the nine months ended September 30, 2017 , the Partnership ended the third quarter of 2017 with a working capital deficit of $539 million . This working capital deficit primarily relates to the scheduled maturities and repayments of $731 million of outstanding debt during the 12 months ending September 30, 2018, which amount was classified as current liabilities as at September 30, 2017 . In addition to these obligations, the Partnership also anticipates making payments for vessels under construction or undergoing conversions/upgrades during the remainder of 2017 and 2018 of approximately $509 million , of which $243 million is expected to be funded from pre-arranged financing and a further $24 million is held in escrow as funding for the Petrojarl I FPSO upgrades.

Based on these factors, over the one-year period following the issuance of these financial statements, the Partnership will need to obtain additional sources of financing, in addition to amounts generated from operations, to meet its minimum liquidity requirements under its financial covenants. The proceeds from the Brookfield Transaction have strengthened the Partnership's capital structure and increased its liquidity. Additional potential sources of financing include raising additional capital through equity issuances, refinancing debt facilities that mature during the one-year period, increasing amounts available under existing debt facilities and entering into new debt facilities,

Page 20 of 50


TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)

including long-term debt financing related to the two shuttle tanker newbuildings ordered in July 2017, negotiating extensions or redeployments of existing assets and the sale of partial interests of assets.

Based on the Partnership’s liquidity at the date these consolidated financial statements were issued, the liquidity it expects to generate from operations over the following year, and by incorporating the Partnership’s plans to raise additional liquidity that it considers probable of completion, the Partnership expects that it will have sufficient liquidity to enable the Partnership to continue as a going concern for at least the one-year period following the issuance of these consolidated financial statements.
10. Total Capital and Net (Loss) Income Per Common Unit

At September 30, 2017 , a total of 26.7% of the Partnership’s common units outstanding were held by the public. Brookfield held a total of 59.5% of the common units of the Partnership and 49% of the general partner interest. The remaining common units, as well as 51% of the general partner interest, were held by subsidiaries of Teekay Corporation. At September 30, 2017 , all of the Partnership’s outstanding Series A Cumulative Redeemable Preferred Units (or the Series A Preferred Units ) and Series B Cumulative Redeemable Preferred Units (or the Series B Preferred Units ) were held by entities other than Teekay Corporation, Brookfield and their affiliates.

Common Units and Brookfield Transaction Warrants

On September 25, 2017, as part of the Brookfield Transaction, the Partnership issued to Brookfield 244.0 million common units and warrants to purchase 62.4 million common units in exchange for gross proceeds of $610.0 million . In addition, the Partnership issued to Teekay Corporation 12.0 million common units and warrants (collectively with the warrants issued to Brookfield, the Brookfield Warrants ) to purchase 3.1 million common units for gross proceeds of $30.0 million . Net of costs paid to Brookfield, a total of $637.0 million was received by the Partnership. As part of the amended and restated Brookfield Promissory Note transaction (see note 6h ), Brookfield concurrently transferred 11.4 million Brookfield Transaction Warrants and $140.0 million to Teekay Corporation to acquire its $200 million subordinated promissory note owed by the Partnership. As at September 30, 2017 , Brookfield and Teekay Corporation held 51.0 million and 14.5 million Brookfield Transaction Warrants, respectively. The $637.0 million net investment in the Partnership has been allocated on a relative fair value basis between the 256 million common units issued to Teekay Corporation and Brookfield ( $512.6 million ), the Brookfield Transaction Warrants ( $121.3 million ), the effective extinguishment of the $200 million Teekay Corporation Promissory Note ( ($160.5) million ) and the concurrent issuance to Brookfield of the $200 million Brookfield Promissory Note ( $163.6 million ) (see note 6h) . The $39.5 million gain on the extinguishment of the subordinated promissory note has been accounted for as a contribution of capital from Teekay Corporation.

The Brookfield Transaction Warrants allow the holders to acquire one common unit for each Brookfield Transaction Warrant for an exercise price of $0.01 per common unit, which are exercisable until September 25, 2024 if the Partnership's common unit volume-weighted average price is equal to or greater than $4.00 per common unit for 10 consecutive trading days.

During 2017, the Partnership also issued 6.4 million common units with a total value of $29.8 million (including the general partner's 2% proportionate capital contribution of $0.6 million ) as a payment-in-kind for the distributions on the Partnership's Series C-1 Cumulative Convertible Perpetual Preferred Units (or the Series C-1 Preferred Units ) and Series D Preferred Units, and distributions on the Partnership's common units and general partner interest held by subsidiaries of Teekay Corporation and payment-in-kind for interest on the 2016 Teekay Corporation Promissory Note (see note 6g ). In June 2016, the Partnership agreed with Teekay Corporation that, until the Partnership's NOK bonds maturing in 2018 had been repaid (see note 15 ), all cash distributions (other than with respect to distributions, if any, on incentive distribution rights) to be paid by the Partnership to Teekay Corporation or its affiliates, including the Partnership's general partner, would instead be paid in common units or from the proceeds of the sale of common units.

Series C-1 and Series D Preferred Units

On September 25, 2017, as part of the Brookfield Transaction, the Partnership repurchased and subsequently canceled all of its outstanding Series C-1 and Series D Preferred Units from existing unitholders. The Series C-1 Preferred Units were repurchased for $18.20 per unit and Series D Preferred Units for $23.75 per unit, for a total cash payment of $260.2 million , which included $10.2 million of accrued and unpaid quarterly distributions, and resulted in a net accounting gain on repurchase of approximately $20.0 million . Consideration for the repurchase of the Series D Preferred Units also included a reduction in the exercise price, from $6.05 to $4.55 per unit, of 2,250,000 warrants issued in conjunction with the Series D Preferred Units in June 2016. As of September 30, 2017 , 6,750,000 warrants with an exercise price of $4.55 remained outstanding of which 26% were held by Teekay Corporation, 11% were held by Resolute Investments Ltd., 10% were held by Brookfield and their affiliates and the remaining were held by unaffiliated entities.

In June 2016, the Partnership and the holders of the Series C Cumulative Convertible Perpetual Preferred Units (or the Series C Preferred Units ) exchanged approximately 1.9 million of the Series C Preferred Units for approximately 8.3 million common units of the Partnership and exchanged the remaining approximately 8.5 million Series C Preferred Units for approximately 8.5 million Series C-1 Preferred Units.


Page 21 of 50


TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)

Net (Loss) Income Per Common Unit

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
 
$
 
$
 
$
 
$
Limited partners' interest in net (loss) income
(323,035
)
 
34,608

 
(348,237
)
 
(90,928
)
Preferred units - periodic accretion
(764
)
 
(826
)
 
(2,373
)
 
(826
)
Net gain on repurchase of Preferred units
19,588

 
—

 
19,577

 
—

Gain on the modification of warrants
1,491

 
—

 
1,490

 
—

Additional consideration for induced conversion of Series C Preferred Units
—

 
—

 
—

 
(36,961
)
Deemed contribution on exchange of Series C Preferred Units
—

 
—

 
—

 
20,231

Limited partners' interest in (loss) income for basic net (loss) income per common unit
(302,720
)
 
33,782

 
(329,543
)
 
(108,484
)
Series C-1 Preferred units - cash distribution
4,015

 
—

 
—

 
—

Gain on repurchase of Series C-1 Preferred units
(26,925
)
 
—

 
—

 
—

Series D Preferred units - cash distribution
—

 
2,573

 
—

 
—

Preferred units - periodic accretion
—

 
826

 
—

 
—

Limited partners' interest in diluted net (loss) income
(325,630
)
 
37,181

 
(329,543
)
 
(108,484
)
Weighted average number of common units
170,657,562

 
139,057,659

 
156,966,145

 
118,046,087

Dilutive effect of Series C-1 repurchase, unit based compensation and warrants
11,736,342

 
18,856,618

 
—

 
—

Common units and common unit equivalents
182,393,904

 
157,914,277

 
156,966,145

 
118,046,087




 


 


 


Limited partner's interest in net (loss) income per common unit


 


 


 


- basic
(1.77
)
 
0.24

 
(2.10
)
 
(0.92
)
- diluted
(1.79
)
 
0.24

 
(2.10
)
 
(0.92
)

Limited partners’ interest in net (loss) income per common unit – basic is determined by dividing net (loss) income , after deducting the amount of net (loss) income attributable to the non-controlling interests, the general partner’s interest, the distributions on the Series A and B Preferred Units and, for periods prior to their exchange or repurchase, the Series C, C-1 and D Preferred Units, the periodic accretion prior to their repurchase of the Series D Preferred Units, the net gain on the repurchase of Preferred Units and gain on the modification of warrants, by the weighted-average number of common units outstanding during the period. The distributions payable or paid on the preferred units for the three and nine months ended September 30, 2017 were $11.9 million and $36.7 million , respectively and $12.4 million and $33.4 million , respectively, for the three and nine months ended September 30, 2016 .

The computation of limited partners’ interest in income per common unit - diluted assumes the issuance of common units for all potential dilutive securities, consisting of restricted units (see note 11 ), warrants and, and for periods prior to their exchange or repurchase, Series C, C-1 and D Preferred Units. Consequently, the net income attributable to limited partners’ interest is exclusive of any distributions on the Series C, C-1 and D Preferred Units, the prior periodic accretion of the Series D Preferred Units and the net gain on the repurchase of Preferred Units and gain on the modification of warrants. In addition, the weighted average number of common units outstanding has been increased assuming exercise of the restricted units and warrants using the treasury stock method and, for periods prior to the exchange or repurchase, the Series C, C-1 and D Preferred Units having been converted to common units using the if-converted method. The computation of limited partners’ interest in income per common unit - diluted does not assume the issuance of common units pursuant to the restricted units, warrants and, for periods prior to their exchange or repurchase, Series C, C-1 and D Preferred Units if the effect would be anti-dilutive. In periods where a loss is attributable to common unitholders all restricted units, warrants, the Series C, C-1 and D Preferred Units (for applicable periods) are anti-dilutive. In periods where income is allocated to common unitholders, the Series C-1 and D Preferred Units could have been anti-dilutive for periods prior to their exchange or repurchase.

For the three and nine months ended September 30, 2017 , 37.3 million and 51.3 million , respectively, common unit equivalent Series C-1 or D Preferred units, 11.0 million and 8.2 million , respectively, common unit equivalent warrants and 0.1 million and 0.4 million , respectively, restricted units were excluded from the computation of limited partners’ interest in net (loss) income per common unit - diluted, as their effect was anti-dilutive. For the three months ended September 30, 2016 , a total of 12.6 million common unit equivalent Series C, C-1 and D Preferred Units and 8.2 million common unit equivalent warrants were excluded from the computation of limited partners’ interest in net income per common unit - diluted, as their effect was anti-dilutive. For the nine months ended September 30, 2016 , a total of 38.7 million common unit equivalent Series C, C-1 and D Preferred Units, 6.8 million common unit equivalent warrants and 0.3 million restricted units were excluded from the computation of limited partners' interest in net loss per common unit - diluted, as their effect was anti-dilutive.

Page 22 of 50


TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)


The general partner’s and common unitholders’ interests in net (loss) income are calculated as if all net (loss) income was distributed according to the terms of the Partnership’s partnership agreement, regardless of whether those earnings would or could be distributed. The partnership agreement does not provide for the distribution of net (loss) income ; rather, it provides for the distribution of available cash, which is a contractually defined term that generally means all cash on hand at the end of each quarter less, among other things, the amount of cash reserves established by the general partner’s board of directors to provide for the proper conduct of the Partnership’s business including reserves for maintenance and replacement capital expenditure, anticipated capital requirements and any accumulated distributions on, or redemptions of, the Series A Preferred Units, Series B Preferred Units, Series C-1 Preferred Units and Series D Preferred Units. Unlike available cash, net (loss) income is affected by non-cash items such as depreciation and amortization, unrealized gains and losses on derivative instruments and unrealized foreign currency translation gains and losses.

The general partner is entitled to incentive distributions based on the amount of quarterly cash distributions per common unit. For more information on the increasing percentages, which may be used to calculate the general partner’s interest in net income or loss, please refer to the Partnership’s Annual Report on Form 20-F for the year ended December 31, 2016. Cash distributions were below $0.35 per common unit during the three and nine months ended September 30, 2017 and 2016 . Consequently, the increasing percentages were not used to calculate the general partner’s interest in net (loss) income for the purposes of the net (loss) income per common unit calculation for the three and nine months ended September 30, 2017 and 2016 .

Pursuant to the partnership agreement, allocations to partners are made on a quarterly basis.
11. Unit Based Compensation

During the nine months ended September 30, 2017 , a total of 56,950 common units, with an aggregate value of $0.3 million , were granted and issued to the non-management directors of the general partner as part of their annual compensation for 2017 .

The Partnership grants restricted unit-based compensation awards as incentive-based compensation to certain employees of Teekay Corporation’s subsidiaries that provide services to the Partnership. During March 2017 and 2016, the Partnership granted restricted unit-based compensation awards with respect to 321,318 and 601,368 units, respectively, with aggregate grant date fair values of $1.6 million and $2.4 million , respectively, based on the Partnership’s closing unit price on the grant dates. Each restricted unit is equal in value to one of the Partnership’s common units. Each award represents the specified number of the Partnership’s common units plus reinvested distributions from the grant date to the vesting date. The awards vest equally over three years from the grant date. Any portion of an award that is not vested on the date of a recipient’s termination of service is canceled, unless the termination arises as a result of the recipient’s retirement and, in this case, the award will continue to vest in accordance with the vesting schedule. Upon vesting, the awards are paid to each grantee in the form of common units or cash.

During the nine months ended September 30, 2017 , restricted unit-based awards with respect to a total of 255,370 common units with a fair value of $2.2 million , based on the Partnership’s closing unit price on the grant date, vested and the amount paid to the grantees was made by issuing 83,060 common units and by paying $0.6 million in cash.

During the nine months ended September 30, 2016 , restricted unit-based awards with respect to a total of 76,637 common units with a fair value of $2.0 million , based on the Partnership’s closing unit price on the grant date, vested and the amount paid to the grantees was made by issuing 25,286 common units and by paying $0.2 million in cash.

The Partnership recorded unit-based compensation expense of $0.1 million and $0.3 million , during the three months ended September 30, 2017 and 2016 , respectively, and $0.7 million and $1.9 million , during the nine months ended September 30, 2017 and 2016 , respectively, in general and administrative expenses in the Partnership’s consolidated statements of (loss) income .

As of September 30, 2017 and December 31, 2016 , liabilities relating to cash settled restricted unit-based compensation awards of $0.5 million and $1.1 million , respectively, were recorded in accrued liabilities on the Partnership’s consolidated balance sheets. As at September 30, 2017 , the Partnership had $1.3 million of non-vested awards not yet recognized, which the Partnership expects to recognize over a weighted average period of one year .
12.    Investment in Equity Accounted Joint Ventures and Advances to Joint Ventures

In October 2014, the Partnership sold a 1995-built shuttle tanker, the Navion Norvegia , to OOG-TK Libra GmbH & Co KG (or Libra Joint Venture ), a 50 / 50 joint venture with OOG, and was converted to a new FPSO unit for the Libra field in Brazil. The FPSO unit is scheduled to commence operations in the fourth quarter of 2017 (see note 9d ). In conjunction with the conversion project, in late-2015, the Libra Joint Venture entered into a ten -year plus construction period loan facility providing total borrowings of up to $804 million , of which $716.6 million was drawn as of September 30, 2017 . The interest payments of the loan facility are based on LIBOR, plus margins which range between 2.50% to 2.65% . The final payment under the loan facility is due October 2027 . The Partnership and OOG have severally guaranteed to the banks their 50% shares of the equity contributions scheduled to fund the conversion project, and have jointly guaranteed any unexpected equity requirements. In addition, the Libra Joint Venture entered into ten -year interest rate swap agreements to economically hedge expected interest payments on the loan facility from 2017 to 2027, with an aggregate notional amount of $ 261.8 million which amortizes quarterly over the term of the interest rate swap agreements. These interest rate swap agreements exchange the receipt of LIBOR-based interest for the payment of a fixed rate of 2.49% . These interest rate swap agreements have been designated as qualifying cash flow hedging instruments for accounting purposes. During 2016 and 2017, as a result of certain defaults on interest payments by an OOG affiliate which OOG had guaranteed, the Libra Joint Venture was required to obtain waivers from the lenders of the loan facility. In November 2017, a new waiver was

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TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)

agreed with lenders which permitted a drawdown under the loan facility and will permit future drawdowns upon the occurrence of the commercial operations date of the FPSO unit, which is expected to occur in the fourth quarter of 2017. A failure in achieving the commercial operations of the FPSO would result in a continuation of a draw stop on the loan facility and could adversely affect the Libra Joint Venture’s ability to fund or operate the Libra FPSO (see note 9d ).
In June 2013, the Partnership acquired Teekay Corporation’s 50% interest in OOG-TKP FPSO GmbH & Co KG, a joint venture with OOG, which owns the Itajai FPSO unit. Included in the joint venture is an eight -year loan facility, which as at September 30, 2017 had an outstanding balance of $168.8 million . The interest payments of the loan facility are based on LIBOR, plus margins which range between 2.15% and 2.45% . The final payment under the loan facility is due October 2021 . The Partnership has guaranteed its 50% share of the loan facility. In addition, the joint venture entered into ten -year interest rate swap agreements with an aggregate notional amount of $75.4 million as at September 30, 2017 , which amortizes semi-annually over the term of the interest rate swap agreements. These interest rate swap agreements exchange the receipt of LIBOR-based interest for the payment of a fixed rate of 2.63% . These interest rate swap agreements are not designated as qualifying cash flow hedging instruments for accounting purposes.
As at September 30, 2017 and December 31, 2016 , the Partnership had total investments of $168.9 million and $141.8 million , respectively, in joint ventures.
13.    Restructuring Charge

During the three and nine months ended September 30, 2017 , the Partnership recognized restructuring charges of $2.9 million and $3.3 million , respectively, mainly relating to severance costs from the termination of the charter contract for the Arendal Spirit UMS and the resulting decommissioning of the unit.
During the three and nine months ended September 30, 2016 , the Partnership recognized restructuring charges of $0.8 million and $2.3 million , respectively, mainly relating to the reorganization of the Partnership’s FPSO business to create better alignment with the Partnership’s offshore operations, resulting in a lower cost organization going forward.
As of September 30, 2017 and September 30, 2016 , restructuring liabilities of $2.7 million and $1.4 million , respectively, were recorded in accrued liabilities on the consolidated balance sheet.
14. Write-down of vessels
During the three and nine months ended September 30, 2017 , the carrying value of the Petrojarl I FPSO unit was written down to its estimated fair value, using a discounted cash flow valuation, as a result of increasing costs associated with additional upgrade work required and estimated liquidated damages associated with the delay in the commencement of the unit's operations. During the third quarter of 2017, the Petrojarl I FPSO unit was moved from the Damen Shipyard in the Netherlands to complete upgrades at the Aibel AS shipyard in Norway. Upon arrival at the Aibel AS shipyard, it was determined that additional upgrade work was required, resulting in a further increase in costs and a further delay of the commencement of the FPSO unit's operations which is expected to be delayed by approximately two months until early-2018. The Partnership's consolidated statement of (loss) income for the three and nine months ended September 30, 2017 includes a $213.2 million write-down related to this unit. The write-down is included in the Partnership's FPSO segment.
During the three and nine months ended September 30, 2017 , the carrying value of the Cidade de Rio das Ostras FPSO unit was written down to its estimated fair value, using a discounted cash flow valuation, as a result of a change in the operating plans for the unit resulting from receiving confirmation from the charterer in the third quarter of 2017 that it will not extend the charter contract beyond the expiration date of January 2018. The Partnership's consolidated statement of (loss) income for the three and nine months ended September 30, 2017 includes a $52.0 million write-down related to this unit. The write-down is included in the Partnership's FPSO segment.
During the three and nine months ended September 30, 2017 , the carrying value of the HiLoad DP unit was written down to its estimated fair value, using a discounted cash flow valuation, as a result of a change in expectations for the future employment opportunities for the unit and the unit proceeding into cold lay-up. The Partnership's consolidated statement of (loss) income for the three and nine months ended September 30, 2017 includes a $26.3 million write-down related to this unit. The write-down is included in the Partnership's shuttle tanker segment.
During the three and nine months ended September 30, 2017 , the carrying value of the Navion Brasilia and Nordic Rio shuttle tankers were written down to their estimated fair values, using appraised values, as a result of a change in the operating plans for these vessels, due to the redelivery of these vessels from their charterer after completing their bareboat charter contracts in July 2017 and a resulting change in expectations for the future opportunities for the vessels. The Partnership's consolidated statement of (loss) income for the three and nine months ended September 30, 2017 includes a $20.1 million write-down related to these vessels, of which $10.8 million is included in a 50% -owned subsidiary of the Partnership. The write-down is included in the Partnership's shuttle tanker segment.
During the three and nine months ended September 30, 2017 , the carrying value of the Navion Marita shuttle tanker was written down to its estimated fair value, using an appraised value, as a result of the expected sale of the vessel and the vessel was classified as held for sale on the Partnership's consolidated balance sheet as at September 30, 2017 . The Partnership's consolidated statement of (loss) income for the three and nine months ended September 30, 2017 includes a $5.1 million write-down related to this vessel. The write-down is included in the Partnership's shuttle tanker segment.
During the nine months ended September 30, 2016 , the Partnership canceled the UMS construction contracts for its two UMS newbuildings. As a result, the carrying values of these two UMS newbuildings were written down to $nil . The Partnership's consolidated statement of loss

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TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)

for the nine months ended September 30, 2016 includes a $43.7 million write-down related to these two UMS newbuildings (see notes 3 and 9c ). The write-down is included in the Partnership’s UMS segment.
15. Subsequent events

a)
In October 2017, the Partnership transferred its shuttle tanker business into a new, wholly-owned, non-recourse subsidiary, Teekay Shuttle Tankers L.L.C. (or ShuttleCo ). As part of the formation of ShuttleCo, six of the Partnership's existing debt facilities were refinanced with a new $600 million , five-year revolving credit facility of the Partnership. The revolving credit facility is guaranteed by ShuttleCo for all outstanding amounts and contains covenants that require ShuttleCo; to maintain a minimum liquidity (cash, cash equivalents and undrawn committed revolving credit lines with at least six months to maturity) in an amount equal to the greater of $35.0 million and 5.0% of the ShuttleCo's total consolidated debt; maintain a minimum historical EBITDA to total interest expense ratio of 1.20 ; and maintain a net debt to total capitalization ratio of no more than 75% . The revolving credit facility is collateralized by first-priority mortgages granted on 17 of ShuttleCo's vessels, together with other related security. In addition, an existing $250.0 million debt facility secured by the three East Coast of Canada newbuildings, an existing $140.7 million private placement bond secured by two shuttle tankers and a $71.2 million facility secured by two 50%-owned vessels, were transferred from the Partnership to ShuttleCo.
b)
In October 2017, ShuttleCo completed an offering of $250 million of new senior unsecured bonds (or ShuttleCo Bonds ) in the Norwegian bond market. The new bonds bear interest at a fixed rate of 7.125% and mature in August 2022. The Partnership expects the bonds to be listed on the Oslo Stock Exchange in early-2018. In August 2017, NOK bond holders elected to have the Partnership purchase approximately NOK 195 million of the previously outstanding NOK 420 million bonds and approximately NOK 517 million of the previously outstanding NOK 800 million bond and reinvest the proceeds into ShuttleCo Bonds. Using the proceeds from the issuance of the ShuttleCo Bonds, the Partnership exercised its call option relating to certain NOK bonds and on November 16, 2017, repurchased the remaining outstanding balances under each of its NOK 420 million and NOK 800 million bonds, which was approximately NOK 225 million and NOK 283 million , respectively. In October 2017, the Partnership terminated the cross currency swaps associated with these NOK bonds.
c)
In October 2017, the Partnership delivered the Navion Saga FSO unit to its buyers. The Partnership received gross proceeds of $7.4 million , resulting in a gain on sale of approximately $0.5 million recorded during the fourth quarter of 2017. The unit had been classified as held for sale as at September 30, 2017.





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TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
SEPTEMBER 30, 2017
PART I – FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

We are an international provider of marine transportation, oil production, storage, long-distance towing and offshore installation and maintenance and safety services to the offshore oil industry focusing on the deep-water offshore oil regions of the North Sea, Brazil and the East Coast of Canada. We operate shuttle tankers, floating production, storage and off-loading (or FPSO ) units, floating storage and off-take (or FSO ) units, a unit for maintenance and safety (or UMS ), long-distance towing and offshore installation vessels and conventional crude oil tankers. As at September 30, 2017 , our fleet consisted of 31 shuttle tankers (including three chartered-in vessels and one HiLoad Dynamic Positioning (or HiLoad DP ) unit), six FPSO units, seven FSO units, eight long-distance towing and offshore installation vessels, one UMS and two chartered-in conventional oil tankers, in which our interests range from 50% to 100%. We also have one FPSO conversion, which is complete and due to commence operations in the fourth quarter of 2017 , one FPSO unit undergoing upgrades and scheduled to commence operations in early-2018 , two long-distance towing and offshore installation vessel newbuildings , one of which delivered in October 2017 and the second one is scheduled for delivery in early-2018 , and five newbuilding shuttle tankers, two of which delivered in October 2017 and the three remaining vessels which are scheduled for delivery in early-2018 , late-2019 and 2020, respectively.
In September 2017, we entered into a strategic partnership with Brookfield Business Partners L.P., together with its institutional partners (or Brookfield ). This transaction is part of a comprehensive solution for us to strengthen our balance sheet and fully fund our existing growth projects. Our near-to-medium term business strategy is primarily focused on implementing existing growth projects, repaying or refinancing scheduled debt obligation and pursuing strategic growth projects. Despite significant weakness in the global energy and capital markets, our operating cash flows remain largely stable and growing, supported by a large and well-diversified portfolio of fee-based contracts with high quality counterparties.
The decline in global oil prices in recent years has affected the energy and capital markets and may also result in our vessels being employed on customer contracts that are cancellable or the failure of customers to exercise charter extension options, potentially resulting in increased off-hire for affected vessels. Conversely, we expect that a continuation of lower oil prices will motivate charterers to use existing FPSO units on new projects, given their lower cost relative to a newbuilding unit. Our operational focus over the short-term is to increase the efficiency of our business to ensure we are a cost-effective supplier in the offshore sector, as well as focusing on the redeployment of our assets that are scheduled to come off charter over the next few years.
Our long-term growth strategy focuses on expanding our fleet of shuttle tankers, and our FPSO and FSO units. Over the long-term, we intend to continue our practice of primarily acquiring vessels as needed for approved projects only after the long-term charters for the projects have been awarded to us, rather than ordering vessels on a speculative basis. We seek to capitalize on opportunities in the offshore transportation, production and storage sectors by selectively targeting long-term, fixed-rate time charters. We have entered and may enter into joint ventures and partnerships with companies that may provide increased access to long-term, fixed-rate time charter opportunities or may engage in vessel or business acquisitions. We seek to leverage the expertise, relationships and reputation of Teekay Corporation and Brookfield to pursue these growth opportunities in the offshore sectors and may consider other opportunities to which our competitive strengths are well suited. We have rights to participate in certain other FPSO, FSO and shuttle tanker opportunities provided by Teekay Corporation, Sevan Marine SAS (or Sevan ) and Remora AS. Our operating fleet primarily trades on medium to long-term, stable contracts and we are structured as a publicly-traded master limited partnership.
SIGNIFICANT DEVELOPMENTS
Strategic Partnership with Brookfield
In September 2017, we completed the previously announced strategic partnership with Brookfield and related transactions (collectively the Brookfield Transaction ), which included the following, among others:
•
Brookfield and Teekay Corporation invested $610.0 million and $30.0 million, respectively, in us in exchange for 244.0 million and 12.0 million common units, respectively, at a price of $2.50 per common unit and 62.4 million and 3.1 million common unit warrants, respectively, with an exercise price of $0.01 per unit and which warrants are exercisable through September 25, 2024 if our common unit volume-weighted average price is equal to or greater than $4.00 per common unit until the seventh anniversary of the closing of the transaction for 10 consecutive trading days prior to that date. Following the investment, Brookfield owns approximately 59.5% and Teekay Corporation owns approximately 13.8% of our outstanding common units;
•
Brookfield acquired from Teekay Corporation a 49.0% interest in our general partner in exchange for $4.0 million and an option to purchase an additional 2.0% interest in our general partner from Teekay Corporation in exchange for 1.0 million of the warrants issued to Brookfield as described above;
•
We repurchased and canceled all of our outstanding Series C-1 and Series D Preferred Units from existing unitholders, for an aggregate of approximately $250.0 million in cash. Concurrently, the per unit exercise price of our Series D tranche B Warrants to purchase common units issued on June 29, 2016, was reduced from $6.05 to $4.55;
•
We agreed with the lenders of the Arendal Spirit UMS debt facility to extend the mandatory prepayment date to September 30, 2018, in exchange for a principal prepayment of $30 million, which we paid in October 2017;
•
Brookfield acquired, from a subsidiary of Teekay Corporation, the $200 million subordinated promissory note originally issued by us to such subsidiary on July 1, 2016 (the 2016 Teekay Corporation Promissory Note ) and which promissory note was amended and restated

Page 26 of 50


in connection with the acquisition by Brookfield to, among other things, extend its maturity date from 2019 to 2022. Brookfield purchased the promissory note from Teekay Corporation for $140.0 million in cash and 11.4 million of the warrants issued initially to Brookfield as described above; and
•
Certain financial institutions providing interest rate swaps to us (i) lowered the fixed interest rate on the swaps, (ii) extended the termination option of the swaps by two years to 2021, and (iii) eliminated the financial guarantee and security package previously provided by Teekay Corporation in return for a prepayment amount and fees.
As part of the Brookfield Transaction, we have reduced our existing common unit distribution to $0.01 per common unit to reinvest cash in the business and further strengthen our balance sheet.
For additional information about these and related proposed transactions, please see our report on Form 6-K furnished to the SEC on August 1, 2017.
Formation of Shuttle Co. Subsidiary and Related Re-financing
In October 2017, we transferred our shuttle tanker business into a new, wholly-owned, non-recourse subsidiary, Teekay Shuttle Tankers L.L.C. (or ShuttleCo ). As part of the formation of ShuttleCo, a majority of our shuttle tanker fleet was refinanced with a new $600.0 million, five-year debt facility of ours within ShuttleCo. In addition, an existing $250.0 million debt facility secured by the three East Coast of Canada newbuildings, an existing $140.7 million private placement bond secured by two vessels and a $71.2 million facility secured by two 50%-owned vessels, were transferred from us to ShuttleCo.
Repurchase of Existing NOK Bonds Maturing in 2018 and Issuance of $250 Million Bonds in ShuttleCo
In October 2017, as part of the Brookfield Transaction, we exercised our call option to repurchase the remaining outstanding balances under each of our Norwegian Kroner (or NOK ) 420 million senior unsecured bond agreement and our NOK 800 million senior unsecured bond agreement. In each case these were settled on November 16, 2017, in accordance with their respective terms. Concurrently, ShuttleCo completed an offering of $250 million of new senior unsecured bonds in the Norwegian bond market. The interest payments on the bonds are fixed at 7.125 percent and the bonds mature in August 2022. We expect the bonds to be listed on the Oslo Stock Exchange in early-2018. For additional information, please see Item 1 - Financial Statements: Note 5. Long Term Debt.
Commencement of Operations of the Randgrid FSO
In early-October 2017, the  Randgrid  FSO, which was converted from one of our shuttle tankers at Sembcorp’s Sembawang shipyard in Singapore, commenced its three-year time-charter contract with Statoil ASA ( Statoil ), including 12 additional one-year extension options, on the Gina Krog oil and gas field in the Norwegian sector of the North Sea.
Voyageur Spirit FPSO Head of Terms

In November 2017, we entered into a heads of terms with Premier Oil to extend the employment of the Voyageur Spirit FPSO unit on the Huntington field for an additional twelve months out to April 2019. The new contract, which will take effect in April 2018, will include a fixed charter rate component plus and an upside component based on oil production and oil price.

Delivery of East Coast of Canada Shuttle Tanker Newbuildings

In October 2017 and November 2017, we took delivery of the first two East Coast of Canada shuttle tanker newbuildings, the Beothuk Spiri t and the Norse Spirit, which are expected to commence 15-year charter contracts, plus extension options in December 2017 and January 2018, respectively, with a group of oil companies. These newbuildings will replace the existing in-chartered vessels servicing the East Coast of Canada, with the first replaced vessel transferring to the North Sea to operate in our contract of affreightment (or CoA) fleet and the second replaced vessel redelivering to its owner.
Delivery of Towage Newbuilding
In October 2017, we took delivery of the third of four state-of-the-art SX-157 Ulstein Design ultra-long distance towing and offshore installation newbuildings, the ALP Sweeper , constructed by Niigata Shipbuilding & Repair in Japan. Due to the delayed delivery of the vessel we received a reimbursement from the shipyard of $8.1 million, during the second quarter of 2017.
Sale of the Navion Saga
In October 2017, we delivered the Navion Saga FSO unit to its buyers. We received gross proceeds of $7.4 million, resulting in a gain on sale of approximately $0.5 million recorded during the fourth quarter of 2017. The unit had been classified as held for sale as at September 30, 2017.
Shuttle Tanker Newbuildings
In July 2017, we entered into shipbuilding contracts with Samsung Heavy Industries Co. Ltd., to construct two Suezmax DP2 shuttle tanker newbuildings, for an aggregate fully built-up cost of approximately $294 million , with options to order up to two additional vessels. These newbuilding vessels will be constructed based on our New Shuttle Spirit design which incorporates technologies to increase fuel efficiency and reduce emissions, including LNG propulsion technology. Upon delivery in late-2019 and early-2020, these vessels will provide shuttle tanker services in the North Sea under our existing master agreement with Statoil, which will add vessel capacity to service our CoA portfolio in the North Sea.
Petrojarl I Charter Amendment

In July 2017, we signed an amendment to the Petrojarl I FPSO five-year charter contract with Queiroz Galvão Exploração e Produção SA (or QGEP ). The amended charter contract includes an extension to the delivery window for the project and an adjusted charter rate profile which reduces the day rate for the FPSO unit during the first 18 months of production. During the final 3.5 years of the contract, the charter contract will

Page 27 of 50


revert to a rate that is higher than the original day rate plus oil price and production tariffs, which will provide the potential for us to recover more than the reduction given in the first 18 months of the charter contract. The start-up of oil production on the Atlanta Field is expected to occur in the first quarter of 2018.
Delivery of Newbuilding Towage Vessel
In June 2017, we took delivery of the ALP Defender , the second of four state-of-the-art SX-157 Ulstein Design ultra-long distance towing and offshore installation newbuildings being constructed by Niigata Shipbuilding & Repair in Japan. Due to the delayed delivery of the vessel, during the second quarter of 2017, we received a reimbursement from the shipyard of $8.5 million and received an advance payment on a $15.8 million reimbursement related to delayed deliveries of two remaining ultra-long distance towing and offshore installation newbuildings, which were not yet delivered at that time.
New North Sea Shuttle Tanker contracts
In June 2017, we finalized the previously announced three-year shuttle tanker CoA to service a development in the U.K. North Sea. The CoA, which is expected to commence during the third quarter of 2017 and require the use of up to approximately 0.6 shuttle tanker equivalents per annum, will be serviced by our existing CoA shuttle tanker fleet.

In March 2017, we finalized a five-year shuttle tanker CoA, plus extension options, with a consortium of oil companies to service a development located in the U.K. Central North Sea. This CoA is expected to commence during the first quarter of 2018 and will be serviced by our existing CoA shuttle tanker fleet. The CoA is expected to require the use of up to approximately 0.6 shuttle tanker equivalents per annum.
Falcon Spirit Contract Extension
In May 2017, we completed a five-year contract extension, plus extension options, for the Falcon Spirit FSO unit, which extension commenced June 1, 2017. The contract extension includes a termination fee payable if the contract is terminated prior to mid-2018. The Falcon Spirit FSO unit operates on the Al Rayyan field located offshore Qatar.
Arendal Spirit UMS

In April 2017, Petroleo Netherlands B.V. notified Logitel Offshore Norway AS, a subsidiary of ours, that Petroleo Netherlands B.V. was terminating the charter contract for the Arendal Spirit UMS and would not pay the charter hire payments from November 2016. We have disputed the termination and are reviewing our legal options, including the initiation of a claim for unpaid standby fees and damages for wrongful termination of the time-charter contract. The unit is currently proceeding into lay-up.
Petrojarl Varg Front-End Engineering and Design Study
In March 2017, we entered into a six-month, customer-funded, front-end engineering and design (or FEED ) study agreement for the Petrojarl Varg FPSO unit with Alpha Petroleum Resources Limited, which is backed by private equity firm Petroleum Equity, for the development of the Cheviot field, formerly known as the Emerald field, located in the U.K. sector of the North Sea. The purpose of the FEED study is to define the modifications required for the Petrojarl Varg FPSO unit and use it to negotiate the terms of a potential FPSO contract for the development of the Cheviot field. The FEED study is due to be completed in late-2017.
Potential Additional Shuttle Tanker, FSO and FPSO Projects
Pursuant to an omnibus agreement that we entered into in connection with our initial public offering in December 2006, Teekay Corporation is obligated to offer to us its interest in certain shuttle tankers, FSO units and FPSO units Teekay Corporation owns or may acquire in the future, provided the vessels are servicing contracts with remaining durations of greater than three years. We may also acquire other vessels that Teekay Corporation may offer us from time to time and we intend to pursue direct acquisitions from third parties and new offshore projects. However, our current near-term business strategy is primarily to focus on funding and implementing existing growth projects and repaying or refinancing scheduled debt obligations rather than pursuing additional growth projects.
In May 2011, Teekay Corporation entered into a joint venture agreement with Oderbrecht Oil & Gas S.A. (or OOG) to jointly pursue FPSO projects in Brazil. OOG is a Brazil-based company that operates in the engineering and construction, petrochemical, bioenergy, energy, oil and gas, real estate and environmental engineering sectors. Through the joint venture agreement, OOG is a 50 percent partner with us in the Cidade de Itajai (or Itajai ) FPSO unit and the Libra FPSO unit project.

RESULTS OF OPERATIONS

There are a number of factors that should be considered when evaluating our historical financial performance and assessing our future prospects and we use a variety of financial and operational terms and concepts when analyzing our results of operations. These can be found in Part I, Item 5 – “Operating and Financial Review and Prospects” in our Annual Report on Form 20-F for the year ended December 31, 2016 . In accordance with United States generally accepted accounting principles (or GAAP ), we report gross revenues in our income statements and include voyage expenses among our operating expenses. However, ship owners often base economic decisions regarding the deployment of their vessels upon anticipated time charter equivalent (or TCE ) rates, and industry analysts typically measure bulk shipping freight rates in terms of TCE rates. This is because under time charters and bareboat charters the customer usually pays the voyage expenses while under voyage charters and contracts of affreightment the shipowner usually pays the voyage expenses, which typically are added to the hire rate at an approximate cost. Accordingly, the discussion of revenues below focuses on net revenues (i.e. revenues less voyage expenses, and which is a non-GAAP financial measure) and TCE rates for our reportable segments (other than our FPSO and UMS segments). TCE rates represent net revenues divided by revenue days. Please read Item 1 – Financial Statements: Note 4. Segment Reporting.


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We manage our business and analyze and report our results of operations on the basis of our six business segments: the FPSO segment, the shuttle tanker segment, the FSO segment, the UMS segment, the towage segment and the conventional tanker segment, each of which is discussed below.
FPSO Segment

As at September 30, 2017 , our FPSO fleet consisted of the Petrojarl Knarr , the Petrojarl Varg, the Cidade de Rio das Ostras (or Rio das Ostras ) , the Piranema Spirit , the Voyageur Spirit , and the Petrojarl I FPSO units , all of which we own 100%, and the Itajai and the Libra FPSO units, of which we own 50%. One equity accounted FPSO unit, the Libra FPSO unit owned through our 50/50 joint venture with OOG, has completed its conversion into an FPSO unit and arrived at the Libra field located in the Santos Basin offshore Brazil where it is expected to commence operations in the fourth quarter of 2017 . The Petrojarl I FPSO unit has undergone upgrades at the Damen Shipyard Group's DSR Schiedam Shipyard (or Damen ) in the Netherlands and will complete upgrades at the Aibel AS shipyard in Norway. The Petrojarl I FPSO unit is scheduled to commence operations under a five-year charter contract with QGEP in early-2018.

In late-2015, we received a termination notice for the Petrojarl Varg FPSO charter contract from Repsol S.A. (or Repsol ), based on a termination right that was specific to the Petrojarl Varg FPSO contract. In accordance with the termination provision of the charter contract, the charterer ceased paying the capital component of the charter hire six months prior to the redelivery date, which occurred at the end of July 2016.

FPSO units provide production, processing and storage services to oil companies operating offshore oil field installations. These services are typically provided under long-term, fixed-rate FPSO contracts, some of which also include certain incentive compensation or penalties based on the level of oil production and other operational measures. Historically, the utilization of FPSO units and other vessels in the North Sea, where the Petrojarl Knarr and Voyageur Spirit operate, is higher in the winter months, as favorable weather conditions in the summer months provide opportunities for repairs and maintenance to our units and the offshore oil platforms, which generally reduces oil production. The strengthening or weakening of the U.S. Dollar relative to the Norwegian Kroner, Brazilian Real, and British Pound may result in significant decreases or increases, respectively, in our revenues and vessel operating expenses.

The following tables present the FPSO segment’s operating results for the three and nine months ended September 30, 2017 and 2016 and also provide a summary of the calendar-ship-days for the FPSO segment. The tables exclude the results of the Itajai and the Libra FPSO units, which are accounted for as equity investments.
(in thousands of U.S. Dollars, except calendar-ship-days and percentages)
Three Months Ended September 30,
 
 
2017
 
2016
 
% Change
Revenues
116,611

 
121,294

 
(3.9
)
Vessel operating expenses
(40,816
)
 
(42,353
)
 
(3.6
)
Depreciation and amortization
(36,497
)
 
(37,180
)
 
(1.8
)
General and administrative  (1)
(11,004
)
 
(10,235
)
 
7.5

Write-down of vessels
(265,229
)
 
—

 
100.0

Restructuring charge
—

 
(597
)
 
(100.0
)
(Loss) income from vessel operations
(236,935
)
 
30,929

 
(866.1
)
Calendar-Ship-Days
 
 
 
 

Owned Vessels
552

 
552

 
—

(in thousands of U.S. Dollars, except calendar-ship-days and percentages)
Nine Months Ended September 30,
 
 
2017
 
2016
 
% Change
Revenues
339,713

 
378,793

 
(10.3
)
Vessel operating expenses
(110,988
)
 
(130,632
)
 
(15.0
)
Depreciation and amortization
(109,496
)
 
(111,998
)
 
(2.2
)
General and administrative  (1)
(25,904
)
 
(27,126
)
 
(4.5
)
Write-down of vessels
(265,229
)
 
—

 
100.0

Restructuring charge
(450
)
 
(2,084
)
 
(78.4
)
(Loss) income from vessel operations
(172,354
)
 
106,953

 
(261.1
)
Calendar-Ship-Days
 
 
 
 
 
Owned Vessels
1,638

 
1,644

 
(0.4
)
(1)
Includes direct general and administrative expenses and indirect general and administrative expenses (allocated to the FPSO segment based on estimated use of corporate resources). See the discussion under “Other Operating Results” below.
Revenues. Revenues decreased for the three and nine months ended September 30, 2017 , compared to the same periods last year, primarily due to: 
•
decreases of $3.0 million and $32.2 million, respectively, for the three and nine months ended September 30, 2017 due to no longer receiving the capital portion of the charter hire for the Petrojarl Varg since February 1, 2016 and the unit being in lay-up since August 1, 2016 subsequent to the termination of the charter contract by Repsol;

Page 29 of 50


•
decreases of $3.3 million and $6.8 million, respectively, for the three and nine months ended September 30, 2017 due to revenue received for offshore field studies associated with the Petrojarl Varg and reimbursement of business development costs during the first three quarters of 2016 (this revenue is offset by operating expenses incurred, as indicated below);
•
decreases of $1.7 million and $3.7 million, respectively, for the three and nine months ended September 30, 2017 due to a decrease in incentive compensation from the Voyageur Spirit ; and
•
a decrease of $1.2 million for the nine months ended September 30, 2017 due to one less calendar day in the first quarter of 2017 compared to the same period last year;
partially offset by
•
increases of $1.5 million and $2.5 million, respectively, for the three and nine months ended September 30, 2017 , mainly due to the receipt of payments for higher reimbursable expenses incurred on the Voyageur Spirit compared to the same periods last year (this revenue is offset by operating expenses incurred, as indicated below); and
•
an increase of $2.0 million for the three and nine months ended September 30, 2017 , due to a one-time performance bonus earned on the Petrojarl Knarr during the third quarter of 2017.

Vessel operating expenses. Vessel operating expenses decreased for the three and nine months ended September 30, 2017 , compared to the same periods last year, primarily due to:
•
decreases of $3.7 million and $15.9 million, respectively, for the three and nine months ended September 30, 2017 due to lower costs as the Petrojarl Varg was decommissioned at the end of July 2016 and is now in lay-up;
•
decreases of $1.3 million and $5.8 million, respectively, for the three and nine months ended September 30, 2017 due to lower crew and repair and maintenance costs for the Petrojarl Knarr relating to the unit preparing during 2016 for the final performance test, that was completed during the third quarter of 2016; and
•
decreases of $3.2 million and $5.5 million, respectively, for the three and nine months ended September 30, 2017 due to expenditures incurred for offshore field studies for the Petrojarl Varg during the first three quarters of 2016;
partially offset by
•
increases of $1.6 million and $3.1 million, respectively, for the three and nine months ended September 30, 2017 due to higher pre-operational costs incurred on the Petrojarl I as the unit continues upgrades and is scheduled to commence operations in early-2018;
•
increases of $1.3 million and $2.3 million, respectively, for the three and nine months ended September 30, 2017 due to higher repair and maintenance costs on the Voyageur Spirit which are reimbursed by the charterer, compared to the same periods last year;
•
increases of $2.3 million and $2.1 million, respectively, for the three and nine months ended September 30, 2017 due to the timing of repair and maintenance costs on the Piranema Spirit ; and
•
increases of $1.0 million and $1.2 million, respectively, for the three and nine months ended September 30, 2017 due to the weakening of the U.S. Dollar against the Norwegian Kroner and Brazilian Real compared to the same periods last year.
Depreciation and amortization expense. Depreciation and amortization expense decreased for the nine months ended September 30, 2017 , compared to the same period last year, primarily due to an increase in the expected useful life of the Petrojarl I , effective January 1, 2017, as a result of an increase in corrective maintenance and replaced equipment from the ongoing upgrades of the unit.
Write-down of vessels. Write-down of vessels was $265.2 million for the three and nine month ended September 30, 2017 and consisted of (a) a $213.2 million write-down of the Petrojarl I due to increasing costs associated with additional upgrade work required and estimated liquidated damages associated with the delay in the commencement of operations of the unit and (b) a $52.0 million write-down of the Rio das Ostras due to a change in the operating plans for the unit resulting from receiving confirmation from the charterer in the third quarter of 2017 that it will not extend the charter contract beyond the expiration date of January 2018.
Restructuring Charge. Restructuring charges incurred in the first quarter of 2017 and the second and third quarters of 2016 relate to the reorganization of our FPSO business to create better alignment with our offshore operations resulting in a lower cost organization going forward.
Shuttle Tanker Segment
As at September 30, 2017 , our shuttle tanker fleet consisted of 30 vessels that operate under fixed-rate CoAs, time charters and bareboat charters, five shuttle tanker newbuildings (two shuttle tanker newbuildings were delivered to us in October 2017 and November 2017, respectively), and the HiLoad DP unit, which is currently in lay-up. Of these 36 shuttle tankers, six are owned through 50%-owned subsidiaries and three were chartered-in. The remaining vessels are owned 100% by us. One unit, the Navion Marita, was held for sale as at September 2017. All of our operating shuttle tankers, with the exception of the HiLoad DP unit, provide transportation services to energy companies in the North Sea, Brazil and the East Coast of Canada. Our shuttle tankers occasionally service the conventional spot tanker market. The strengthening or weakening of the U.S. Dollar relative to the Norwegian Kroner, Euro and Brazilian Real may result in significant decreases or increases, respectively, in our vessel operating expenses.
The following tables present the shuttle tanker segment’s operating results for the three and nine months ended September 30, 2017 and 2016 , and compare its net revenues (which is a non-GAAP financial measure) for the three and nine months ended September 30, 2017 and 2016 , to revenues, the most directly comparable GAAP financial measure, for the same periods. The following tables also provide a summary of the changes in calendar-ship-days by owned and chartered-in vessels for the shuttle tanker segment:

Page 30 of 50


(in thousands of U.S. Dollars, except calendar-ship-days and percentages)
Three Months Ended September 30,
 
 
2017
 
2016
 
% Change
Revenues
135,549

 
128,482

 
5.5

Voyage expenses
(20,018
)
 
(18,898
)
 
5.9

Net revenues
115,531

 
109,584

 
5.4

Vessel operating expenses
(31,007
)
 
(33,062
)
 
(6.2
)
Time-charter hire expenses
(16,415
)
 
(14,723
)
 
11.5

Depreciation and amortization
(31,049
)
 
(30,166
)
 
2.9

General and administrative  (1)
(6,060
)
 
(1,147
)
 
428.3

Write-down of vessels
(51,497
)
 
—

 
100.0

Restructuring charge
—

 
(205
)
 
(100.0
)
(Loss) income from vessel operations
(20,497
)
 
30,281

 
(167.7
)
Calendar-Ship-Days
 
 
 
 

Owned Vessels
2,576

 
2,668

 
(3.4
)
Chartered-in Vessels
313

 
309

 
1.3

Total
2,889

 
2,977

 
(3.0
)
 
Nine Months Ended September 30,
 
 
(in thousands of U.S. Dollars, except calendar-ship-days and percentages)
2017
 
2016
 
% Change
Revenues
404,746

 
380,505

 
6.4

Voyage expenses
(58,615
)
 
(45,409
)
 
29.1

Net revenues
346,131

 
335,096

 
3.3

Vessel operating expenses
(86,846
)
 
(91,735
)
 
(5.3
)
Time-charter hire expenses
(48,500
)
 
(44,298
)
 
9.5

Depreciation and amortization
(91,711
)
 
(90,903
)
 
0.9

General and administrative  (1)
(12,709
)
 
(8,975
)
 
41.6

Write-down of vessels
(51,497
)
 
—

 
100.0

Restructuring charge
—

 
(205
)
 
(100.0
)
Income from vessel operations
54,868

 
98,980

 
(44.6
)
Calendar-Ship-Days
 
 
 
 

Owned Vessels
7,644

 
7,967

 
(4.1
)
Chartered-in Vessels
920

 
941

 
(2.2
)
Total
8,564

 
8,908

 
(3.9
)
(1)
Includes direct general and administrative expenses and indirect general and administrative expenses (allocated to the shuttle tanker segment based on estimated use of corporate resources). See the discussion under “Other Operating Results” below.
The average size of our owned shuttle tanker fleet decreased for the three and nine months ended September 30, 2017 , compared to the same periods last year, primarily due to the sale of the Navion Torinita and the Navion Europa in January 2016 and November 2016, respectively. Five shuttle tanker newbuildings have been excluded from calendar-ship-days as these vessels were not yet delivered to us as at September 30, 2017 .
Net revenues. Net revenues increased for the three and nine months ended September 30, 2017 compared to the same periods last year, primarily due to:
•
increases of $6.3 million and $11.3 million, respectively, for the three and nine months ended September 30, 2017 , due to an increase in project revenues, mainly due to due to providing offloading services to Statoil for the Gina Krog field as an interim measure pending the start-up of the recently converted Randgrid FSO in October 2017;
•
increases of $4.4 million and $9.2 million, respectively, for the three and nine months ended September 30, 2017 , primarily due to an increase in revenues in our CoA fleet mainly due to higher fleet utilization and higher average rates; and
•
an increase of $4.0 million for the nine months ended September 30, 2017 , due to the Petroatlantic and Petronordic commencing time-charter-out contracts in April 2017 after converting from their respective bareboat charters;
partially offset by
•
a decrease of $4.4 million for the nine months ended September 30, 2017 , due to the redelivery of one vessel to us in June 2016 as it completed its time-charter-out agreement;

Page 31 of 50


•
decreases of $4.0 million and $5.5 million for three and nine months ended September 30, 2017 , due to one vessel acting as a substitute for one of our FSO units during the second and third quarters of 2016; and
•
decreases of $0.6 million and $3.5 million, respectively, for the three and nine months ended September 30, 2017 , due to lower average rates and fewer opportunities to trade excess shuttle tanker capacity in the conventional tanker spot market.
Vessel operating expenses. Vessel operating expenses decreased for the three and nine months ended September 30, 2017 compared to the same periods last year, primarily due to:
•
decreases of $3.2 million and $5.6 million, respectively, for the three and nine months ended September 30, 2017 , mainly due to the timing of repairs and maintenance expenses; and
•
decreases of $0.8 million and $2.7 million, respectively, for the three and nine months ended September 30, 2017 , due to the sale of one vessel in November 2016;
partially offset by
•
increases of $2.3 million and $4.0 million, respectively, for the three and nine months ended September 30, 2017 , due to the Petroatlantic and Petronordic commencing time-charter-out contracts in April 2017 after converting from their respective bareboat charters.
Time-charter hire expenses. Time-charter hire expenses increased for the three and nine months ended September 30, 2017 compared to the same periods last year, primarily due to:
•
increases of $3.9 million and $13.1 million, respectively, for the three and nine months ended September 30, 2017 , due to the in-chartering of one vessel from September 2016;
partially offset by
•
decreases of $2.4 million and $7.9 million, respectively, for the three and nine months ended September 30, 2017 , due to the redelivery of one vessel by us in December 2016; and
•
a decrease of $1.0 million for the nine months ended September 30, 2017 , due to decreased spot in-chartering of shuttle tankers.
Write-down on vessels. Write-down of vessels was $51.5 million for the three and nine months ended September 30, 2017 and consisted of (a) a $26.3 million write-down of the HiLoad DP unit as result of a change in expectations for the future opportunities of the unit, (b) a $10.8 million write-down of the Nordic Rio and a $9.3 million write-down of the Nordic Brasilia as a result of a change in the operating plans for these vessels due to the redelivery of these vessels from their charterer after completing their bareboat charter contracts in July 2017 and (c) a $5.1 million write-down of the Navion Marita as a result of the expected sale of the vessel.
FSO Segment

As at September 30, 2017 , our FSO fleet consisted of five units that operate under fixed-rate time charters or fixed-rate bareboat charters, for which our ownership interests range from 89% to 100%, one unit, the Randgrid, for which our ownership interest is 100%, and one idle unit, the Navion Saga , for which our ownership interest is 100%. The Randgrid completed its conversion from a shuttle tanker to an FSO unit in June 2017 and commenced operations in early-October 2017 at the Gina Krog oil and gas field located in the North Sea, under a three-year time-charter contract, which includes 12 additional one-year extension options. The Navion Saga FSO unit was sold in October 2017.

FSO units provide an on-site storage solution to oil field installations that have no oil storage facilities or that require supplemental storage. Our revenues and vessel operating expenses for the FSO segment are affected by fluctuations in currency exchange rates, as a significant component of revenues are earned and vessel operating expenses are incurred in Norwegian Kroner and Australian Dollars for certain vessels. The strengthening or weakening of the U.S. Dollar relative to the Norwegian Kroner or Australian Dollar may result in significant decreases or increases, respectively, in our revenues and vessel operating expenses.

The following tables present the FSO segment’s operating results for the three and nine months ended September 30, 2017 and 2016 , and compare its net revenues (which is a non-GAAP financial measure) for the three and nine months ended September 30, 2017 and 2016 , to revenues, the most directly comparable GAAP financial measure, for the same periods. The following tables also provide a summary of the changes in calendar-ship-days for the FSO segment: 
 
Three Months Ended September 30,
 
 
(in thousands of U.S. Dollars, except calendar-ship-days and percentages)
2017
 
2016
 
% Change
Revenues
10,205

 
14,251

 
(28.4
)
Voyage expenses
(258
)
 
(96
)
 
168.8

Net revenues
9,947

 
14,155

 
(29.7
)
Vessel operating expenses
(5,132
)
 
(6,056
)
 
(15.3
)
Depreciation and amortization
(2,589
)
 
(2,205
)
 
17.4

General and administrative  (1)
(446
)
 
(230
)
 
93.9

Income from vessel operations
1,780

 
5,664

 
(68.6
)
Calendar-Ship-Days
 
 
 
 

Owned Vessels
644

 
644

 
—


Page 32 of 50


 
Nine Months Ended September 30,
 
 
(in thousands of U.S. Dollars, except calendar-ship-days and percentages)
2017
 
2016
 
% Change
Revenues
32,492

 
42,403

 
(23.4
)
Voyage expenses
(1,013
)
 
(431
)
 
135.0

Net revenues
31,479

 
41,972

 
(25.0
)
Vessel operating expenses
(14,904
)
 
(17,724
)
 
(15.9
)
Depreciation and amortization
(7,729
)
 
(6,586
)
 
17.4

General and administrative (1)
(1,356
)
 
(612
)
 
121.6

Write-down of vessels
(1,500
)
 
—

 
100.0

Income from vessel operations
5,990

 
17,050

 
(64.9
)
Calendar-Ship-Days
 
 
 
 
 
Owned Vessels
1,911

 
1,918

 
(0.4
)
(1)
Includes direct general and administrative expenses and indirect general and administrative expenses (allocated to the FSO segment based on estimated use of corporate resources). See the discussion under “Other Operating Results” below.

Net revenues. Net revenues decreased for the three and nine months ended September 30, 2017 , compared to the same periods last year, primarily due to the redelivery of the Navion Saga in October 2016 following the completion of its time-charter-out contract partially offset by dry dock reimbursements relating to the Apollo Spirit received during the first three quarters of 2017 (this revenue is offset by an increase in depreciation and amortization expense).

Vessel operating expenses. Vessel operating expenses decreased for the nine months ended September 30, 2017 , compared to the same period last year, primarily due to the redelivery of the Navion Saga in October 2016.

Write-down of vessels . Write-down of vessels for the nine months ended September 30, 2017 consists of the write-down of the Falcon Spirit as a result of a decrease in the estimated residual value of the unit.
UMS Segment
As at September 30, 2017 , our UMS fleet consisted of one unit, the Arendal Spirit , in which we own a 100% interest.

The Arendal Spirit began its three-year charter contract for Petroleo Netherlands B.V. on June 7, 2015. In mid-April 2016, during the process of lifting off the gangway connecting the Arendal Spirit to an FPSO unit, the gangway of the Arendal Spirit suffered damage. During the gangway replacement, the Arendal Spirit was declared off-hire. The gangway was replaced in mid-June 2016 and the Arendal Spirit was declared on-hire in early-July 2016. In early-November 2016, the unit experienced an operational incident relating to the dynamic positioning system and, as a result, Petroleo Netherlands B.V. suspended its charter hire payments beginning November 6, 2016 to complete an operational review relating to this incident. In late-April 2017, Petroleo Netherlands B.V. notified our subsidiary, Logitel Offshore Norway AS, that Petroleo Netherlands B.V. was terminating the charter contract for the Arendal Spirit UMS and would not pay the charter hire payments from November 2016. We have disputed the grounds for termination and expect to initiate a claim for unpaid standby fees and damages for wrongful termination of the time-charter contract. The unit is currently proceeding into lay-up. The following tables present the UMS segment’s operating results and calendar-ship-days for the three and nine months ended September 30, 2017 and 2016 .
(in thousands of U.S. Dollars, except calendar-ship-days and percentages)
Three Months Ended September 30,
 
% Change
2017
 
2016
 
Revenues
—

 
13,395

 
(100.0
)
Vessel operating expenses
(4,509
)
 
(8,331
)
 
(45.9
)
Depreciation and amortization
(1,640
)
 
(1,647
)
 
(0.4
)
General and administrative (1)
(1,019
)
 
(2,640
)
 
(61.4
)
Restructuring charges
(2,885
)
 
—

 
100.0

(Loss) income from vessel operations
(10,053
)
 
777

 
(1,393.8
)
Calendar-Ship-Days
 
 
 
 

Owned Vessels
92

 
92

 
—


Page 33 of 50


(in thousands of U.S. Dollars, except calendar-ship-days and percentages)
Nine Months Ended September 30,
 
% Change
2017
 
2016
 
Revenues
3,916

 
30,612

 
(87.2
)
Vessel operating expenses
(28,327
)
 
(25,576
)
 
10.8

Depreciation and amortization
(4,907
)
 
(5,037
)
 
(2.6
)
General and administrative  (1)
(4,183
)
 
(4,166
)
 
0.4

Write-down of vessels
—

 
(43,650
)
 
(100.0
)
Restructuring charges
(2,885
)
 
—

 
100.0

Loss from vessel operations
(36,386
)
 
(47,817
)
 
(23.9
)
Calendar-Ship-Days
 
 
 
 
 
Owned Vessels
273

 
274

 
(0.4
)
(1)
Includes direct general and administrative expenses and indirect general and administrative expenses (allocated to the UMS segment based on estimated use of corporate resources). See the discussion under “Other Operating Results” below.
Revenues. Revenues decreased for the three and nine months ended September 30, 2017 , compared to the same periods last year, due to the charterer not paying charter hire payments since early-November 2016. The charter contract was subsequently terminated in late-April 2017 and the remaining deferred revenue of $3.9 million relating to the charter contract was recognized during the nine months ended September 30, 2017 . The Arendal Spirit was off-hire from mid-April 2016 until early-July 2016 due to damage suffered to the gangway of the unit.
Vessel operating expenses. Vessel operating expenses decreased for the three months and increased for the nine months ended September 30, 2017 , compared to the same periods last year, primarily due to:
•
a decrease of $2.5 million for the three and nine months ended September 30, 2017 , due to deferred operating expenses being written off in the third quarter of 2017; and
•
decreases of $1.0 million and $3.9 million, respectively, for the three and nine months ended September 30, 2017 , mainly due to lower repairs and maintenance expenses as the Arendal Spirit prepares for lay-up;
offset by
•
an increase of $9.3 million for the nine months ended September 30, 2017 , due to the write-off of deferred operating expenses upon the termination of the Arendal Spirit's charter contract in late-April 2017.
Write-down of vessels. Write-down of vessels for the nine months ended September 30, 2016 , consists of the write-down relating to the cancellation of two UMS newbuilding contracts in June 2016.
Restructuring charges. Restructuring charges for the three and nine months ended September 30, 2017 relate to crew and onshore staff severance costs relating to the termination of the charter contract of the Arendal Spirit UMS and the unit proceeding to lay-up.
Towage Segment

As at September 30, 2017 , our towage vessel fleet consisted of eight long-distance towing and offshore installation vessels and two long-distance towing and offshore installation vessel newbuildings, one of which, the ALP Sweeper, delivered in October 2017 and the remaining vessel is scheduled to deliver in early-2018 . We own a 100% interest in each of the vessels in our towage fleet.

Long-distance towing and offshore installation vessels are used for the towage, station-keeping, installation and decommissioning of large floating objects, such as exploration, production and storage units, including FPSO units, floating liquid natural gas units and floating drill rigs.

The following tables present our towage segment’s operating results for the three and nine months ended September 30, 2017 and 2016 , and compare its net revenues (which is a non-GAAP financial measure) for the three and nine months ended September 30, 2017 and 2016 , to revenues, the most directly comparable GAAP financial measure, for the same periods. The following tables also provide a summary of the changes in calendar-ship-days by owned and chartered-in vessels for the towage segment:

Page 34 of 50


 
Three Months Ended September 30,
 
% Change
(in thousands of U.S. Dollars, except calendar-ship-days and percentages)
2017
 
2016
 
Revenues
11,431

 
5,345

 
113.9
Voyage expenses
(6,191
)
 
(2,440
)
 
153.7
Net revenues
5,240

 
2,905

 
80.4
Vessel operating expenses
(5,825
)
 
(4,206
)
 
38.5
Depreciation and amortization
(4,111
)
 
(2,961
)
 
38.8
General and administrative (1)
(1,251
)
 
(859
)
 
45.6
Loss from vessel operations
(5,947
)
 
(5,121
)
 
16.1
Calendar-Ship-Days
 
 
 
 

Owned Vessels
736

 
571

 
28.9
 
Nine Months Ended September 30,
 
% Change
(in thousands of U.S. Dollars, except calendar-ship-days and percentages)
2017
 
2016
 
Revenues
26,558

 
28,158

 
(5.7
)
Voyage expenses
(12,110
)
 
(10,239
)
 
18.3

Net revenues
14,448

 
17,919

 
(19.4
)
Vessel operating expenses
(14,929
)
 
(13,015
)
 
14.7

Time-charter hire expenses
(925
)
 
—

 
100.0

Depreciation and amortization
(11,056
)
 
(8,614
)
 
28.3

General and administrative (1)
(3,444
)
 
(2,350
)
 
46.6

Loss from vessel operations
(15,906
)
 
(6,060
)
 
162.5

Calendar-Ship-Days
 
 
 
 

Owned Vessels
2,014

 
1,663

 
21.1

Chartered-in Vessels
52

 
—

 
100.0

Total
2,066

 
1,663

 
24.2

(1)
Includes direct general and administrative expenses and indirect general and administrative expenses (allocated to the towage segment based on estimated use of corporate resources). See the discussion under “Other Operating Results” below.
The average number of our owned towing and offshore installation vessels increased for the three and nine months ended September 30, 2017 , compared to the same periods last year, due to the delivery of two newbuilding vessels, the ALP Striker and the ALP Defender, in September 2016 and June 2017, respectively.

The average number of our chartered-in towing and offshore installation vessels increased for the nine months ended September 30, 2017 , compared to the same period last year, due to the in-chartering of two vessels for a project completed during the nine months ended September 30, 2017 .

Net revenues. Net revenues increased for the three months ended September 30, 2017 , compared to the same period last year, due to higher utilization and average day rates for the towage fleet, mainly from the ALP Defender towing the Randgrid FSO from Singapore to Norway during the three months ended September 30, 2017 , and an increase in the owned and chartered-in fleet size.

Net revenues decreased for the nine months ended September 30, 2017 , compared to the same period last year, mainly due to lower utilization for the towage fleet as a result of lower demand in the offshore market, partially offset by an increase in the owned and chartered-in fleet size.

Vessel operating expenses . Vessel operating expenses increased for the three and nine months ended September 30, 2017 , compared to the same periods last year, mainly due to the delivery of the ALP Striker and ALP Defender in September 2016 and June 2017, respectively.

Time-charter hire expenses. Time-charter hire expenses increased for the nine months ended September 30, 2017 , compared to the same period last year, due to the in-chartering of two vessels in support of an FPSO installation project. The time-charter hire expenses were reimbursed by the customer and are included in revenues.

Depreciation and amortization expense. Depreciation and amortization expense increased for the three and nine months ended September 30, 2017 , compared to the same periods last year, due to the delivery of the ALP Striker in September 2016 and the ALP Defender in June 2017.


Page 35 of 50


Conventional Tanker Segment

As at September 30, 2017 , our conventional tanker fleet consisted of two in-chartered conventional tankers. One vessel is fixed on a two-year time-charter-out contract that commenced in March 2016 and the other vessel is trading in the spot conventional tanker market.

The following tables present our conventional tanker segment’s operating results for the three and nine months ended September 30, 2017 and 2016 , and compare its net revenues (which is a non-GAAP financial measure) for the three and nine months ended September 30, 2017 and 2016 , to revenues, the most directly comparable GAAP financial measure, for the same periods. The following tables also provide a summary of the changes in calendar-ship-days by owned and chartered-in vessels for the conventional tanker segment:
(in thousands of U.S. Dollars, except calendar-ship-days and percentages)
Three Months Ended September 30,
 
% Change
2017
 
2016
 
Revenues
3,181

 
3,531

 
(9.9
)
Voyage expenses
(45
)
 
(61
)
 
(26.2
)
Net revenues
3,136

 
3,470

 
(9.6
)
Time-charter hire expenses
(4,262
)
 
(4,171
)
 
2.2

General and administrative (1)
(90
)
 
(90
)
 
—

Loss from vessel operations
(1,216
)
 
(791
)
 
53.7

Calendar-Ship-Days
 
 
 
 

Chartered-in Vessels
184

 
184

 
—

(in thousands of U.S. Dollars, except calendar-ship-days and percentages)
Nine Months Ended September 30,
 
% Change
2017
 
2016
 
Revenues
10,482

 
16,999

 
(38.3
)
Voyage expenses
(111
)
 
(1,348
)
 
(91.8
)
Net revenues
10,371

 
15,651

 
(33.7
)
Vessel operating recoveries (expenses)
10

 
(1,439
)
 
(100.7
)
Time-charter hire expenses
(12,515
)
 
(8,747
)
 
43.1

General and administrative (1)
(270
)
 
(262
)
 
3.1

(Loss) income from vessel operations
(2,404
)
 
5,203

 
(146.2
)
Calendar-Ship-Days
 
 
 
 
 
Owned Vessels
—

 
160

 
(100.0
)
Chartered-in Vessels
546

 
388

 
40.7

Total
546

 
548

 
(0.4
)
(1)
Includes direct general and administrative expenses and indirect general and administrative expenses (allocated to the conventional tanker segment based on estimated use of corporate resources). See the discussion under “Other Operating Results” below.
The average number of our owned conventional tankers decreased to nil for the nine months ended September 30, 2017 , compared to the same period last year, due to the sales of the Kilimanjaro Spirit and the Fuji Spirit conventional tankers in March 2016, which were subsequently renamed Blue Pride and Blue Power , respectively, by the new owners.
The average number of our chartered-in conventional tankers increased for the nine months ended September 30, 2017 , compared to the same period last year, due to the in-chartering of the Blue Pride and Blue Power conventional tankers from March 2016 for three years.

Net Revenues. Net revenues decreased for the nine months ended September 30, 2017 , compared to the same period last year, mainly due to a $4.0 million termination fee received from Teekay Corporation for the early termination of the time-charter-out contract of the Kilimanjaro Spirit in March 2016.

Vessel operating expenses. Vessel operating expenses decreased for the nine months ended September 30, 2017 , compared to the same period last year, due to the sale of our two remaining owned conventional tankers in March 2016.

Time-charter hire expenses. Time-charter hire expenses increased for the nine months ended September 30, 2017 , compared to the same period last year, due to the in-chartering of the Blue Pride and the Blue Power conventional tankers from March 2016.
Other Operating Results
General and Administrative Expenses. General and administrative expenses were $19.9 million and $47.9 million , respectively, for the three and nine months ended September 30, 2017 , compared to $15.2 million and $43.5 million , respectively, for the same periods last year. General and administrative expenses increased mainly due to costs associated with the Brookfield Transaction and higher business development fees relating

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to our FPSO segment, partially offset by lower management fees relating to the FPSO and shuttle tanker segments primarily from our cost saving initiatives and lower expenses as a result of the redelivery and lay-up of the Petrojarl Varg FPSO unit in August 2016.
Interest Expense. Interest expense increased to $38.8 million and $111.5 million for the three and nine months ended September 30, 2017 from $35.4 million and $104.8 million for the same periods last year, primarily due to:
•
increases of $3.8 million and $7.9 million, respectively, for the three and nine months ended September 30, 2017, due to an increase in the weighted-average interest rates on our long-term debt;
•
an increase of $3.9 million for the nine months ended September 30, 2017, due to non-cash guarantee fees to Teekay Corporation associated with the long-term financing for the East Coast of Canada shuttle tanker newbuildings and certain of our interest rate swaps and cross currency swaps commencing during the second quarter of 2016, which guarantees were eliminated as part of the Brookfield Transaction; and
•
an increase of $2.3 million for the nine months ended September 30, 2017, due to the ineffective portion of the unrealized loss, and the reclassification of the realized loss from accumulated other comprehensive loss to interest expense, on interest rate swaps designated as cash flow hedges relating to the towage segment;
partially offset by
•
a decrease of $4.8 million for the nine months ended September 30, 2017, due to interest expense incurred relating to costs associated with the delay in the delivery of a UMS newbuilding in the first and second quarters of 2016 up until its construction contract cancellation in late-June 2016; and
•
decreases of $0.8 million and $3.0 million, respectively, for the three and nine months ended September 30, 2017, due to decreases in our total debt balances.

Realized and Unrealized (Loss) Gain on Derivatives . Net realized and unrealized losses on non-designated derivative instruments were $19.2 million and $47.6 million , respectively, for the three and nine months ended September 30, 2017 , compared to a gain of $20.2 million and a loss of $102.3 million for the same periods last year.

During the three months ended September 30, 2017 and 2016 , we had interest rate swap agreements with aggregate average outstanding notional amounts of approximately $1.8 billion and $2.2 billion, respectively, and average fixed rates of approximately 3.5% and 3.4%, respectively. Short-term variable benchmark interest rates during the three months ended September 30, 2017 and 2016 were 1.5% or less and 1.2% or less, respectively; we incurred related realized losses of $49.0 million (which includes a $38.0 million realized loss relating to the partial settlement of certain interest rate swaps) and $13.5 million during the three months ended September 30, 2017 and 2016 , respectively, under the interest rate swap agreements.

During the nine months ended September 30, 2017 and 2016 , we had interest rate swap agreements with aggregate average outstanding notional amounts of approximately $1.8 billion and $2.2 billion, respectively, and average fixed rates of approximately 3.4% and 3.2%, respectively. Short-term variable benchmark interest rates during the nine months ended September 30, 2017 and 2016 were 1.5% or less and 1.2% or less, respectively; we incurred realized losses of $69.9 million (which includes a $38.0 million realized loss relating to the partial settlement of certain interest rate swaps) and $41.0 million during the nine months ended September 30, 2017 and 2016 , respectively, under the interest rate swap agreements.

During the three months ended September 30, 2017 and 2016 , we were committed to foreign currency forward contracts to economically hedge portions of our forecasted expenditures denominated in Norwegian Kroner, Euro and the Singapore Dollar, and we recognized a related realized gain of $1.0 million and a related realized loss of $1.8 million during the three months ended September 30, 2017 and 2016 , respectively.

During the nine months ended September 30, 2017 and 2016 , we were committed to foreign currency forward contracts to economically hedge portions of our forecasted expenditures denominated in Norwegian Kroner, Euro and the Singapore Dollar, and we recognized a related realized gain of $0.6 million and a related realized loss of $6.4 million during the nine months ended September 30, 2017 and 2016 , respectively.

The $39.5 million increase in net realized and unrealized loss on non-designated derivatives for the three months ended September 30, 2017 compared to the same period last year was primarily due to; a $38.0 million increase in the realized loss relating to partial settlement on certain interest rate swaps during the three months ended September 30, 2017; a $3.4 million decrease in the unrealized gain on interest rate swaps due to long-term LIBOR benchmark rates increasing less as at September 30, 2017 relative to June 30, 2017, compared to as at September 30, 2016 relative to June 30, 2016; and a $3.4 million decrease in the unrealized gain on foreign exchange forward contracts mainly due to a decrease in the aggregate average outstanding notional balance of foreign exchange forward contract agreements as at September 30, 2017 compared to as at September 30, 2016, partially offset by a $2.8 million increase in the realized gain on foreign exchange forward contracts due to an increase in the transfer of previously recognized unrealized gain to realized gain during the third quarter of 2017 related to actual cash settlements; a decrease in the realized loss on interest rate swaps of $2.5 million due to an increase in current LIBOR during the third quarter of 2017; and a decrease in the aggregate average outstanding notional balance of interest rate swap agreements compared to the same period last year.

The $54.7 million decrease in net realized and unrealized loss on non-designated derivatives for the nine months ended September 30, 2017 compared to the same period last year was primarily due to; an $86.9 million decrease in the unrealized loss on interest rate swaps relating to long-term LIBOR benchmark rates increasing as at September 30, 2017 relative to December 31, 2016, compared to decreasing as at September 30, 2016 relative to December 31, 2015; a decrease in the realized loss on interest rate swaps of $9.0 million due to an increase in current LIBOR during the nine months ended September 30, 2017; a decrease in the aggregate average outstanding notional balance of interest rate swap agreements, compared to the same period last year; and a $7.0 million decrease in the realized loss on foreign currency forward contracts due to a decrease in the transfer of previously unrealized loss to realized loss during the nine months ended September 30, 2017 related to actual cash settlements; partially offset by a; $38.0 million increase in the realized loss relating to partial settlement on certain interest rate swaps during the three months ended September 30, 2017; a $10.3 million decrease in the unrealized gain on foreign currency forward contracts due to a decrease in the aggregate average notional balance outstanding of foreign currency forward contract agreements as at September 30, 2017 compared to

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as at September 30, 2016; and from the U.S. Dollar weakening less against the Norwegian Kroner as at September 30, 2017 relative to December 31, 2016, compared to as at September 30, 2016 relative to December 31, 2015.

Foreign Currency Exchange (Loss) Gain . Foreign currency exchange (loss) gain was ($6.5) million and ($13.3) million for the three and nine months ended September 30, 2017 , respectively, compared to $0.8 million and ($15.1) million for the same periods last year. Our foreign currency exchange losses and gains are due primarily to the relevant period-end revaluation of NOK-denominated monetary assets and liabilities for financial reporting purposes and the realized and unrealized gains and losses on our cross currency swaps. Gains on NOK-denominated net monetary liabilities reflect a stronger U.S. Dollar against the Norwegian Kroner on the date of revaluation or settlement compared to the rate in effect at the beginning of the period. Losses on NOK-denominated net monetary liabilities reflect a weaker U.S. Dollar against the Norwegian Kroner on the date of revaluation or settlement compared to the rate in effect at the beginning of the period.

For the three and nine months ended September 30, 2017 , foreign currency exchange losses and gains includes realized losses of $43.0 million and $49.5 million, respectively ( 2016 - losses of $3.3 million and $41.3 million, respectively) and unrealized gains of $54.5 million and $67.0 million, respectively ( 2016 - gains of $19.8 million and $58.3 million, respectively) on the cross currency swaps. The realized losses and the unrealized gains relating to the cross currency swaps during the three and nine months ended September 30, 2017, were impacted by the partial settlement of certain cross currency swaps related to the repurchase of certain of our NOK bonds in October 2017. There were additional unrealized losses of $12.8 million and $21.9 million, respectively, for the three and nine months ended September 30, 2017 ( 2016 - losses of $13.6 million and $61.8 million, respectively), on the revaluation of the NOK-denominated debt.

During the nine months ended September 30, 2016, NOK 500 million of our senior unsecured bonds matured and we recorded a $32.6 million realized foreign currency exchange gain on the repayment of the bonds and a $32.6 million realized loss on the maturity of its associated cross currency swap. There were additional realized and unrealized foreign exchange losses of $5.2 million and $8.9 million, respectively, for the three and nine months ended September 30, 2017 ( 2016 - losses of $2.1 million and $3.0 million, respectively) on all other monetary assets and liabilities.

Other Income (Expense) - Net. Other income (expense) - net was $15.2 million and $14.3 million for the three and nine months ended September 30, 2017, compared to ($0.2) million and ($21.5) million for the same periods last year. The increase in other income for the three and nine months ended September 30, 2017 , compared to the same periods last year, was mainly due to a partial reversal of a previously accrued contingent liability associated with the estimated damages from the cancellation of the UMS construction contracts partially offset by a settlement entered into between CeFront Technology AS (or CeFront ) and certain subsidiaries of ours in September 2017 to settle certain outstanding claims against us (refer to Item 1 - Financial Statements: Note 9c Commitments and Contingencies). The increase in other income for the nine months ended September 30, 2017, compared to the same period last year, also includes the cancellation of the UMS construction contracts, recorded during the nine months ended September 30, 2016 resulting in the recognition of an expense relating to estimated damages of $38.0 million, partially offset by a $14.5 million gain associated with the extinguishment of contingent liabilities relating to the UMS newbuildings and a $2.1 million gain relating to the reassessment of a contingent liability fair value associated with the Arendal Spirit UMS.

Income Tax (Expense) Recovery . Income tax (expense) recovery was ($2.3) million and ($4.1) million , respectively, for the three and nine months ended September 30, 2017 , compared to ($1.6) million and $2.7 million , respectively, for the same periods last year.

The increase in income tax expense for the three and nine months ended September 30, 2017 , compared to the same periods last year, was primarily due to increases in deferred tax expense during the three and nine months ended September 30, 2017 due to changes in our future income assumptions of our FPSO units given the sustained low oil price, partially offset by a decrease in current tax expense mainly due to a withholding tax accrual recorded during the three and nine months ended September 30, 2016 due to an estimated tax liability relating to our Singapore entities.
Liquidity and Capital Resources

Liquidity and Cash Needs

Our business model is to employ our vessels on fixed-rate contracts with major oil companies, typically with terms between three to ten years. In September 2017, we finalized the previously-announced Brookfield Transaction, which has strengthened our capital structure and allows us to fully fund our existing growth projects, excluding our two Suezmax DP2 shuttle tanker newbuildings ordered in July 2017. As part of the Brookfield Transaction and effective for the distributions paid during the third quarter of 2017, we reduced our quarterly cash distributions to $0.01 per common unit in order to reinvest cash in the business and further strengthen our balance sheet. We believe that it is in the best interests of our common unitholders to conserve more of our internally generated cash flows to reduce debt levels. Our near-to-medium term business strategy is primarily focused on implementing existing growth projects, repaying or refinancing scheduled debt obligations and pursuing strategic growth projects. Despite significant weakness in the global energy and capital markets, our operating cash flows remain largely stable and growing, supported by a large and well-diversified portfolio of fee-based contracts with high quality counterparties.

As at September 30, 2017 , our total consolidated cash and cash equivalents were $416.3 million , compared to $227.4 million at December 31, 2016 . Our total consolidated liquidity, including cash, cash equivalents and undrawn revolving credit facilities was $416.3 million as at September 30, 2017 , compared to $260.7 million as at December 31, 2016 . The increase in liquidity was primarily due to: the net proceeds received from Brookfield and Teekay Corporation as part of the Brookfield Transaction in September 2017; the proceeds from long-term debt; a decrease in cash collateral on cross currency swaps; and the release of the Petrojarl Knarr performance bond; and net operating cash flows, partially offset by our repurchase of Series C-1 and Series D convertible preferred units as part of the Brookfield Transaction; the scheduled repayments of outstanding term loans and revolving credit facilities; cash distributions paid by us; and payments for committed newbuildings and conversions (please read Item 1 - Financial Statements: Note 9 . Commitments and Contingencies).

As at September 30, 2017 , we had a working capital deficit of $538.9 million , compared to a working capital deficit of $398.0 million at December 31, 2016 . Accounts receivable increased mainly due to the timing of collections. Assets held for sale increased due to the Navion Marita being classified as held for sale as at September 30, 2017. Accounts payable and accrued liabilities increased mainly due to timing of expenses related to our

Page 38 of 50


committed newbuildings and conversions and expenses related to the investment from Brookfield. The net due to affiliates balance increased mainly due to the timing of settlements. The current portion of long-term debt increased mainly due to; the reclassification of the term loan outstanding for the Arendal Spirit UMS due to the termination of its charter contract during the second quarter of 2017; the reclassification to current liabilities of two term loans and one revolver facility with maturity dates prior to September 30, 2018; and the drawdown of a $50 million short-term debt facility during the second quarter of 2017; partially offset by the maturity and repayment of one revolving credit facility during the nine months ended September 30, 2017 .

Our primary liquidity needs for the remainder of 2017 and 2018 are to pay existing, committed capital expenditures, to make scheduled repayments of debt, to pay debt service costs, quarterly distributions on outstanding common and preferred units, operating expenses and dry docking expenditures, to fund general working capital requirements, to settle claims and potential claims against us and manage our working capital deficit. We expect that our primary sources of funds for the remainder of 2017 and 2018 will be bank debt, bond issuances and cash flows from operations. As at September 30, 2017 , our total future contractual obligations for vessels and newbuildings and committed conversions, including our 50% interest in the Libra FPSO conversion, were estimated to be $736.3 million , consisting of $357.1 million (remainder of 2017) and $151.9 million (2018), $136.3 million (2019) and $91.0 million (2020). Of this $736 million of future contractual obligations, we have pre-arranged financing in place of $243 million and a further $24 million held in escrow as funding for the Petrojarl I FPSO project, with a remaining requirement of $469.0 million which will be funded from the net proceeds of the equity and bond issuances as part of the Brookfield Transaction and expected new debt facilities, including long-term debt financing related to the two shuttle tanker newbuildings ordered in July 2017.

Primarily as a result of the working capital deficit and committed capital expenditures, over the one-year period following the issuance of our September 30, 2017 unaudited consolidated financial statements we will need to obtain additional sources of financing, in addition to amounts generated from operations, to meet our minimum liquidity requirements under our financial covenants. The proceeds from the Brookfield Transaction have strengthened our capital structure and increased our liquidity. Additional potential sources of financing include raising additional capital through equity issuances, refinancing debt facilities that mature during the one-year period, increasing amounts available under existing debt facilities and entering into new debt facilities, negotiating extensions or redeployments of existing assets and the sale of partial interests of assets. We are actively pursuing the funding alternatives described above, which we consider probable of completion based on our history of being able to raise equity, refinance loan facilities for similar types of vessels, and indicative offers received from potential investors for partial interests in certain assets. We are in various stages of completion on these matters. Please refer to Item 1 - Financial Statements: Note 9l - Commitments and Contingencies.
Our revolving credit facilities and term loans are described in Item 1 - Financial Statements: Note 5 . Long-Term Debt. They contain covenants and other restrictions typical of debt financing secured by vessels that restrict the ship-owning subsidiaries from incurring or guaranteeing indebtedness; changing ownership or structure, including mergers, consolidations, liquidations and dissolutions; making dividends or distributions if we are in default; making capital expenditures in excess of specified levels; making certain negative pledges and granting certain liens; selling, transferring, assigning or conveying assets; making certain loans and investments; or entering into a new line of business. Certain of our revolving credit facilities and term loans include financial covenants. Should we not meet these financial covenants, the lender may accelerate the repayment of the revolving credit facilities and term loans, thus having an impact on our short-term liquidity requirements. We have two revolving credit facilities and six term loans that require us to maintain vessel values to drawn principal balance ratios of a minimum range of 113% to 125% . Such requirement is assessed either on a semi-annual or annual basis, with reference to vessel valuations compiled by one or more agreed upon third parties. Should the ratio drop below the required amount, the lender may request us to either prepay a portion of the loan in the amount of the shortfall or provide additional collateral in the amount of the shortfall, at our option. As at September 30, 2017 , these ratios were estimated to range from 117% to 382% and exceeded the minimum ratios required. The vessel values used in calculating these ratios are appraised values provided by third parties where available, or are prepared by us based on second-hand sale and purchase market data. Changes in the shuttle tanker, towing and offshore installation, UMS, FPSO or FSO markets could negatively affect these ratios. The lenders for our loan relating to the Petrojarl I FPSO unit agreed to extend the availability date of the loan for successive periods up to December 15, 2017, as the loan was subject to a mandatory prepayment provision, initially in early October 2016, if the unit was not accepted at that time by QGEP. These interim extensions provide additional time for us to negotiate a revised schedule for the delivery of the unit and thereafter, amend the loan facility accordingly to reflect the revised delivery schedule. As at September 30, 2017 , we had $24.3 million held in escrow to fund the final upgrade costs. As at September 30, 2017 , we and our affiliates were in compliance with all covenants relating to our revolving credit facilities and term loans.

The passage of any climate control legislation or other regulatory initiatives that restrict emissions of greenhouse gases could have a significant financial and operational impact on our business, which we cannot predict with certainty at this time. Such regulatory measures could increase our costs related to operating and maintaining our vessels and require us to install new emission controls, acquire allowances or pay taxes related to our greenhouse gas emissions, or administer and manage a greenhouse gas emissions program. In addition, increased regulation of greenhouse gases may, in the long term, lead to reduced demand for oil and reduced demand for our services.
Cash Flows. The following table summarizes our sources and uses of cash for the periods presented:
(in thousands of U.S. Dollars)
Nine months ended September 30,
2017
 
2016
Net cash flow from operating activities
192,657

 
274,160

Net cash flow from (used for) financing activities
274,031

 
(72,508
)
Net cash flow used for investing activities
(277,720
)
 
(237,253
)

Operating Cash Flows.

Net cash flow from operating activities decreased to $192.7 million for the nine months ended September 30, 2017 , from $274.2 million for the same period in 2016 , primarily due to; the redelivery of the Petrojarl Varg FPSO unit; the redelivery of one shuttle tanker and one FSO unit as they completed their time-charter-out agreements during 2016; the charterer of the Arendal Spirit UMS not paying charter hire payments since early-November 2016 and the subsequent contract termination in late-April 2017; lower average rates and lower utilization from our towage fleet; the

Page 39 of 50


sale of two conventional tankers during 2016 which were subsequently chartered-in by us; and an increase in the realized loss on derivative instruments; partially offset by higher average rates and higher utilization from our shuttle tanker fleet; lower repairs and maintenance expenses on our FPSO units and shuttle tanker fleet; and the commencement of time-charter-out contracts for two shuttle tankers which were previously operating on bareboat contracts.

The increase in non-cash working capital items for the nine months ended September 30, 2017 compared to the same period last year is primarily due to the timing of payments made to vendors and settlements of intercompany balances with related parties, partially offset by the timing of payments received from customers.

For a further discussion of changes in income statement items described above for our six reportable segments, please read “Results of Operations”.

Financing Cash Flows .

We use our revolving credit facilities to finance capital expenditures and for general partnership purposes. Occasionally, we will do this until longer-term financing is obtained, at which time we typically use all or a portion of the proceeds from the longer-term financings to prepay outstanding amounts under the revolving credit facilities. Our proceeds from long-term debt, net of debt issuance costs and prepayments of long-term debt, were $276.6 million for the nine months ended September 30, 2017 , and $75.1 million for the same period in 2016 .

Net proceeds from the issuance of long-term debt for the nine months ended September 30, 2017 mainly related to the refinancing of two debt facilities, the drawdown of four existing debt facilities and two existing revolving debt facilities, and a $50 million short-term debt facility. These proceeds were used primarily for the final bullet payments on existing debt facilities, to fund the installment payments on the three shuttle tanker newbuildings being constructed for the East Coast of Canada contract, the Gina Krog FSO conversion, the Petrojarl I FPSO unit upgrades, the final installment on the ALP Defender towing and offshore installation vessels and to fund working capital requirements.
 
Net proceeds from the issuance of long-term debt for the nine months ended September 30, 2016 mainly related to the drawdowns of one new term loan, three existing term loans, a new $35 million tranche added to an existing debt facility secured by two shuttle tankers and one existing revolving debt facility, partially offset by the prepayments of three revolving debt facilities. These proceeds were used primarily to fund the installment payments on the four towing and offshore installation newbuildings, three shuttle tanker newbuildings being constructed for the East Coast of Canada contract, upgrades on the Petrojarl I FPSO unit, the Gina Krog FSO conversion and to fund working capital requirements.

We actively manage the maturity profile of our outstanding financing arrangements. Our scheduled repayments of long-term debt was $419.1 million for the nine months ended September 30, 2017 , an increase from $314.7 million for the same period in 2016 . Repayments for the nine months ended September 30, 2017 reflect the maturity of one revolving debt facility, the refinancing of three debt facilities and repayments on two existing facilities and a debt facility relating to the Petrojarl I FPSO. During the nine months ended September 30, 2016 , the repayments reflect the maturity of a NOK 500 million tranche of our senior unsecured bonds in January 2016, the maturity of an existing revolving debt facility and the repayment of a portion of an existing revolving debt facility relating to the Petrojarl Varg FPSO unit.

On September 25, 2017, as part of the Brookfield Transaction, we issued 244.0 million common units and 62.4 million common unit warrants to Brookfield for gross proceeds of $610.0 million . In addition, we issued 12.0 million common units and 3.1 million common unit warrants to Teekay Corporation for gross proceeds of $30.0 million . We used a portion of the proceeds to repurchase and subsequently cancel all outstanding Series C-1 and D preferred units and we will use the remainder for general partnership purposes including the funding of existing newbuilding installments and capital conversion projects.

During the three months ended September 30, 2016, we issued 3.7 million common units under our continuous offering program for net proceeds of approximately $21.4 million, including the general partner’s 2% proportionate capital contribution of $0.4 million and net of approximately $0.3 million of offering costs. The net proceeds from the issuance of these common units were used for general partnership purposes.

In June 2016, we issued 22.0 million common units in a private placement for net proceeds of approximately $99.5 million, including the general
partner's 2% proportionate capital contribution. We used the proceeds for general partnership purposes, including the funding of existing newbuilding installments and capital conversion projects.

In June 2016, we issued 4,000,000 10.50% Series D Preferred Units to a group of investors for net proceeds of approximately $97.2 million. These investors also received 4,500,000 common unit warrants with an exercise price equal to the closing price of our common units on June 16, 2016, or $4.55 per unit and 2,250,000 common unit warrants with an exercise price at a 33% premium to the closing price of our common units on June 16, 2016, or $6.05 per unit which was amended to $4.55 per unit in September 2017 as part of the Brookfield Transaction. We used the proceeds for general partnership purposes including the funding of existing newbuilding installments and capital conversion projects.

Restricted Cash decreased by $87.4 million for the nine months ended September 30, 2017 relates to a decrease in collateral on our cross currency swaps, the release of collateral of $35.7 million held for the Petrojarl I FPSO unit upgrade expenses and the release of $20.0 million of cash held for a performance bond relating to the Petrojarl Knarr FPSO. The decrease in restricted cash of $13.9 million for the nine months ended September 30, 2016 relates to a decrease in collateral on our cross currency swaps.

The decrease in distributions to our common and preferred unitholders and our general partner was mainly due to the issuance of 3.7 million common units for a total value of $19.4 million, as a payment-in-kind for the distributions on our Series C-1 Preferred Units and our common units and general partner interest held by subsidiaries of Teekay Corporation for the distributions paid during for the nine months ended September 30, 2017 , and a decrease in the quarterly distribution paid on our common units effective from the third quarter of 2017 to $0.01 per common unit compared to $0.11 per common unit paid during the first two quarters of 2017, partially offset by an increase in distributions due to the issuance of 38.1 million common units, excluding common units issued to subsidiaries of Teekay Corporation, during 2016.


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Subsequent to September 30, 2017 , distributions of $4.1 million on our outstanding common units and general partner interest related to the third quarter of 2017 were declared and paid in cash on November 10, 2017. Subsequent to September 30, 2017 , distributions of $5.4 million for our Series A and Series B Preferred Units relating to the third quarter of 2017 were declared and paid in cash on November 15, 2017.

Investing Cash Flows.

During the nine months ended September 30, 2017 , net cash flow used for investing activities was $277.7 million , primarily relating to $257.9 million of payments for vessels and equipment (including conversion costs on the Gina Krog FSO conversion, upgrade costs on the Petrojarl I FPSO unit and installment payments on the newbuilding towing and offshore installation vessels and the East Coast of Canada newbuilding shuttle tankers) and $24.1 million of investments in our joint ventures, partially offset by scheduled lease payments received of $4.3 million from leasing our direct financing lease assets.

During the nine months ended September 30, 2016 , net cash flow used for investing activities was $237.3 million , primarily relating to $238.3 million of expenditures for vessels and equipment (including conversion costs on the Gina Krog FSO conversion, upgrade costs on the Petrojarl I FPSO unit and installment payments on the newbuilding towing and offshore installation vessels and the East Coast of Canada newbuilding shuttle tankers), a $52.9 million investment in our joint ventures (including $56.2 million of cash investments partially offset by a $3.3 million construction credit received) and $1.5 million of net investments in direct financing lease assets (including $5.9 million of investments in direct financing lease assets partially offset by $4.4 million received from leasing our direct financing lease assets), partially offset by proceeds of $55.5 million from the sale of the Navion Torinita shuttle tanker and the Fuji Spirit and Kilimanjaro Spirit conventional tankers.
Contractual Obligations and Contingencies
The following table summarizes our long-term contractual obligations as at September 30, 2017 :




Balance














of









Beyond


Total

2017

2018

2019

2020

2021

2021

 
(in millions of U.S. Dollars)
U.S. Dollar-Denominated Obligations





















Bond repayments (1)

300.0


—


—


300.0


—


—


—

Secured debt - scheduled repayments (1)

1,935.2


135.9


402.5


330.7


310.9


285.5


469.7

Secured debt - repayments on maturity (1)

608.9


85.0


212.9


25.0


40.0


19.4


226.6

Subordinated promissory note - repayment on maturity (2)
 
200.0

 
—

 
—

 
—

 
—

 
—

 
200.0

Chartered-in vessels (operating leases)

123.4


22.6


51.5


33.9


15.4


—


—

Acquisition of vessels and newbuildings and committed conversion costs (3)

736.3


357.1


151.9


136.3


91.0


—


—

Norwegian Kroner-Denominated Obligations





















Bond repayments (4)

278.8


—


—


125.6


—


—


153.2

Total contractual obligations

4,182.6


600.6


818.8


951.5


457.3


304.9


1,049.5

(1)
Excludes expected interest payments of $26.1 million (remainder of 2017 ), $86.7 million ( 2018 ), $60.9 million ( 2019 ), $40.1 million ( 2020 ), $29.4 million ( 2021 ) and $37.5 million (beyond 2021 ). Expected interest payments are based on existing interest rates (fixed-rate loans) and LIBOR plus margins which ranged between 0.30% and 4.75% (variable-rate loans) as at September 30, 2017 . The expected interest payments do not reflect the effect of related interest rate swaps that we have used as an economic hedge of certain of our variable rate debt.
(2)
Consists of the repayment of the Brookfield Promissory Note. The Brookfield Promissory Note bears interest at an annual rate of 10.0% on the outstanding principal balance, one half of which will be paid in cash, and the other half of which will be paid in common units or from the proceeds of the sale of equity securities (see Item 1 - Financial Statements: Note 6h ). Excludes maximum expected interest payments of $5.1 million (remainder of 2017 ) and $20.0 million ( 2018 , 2019 , 2020 and 2021 ) until repayment of the loan in full in 2022.
(3)
Consists of the estimated remaining payments for the acquisition of two towing and offshore installation newbuildings, five shuttle tanker newbuildings, our 50% interest in an FPSO conversion for the Libra field, upgrades for the Petrojarl I FPSO unit, and the FSO conversion for the Randgrid shuttle tanker. Please read Item 1 - Financial Statements: Note 9a , 9b , 9d , 9e , 9f and 9k - Commitments and Contingencies. We have pre-arranged undrawn financing of approximately $243.0 million relating to our capital expenditure commitments and $24.3 million held in escrow as funding for the Petrojarl I FPSO project.
(4)
NOK-denominated bond repayments are based on the foreign exchange rate as at September 30, 2017 and exclude the impact of the cross currency swaps. Excludes expected interest payments of $4.1 million (remainder of 2017 ), $16.2 million ( 2018 ) and $10.4 million ( 2019 ) $9.9 million ( 2020 ), $9.9 million ( 2021 ), $9.8 million (beyond 2021 ). Expected interest payments are based on NIBOR, plus margins which ranged between 4.25% and 5.75% as at September 30, 2017 . The expected interest payments do not reflect the effect of related cross currency swaps that we have used as an economic hedge of certain of our NOK-denominated obligations.
Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have, a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting Estimates
We prepare our consolidated financial statements in accordance with GAAP, which requires us to make estimates in the application of our accounting policies based on our best assumptions, judgments and opinions. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our consolidated financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates and such differences could be material. Accounting estimates and assumptions discussed in this section are those that we consider to be the most critical

Page 41 of 50


to an understanding of our financial statements, because they inherently involve significant judgments and uncertainties. For a further description of our material accounting policies, please read Part I, Item 18 - Financial Statements: Note 1 - Summary of Significant Accounting Policies in our Annual Report on Form 20-F for the year ended December 31, 2016 .
At September 30, 2017 , the shuttle tanker and towage segments had goodwill attributable to them. Based on conditions that existed at September 30, 2017 , we do not believe that there is a reasonable possibility that the goodwill attributable to these reporting units might be impaired for the remainder of the year. However, certain factors that impact this assessment are inherently difficult to forecast and, as such, we cannot provide any assurance that an impairment will or will not occur in the future. An assessment for impairment involves a number of assumptions and estimates that are based on factors that are beyond our control. These are described in our Annual Report on Form 20-F for the year ended December 31, 2016 .
FORWARD-LOOKING STATEMENTS
This Report on Form 6-K contains certain forward-looking statements (as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended) concerning future events and our operations, performance and financial condition, including, in particular, statements regarding:

•
our future growth prospects, business strategy and other plans and objectives for future operations;
•
the Brookfield Transaction and the expected effects and benefits of the completion of the Brookfield Transaction on our operations and financial condition, including expectations regarding our enhanced liquidity as a result of the transactions;
•
our liquidity needs and meeting our going concern requirements, including our working capital deficit, anticipated funds and sources of financing for liquidity needs and the sufficiency of cash flows, and our estimation that we will have sufficient liquidity for at least the next one-year period;
•
our ability to refinance existing debt obligations, to raise additional debt, to fund capital expenditures and negotiate extensions or redeployments of existing assets;
•
the negative impact of low oil prices on the likelihood of certain contract extensions;
•
the outcome and cost of claims and potential claims against us, including claims and potential claims by Sevan and COSCO relating to Logitel and cancellation of the UMS newbuildings, Sembcorp associated with the Randgrid FSO, Damen associated with the Petrojarl I FPSO, Petrobras associated with the Piranema Spirit FPSO and the Arendal Spirit UMS, Shell associated with the Petrojarl Knarr FPSO and Transocean associated with the ALP Forward ;
•
the outcome of the negotiations for the lease and operate contract for the Petrojarl Varg FPSO unit;
•
offers of shuttle tankers, FSO units, or FPSO units and related contracts from Teekay Corporation and our accepting such offers;
•
acquisitions from third parties and obtaining offshore projects, that we or Teekay Corporation bid on or may be awarded;
•
certainty of completion, estimated delivery and completion dates, commencement dates of charters, intended financing and estimated costs for newbuildings, acquisitions, conversions and upgrades, including the towing and offshore installation vessel newbuildings, conversion of the Libra FPSO unit, the upgrade of the Petrojarl I FPSO unit and shuttle tanker newbuildings;
•
the ability of the Libra Joint Venture to obtain cross default waivers from the facility lenders associated with the Libra FPSO conversion;
•
our ability to recover the lower day rate on the Petrojarl I FPSO unit under the amended variable rate;
•
the expected employment of the newbuilding shuttle tankers under our agreement with Statoil and the expected required capacity in our CoA fleet in the North Sea;
•
expected employment and trading of older shuttle tankers;
•
payment of additional contingent consideration for our acquisitions of ALP;
•
the expectations as to the chartering of unchartered vessels, including the towage newbuildings and the HiLoad DP unit;
•
our ability to maximize the use of our vessels, including the re-deployment or disposition of vessels no longer under long-term time charter contracts;
•
timing of settlement of amounts due to and from affiliates;
•
the future valuation of goodwill;
•
our compliance with covenants under our credit facilities;
•
the ability of the counterparties for our derivative contracts to fulfill their contractual obligations;
•
our hedging activities relating to foreign exchange, interest rate and spot market risks;
•
our exposure to foreign currency fluctuations, particularly in Norwegian Kroner;
•
the completion of our NOK bond refinancing and our expected uses of proceeds from equity and debt issuances;
•
increasing the efficiency of our business and redeploying vessels as charters expire or terminate; and
•
our ability to pay distributions on our common units and the amounts of such distributions.

Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain the words “believe”, “anticipate”, “expect”, “estimate”, “project”, “will be”, “will continue”, “will likely result”, “plan”,

Page 42 of 50


“intend” or words or phrases of similar meanings. These statements involve known and unknown risks and are based upon a number of assumptions and estimates that are inherently subject to significant uncertainties and contingencies, many of which are beyond our control. Actual results may differ materially from those expressed or implied by such forward-looking statements. Important factors that could cause actual results to differ materially include, but are not limited to: failure to realize the expected benefits of the Brookfield Transaction; failure to achieve or the delay in achieving expected benefits of our financing initiatives; changes in production of oil from offshore oil fields; changes in oil prices; changes in the demand for offshore oil transportation, production and storage services; greater or less than anticipated levels of vessel newbuilding orders or greater or less than anticipated rates of vessel scrapping; changes in trading patterns; changes in our expenses; the timing of implementation of new laws and regulations; potential inability to implement our growth strategy; competitive factors in the markets in which we operate; potential for early termination of long-term contracts and our potential inability to renew or replace long-term contracts; loss of any customer, time charter or vessel; shipyard production, conversion or vessel delivery delays; failure to obtain required approvals by the Conflicts Committee of our general partner to acquire other vessels or offshore projects from Teekay Corporation or third parties; our potential inability to fund our liquidity needs for the upcoming 12-month period, to raise financing to refinance debt maturities, fund existing projects or purchase additional vessels; our cash flows and levels of available cash, and the levels of cash reserves established by the Board of Directors of our general partners and required by any financing agreements; the effects of the issuance of additional common units and other equity securities on cash distributions; the outcome of discussions or legal action with COSCO, Sembcorp, Damen, Petrobras, Shell, Transocean and third parties relating to existing or potential claims; the outcome of discussions with QGEP and lenders of the Petrojarl I loan facility relating to the project delays in the delivery of the unit; our exposure to currency exchange rate fluctuations; changes to the amount or proportion of revenues and expenses denominated in foreign currencies; potential inability to obtain charters related to the towage newbuildings; our inability to negotiate acceptable terms with the lenders of the Arendal Spirit UMS debt facility; delays in the start-up of offshore oil fields related to the CoA contracts or the actual vessel equivalent requirements of new CoAs; and other risk factors detailed from time to time in our periodic reports filed with the SEC, including our Annual Report on Form 20-F for the year ended December 31, 2016. We do not intend to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with respect thereto or any change in events, conditions or circumstances on which any such statement is based.


Page 43 of 50


TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
SEPTEMBER 30, 2017
PART I – FINANCIAL INFORMATION
ITEM 3    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

We are exposed to the impact of interest rate changes, primarily through our floating-rate borrowings that require us to make interest payments based on LIBOR or NIBOR. Significant increases in interest rates could adversely affect operating margins, results of operations and our ability to service our debt. From time to time, we use interest rate swaps to reduce our exposure to market risk from changes in interest rates. The principal objective of these contracts is to minimize the risks and costs associated with our floating-rate debt.

We are exposed to credit loss in the event of non-performance by the counterparties to the interest rate swap agreements. In order to minimize counterparty risk, we only enter into derivative transactions with counterparties that are rated A- or better by Standard & Poor’s or A3 or better by Moody’s at the time of the transactions. In addition, to the extent possible and practical, interest rate swaps are entered into with different counterparties to reduce concentration risk.

The tables below provide information about financial instruments as at September 30, 2017 that are sensitive to changes in interest rates. For long-term debt, the table presents principal payments and related weighted-average interest rates by expected contractual maturity dates. For interest rate swaps, the table presents notional amounts and weighted-average interest rates by expected contractual maturity dates.

 
Expected Maturity Date


Balance













Fair




of









There-


Value




2017

2018

2019

2020

2021

after

Total

 Liability

Rate (1)

 
(in millions of U.S. dollars, except percentages)
Long-Term Debt:



















Variable Rate ($U.S.) (2)

215.4


590.1


328.4


325.1


275.4


580.5


2,314.9


2,195.4


3.5
%
Variable Rate (NOK) (3)

—


—


125.6


—


—


153.2


278.8


278.8


5.9
%
Fixed Rate Debt ($U.S.) (4)

5.5


25.3


327.3


25.8


29.5


315.8


729.2


784.9


6.6
%
Interest Rate Swaps:



























Contract Amount (5)(6)

47.8


218.4


95.4


449.3


326.7


542.7


1,680.3


185.2


3.5
%
Average Fixed Pay Rate (2)

2.5
%

1.7
%

2.8
%

2.9
%

4.2
%

4.6
%

3.5
%






________________
(1)
Rate relating to long-term debt refers to the weighted-average effective interest rate for our debt, including the margin paid on our floating-rate debt. Rate relating to interest rate swaps refers to the average fixed pay rate for interest rate swaps. The average fixed pay rate for interest rate swaps excludes the margin paid on the floating-rate debt, which as of September 30, 2017 ranged between 0.30% and 4.75% based on LIBOR and between 4.25% and 5.75% based on NIBOR.
(2)
Interest payments on U.S. Dollar-denominated debt and interest rate swaps are based on LIBOR.
(3)
Interest payments on NOK-denominated debt and interest rate swaps are based on NIBOR. Our NOK-denominated debt has been economically hedged with cross currency swaps, to swap all interest and principal payments at maturity into U.S. Dollars. Please see the table in the Foreign Currency Fluctuation Risk section below and read Item 1 – Financial Statements: Note 7 – Derivative Instruments and Hedging Activities.
(4)
Includes amounts related to the Brookfield Promissory Note.
(5)
The average variable receive rate for interest rate swaps is set quarterly at the 3-month LIBOR or semi-annually at the 6-month LIBOR.
(6)
Includes five interest rate swaps, which as at September 30, 2017 , had a total notional amount of $756.5 million and a total fair value liability of $163.5 million. These interest rate swaps include early termination provisions, which if exercised, would terminate these interest rate swaps in 2021.

Foreign Currency Fluctuation Risk
Our functional currency is the U.S. Dollar because most of our revenues and operating costs are in U.S. Dollars. We incur certain vessel operating expenses, general and administrative expenses and a portion of our capital conversion and upgrade projects in foreign currencies, the most significant of which is the Norwegian Kroner and, to a lesser extent, the Australian Dollar, Brazilian Real, British Pound, Euro and Singapore Dollar. There is a risk that currency fluctuations will have a negative effect on the value of our cash flows.
We may continue to seek to hedge certain of our currency fluctuation risks in the future. At September 30, 2017 , we were committed to the following foreign currency forward contracts:

Page 44 of 50


 
Contract Amount
in Foreign Currency
(thousands)
 
Average
Forward
Rate (1)
 
Expected Maturity
Fair Value / Carrying
Amount of Asset (Liability)
(in thousands of U.S.  Dollars)
Non-hedge
 
2017
 
2018
 
 
(in thousands of U.S. Dollars)
Norwegian Kroner
165,000

 
8.20

 
12,289

 
7,829

 
532

Euro
3,750

 
0.92

 
4,087

 
—

 
320

 
 
 
 
 
16,376

 
7,829

 
852

(1)
Average forward rate represents the contracted amount of foreign currency one U.S. Dollar will buy.
We incur interest expense on our NOK-denominated bonds. We have entered into cross currency swaps to economically hedge the foreign exchange risk on the principal and interest for these bonds. Please read Item 1 – Financial Statements: Note 7 . Derivative Instruments and Hedging Activities.
As at September 30, 2017 , we were committed to the following cross currency swaps:
Notional
Amount
NOK
(thousands)
 
Principal
Amount
USD
(thousands)
 
Floating Rate Receivable
 
Fixed Rate
Payable
 

Fair Value /
Asset (Liability)
(in thousands of U.S. Dollars)
 
Remaining
Term
(years)
 
 
Reference
Rate
 
Margin
 
 
 
 
 
224,970 (1)(2)(3)

 
38,002

 
NIBOR
 
5.75
%
 
8.84
%
 
(10,731
)
 
1.2
283,100 (1)(2)(4)

 
50,794

 
NIBOR
 
5.75
%
 
7.58
%
 
(16,402
)
 
1.3
1,000,000

 
162,200

 
NIBOR
 
4.25
%
 
7.45
%
 
(42,414
)
 
1.3
 
 
 
 
 
 
 
 
 
 
(69,547
)
 
 
(1)
Notional amount reduces equally with NOK bond repayments.
(2)
These swaps were partially settled during the three months ended September 30, 2017 . The remaining amounts of these swaps were settled in October 2017.
(3)
Excludes an economic hedge on the foreign currency exposure for a three percent premium upon maturity of the NOK bonds which exchanges NOK 3.9 million for $0.7 million .
(4)
Excludes an economic hedge on the foreign currency exposure for a three percent premium upon maturity of the NOK bonds which exchanges NOK 6.8 million for $1.2 million .

Commodity Price Risk

We are exposed to changes in forecasted bunker fuel costs for certain vessels being time-chartered-out and for vessels servicing certain contracts of affreightment. We may use bunker fuel swap contracts as economic hedges to protect against changes in bunker fuel costs. As at September 30, 2017 , we were not committed to any bunker fuel swap contracts.

Page 45 of 50


ITEM 4 -    CONTROLS AND PROCEDURES

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended) during the nine months ended September 30, 2017 , that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.


Page 46 of 50


TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
SEPTEMBER 30, 2017
PART II – OTHER INFORMATION
Item 1 – Legal Proceedings
Occasionally we have been, and expect to continue to be, subject to legal proceedings and claims in the ordinary course of our business, principally personal injury and property casualty claims. These claims, even if lacking merit, could result in the expenditure of significant financial and managerial resources.
Please read Item 1 - Financial Statements: Note 9 - Commitments and Contingencies: Parts a), c), g), h) and j) for a description of certain potential claims and claims made against us.
Item 1A – Risk Factors
In addition to the other information set forth in this Report on Form 6-K, you should carefully consider the risk factors discussed in Part I, Item 3. Key Information - Risk Factors in our Annual Report on Form 20-F for the year ended December 31, 2016, as well as in Part II - Other Information, Items 1A - Risk Factors in our Report on Form 6-K for the quarter ended June 30, 2017, which could materially affect our business, financial condition or results of operations and the price and value of our securities.
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds
On September 25, 2017, Brookfield TK TOLP L.P., an affiliate of public company Brookfield Business Partners L.P. (or Brookfield TOLP ), Teekay Corporation, each of which is an accredited investor, invested $610.0 million and $30.0 million, respectively, in us in exchange for (a) 244.0 million and 12.0 million common units, respectively, at a price of $2.50 per common unit and (b) 62.4 million and 3.1 million common unit warrants, respectively, with an exercise price of $0.01 per unit and which warrants are exercisable through September 25, 2024 if our common unit volume-weighted average price is equal to or greater than $4.00 per common unit for 10 consecutive trading days prior to that date. Each issuance of securities qualified for an exemption from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended.
Item 3 – Defaults Upon Senior Securities
None
Item 4 – Mine Safety Disclosures
None
Item 5 – Other Information
None
Item 6 – Exhibits
The following exhibits are filed as part of this report:

Page 47 of 50


  4.1

  
Warrant Agreement, dated as of September 25,2017, by and between Teekay Offshore Partners L.P. and Brookfield TK TOLP L.P.
 
 
4.2

 
Warrant Agreement, dated as of September 25,2017, by and between Teekay Offshore Partners L.P. and Teekay Shipping Limited
 
 
 
4.3

  
Second Amended and Restated Limited Liability Company Agreement, of Teekay Offshore GP L.L.C. dated September 25, 2017, by and between Teekay Holdings Limited and Brookfield TK TOGP L.P.
 
 
4.4

  
Registration Rights Agreement, dated September 25, 2017, by and between Teekay Offshore Partners L.P., Teekay Corporation and Brookfield TK TOLP L.P.
 
 
 
10.1

 
Investment Agreement, dated as of July 26, 2017, between Teekay Offshore Partners L.P. and Brookfield TK TOP L.P. (incorporated by reference to Exhibit 10.1 to our report on Form 6-K (File No. 001 33198), furnished to the SEC on August 1, 2017)
 
 
 
10.2

 
Investment Agreement, dated as of July 26,2017, between Teekay Offshore Partners L.P. and Teekay Holdings Limited (incorporated by reference to Exhibit 10.2 to our report on Form 6-K (File No. 001 33198), furnished to the SEC on August 1, 2017)
 
 
 
10.3

  
Purchase Agreement, dated as of July 26, 2017, between Teekay Holdings Limited and Brookfield TK TOGP L.P.(incorporated by reference to Exhibit 10.3 to our report on Form 6-K (File No. 001 33198), furnished to the SEC on August 1, 2017)
 
 
 
10.4

  
Amended and Restated Subordinate Promissory Note, dated as of July 26, 2017, by and between Teekay Offshore Partners L.P., Teekay Corporation and Brookfield TK TOLP L.P. (incorporated by reference to Exhibit 10.4 to our report on Form 6-K (File No. 001 33198), furnished to the SEC on August 1, 2017)
 
 
 
10.5

  
Master Services Agreement, dated September 25, 2017, by and between Teekay Corporation, Teekay Offshore Partners L.P. and Brookfield TK TOLP L.P
 
 
 
10.6

  
Trademark License Agreement, dated September 25, 2017, by and between Teekay Corporation and Teekay Offshore Partners L.P.
 
 
 
10.7

 
Agreement, dated September 8, 2017, for U.S. $600,000,000 Revolving Credit Facility, between Teekay Shuttle Tankers L.L.C. and Den Norske Bank Capital L.L.C. and various other banks

THIS REPORT ON FORM 6-K IS HEREBY INCORPORATED BY REFERENCE INTO THE FOLLOWING REGISTRATION STATEMENTS OF THE PARTNERSHIP:
 
•
REGISTRATION STATEMENT ON FORM S-8 (NO. 333-147682) FILED WITH THE SEC ON NOVEMBER 28, 2007
•
REGISTRATION STATEMENT ON FORM F-3 (NO. 333-206461) FILED WITH THE SEC ON AUGUST 19, 2015
•
REGISTRATION STATEMENT ON FORM F-3 (NO. 333-212782) FILED WITH THE SEC ON JULY 29, 2016
•
REGISTRATION STATEMENT ON FORM F-3 (NO. 333-213229) FILED WITH THE SEC ON AUGUST 22, 2016


Page 48 of 50


SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
TEEKAY OFFSHORE PARTNERS L.P.
 
 
 
 
By:
Teekay Offshore GP L.L.C., its general partner
 
 
 
Date: November 24, 2017
By:
/s/ Edith Robinson
 
 
Edith Robinson
Secretary

Page 49 of 50
Exhibit 4.1

TEEKAY OFFSHORE PARTNERS L.P.
(as Issuer)
and
BROOKFIELD TK TOLP L.P.
Warrant Agreement
Dated as of September 25, 2017

Warrants Exercisable for
Common Units
 

 



 
TABLE OF CONTENTS
Page

 
 
 
ARTICLE 1. DEFINITIONS
3

Section 1.01
Definitions
3

Section 1.02
Rules of Construction
8

 
 
 
ARTICLE 2. THE WARRANTS
9

Section 2.01
Issuance and Acquisition of Warrants
9

Section 2.02
Form and Dating; Legends
9

Section 2.03
Execution
10

Section 2.04
Replacement Warrants
10

Section 2.05
Outstanding Warrants
10

Section 2.06
Cancellation
10

Section 2.07
Registration, Transfer and Exchange
10

Section 2.08
Restrictions on Transfer and Exchange
11

 
 
 
ARTICLE 3. SEPARATION OF WARRANTS; TERMS OF WARRANTS; EXERCISE OF WARRANT
12

Section 3.01
Terms of Warrants; Exercise of Warrants
12

Section 3.02
Conditional Exercise
13

Section 3.03
Privatization Event
13

Section 3.04
Cost Basis Information
14

 
 
 
ARTICLE 4. COVENANTS OF THE PARTNERSHIP    
14

Section 4.01
Maintenance of Office or Agency
14

Section 4.02
Payment of Taxes
15

Section 4.03
Rule 144 Information    
15

Section 4.04
Reservation of Warrant Units
15

 
 
 
ARTICLE 5. ADJUSTMENTS
15

Section 5.01
Adjustments
15

Section 5.02
Fractional Interests
23

Section 5.03
Notices to Warrantholders
23

Section 5.04
No Rights as Unitholders
24

 
 
 
ARTICLE 6. MISCELLANEOUS
24

Section 6.01
Warrantholder Actions
24

Section 6.02
Notices
24

Section 6.03
Supplements and Amendments
26

Section 6.04
Governing Law
27

Section 6.05
No Adverse Interpretation of Other Agreements
27

Section 6.06
Successors and Assigns
27

Section 6.07
Duplicate Originals
28




Section 6.08
Separability
28

Section 6.09
Table of Contents and Headings
28

Section 6.10
Benefits of this Agreement
28

Section 6.11
Good Faith Determinations
28

Section 6.12
Obligations Limited to Parties to Agreement
28

Section 6.13
Confidentiality
28

 
 
 
 
EXHIBITS
 
Exhibit A
Form of Warrant
 
Exhibit B
Restricted Legend
 




    2


137007356.2


WARRANT AGREEMENT, dated as of September 25, 2017, between TEEKAY OFFSHORE PARTNERS L.P., a Republic of the Marshall Islands limited partnership (as further defined below, the “ Partnership ”), and BROOKFIELD TK TOLP L.P., a Bermuda limited partnership (the “ Investor ”).
WHEREAS, pursuant to that Investment Agreement, dated as of July 26, 2017, between the Partnership and the Investor (the “ Investment Agreement ”), the Partnership agreed to issue, sell and deliver to the Investor, and the Investor agreed to purchase and acquire from the Partnership, pursuant to the terms and subject to the conditions set forth in the Investment Agreement, (i) an aggregate of 244,000,000 Common Units and (ii) an aggregate of 62,440,945 warrants (the “ Warrants ”), that upon exercise may be net unit settled for Common Units (the Common Units issuable on exercise of the Warrants being referred to herein as the “ Warrant Units ”); and
WHEREAS, in connection with the Investment Agreement, and as a condition thereunder, the Partnership is issuing to the Investor, and the Investor is acquiring from the Partnership, 62,440,945 Warrants.
NOW, THEREFORE, in consideration of the premises and the mutual agreements set forth in the Investment Agreement and herein, the parties hereto agree as follows:
Article 1.
DEFINITIONS
Section 1.01      Definitions . As used in this Agreement, the following terms shall have the following respective meanings.
“ act ” has the meaning assigned to such term in Section 6.01 .
“ Affiliate ” shall have the meaning ascribed to it, on the date hereof, in Rule 405 under the Securities Act.
“ Agreement ” means this Warrant Agreement, as amended or supplemented from time to time.
“ Average VWAP ” per unit over a certain period means the arithmetic average of the VWAP per unit for such period.
“ Board of Directors ” means the Board of Directors of the General Partner or, with respect to any action to be taken by the Board of Directors, any committee of the Board of Directors duly authorized to take such action.
“ Business Combination ” means a merger, sale, consolidation, statutory exchange or similar transaction that requires the approval of the Partnership’s unitholders.
“ Business Day ” means Monday through Friday of each week, except that a legal holiday recognized as such by the government of the United States of America or the State of New York shall not be regarded as a Business Day.




“ Capital Stock ” means:
(1)
in the case of a corporation, corporate stock;
(2)
in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;
(3)
in the case of a partnership or limited liability company, partnership interests (whether general or limited) or membership interests, respectively; and
(4)
any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person, but excluding from all of the foregoing any debt securities convertible into Capital Stock, whether or not such debt securities include any right of participation with Capital Stock.
“ Cash Redemption Value ” has the meaning assigned to such term in Section 3.03.
“ Closing Sale Price ” of the Common Units means, as of any date, the closing sale price per unit (or if no closing sale price is reported, the average of the closing bid and ask prices or, if more than one in either case, the average of the average closing bid and the average closing ask prices) on such date as reported on the principal United States securities exchange on which the Common Units are traded or, if the Common Units are not listed on a United States national or regional securities exchange, in the over-the-counter market as reported by OTC Markets Group Inc. or a similar organization. In the absence of such a listing or quotation, the Closing Sale Price shall be, subject to Section 5.01(e), an amount determined by the Board of Directors to be the fair market value of a Common Unit.
“ Code ” means the U.S. Internal Revenue Code of 1985, as amended.
“ Commission ” means the United States Securities and Exchange Commission.
“ Common Units ” has the meaning specified therefor in Article I of the Partnership Agreement.
“ Convertible Securities ” means any stock or securities (other than Options) directly or indirectly convertible into or exercisable or exchangeable for Common Units.
“ Ex-Date ” means, when used with respect to any issuance of or distribution in respect of the Common Units or any other securities, the first date on which the Common Units or such other securities trade without the right to receive such issuance or distribution.
“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“ Exercise Date ” has the meaning assigned to such term in Section 3.03.

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“ Exercise Notice ” has the meaning assigned to such term in Section 3.01(b) .
“ Exercise Price ” means the applicable exercise price for the Warrants as set forth on Exhibit A , subject to adjustment pursuant to Section 5.01 .
“ Exercise Units ” has the meaning assigned to such term in Section 3.01(c) .
“ Expiration Time ” has the meaning assigned to such term in Section 3.01(a) .
“ GAAP ” means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board Accounting Standards Codification or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect on the Issue Date.
“ General Partner ” means Teekay Offshore GP L.L.C., a Republic of the Marshall Islands limited liability company, and its successors and permitted assigns that are admitted to the Partnership as general partner of the Partnership, in its capacity as general partner of the Partnership (except as the context otherwise requires).
“ Holder ” or “ Warrantholder ” means the registered holder of any Warrant.
“ Independent Financial Expert ” means a nationally recognized financial advisory firm mutually agreed by the Partnership and the holders of a majority of the Warrants. If the Partnership and the holders of a majority of the Warrants are unable to agree on an Independent Financial Expert for a valuation contemplated herein, each of them shall choose promptly a separate Independent Financial Expert and these two Independent Financial Experts shall choose promptly a third Independent Financial Expert to conduct such valuation; provided that no firm may be selected as the Independent Financial Expert if it has had a material relationship with the Partnership, the General Partner or the Holders or their respective Affiliates within the preceding two (2) years.
“ Initial Distribution Amount ” means $0.01.
“ Investment Agreement ” has the meaning assigned to such term in the Recitals.
“ Investor ” has the meaning assigned to such term in the Recitals.
“ Issue Date ” means the date of this Agreement.
“ Market Value ” means the Average VWAP during a 10 consecutive Trading Day period ending on the Trading Day immediately prior to the date of determination.
“ National Securities Exchange ” means an exchange registered with the Commission under Section 6(a) of the Exchange Act.
“ Net Unit Settlement ” has the meaning assigned to such term in Section 3.01(c).

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“ Officer ” means the Chief Executive Officer, the President, any Executive Vice President, any Senior Vice President, any Vice President, the Chief Financial Officer, the Treasurer, the Secretary or any Assistant Secretary of the General Partner.
“ Option Value ” means the value of an Option based on the Black and Scholes Option Pricing model obtained from the “OV” function on Bloomberg determined as of the day prior to the public announcement of the applicable Option for pricing purposes and reflecting (i) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the remaining term of the applicable Option as of the applicable date of determination, (ii) an expected volatility equal to the greater of (a) 100% and (b) the 100 day volatility obtained from the “HVT” function on Bloomberg as of the day immediately following the public announcement of the issuance of the applicable Option, (iii) the underlying price per share used in such calculation shall be the highest VWAP of the Common Units on any Trading Day during the period beginning on the day prior to the execution of definitive documentation relating to the issuance of the applicable Option and ending on the day of the public announcement of such issuance and (iv) a 360 day annualization factor.
“ Options ” means any rights, warrants or options to subscribe for or purchase Common Units or Convertible Securities.
“ Partnership ” means Teekay Offshore Partners L.P., a Republic of the Marshall Islands limited partnership, and any successors thereto.
“ Partnership Agreement ” means the Fifth Amended and Restated Agreement of Limited Partnership of the Partnership, as amended or modified.
“ Person ” means any individual, corporation, general partnership, limited partnership, limited liability partnership, joint venture, association, joint-stock company, trust, limited liability company, unincorporated organization or government or any agency or political subdivision thereof.
“ Privatization Event ” means an event or series of events by which (a) the Partnership’s Common Units are no longer traded on a national securities exchange or (b) the Partnership’s reporting obligations under the Exchange Act are terminated; provided that the holders of Common Units receive consideration in connection therewith with a fair market value of no less than the Threshold Price per Common Unit if prior to January 1, 2021, or 82.5% of the Threshold Price per Common Unit if January 1, 2021 or later, if such event or series of events is a merger, consolidation, share exchange or similar transaction.
“ Pro Rata Repurchases ” means any purchase of Common Units by the Partnership or any Affiliate thereof pursuant to (i) any tender offer or exchange offer directed to all of the holders of Common Units subject to Section 13(e) or 14(e) of the Exchange Act or Regulation 14E promulgated thereunder or (ii) any other tender offer available to substantially all holders of Common Units, in the case of both (i) and (ii), whether for cash, shares of Capital Stock of the Partnership, other securities of the Partnership, evidences of indebtedness of the Partnership or any other Person or any other property (including shares of Capital Stock, other securities or evidences of indebtedness of a subsidiary), or any combination thereof, effected while the Warrants are outstanding. The

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“Effective Date” of a Pro Rata Repurchase means the date of purchase with respect to any Pro Rata Purchase.
“ Public Stock ” means common stock listed on a recognized U.S. national securities exchange.
“ Register ” has the meaning assigned to such term in Section 2.07(a).
“ Restricted Legend ” means the legend set forth in Exhibit B .
“ Rule 144 ” means Rule 144 promulgated under the Securities Act.
“ Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“ Specified Distribution ” means:
(1)
any dividend or distribution referred to in Section 5.01(a)(i);
(2)
any rights, options or warrants referred to in Section 5.01(a)(ii);
(3)
any dividend of shares of Capital Stock of any class or series, or similar equity interests, of or relating to a subsidiary or other business unit in the case of certain spin-off transactions as described in Section 5.01(a)(iv);
(4)
any distribution in connection with the liquidation, dissolution or winding up of the Partnership, whether voluntary or involuntary; and
(5)
any quarterly dividend or distribution paid in cash to the extent such dividend or distribution is no more than the Initial Distribution Amount; provided , however , that this clause (5) shall not include any dividends or distributions to the extent that any such dividend or distribution is paid at a rate that exceeds 107.5% of the quarterly distribution rate for the immediately preceding fiscal quarter of the Partnership, on a per unit basis, in which case the amount of such dividend or distribution in excess of 107.5% of such quarterly distribution rate shall be deemed to not be a Specified Distribution under this clause (5).
“ Threshold Price ” has the meaning assigned to such term in Section 3.01(a) .
“ Trading Day ” means a day during which trading in securities generally occurs on the New York Stock Exchange or, if the Common Units are not listed on the New York Stock Exchange, on the principal other national or regional securities exchange on which the Common Units are then listed or, if the Common Units are not listed on a national or regional securities exchange, on the principal other market on which the Common Units are then traded. If the Common Units are not so listed or traded, “Trading Day” means a Business Day.
“ Transfer Agent ” has the meaning assigned to such term in Section 4.04(b) .

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“ Trigger Event ” has the meaning assigned to such term in Section 5.01(a)(vii) .
“ VWAP ” per Common Unit on any Trading Day means the per unit volume-weighted average price as displayed on Bloomberg page “ TOO US Equity AQR ” (or its equivalent successor if such page is not available) in respect of the period from 9:30 a.m. to 4:00 p.m., New York City time, on such Trading Day; or, if such price is not available, “VWAP” means the market value Common Unit on such Trading Day as determined, using a volume-weighted average method, by a nationally recognized independent investment banking firm retained by the Partnership for this purpose.
“ Warrant Exercise ” has the meaning assigned to such term in Section 3.01(b) .
“ Warrant Units ” has the meaning assigned to such term in the Recitals.
“ Warrants ” has the meaning assigned to such term in the Recitals and includes Warrants issued on the Issue Date.
Section 1.02      Rules of Construction . Unless the context otherwise requires:
(a)      a term has the meaning assigned to it;
(b)      an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;
(c)      “or” is not exclusive;
(d)      words in the singular include the plural, and words in the plural include the singular;
(e)      “herein,” “hereof” and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision;
(f)      when the words “includes” or “including” are used herein, they shall be deemed to be followed by the words “without limitation”;
(g)      all references to Sections or Articles or Exhibits refer to Sections or Articles or Exhibits of or to this Agreement unless otherwise indicated; and
(h)      references to agreements or instruments, or to statutes or regulations, are to such agreements or instruments, or statutes or regulations, as amended from time to time (or to successor statutes and regulations).
ARTICLE 2.     
THE WARRANTS
Section 2.01      Issuance and Acquisition of Warrants . In connection with the Investment Agreement, and as a condition thereunder, the Partnership hereby agrees to issue, subject to the conditions and restrictions contained in this Agreement, to the Investor, and the Investor hereby

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agrees to acquire from the Partnership, 62,440,945 Warrants. One Warrant certificate may be issued for multiple Warrants.
Section 2.02      Form and Dating; Legends.
(a)      The Warrants will be substantially in the form attached as Exhibit A . The terms and provisions contained in the form of the Warrant attached as Exhibit A constitutes, and are hereby expressly made, a part of this Agreement.
(b)      Except as otherwise provided in Section 2.02(c) or Section 2.08 , each Warrant will bear the Restricted Legend.
(c)      (i) If the Partnership determines (upon the advice of counsel and such other certifications and evidence as the Partnership may reasonably require) that a Warrant is eligible for resale pursuant to Rule 144 under the Securities Act (or a successor provision) without the need to satisfy current information or other requirements therein and that the Restricted Legend is no longer necessary or appropriate in order to ensure that subsequent transfers of the Warrant are effected in compliance with the Securities Act, or (ii) after a Warrant is sold pursuant to an effective registration statement under the Securities Act, then, in each case, the Partnership may cancel the Warrant and issue to the Holder thereof (or to its transferee) a new Warrant of like tenor, registered in the name of the Holder thereof (or its transferee), that does not bear the Restricted Legend.
(d)      By its acceptance of any Warrant bearing the Restricted Legend, each Holder thereof and each owner of a beneficial interest therein acknowledges the restrictions on transfer of such Warrant set forth in this Agreement and in the Restricted Legend and agrees that it will transfer such Warrant only in accordance with this Agreement and such legend.
Section 2.03      Execution . An Officer shall execute the Warrants for the Partnership by facsimile or manual signature in the name and on behalf of the Partnership, and a Warrant will be valid upon such execution. If an Officer whose signature is on a Warrant no longer holds that office at the time the Warrant is countersigned, the Warrant will still be valid.
Section 2.04      Replacement Warrants. The Partnership shall issue replacement Warrants for those certificates alleged to have been lost, stolen or destroyed, upon receipt by the Partnership of (i) evidence reasonably satisfactory to the Partnership of such loss, theft or destruction of such Warrants, and (ii) indemnity satisfactory to the Partnership (unless waived by the Partnership). The Partnership may, at its option, issue replacement Warrants for mutilated certificates upon presentation thereof without such indemnity.
Section 2.05      Outstanding Warrants .
(a)      Warrants outstanding at any time are all Warrants that have been executed by the Partnership except for:
(i)      Warrants canceled by the Partnership or delivered to the Partnership for cancellation;

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(ii)      Warrants exercised by the Holder thereof; and
(iii)      any Warrant which has been replaced pursuant to Section 2.04 unless and until the Partnership receives proof satisfactory to it that the replaced Warrant is held by a bona fide purchaser, in which case the replacement Warrant issued pursuant to Section 2.04 shall be automatically canceled.
Section 2.06      Cancellation . Notwithstanding any Warrants canceled in accordance with Section 3.01 , the Partnership must promptly cancel any Warrants previously executed and delivered hereunder which the Partnership may have acquired in any manner whatsoever, and may cancel any Warrants previously executed hereunder which the Partnership has not issued and sold. The Partnership will cancel all Warrants surrendered for transfer, exchange or cancellation in accordance with customary procedures. The Partnership may not issue new Warrants to replace Warrants that have been exercised or delivered to the Partnership for cancellation.
Section 2.07      Registration, Transfer and Exchange .
(a)      The Partnership shall maintain a register (the “ Register ”) for registering the record ownership of the Warrants by the Holders and transfers and exchanges of the Warrants. Each Warrant will be registered in the name of the Holder thereof or its nominee.
(b)      Subject to compliance with Section 2.08, a Holder may transfer a Warrant to another Person or exchange a Warrant for another Warrant by presenting to the Partnership a written request therefor stating the name of the proposed transferee or requesting such an exchange, accompanied by any certification, opinion or other document required by this Agreement. The Partnership will promptly register any transfer or exchange that meets the requirements of this Section and Section 2.08 by noting the same in the Register maintained by the Partnership for such purpose; provided that no transfer or exchange will be effective until it is registered in the Register. Prior to the registration of any transfer, the Partnership and its agents will treat the Person in whose name the Warrant is registered as the owner and Holder thereof for all purposes, and will not be affected by notice to the contrary.
From time to time the Partnership will execute Warrants as necessary in order to permit the registration of a transfer or exchange in accordance with this Section. All Warrants issued upon transfer or exchange shall be the duly authorized, executed and delivered Warrants of the Partnership entitled to the benefits of this Agreement.
No service charge will be imposed in connection with any transfer or exchange of any Warrant, but the Partnership may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith. The Partnership shall have no obligation to effect an exchange or register a transfer unless and until it is satisfied that any payments required by the immediately preceding sentence have been made.
(c)      Subject to compliance with Section 2.08(b) , if a Warrant is transferred or exchanged for another Warrant, the Partnership will (i) cancel the Warrant being transferred or exchanged, (ii) deliver one or more new Warrants which (in the aggregate) reflect the amount equal to the amount

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of Warrants being transferred or exchanged to the transferee (in the case of a transfer) or the Holder of the canceled Warrant (in the case of an exchange), registered in the name of such transferee or Holder, as applicable, and (iii) if such transfer or exchange involves less than the entire amount of the canceled Warrant, deliver to the Holder thereof one or more Warrants which (in the aggregate) reflect the amount of the untransferred or unexchanged portion of the canceled Warrant, registered in the name of the Holder thereof.
Section 2.08      Restrictions on Transfer and Exchange .
(a)      The transfer or exchange of any Warrant may only be made in accordance with this Section 2.08 and Section 2.07. The Person requesting the transfer or exchange must deliver or cause to be delivered to the Partnership such certifications and evidence as the Partnership may reasonably require in order to determine that the proposed transfer or exchange is being made in compliance with the Securities Act and any applicable securities laws of any state of the United States.
(b)      No certification is required in connection with any transfer or exchange of any Warrant (or a beneficial interest therein):
(i)      after such Warrant is eligible for resale pursuant to Rule 144 under the Securities Act (or a successor provision) without the need to satisfy current information or other requirements therein; provided that the Partnership may require from any Person requesting a transfer or exchange in reliance upon this clause (i) any other reasonable certifications and evidence in order to support such certificate; or
(ii)      sold pursuant to an effective registration statement.
Any Warrant delivered in reliance upon this paragraph will not bear the Restricted Legend.
ARTICLE 3.     
SEPARATION OF WARRANTS; TERMS OF WARRANTS; EXERCISE OF WARRANTS
Section 3.01      Terms of Warrants; Exercise of Warrants .
(a)      Subject to the terms of this Agreement, each Warrant shall be exercisable for one Common Unit (prior to giving effect to Net Unit Settlement), at the election of the Holder thereof, either in full or from time to time in part during the period commencing on the first date that the Market Value per Common Unit is equal to or greater than $4.00, subject to the adjustments provided in Article 5 (the “ Threshold Price ”), and until 5:00 p.m., New York City time, on September 25, 2024 (the “ Expiration Time ”), and shall entitle the Holder thereof to receive from the Partnership Warrant Units pursuant to Section 3.01(c). If all or any of the Warrants are exercised following the declaration of a distribution on Common Units, no decrease to or rescindment of any such declared but unpaid distribution will be made. Each Warrant not exercised prior to the Expiration Time shall become void and all rights thereunder and all rights in respect thereof under this agreement shall cease as of such time.

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(b)      In order to exercise all or any of the Warrants (each, a “ Warrant Exercise ”), the Holder thereof must deliver to the Partnership (i) such Warrants and (ii) the form of election to exercise on the reverse thereof duly filled in and signed (the “ Exercise Notice ”).
(c)      If a Holder provides an Exercise Notice pursuant to Section 3.01(b) , then the Warrant Exercise shall be “net unit settled” (a “ Net Unit Settlement ”) whereupon the Warrants that are exercised will be converted into Common Units pursuant to a cashless exercise, after which the Partnership will issue to the Holder the Warrant Units equal to the result obtained by (i) subtracting B from A, (ii) dividing the result by A, and (iii) multiplying the quotient by C as set forth in the following equation:
X = ((A - B)/A) × C
where:
X =
the Warrant Units issuable upon exercise pursuant to this paragraph (c).
A =
the Market Value on the day immediately preceding the date on which the Holder delivers the applicable Exercise Notice.
B =
the Exercise Price.
C =
the number of Common Units as to which the Warrants are then being exercised (the “ Exercise Units ”).
If the foregoing calculation results in a negative number, then no Common Units shall be issued upon exercise pursuant to this paragraph (c). For the avoidance of doubt, each Warrant entitles the Holder upon exercise at any time from the first date that the Threshold Price is met until the Expiration Time, to receive one Common Unit, prior to giving effect to Net Unit Settlement.
(d)      Upon compliance with the provisions set forth above, the Partnership shall deliver or cause to be delivered with all reasonable dispatch, to or upon the written order of the Holder and in such name or names as the Holder may designate, a certificate or certificates for the number of whole Warrant Units issuable upon the exercise of such Warrants or other securities or property to which such Holder is entitled, together with cash in lieu of fractional units as provided in Section 5.02 hereof. Such certificate or certificates or other securities or property shall be deemed to have been issued, and any person so designated to be named therein shall be deemed to have become a holder of record of such Warrant Units or other securities or property, as of the date of the surrender of such Warrants, notwithstanding that the unit transfer books of the Partnership shall then be closed or the certificates or other securities or property have not been delivered.
(e)      If less than all the Warrants represented by a Warrant certificate are exercised, such Warrant certificate shall be surrendered and a new Warrant certificate of the same tenor and for the number of Warrants which were not exercised shall be executed by the Partnership and registered in such name or names as may be directed in writing by the Holder (subject to Section 2.08) and shall deliver the new Warrant certificate to the Person or Persons entitled to receive the same.

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(f)      All Warrant certificates surrendered upon exercise of Warrants shall be canceled by the Partnership. Such canceled Warrant certificates shall then be disposed of by the Partnership in accordance with its standard procedures.
(g)      The Partnership shall keep copies of this Agreement and any notices given or received hereunder available for inspection by the Holders during normal business hours at its office upon reasonable notice to the Partnership by a Holder seeking inspection.
(h)      Certificates, if any, representing Warrant Units shall bear a Restricted Legend (with all references to Warrants therein replaced by references to Common Units, and with such changes thereto as the Partnership may deem appropriate in its reasonable judgment) if (i) the Warrants for which they were issued carried a Restricted Legend or (ii) the Warrant Units are issued in a transaction exempt from registration under the Securities Act (other than the exemption provided by Section 3(a)(9) of the Securities Act), in each case until and unless the circumstances set forth in Section 2.02(c) apply to such Warrant Units, and any transfers thereof shall comply with the Restricted Legend.
Section 3.02      Conditional Exercise . Notwithstanding any other provision hereof, if an exercise of any portion of a Warrant is to be made in connection with a public offering or a sale of the Partnership (pursuant to a merger, sale of assets, or otherwise), such exercise may at the election of the Holder be conditioned upon the consummation of such transaction, in which case such exercise shall not be deemed to be effective until immediately prior to the consummation of such transaction.
Section 3.03      Privatization Event . Upon the occurrence of a Privatization Event, the Partnership shall pay to such Holder of outstanding Warrants as of the date of such Privatization Event, an amount in immediately available funds equal to the Cash Redemption Value for such Warrants, not later than the date which is ten (10) Business Days after such Privatization Event and the Warrants shall thereafter be cancelled. The cash redemption value for any Warrant (the “ Cash Redemption Value ”) will equal the fair value of the Warrant as of the date of such Privatization Event as determined by an Independent Financial Expert. The Cash Redemption Value of the Warrants shall be due and payable within ten (10) Business Days after the date of the applicable Privatization Event.
Section 3.04      Cost Basis Information . For purposes of Section 6045B of the Code and the Treasury Regulations thereunder, the Partnership shall record the cost basis for Warrant Units issued pursuant to a cashless exercise at the time the Partnership confirms the number of Warrant Units issuable in connection with the cashless exercise.
ARTICLE 4.     
COVENANTS OF THE PARTNERSHIP
Section 4.01      Maintenance of Office or Agency . The Partnership will maintain in the United States an office or agency where Warrants may be surrendered for registration of transfer or exchange or for presentation for exercise. The Partnership hereby initially designates the Corporate Trust Office of Computershare Trust Company, N.A., a federally chartered trust company, as such office of the Partnership. The Partnership will give prompt written notice to the Holders of any change in

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the location of such office or agency. The Partnership may also from time to time designate one or more other offices or agencies where the Warrants may be surrendered or presented for any of such purposes and may from time to time rescind such designations. The Partnership will give prompt written notice to the Holders of any such designation or rescission and of any change in the location of any such other office or agency.
Section 4.02      Payment of Taxes . The Partnership will pay all documentary, stamp or similar issue or transfer taxes in respect of the issuance or delivery of Warrant Units upon the exercise of Warrants; provided that the exercising Holder shall be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issue of any Warrants or any Warrant Units in a name other than that of the registered holder of a Warrant surrendered upon exercise.
Section 4.03      Rule 144 Information . For so long as any of the Warrants or Warrant Units remain outstanding and constitute “restricted securities” under Rule 144, the Partnership will (i) make and keep public information available, as those terms are understood and defined in Rule 144, at all times after the date of this Agreement; (ii) so long as a Holder owns any Warrants or Warrant Units, furnish to the Holder upon written request a written statement by the Company as to its compliance with the reporting requirements of the Exchange Act; and (iii) cooperate with the Holders in any sale or transfer of Warrants or Warrant Units pursuant to Rule 144.
Section 4.04      Reservation of Warrant Units .
(a)      The Partnership will at all times reserve and keep available for issuance and delivery, free and clear of all liens, security interests, charges and other encumbrances or restrictions on sale and free and clear of all preemptive rights, such number of its Common Units or other securities of the Partnership as will from time to time be sufficient to permit the exercise in full of all outstanding Warrants pursuant to Net Unit Settlements.
(b)      The Partnership will keep a copy of this Agreement on file with the transfer agent for the Common Units (the “ Transfer Agent ”) and with every subsequent transfer agent for any of the Partnership’s securities issuable upon the exercise of the Warrants. The Partnership will supply such Transfer Agent with duly executed certificates for such purposes and will provide or otherwise make available any cash which may be payable as provided in Section 3.01 or Section 5.02 hereof. The Partnership will furnish such Transfer Agent a copy of all notices of adjustments, and certificates related thereto, transmitted to each Holder pursuant to Section 5.01(d) hereof.
ARTICLE 5.     
ADJUSTMENTS
Section 5.01      Adjustments . The Threshold Price and the number of Warrant Units issuable upon the exercise of each Warrant pursuant to a Net Unit Settlement are subject to adjustment from time to time upon the occurrence of the events enumerated in this Section 5.01 .
In the event that, at any time as a result of the provisions of this Section 5.01 , the Holders of the Warrants shall become entitled upon subsequent exercise to receive any shares of Capital Stock of the Partnership other than Common Units, the number of such other shares so receivable

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upon exercise of this Warrant pursuant to a Net Unit Settlement shall thereafter be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions contained herein.
(a)      Adjustments for Change in Capital Stock .
(i)      If the Partnership pays a dividend (or other distribution) in Common Units to all holders of Common Units, then (A) the Warrant Units in effect immediately following the record date for such dividend (or distribution) shall be multiplied by the following fraction and (B) the Threshold Price in effect immediately following the record date for such dividend (or distribution) shall be divided by the following fraction:
OS 1
OS 0
where:
OS 0
=
the number of Common Units outstanding immediately prior to the record date for such dividend or distribution.
OS 1
=
the sum of (A) the number of Common Units outstanding immediately prior to the record date for such dividend or distribution and (B) the total number of Common Units constituting such dividend.
In any such event, the number of Warrant Units issuable upon exercise of each Warrant at the time of the record date for such dividend or distribution shall be proportionately adjusted so that the Holder, after such date, shall be entitled to purchase the number of Common Units that such Holder would have owned or been entitled to receive in respect of the Common Units subject to the Warrant after such date had the Warrant been exercised immediately prior to such date.
(ii)      If the Partnership issues to all holders of Common Units rights, options or warrants entitling them to subscribe for or purchase Common Units at less than the Market Value determined on the Ex-Date for such issuance, then (A) the Warrant Units in effect immediately following the close of business on the Ex-Date for such issuance shall be multiplied by the following fraction and (B) the Threshold Price in effect immediately following the close of business on the Ex-Date for such issuance shall be divided by the following fraction:
OS 0  + X
OS 0  + Y
where:

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OS 0
=
the number of Common Units outstanding at the close of business on the record date for such issuance.
X
=
the total number of Common Units issuable pursuant to such rights, options or warrants.
Y
=
the number of Common Units equal to the aggregate price payable to exercise such rights, options or warrants divided by the Market Value determined as of the Ex-Date for such issuance.
In any such event, the number of Warrant Units issuable upon the exercise of each Warrant immediately prior to the date of the agreement on pricing of such rights, options or warrants (the “ Initial Number ”) shall be increased to the number obtained by multiplying the Initial Number by a fraction (i) the numerator of which shall be the sum of (x) the number of Common Units outstanding on such date and (y) the number of additional Common Units issuable in connection with such rights, options or warrants and (ii) the denominator of which shall be the sum of (1) the number of Common Units outstanding on such date and (2) the number of Common Units that the aggregate consideration receivable by the Partnership for the total number of Common Units so issuable in connection with such rights, options or warrants would purchase at the Market Value on the last trading day preceding the date of the agreement on pricing such rights, options or warrants.
To the extent that such rights, options or warrants are not exercised in full prior to their expiration or Common Units are otherwise not delivered in full pursuant to such rights or warrants upon the exercise of such rights or warrants, then the number of Warrant Units and Threshold Price shall be readjusted to the number of Warrant Units and Threshold Price that would have then been in effect had the adjustment made upon the issuance of such rights, options or warrants been made on the basis of the delivery of only the number of Common Units actually delivered. If such rights, options or warrants are only exercisable upon the occurrence of certain triggering events, then the number of Warrant Units and Threshold Price shall not be adjusted until such triggering events occur. In determining the aggregate offering price payable for such Common Units, the Partnership shall take into account any consideration received for such rights, options or warrants and the value of such consideration (if other than cash, to be determined by the reasonable judgment of the Board of Directors).
(iii)      If the Partnership subdivides, combines or reclassifies the Common Units into a greater or lesser number of Common Units, then (A) the number of Warrant Units in effect immediately following the effective date of such unit subdivision, combination or reclassification shall be multiplied by the following fraction and (B) the Threshold Price in effect immediately following the effective date of such unit subdivision, combination or reclassification shall be divided by the following fraction:
OS 1
OS 0

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where:
OS 0
=
the number of Common Units outstanding immediately prior to the effective date of such unit subdivision, combination or reclassification.
OS 1
=
the number of Common Units outstanding immediately after the opening of business on the effective date of such unit subdivision, combination or reclassification.
In any such event, the number of Warrant Units issuable upon exercise of each Warrant at the time of the effective date of such subdivision, combination or reclassification shall be proportionately adjusted so that the Holder, after such date, shall be entitled to purchase the number of Common Units that such Holder would have owned or been entitled to receive in respect of the Common Units subject to the Warrant after such date had the Warrant been exercised immediately prior to such date.
(iv)      If the Partnership distributes to all holders of Common Units evidences of indebtedness, shares of Capital Stock (other than Common Units) or other assets (including cash, securities and any other property, but excluding any Specified Distributions), then (A) the number of Warrant Units in effect immediately following the close of business on the record date for such distribution shall be multiplied by the following fraction and (B) the Threshold Price in effect immediately following the close of business on the record date for such distribution shall be divided by the following fraction:
SP 0
SP 0  - FMV
where:
SP 0
=
the Closing Sale Price per Common Unit on the Trading Day immediately preceding the Ex-Date.
FMV
=
the fair market value of the portion of the distribution applicable to one Common Unit on the Trading Day immediately preceding the Ex-Date as determined by the Board of Directors.

In a spin-off, where the Partnership makes a distribution to all holders of Common Units consisting of Capital Stock of any class or series, or similar equity interests of, or relating to, a subsidiary or other business unit, (A) the number of Warrant Units shall be adjusted on the fourteenth Trading Day after the effective date of the distribution by multiplying the number of Warrant Units in effect immediately prior to such fourteenth Trading Day by the following fraction and (B) the Threshold Price shall be adjusted on the fourteenth Trading Day after the effective date of the distribution by dividing the Threshold Price in effect immediately prior to such fourteenth Trading Day by the following fraction:

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MP 0 + MP s
MP 0
where:
MP 0
=
the average of the Closing Sale Price of the Common Units over each of the first 10 Trading Days commencing on and including the fifth Trading Day following the effective date of such distribution.
MP S
=
the average of the closing sale price of the Capital Stock or equity interests representing the portion of the distribution applicable to one Common Unit over each of the first 10 Trading Days commencing on and including the fifth Trading Day following the effective date of such distribution, or, as reported in the principal securities exchange or quotation system or market on which such shares are traded, or if not traded on a national or regional securities exchange or over-the-counter market, the fair market value of the Capital Stock or equity interests representing the portion of the distribution applicable to one Common Unit on such date as determined by the Board of Directors.
In the event that such distribution described in this clause (iv) is not so made, the number of Warrant Units and Threshold Price shall be readjusted, effective as of the date the Board of Directors publicly announces its decision not to pay such dividend or distribution, to the number of Warrant Units that would then be in effect if such dividend distribution had not been declared.
(v)      In case the Partnership effects a Pro Rata Repurchase of Common Units, then (A) the number of Warrant Units shall be adjusted by dividing the number of Warrant Units in effect immediately prior to the effective date of such Pro Rata Repurchase by the following fraction and (B) the Threshold Price shall be adjusted by multiplying the Threshold Price in effect immediately prior to the effective date of such Pro Rata Repurchase by the following fraction: the numerator of such fraction shall be (i) the product of (x) the number of Common Units outstanding immediately before such Pro Rata Repurchase and (y) the Market Value of a Common Unit on the trading day immediately preceding the first public announcement by the Partnership or any of its Affiliates of the intent to effect such Pro Rata Repurchase, minus (ii) the aggregate purchase price of the Pro Rata Repurchase, and the denominator of such fraction shall be the product of (1) the number of Common Units outstanding immediately prior to such Pro Rata Repurchase minus the number of Common Units so repurchased and (2) the Market Value per Common Unit on the trading day immediately preceding the first public announcement by the Partnership or any of its Affiliates of the intent to effect such Pro Rata Repurchase.
(vi)      In case of any Business Combination or reclassification of Common Units (other than a reclassification of Common Units referred to in Section 5.01(a)(iii) ), the Holder’s right to receive Warrant Units upon exercise of the Warrants shall be converted into the right to exercise the Warrants to acquire the number of shares of stock or other securities or property (including cash) that the Common Units issuable (at the time of such

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Business Combination or reclassification) upon exercise of each Warrant immediately prior to such Business Combination or reclassification would have been entitled to receive upon consummation of such Business Combination or reclassification; and in any such case, if necessary, the provisions set forth herein with respect to the rights and interests thereafter of the Holder shall be appropriately adjusted so as to be applicable, as nearly as may reasonably be, to the Holder’s right to exercise each Warrant in exchange for any shares of stock or other securities or property pursuant to this Section 5.01(a)(vi). In determining the kind and amount of stock, securities or the property receivable upon exercise of each Warrant following the consummation of such Business Combination, if the holders of Common Units have the right to elect the kind or amount of consideration receivable upon consummation of such Business Combination, then the Holder shall have the right to make a similar election (including being subject to similar proration constraints) upon exercise of each Warrant with respect to the number of shares of stock or other securities or property that the Holder will receive upon exercise of a Warrant.
(vii)      If the Partnership issues Common Units at less than 50% of the Threshold Price per Common Unit, then the Threshold Price in effect at the close of business on the day immediately preceding the issuance date for such issuance shall be divided by the following fraction:
OS 0  + X
OS 0  + Y
where:
OS 0
=
the number of Common Units outstanding at the close of business on the day immediately preceding the issuance date for such issuance.
X
=
the total number of Common Units issued in such issuance.
Y
=
the number of Common Units equal to the aggregate price paid as consideration for the Common Units issued in such issuance divided by 56.25% of the Threshold Price per Common Unit as of the issuance date for such issuance.

The provisions of this clause (vii) shall not apply to an issuance unless such issuance has been approved by a committee of the Board of Directors composed solely of two or more directors who are Independent Directors (as such term is defined in the Second Amended and Restated Limited Liability Company Agreement of the General Partner, as in effect on the date hereof). No adjustment pursuant to this clause (vii) shall be made if such adjustment would result in an increase of the Threshold Price then in effect.


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For purposes of this clause (vii), if the Partnership grants, issues or sells Options or Convertible Securities, and the lowest price per unit for which one Common Unit is issuable upon the conversion, exchange or exercise thereof is less than 50.0% of the Threshold Price per Common Unit, then such Common Unit shall be deemed to be outstanding and to have been issued and sold by the Partnership at the time of the issuance of such security for such price per unit. For purposes of this paragraph , the “lowest price per unit for which one Common Unit is issuable upon the conversion, exchange or exercise thereof” shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Partnership with respect to any one Common Unit upon the issuance of such security and upon conversion, exchange or exercise thereof less any consideration paid or payable by the Partnership with respect to such one Common Unit upon the issuance of such security and upon conversion, exchange or exercise thereof. No further adjustment of the Threshold Price shall be made upon the actual issuance of such Common Units upon the conversion, exchange or exercise or such security or upon the actual issuance of such Common Unit.

For purposes of this clause (vii), if the purchase price provided for in any Options, the additional consideration, if any, payable upon the issue, conversion, exercise or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertible into or exercisable or exchangeable for Common Units increases or decreases at any time, the Threshold Price in effect at the time of such increase or decrease shall be adjusted to the Threshold Price which would have been in effect at such time had such Options or Convertible Securities provided for such increased or decreased purchase price, additional consideration or increased or decreased conversion rate, as the case may be, at the time initially granted, issued or sold. For purposes of this paragraph, if the terms of any Option or Convertible Security that was outstanding as of the date of this Agreement are increased or decreased in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the Common Units deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such increase or decrease. No adjustment pursuant to this paragraph shall be made if such adjustment would result in an increase of the Threshold Price.

For purposes of this clause (vii), in case any Option is issued in connection with the issue or sale of other securities of the Partnership, together comprising one integrated transaction, (A) the Options will be deemed to have been issued for the Option Value of such Options and (B) the other securities issued or sold in such integrated transaction shall be deemed to have been issued for the difference of (x) the aggregate consideration received by the Partnership less any consideration paid or payable by the Partnership pursuant to the terms of such other securities of the Partnership, less (y) the Option Value. If any Common Units, Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the net amount received by the Partnership therefor. If any Common Units, Options or Convertible Securities are issued or sold

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for consideration other than cash, the amount of such consideration received by the Partnership will be the fair market value of such consideration, except where such consideration consists of securities, in which case the amount of consideration received by the Partnership will be the closing sale price of such security on the date of receipt. If any Common Units, Options or Convertible Securities are issued to the owners of the non-surviving entity in connection with any merger in which the Partnership is the surviving entity, the amount of consideration therefor will be deemed to be the fair market value of such portion of the net assets and business of the non-surviving entity as is attributable to such Common Units, Options or Convertible Securities, as the case may be.


(viii)      The Partnership reserves the right to make such reductions in the Exercise Price or increases to the number of Warrant Units as it considers advisable in order that any event treated for Federal income tax purposes as a dividend of stock or stock rights will not be taxable to the recipients. In the event the Partnership elects to make such a reduction in the Exercise Price or increase in the number of Warrant Units, the Partnership shall comply with the requirements of Rule 14e-1 under the Exchange Act, and any other securities laws and regulations thereunder if and to the extent that such laws and regulations are applicable in connection with the reduction of the Exercise Price or increase in the number of Warrant Units.
(ix)      Notwithstanding any other provisions of this Section 5.01(a) , rights or warrants distributed by the Partnership to all holders of Common Units entitling the holders thereof to subscribe for or purchase shares of the Partnership’s Capital Stock (either initially or under certain circumstances), which rights or warrants, until the occurrence of a specified event or events (“ Trigger Event ”): (A) are deemed to be transferred with such Common Units; (B) are not exercisable; and (C) are also issued in respect of future issuances of Common Units, shall be deemed not to have been distributed for purposes of this Section 5.01(a) (and no adjustment to the number of Warrant Units or Threshold Price under this Section 5.01(a) will be required) until the occurrence of the earliest Trigger Event, whereupon such rights and warrants shall be deemed to have been distributed and an appropriate adjustment (if any is required) to the number of Warrant Units and Threshold Price shall be made under Section 5.01(a)(ii) . In addition, in the event of any distribution (or deemed distribution) of rights or warrants, or any Trigger Event or other event with respect thereto that was counted for purposes of calculating a distribution amount for which an adjustment to the number of Warrant Units and Threshold Price under this Section 5.01(a) was made, (1) in the case of any such rights or warrants that shall all have been redeemed or repurchased without exercise by any holders thereof, the number of Warrant Units and Threshold Price shall be readjusted upon such final redemption or repurchase to give effect to such distribution or Trigger Event, as the case may be, as though it were a cash distribution, equal to the per unit redemption or repurchase price received by a holder or holders of Common Units with respect to such rights or warrants (assuming such holder had retained such rights or warrants), made to all holders of Common Units as of the date of such redemption or repurchase, and (2) in the case of such rights or warrants that shall have

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expired or been terminated without exercise thereof, the number of Warrant Units and Threshold Price shall be readjusted as if such expired or terminated rights and warrants had not been issued. To the extent that the Partnership has a rights plan or agreement in effect upon exercise of the Warrants, which rights plan provides for rights or warrants of the type described in this clause, then upon exercise of the Warrants pursuant to a Net Unit Settlement, the Holder will receive, in addition to the Common Units to which he is entitled, a corresponding number of rights in accordance with the rights plan, unless a Trigger Event has occurred and the adjustments to the number of Warrant Units with respect thereto have been made in accordance with the foregoing. In lieu of any such adjustment, the Partnership may amend such applicable unitholder rights plan or agreement to provide that upon exercise of the Warrants pursuant to a Net Unit Settlement, the Holders will receive, in addition to the Common Units issuable upon such exercise, the rights that would have attached to such Common Units if the Trigger Event had not occurred under such applicable unitholder rights plan or agreement.
(b)      Notwithstanding anything to the contrary in Section 5.01 , no adjustment to the number of Warrant Units shall be made with respect to any distribution or other transaction if Holders are entitled to participate in such distribution or transaction as if they held a number of Common Units issuable upon exercise of the Warrants pursuant to a Net Unit Settlement immediately prior to such event, without having to exercise their Warrants.
(c)      If the Partnership shall take a record of the holders of its Common Units for the purpose of entitling them to receive a dividend or other distribution, and shall thereafter (and before the dividend or distribution has been paid or delivered to unitholders) abandon its plan to pay or deliver such dividend or distribution, then thereafter no adjustment in the number of Warrant Units or Threshold Price then in effect shall be required by reason of the taking of such record.
(d)      Notice of Adjustment. Whenever the number of Warrant Units is adjusted, the Partnership shall provide the notices required by Section 5.03 hereof.
(e)      Fair Market Value Determination . Notwithstanding anything to the contrary herein, whenever the Board of Directors is permitted or required to determine fair market value, such determination shall be made in good faith. If the Board of Directors is unable to determine the fair market value, or if the Holders of more than fifty percent (50%) of all of the Warrants then outstanding (collectively, the “ Requesting Holders ”) disagree with the Board of Director’s determination of fair market value by written notice delivered to the Partnership within thirty (30) days after the determination thereof by the Board of Directors is communicated to the Holders affected thereby, which notice specifies the Requesting Holders’ determination of such fair market value, then following a thirty (30) day period in which the Partnership and the Requesting Holders shall attempt to resolve the differences in their fair market value determinations, an Independent Financial Expert shall determine such fair market value. Such Independent Financial Expert’s determination of such fair market value shall be final, binding and conclusive on the Partnership and the Holders. Any and all costs and fees of such Independent Financial Expert shall be split equally between the Partnership, on the one hand, and the Requesting Holders, on the other.

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(f)      When Issuance or Payment May be Deferred . In any case in which this Section 5.01 shall require that an adjustment in the number of Warrant Units be made effective as of a record date for a specified event, the Partnership may elect to defer until the occurrence of such event (i) issuing to the Holder of any Warrant exercised after such record date the number of Warrant Units and other Capital Stock of the Partnership, if any, issuable upon such exercise and pursuant to a Net Unit Settlement over and above the Warrant Units and other Capital Stock of the Partnership, if any, issuable upon such exercise and (ii) paying to such Holder any amount in cash in lieu of a fractional unit pursuant to Section 5.02 hereof; provided that the Partnership shall deliver to such Holder a due bill or other appropriate instrument evidencing such Holder’s right to receive such additional Warrant Units, other Capital Stock and cash upon the occurrence of the event requiring such adjustment.
(g)      Form of Warrants . Irrespective of any adjustments in the number of Warrant Units or the number of units purchasable upon the exercise of the Warrants, Warrants theretofore or thereafter issued may continue to express the same price and number and kind of units as are stated in the Warrants initially issuable pursuant to this Agreement.
Section 5.02      Fractional Interests . The Partnership shall not issue fractional Warrant Units or scrip representing fractional units on the exercise of Warrants. If more than one Warrant shall be presented for exercise in full at the same time by the same Holder, the number of full Warrant Units which shall be issuable upon the exercise thereof shall be computed on the basis of the aggregate number of Warrant Units issuable on exercise of the Warrants so presented. If any fraction of a Warrant Unit would, except for the provisions of this Section 5.02 , be issuable on the exercise of any Warrants (or specified portion thereof), the Partnership shall pay an amount in cash equal to the current Closing Sale Price per Warrant Unit, as determined on the date the Warrant is presented for exercise, multiplied by such fraction, computed to the nearest whole U.S. cent.
Section 5.03      Notices to Warrantholders .
(a)      Upon any adjustment of the number of Warrant Units pursuant to Section 5.01 hereof, the Partnership shall promptly thereafter cause to be delivered to each of the Holders written notice, by first-class mail, postage prepaid, setting forth the number of Warrant Units after such adjustment and setting forth in reasonable detail the method of calculation and the facts upon which such calculations are based and setting forth the number of Warrant Units (or portion thereof) or other securities or property issuable after such adjustment, upon exercise of a Warrant. Where appropriate, such notice may be given in advance and included as a part of the notice required to be mailed under the other provisions of this Section 5.03 .
(b)      In case:
(i)      the Partnership shall authorize the issuance to all holders of Common Units of rights, options or warrants to subscribe for or purchase Common Units or of any other subscription rights or warrants;

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(ii)      the Partnership shall authorize the distribution to all holders of Common Units of evidences of its indebtedness or assets (other than dividends or distributions referred to in Section 5.01(a) hereof);
(iii)      of any reclassification or change of Common Units issuable upon exercise of the Warrants, or a tender offer or exchange offer for Common Units by the Partnership;
(iv)      of the voluntary or involuntary dissolution, liquidation or winding up of the Partnership; or
(v)      the Partnership proposes to take any action which would require an adjustment of the number of Warrant Units pursuant to Section 5.01 hereof;
then the Partnership shall cause to be given to each of the Holders, at least 10 days prior to any applicable record date, or promptly in the case of events for which there is no record date, by first-class mail, postage prepaid, a written notice stating (x) the date as of which the holders of record of Common Units to be entitled to receive any such rights, options, warrants or distribution are to be determined, (y) the initial expiration date set forth in any tender offer or exchange offer for Common Units, or (z) the date on which any such consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up is expected to become effective or consummated, and the date as of which it is expected that holders of record of Common Units shall be entitled to exchange such units for securities or other property, if any, deliverable upon such reclassification, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up. The failure to give the notice required by this Section 5.03 or any defect therein shall not affect the legality or validity of any distribution, right, option, warrant, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up, or the vote upon any action.
Section 5.04      No Rights as Unitholders . Nothing contained in this Agreement or the Warrants shall be construed as conferring upon the holders of Warrants the right to vote or to consent or to receive notice as unitholders in respect of the meetings of unitholders or any other matter, or any rights whatsoever, including the right to receive dividends, as unitholders of the Partnership, or the right to share in the assets of the Partnership in the event of its liquidation, dissolution or winding up, except in respect of Common Units received following exercise of Warrants. In addition, nothing contained in this Agreement or the Warrants shall be construed as imposing any liabilities on the Holder as a unitholder of the Partnership, whether such liabilities are asserted by the Partnership or by creditors of the Partnership.
ARTICLE 6.     
MISCELLANEOUS
Section 6.01      Warrantholder Actions .
(a)      Any notice, consent to amendment, supplement or waiver provided by this Agreement to be given by a Holder (an “ act ”) may be evidenced by an instrument signed by the Holder delivered to the Partnership.

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(b)      Any act by the Holder of any Warrant binds that Holder and every subsequent Holder of a Warrant certificate that evidences the same Warrant of the acting Holder, even if no notation thereof appears on the Warrant certificate. Subject to Section 6.02(c), a Holder may revoke an act as to its Warrants, but only if the Partnership receives the notice of revocation before the date the amendment or waiver or other consequence of the act becomes effective.
(c)      The Partnership may, but is not obligated to, fix a record date for the purpose of determining the Holders entitled to act with respect to any amendment or waiver or in any other regard. If a record date is fixed, those Persons that were Holders at such record date and only those Persons will be entitled to act, or to revoke any previous act, whether or not those Persons continue to be Holders after the record date. No act will be valid or effective for more than 90 days after the record date, unless an earlier date is required by the Partnership Agreement.
Section 6.02      Notices .
(a)      All notices, requests and other communications to any party hereunder shall be in writing and shall be deemed given if delivered personally, by facsimile (which is confirmed), emailed (which is confirmed) or sent by overnight courier (providing proof of delivery) to the parties at the following addresses:
If to the Partnership :
Teekay Offshore Partners L.P.
4th Floor, Belvedere Building
69 Pitts Bay Road
Hamilton HM 08, Bermuda
Attention: Corporate Secretary
Facsimile: (441) 292-3931
with a copy to (which copy alone shall not constitute notice):
Vinson & Elkins LLP
666 Fifth Avenue, 26th Floor
New York, NY 10103-0040
Attention:     Mike Rosenwasser
Facsimile:     (917) 206-8100
Email:         mrosenwasser@velaw.com

If to the Investor:
Brookfield TK TOLP L.P.
c/o Brookfield Capital Partners (Bermuda) Ltd.
73 Front Street, 5th Floor
Hamilton HM 12, Bermuda
Attention: Manager - Corporate Services
Facsimile:     (441) 296-4475

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Email:          Jane.Sheere@brookfield.com

with a copy to (which copy alone shall not constitute notice):

Brookfield TK TOLP L.P.
c/o Brookfield Capital Partners Ltd.
Brookfield Place, Suite 300
181 Bay Street
Toronto, Ontario, M5J 2T3
Attention:     Ryan Szainwald, Senior Vice President
Facsimile:    (416) 369-2301
Email:         Ryan.Szainwald@brookfield.com

with a copy to (which copy alone shall not constitute notice):

Kirkland & Ellis LLP
601 Lexington Avenue
New York, NY 10022
Attention:    Joshua N. Korff, Esq.
Elazar Guttman, Esq.
Ross M. Leff, Esq.
Facsimile:    (212) 446-4900
Email:         JKorff@kirkland.com
Elazar.Guttman@kirkland.com
Ross.Leff@kirkland.com

If to a Holder:
The address of such Holder as provided by the Holder to the Partnership.
The Partnership by notice to the Investor and Holders, and the Investor and each Holder by written notice to the Partnership, may designate additional or different addresses for subsequent notices or communications. All such notices, requests and other communications shall be deemed received on the date of actual receipt by the recipient thereof if received prior to 5:00 p.m. local time in the place of receipt and such day is a Business Day in the place of receipt. Otherwise, any such notices, requests and other communications shall be deemed not to have been received until the next succeeding Business Day in the place of receipt.
(b)      Defect in mailing a notice or communication to any particular Holder will not affect its sufficiency with respect to other Holders.
(c)      Where this Agreement provides for notice, the notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and the waiver will be the equivalent of the notice.

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Section 6.03      Supplements and Amendments .
(a)      The Partnership and the Investor may amend or supplement this Agreement or the Warrants without notice to or the consent of any Holder (other than the Investor):
(i)      to cure any ambiguity, omission, inconsistency or mistake in this Agreement or the Warrants in a manner that is not inconsistent with the provisions of this Agreement and that does not adversely affect the rights, preferences and privileges of the Warrants or any Holder; or
(ii)      to make any other change that does not adversely affect the rights of any Holder.
(b)      Except as otherwise provided in paragraphs (a) or (c), this Agreement and the Warrants may be amended only by means of a written amendment signed by the Partnership, the Investor and the Holders of 66 2 / 3 % of the outstanding Warrants; provided , however , that any such amendment, modification or supplement to, this Agreement that would materially and adversely affect the economic terms of the Warrants of any Holder shall require the affirmative vote or consent of the holders of at least 80% of the outstanding Warrants. Any amendment or modification of or supplement to this Agreement or the Warrants, any waiver of any provision of this Agreement, and any consent to any departure by the Partnership, the Investor or any Holder from the terms of any provision of this Agreement shall be effective only in the specific instance and for the specific purpose for which such amendment, supplement, modification, waiver or consent has been made or given. In addition, any term of a specific Warrant may be amended or waived with the written consent of the Partnership and the Holder of such Warrant.
(c)      Notwithstanding the provisions of paragraph (b), without the consent of each Holder affected, an amendment or waiver may not:
(i)      increase the Exercise Price;
(ii)      reduce the term of the Warrants;
(iii)      make a material and adverse change that does not equally affect all Warrants; or
(iv)      decrease the number of Common Units, cash or other securities or property issuable upon exercise of the Warrants,
except, in each case, for adjustments expressly provided for in this Agreement.
(d)      It is not necessary for Holders to approve the particular form of any proposed amendment, supplement or waiver if their consent approves the substance thereof.
(e)      An amendment, supplement or waiver under this Section will become effective on receipt by the Partnership of written consents from the Holders of the requisite percentage of the outstanding Warrants. After an amendment, supplement or waiver under this Section becomes

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effective, the Partnership will send to the Holders affected thereby a notice describing the amendment, supplement or waiver in reasonable detail. Any failure of the Partnership to send such notice, or any defect therein, will not, however, in any way impair or affect the validity of any such supplemental indenture or waiver.
(f)      After an amendment, supplement or waiver becomes effective, it will bind every Holder unless it is of the type requiring the consent of each Holder affected. If the amendment, supplement or waiver is of the type requiring the consent of each Holder affected, the amendment, supplement or waiver will bind each Holder that has consented to it and every subsequent Holder of a Warrant with respect to which consent was granted.
(g)      If an amendment, supplement or waiver changes the terms of a Warrant, the Partnership may require the Holder to deliver it to the Partnership so that the Partnership may place an appropriate notation of the changed terms on the Warrant and return it to the Holder, or exchange it for a new Warrant that reflects the changed terms. However, the effectiveness of the amendment, supplement or waiver is not affected by any failure to annotate or exchange Warrants in this fashion.
Section 6.04      Governing Law . This Agreement and the Warrants shall be governed by, and construed in accordance with, the laws of the State of New York without regard to principles of conflicts of laws. Any action against any party relating to the foregoing shall be brought in any federal or state court of competent jurisdiction located within the State of New York, and the parties hereto hereby irrevocably submit to the non-exclusive jurisdiction of any federal or state court located within the State of New York over any such action. The parties hereby irrevocably waive, to the fullest extent permitted by applicable law, any objection which they may now or hereafter have to the laying of venue of any such dispute brought in such court or any defense of inconvenient forum for the maintenance of such dispute. Each of the parties hereto agrees that a judgment in any such dispute may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.
Section 6.05      No Adverse Interpretation of Other Agreements . This Agreement may not be used to interpret another agreement of the Partnership, and no such agreement may be used to interpret this Agreement.
Section 6.06      Successors and Assigns . All agreements of the Partnership in this Agreement and the Warrants will bind its successors and assigns. Subject to the transfer conditions referred to in any legend in effect as set forth herein and Section 2.07 and Section 2.08, each Holder may freely assign its Warrants and its rights under this Agreement, in whole or in part, to any Person.
Section 6.07      Duplicate Originals . The parties may sign any number of copies of this Agreement. Each signed copy shall be deemed an original, but all of them together represent the same agreement. A signature to this agreement executed/transmitted electronically will have the same authority, effect and enforceability as an original signature.
Section 6.08      Separability . In case any provision in this Agreement or in the Warrants is invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions will not in any way be affected or impaired thereby.

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Section 6.09      Table of Contents and Headings . The Table of Contents and headings of the Articles and Sections of this Agreement have been inserted for convenience of reference only, are not to be considered a part of this Agreement and in no way modify or restrict any of the terms and provisions of this Agreement.
Section 6.10      Benefits of this Agreement . Nothing in this Agreement shall be construed to give to any Person other than the Partnership, the Investor and the registered holders of Warrants any legal or equitable right, remedy or claim under this Agreement. This Agreement shall be for the sole and exclusive benefit of the Partnership, the Investor and the registered holders of Warrants.
Section 6.11      Good Faith Determinations . Notwithstanding anything to the contrary herein, whenever the Board of Directors is permitted or required to determine fair market value, such determination shall be made in good faith.
Section 6.12      Obligations Limited to Parties to Agreement . Each of the parties hereto covenants, agrees and acknowledges that, other than as set forth herein, no Person other than the Investor, the Holders, their respective permitted assignees and the Partnership shall have any obligation hereunder and that, notwithstanding that one or more of such Persons may be a corporation, partnership or limited liability company, no recourse under this Agreement or under any documents or instruments delivered in connection herewith shall be had against any former, current or future director, officer, employee, agent, general or limited partner, manager, member, stockholder or Affiliate of any of such Persons or their respective permitted assignees, or any former, current or future director, officer, employee, agent, general or limited partner, manager, member, stockholder or Affiliate of any of the foregoing, whether by the enforcement of any assessment or by any legal or equitable proceeding, or by virtue of any applicable law, it being expressly agreed and acknowledged that no personal liability whatsoever shall attach to, be imposed on or otherwise be incurred by any former, current or future director, officer, employee, agent, general or limited partner, manager, member, stockholder or Affiliate of any of such Persons or any of their respective assignees, or any former, current or future director, officer, employee, agent, general or limited partner, manager, member, stockholder or Affiliate of any of the foregoing, as such, for any obligations of such Persons or their respective permitted assignees under this Agreement or any documents or instruments delivered in connection herewith or for any claim based on, in respect of or by reason of such obligation or its creation, except, in each case, for any assignee of any Holder hereunder.
Section 6.13      Confidentiality . The Partnership agrees that all books, records, information and data pertaining to the Holders, including inter alia, personal, non-public warrant holder information, which are exchanged or received pursuant to the negotiation or the carrying out of this Agreement shall remain confidential, and shall not be voluntarily disclosed to any other Person, except as may be required by law, including pursuant to subpoenas from state or federal government authorities ( e.g. , in divorce and criminal actions).
Section 6.14     

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IN WITNESS WHEREOF , the parties hereto have caused this Agreement to be duly executed, as of the day and year first above written.

TEEKAY OFFSHORE PARTNERS L.P.
 
By:
Teekay Offshore GP L.L.C.,
 
its general partner
 
By:
/s/ Edith Robinson
 
Name: Edith Robinson
 
Title: Secretary


Signature Page to Warrant Agreement

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BROOKFIELD TK TOLP L.P., BY ITS GENERAL PARTNER, BROOKFIELD CAPITAL PARTNERS (BERMUDA) LTD.
 
By
/s/ Gregory E A Morrison
 
Name: Gregory E A Morrison
 
Title: Director




     Signature Page to Warrant Agreement
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EXHIBIT A
[Face of Warrant Certificate]
[Insert legend, if applicable]
September 25, 2017
No.__________    Warrants
Warrant Certificate
This Warrant Certificate certifies that _____________________ or its registered assigns, is the registered holder of _____________________ Warrants (the “ Warrants ”), exercisable for common units (the “ Common Units ”) representing limited partnership interests in Teekay Offshore Partners L.P., a Republic of the Marshall Islands limited partnership (the “ Partnership ”). Each Warrant entitles the registered holder upon exercise at any time from the first date that the Market Value per Common Unit is equal to or greater than four dollars and zero cents ($4.00), subject to the adjustments provided in the Warrant Agreement (the “ Threshold Price ”) until 5:00 p.m., New York City time, on September 25, 2024 (the “ Expiration Time ”), to receive from the Partnership a number of fully paid and nonassessable Common Units (the “ Warrant Units ”) at an exercise price (the “ Exercise Price ”) of zero dollars and one cent ($0.01) pursuant to a Net Unit Settlement, subject to the conditions and terms set forth herein and in the Warrant Agreement referred to on the reverse hereof. The number of Warrant Units issuable is subject to adjustment upon the occurrence of certain events set forth in the Warrant Agreement.
Reference is hereby made to the further provisions of this Warrant Certificate set forth on the reverse hereof and such further provisions shall for all purposes have the same effect as though fully set forth at this place.

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IN WITNESS WHEREOF, the Partnership has caused this Warrant Certificate to be signed below by its duly authorized officer as of the date first set forth above.

TEEKAY OFFSHORE PARTNERS L.P.
By:    Teekay Offshore GP L.L.C.,
its general partner
By:        

    Name:    

    Title:    

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TEEKAY OFFSHORE PARTNERS L.P.
[Reverse of Warrant Certificate]
1.
Warrant Agreement
The Warrants evidenced by this Warrant Certificate are part of a duly authorized issue of Warrants issued or to be issued pursuant to a Warrant Agreement dated as of September 25, 2017 (the “ Warrant Agreement ”), between the Partnership and Brookfield TK TOLP L.P., a Bermuda limited partnership (the “ Investor ”), which Warrant Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to for a description of the rights, limitation of rights, obligations, duties and immunities thereunder of the Partnership, the Investor and the holders (the words “ holders ” or “ holder ” meaning the registered holders or registered holder) of the Warrants. In the event of an inconsistency or conflict between the terms of this Warrant and the Warrant Agreement, the terms of the Warrant Agreement will prevail.
2.
Exercise
Warrants may be exercised at any time from the first date the Market Value per Common Unit is equal to or greater than the Threshold Price until the Expiration Time. In order to exercise all or any of the Warrants represented by this Warrant Certificate, the holder must deliver to the Partnership this Warrant Certificate and the form of election to exercise on the reverse hereof duly completed. The exercise of Warrants is subject to certain restrictions on exercise as described in the Warrant Agreement.
The Partnership, pursuant to the terms of the Warrant Agreement, will net settle the Warrants which are exercised into Common Units as provided in the Warrant Agreement. No Warrant may be exercised after the Expiration Time, and to the extent not exercised by such time the Warrants shall become void.
3.
Adjustments
The Warrant Agreement provides that, upon the occurrence of certain events, the number of Common Units issuable upon the exercise of each Warrant and the Threshold Price shall be adjusted.
4.
No Fractional Units
No fractions of Common Units will be issued upon the exercise of any Warrant, but the Partnership will pay the cash value thereof determined as provided in the Warrant Agreement.
5.
Registered Form; Transfer and Exchange
The Warrants have been issued in registered form. Warrant Certificates, when surrendered at the office or agency of the Partnership by the registered holder thereof, may be exchanged, in

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the manner and subject to the limitations provided in the Warrant Agreement, but without payment of any service charge (except as specified in the Warrant Agreement), for another Warrant Certificate or Warrant Certificate of like tenor evidencing in the aggregate a like number of Warrants.
Upon due presentation for registration of transfer of this Warrant Certificate at the office or agency of the Partnership a new Warrant Certificate or Warrant Certificate of like tenor and evidencing in the aggregate a like number of Warrants shall be issued to the transferee(s) in exchange for this Warrant Certificate, subject to the limitations provided in the Warrant Agreement, without charge except for any tax or other governmental charge imposed in connection therewith.
The Partnership may deem and treat the registered holder(s) thereof as the absolute owner(s) of this Warrant Certificate (notwithstanding any notation of ownership or other writing hereon made by anyone), for the purpose of any exercise hereof, of any distribution to the holder(s) hereof, and for all other purposes. This Warrant Certificate does not entitle any holder hereof to any rights of a unitholder of the Partnership.
6.
Governing Law; Jurisdiction
This Warrant shall be governed by and construed in accordance with the internal laws of the State of New York without regard to principles of conflicts of laws. The Partnership and the Holder of this Warrant each hereby irrevocably and unconditionally:
(i) submits for itself and its property in any legal action or proceeding relating solely to this Warrant or the transactions contemplated hereby, to the non-exclusive jurisdiction of the courts of the state of New York and the Federal courts of the United States of America located within the State of New York, and appellate courts thereof;
(ii)      consents that any such action or proceeding may be brought in such courts, and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same to the extent permitted by applicable law;
(iii)      agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to the party, as the case may be, at its address set forth in the Register or at such other address of which the other party shall have been notified pursuant thereto;
(iv)      agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction for recognition and enforcement of any judgment or if jurisdiction in the courts referenced in the foregoing clause (i) are not available despite the intentions of the parties hereto;
(v)      agrees that final judgment in any such suit, action or proceeding brought in such a court may be enforced in the courts of any jurisdiction to which such party is subject

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by a suit upon such judgment, provided that service of process is effected upon such party in the manner specified herein or as otherwise permitted by law;
(vi)      agrees that to the extent that such party has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process with respect to itself or its property, such party hereby irrevocably waives such immunity in respect of its obligations under this Warrant Certificate, to the extent permitted by law; and
(vii)      IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING IN RELATION TO THIS AGREEMENT AND THE WARRANT ISSUED.
A copy of the Warrant Agreement may be obtained by the holder hereof upon written request to the Partnership.

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[Form of Exercise Notice]
(To Be Executed Upon Exercise of Warrant)
The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate for _______________________ Common Units to be net unit settled pursuant to the Net Unit Settlement procedures set forth in the Warrant Agreement.
In a Net Unit Settlement, the undersigned requests that a certificate for such units be registered in the name of _______________________, whose address is _____________________ and that such units be delivered to _______________________, whose address is _______________________. If said number of units is less than all of the Common Units issuable hereunder, the undersigned requests that a new Warrant representing the remaining balance of such units be registered in the name of _______________________, whose address is _________________, and that such Warrant be delivered to _______________________, whose address is _______________________.

By          
NOTICE: The signature to this assignment must correspond with the name as written upon the face of the within-mentioned instrument in every particular, without alteration or any change whatsoever.

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[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s), assign(s) and transfer(s) unto ________________________________________________ (the “ Assignee ”).                (Please type or print block letters)
        

    (Please print or typewrite name and address including zip code of assignee)
the within Warrant and all rights thereunder (the “ Securities ”), hereby irrevocably constituting and appointing
    

attorney to transfer said Warrant Certificate on the books of the Partnership with full power of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED ON ALL CERTIFICATES BEARING A RESTRICTED LEGEND]
In connection with any transfer of this Warrant Certificate occurring prior to the removal of the Restricted Legend, the undersigned confirms (i) the understanding that the Securities have not been registered under the Securities Act of 1933, as amended; and (ii) that such transfer is made without utilizing any general solicitation or general advertising.

Date:          
    

Seller
By          
NOTICE: The signature to this assignment must correspond with the name as written upon the face of the within-mentioned instrument in every particular, without alteration or any change whatsoever.



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EXHIBIT B
RESTRICTED LEGEND
THIS WARRANT AND THE UNDERLYING COMMON UNITS THAT MAY BE ISSUED UPON ITS EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.




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Exhibit 4.2

TEEKAY OFFSHORE PARTNERS L.P.
(as Issuer)
and
TEEKAY SHIPPING LIMITED
Warrant Agreement
Dated as of September 25, 2017

Warrants Exercisable for
Common Units
 

 



 
TABLE OF CONTENTS
Page

 
 
 
ARTICLE 1. DEFINITIONS
3

Section 1.01
Definitions
3

Section 1.02
Rules of Construction
8

 
 
 
ARTICLE 2. THE WARRANTS
9

Section 2.01
Issuance and Acquisition of Warrants
9

Section 2.02
Form and Dating; Legends
9

Section 2.03
Execution
10

Section 2.04
Replacement Warrants
10

Section 2.05
Outstanding Warrants
10

Section 2.06
Cancellation
10

Section 2.07
Registration, Transfer and Exchange
10

Section 2.08
Restrictions on Transfer and Exchange
11

 
 
 
ARTICLE 3. SEPARATION OF WARRANTS; TERMS OF WARRANTS; EXERCISE OF WARRANT
12

Section 3.01
Terms of Warrants; Exercise of Warrants
12

Section 3.02
Conditional Exercise
13

Section 3.03
Privatization Event
13

Section 3.04
Cost Basis Information
14

 
 
 
ARTICLE 4. COVENANTS OF THE PARTNERSHIP    
14

Section 4.01
Maintenance of Office or Agency
14

Section 4.02
Payment of Taxes
15

Section 4.03
Rule 144 Information    
15

Section 4.04
Reservation of Warrant Units
15

 
 
 
ARTICLE 5. ADJUSTMENTS
15

Section 5.01
Adjustments
15

Section 5.02
Fractional Interests
23

Section 5.03
Notices to Warrantholders
23

Section 5.04
No Rights as Unitholders
24

 
 
 
ARTICLE 6. MISCELLANEOUS
24

Section 6.01
Warrantholder Actions
24

Section 6.02
Notices
24

Section 6.03
Supplements and Amendments
26

Section 6.04
Governing Law
27

Section 6.05
No Adverse Interpretation of Other Agreements
27

Section 6.06
Successors and Assigns
27

Section 6.07
Duplicate Originals
28





Section 6.08
Separability
28

Section 6.09
Table of Contents and Headings
28

Section 6.10
Benefits of this Agreement
28

Section 6.11
Good Faith Determinations
28

Section 6.12
Obligations Limited to Parties to Agreement
28

Section 6.13
Confidentiality
28

 
 
 
 
EXHIBITS
 
Exhibit A
Form of Warrant
 
Exhibit B
Restricted Legend
 


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WARRANT AGREEMENT, dated as of September 25, 2017, between TEEKAY OFFSHORE PARTNERS L.P., a Republic of the Marshall Islands limited partnership (as further defined below, the “ Partnership ”), and TEEKAY SHIPPING LIMITED, a Bermuda corporation (the “ Investor ”).
WHEREAS, pursuant to that Investment Agreement (the “ Investment Agreement ”), dated as of July 26, 2017, between the Partnership and Teekay Holdings Limited, a Bermuda corporation (“ Teekay Holdings ”), the Partnership agreed to issue, sell and deliver to Teekay Holdings, and Teekay Holdings agreed to purchase and acquire from the Partnership, pursuant to the terms and subject to the conditions set forth in the Investment Agreement, (i) an aggregate of 12,000,000 Common Units and (ii) an aggregate of 3,059,055 warrants (the “ Warrants ”), that upon exercise may be net unit settled for Common Units (the Common Units issuable on exercise of the Warrants being referred to herein as the “ Warrant Units ”); and
WHEREAS, on September 25, 2017, Teekay Holdings assigned its rights under the Investment Agreement to receive the 12,000,000 Common Units and the Warrants to the Investor; and
WHEREAS, in connection with the Investment Agreement, and as a condition thereunder, the Partnership is issuing to the Investor, and the Investor is acquiring from the Partnership, 3,059,055 Warrants.
NOW, THEREFORE, in consideration of the premises and the mutual agreements set forth in the Investment Agreement and herein, the parties hereto agree as follows:
Article 1.
DEFINITIONS
Section 1.01      Definitions . As used in this Agreement, the following terms shall have the following respective meanings.
“ act ” has the meaning assigned to such term in Section 6.01.
“ Affiliate ” shall have the meaning ascribed to it, on the date hereof, in Rule 405 under the Securities Act.
“ Agreement ” means this Warrant Agreement, as amended or supplemented from time to time.
“ Average VWAP ” per unit over a certain period means the arithmetic average of the VWAP per unit for such period.
“ Board of Directors ” means the Board of Directors of the General Partner or, with respect to any action to be taken by the Board of Directors, any committee of the Board of Directors duly authorized to take such action.




“ Business Combination ” means a merger, sale, consolidation, statutory exchange or similar transaction that requires the approval of the Partnership’s unitholders.
“ Business Day ” means Monday through Friday of each week, except that a legal holiday recognized as such by the government of the United States of America or the State of New York shall not be regarded as a Business Day.
“ Capital Stock ” means:
(1)
in the case of a corporation, corporate stock;
(2)
in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;
(3)
in the case of a partnership or limited liability company, partnership interests (whether general or limited) or membership interests, respectively; and
(4)
any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person, but excluding from all of the foregoing any debt securities convertible into Capital Stock, whether or not such debt securities include any right of participation with Capital Stock.
“ Cash Redemption Value ” has the meaning assigned to such term in Section 3.03.
“ Closing Sale Price ” of the Common Units means, as of any date, the closing sale price per unit (or if no closing sale price is reported, the average of the closing bid and ask prices or, if more than one in either case, the average of the average closing bid and the average closing ask prices) on such date as reported on the principal United States securities exchange on which the Common Units are traded or, if the Common Units are not listed on a United States national or regional securities exchange, in the over-the-counter market as reported by OTC Markets Group Inc. or a similar organization. In the absence of such a listing or quotation, the Closing Sale Price shall be, subject to Section 5.01(e), an amount determined by the Board of Directors to be the fair market value of a Common Unit.
“ Code ” means the U.S. Internal Revenue Code of 1985, as amended.
“ Commission ” means the United States Securities and Exchange Commission.
“ Common Units ” has the meaning specified therefor in Article I of the Partnership Agreement.
“ Convertible Securities ” means any stock or securities (other than Options) directly or indirectly convertible into or exercisable or exchangeable for Common Units.

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“ Ex-Date ” means, when used with respect to any issuance of or distribution in respect of the Common Units or any other securities, the first date on which the Common Units or such other securities trade without the right to receive such issuance or distribution.
“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“ Exercise Date ” has the meaning assigned to such term in Section 3.03.
“ Exercise Notice ” has the meaning assigned to such term in Section 3.01(b).
“ Exercise Price ” means the applicable exercise price for the Warrants as set forth on Exhibit A , subject to adjustment pursuant to Section 5.01.
“ Exercise Units ” has the meaning assigned to such term in Section 3.01(c).
“ Expiration Time ” has the meaning assigned to such term in Section 3.01(a).
“ GAAP ” means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board Accounting Standards Codification or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect on the Issue Date.
“ General Partner ” means Teekay Offshore GP L.L.C., a Republic of the Marshall Islands limited liability company, and its successors and permitted assigns that are admitted to the Partnership as general partner of the Partnership, in its capacity as general partner of the Partnership (except as the context otherwise requires).
“ Holder ” or “ Warrantholder ” means the registered holder of any Warrant.
“ Independent Financial Expert ” means a nationally recognized financial advisory firm mutually agreed by the Partnership and the holders of a majority of the Warrants. If the Partnership and the holders of a majority of the Warrants are unable to agree on an Independent Financial Expert for a valuation contemplated herein, each of them shall choose promptly a separate Independent Financial Expert and these two Independent Financial Experts shall choose promptly a third Independent Financial Expert to conduct such valuation; provided that no firm may be selected as the Independent Financial Expert if it has had a material relationship with the Partnership, the General Partner or the Holders or their respective Affiliates within the preceding two (2) years.
“ Initial Distribution Amount ” means $0.01.
“ Investment Agreement ” has the meaning assigned to such term in the Recitals.
“ Investor ” has the meaning assigned to such term in the Recitals.

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“ Issue Date ” means the date of this Agreement.
“ Market Value ” means the Average VWAP during a 10 consecutive Trading Day period ending on the Trading Day immediately prior to the date of determination.
“ National Securities Exchange ” means an exchange registered with the Commission under Section 6(a) of the Exchange Act.
“ Net Unit Settlement ” has the meaning assigned to such term in Section 3.01(c).
“ Officer ” means the Chief Executive Officer, the President, any Executive Vice President, any Senior Vice President, any Vice President, the Chief Financial Officer, the Treasurer, the Secretary or any Assistant Secretary of the General Partner.
“ Option Value ” means the value of an Option based on the Black and Scholes Option Pricing model obtained from the “OV” function on Bloomberg determined as of the day prior to the public announcement of the applicable Option for pricing purposes and reflecting (i) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the remaining term of the applicable Option as of the applicable date of determination, (ii) an expected volatility equal to the greater of (a) 100% and (b) the 100 day volatility obtained from the “HVT” function on Bloomberg as of the day immediately following the public announcement of the issuance of the applicable Option, (iii) the underlying price per share used in such calculation shall be the highest VWAP of the Common Units on any Trading Day during the period beginning on the day prior to the execution of definitive documentation relating to the issuance of the applicable Option and ending on the day of the public announcement of such issuance and (iv) a 360 day annualization factor.
“ Options ” means any rights, warrants or options to subscribe for or purchase Common Units or Convertible Securities.
“ Partnership ” means Teekay Offshore Partners L.P., a Republic of the Marshall Islands limited partnership, and any successors thereto.
“ Partnership Agreement ” means the Fifth Amended and Restated Agreement of Limited Partnership of the Partnership, as amended or modified.
“ Person ” means any individual, corporation, general partnership, limited partnership, limited liability partnership, joint venture, association, joint-stock company, trust, limited liability company, unincorporated organization or government or any agency or political subdivision thereof.
“ Privatization Event ” means an event or series of events by which (a) the Partnership’s Common Units are no longer traded on a national securities exchange or (b) the Partnership’s reporting obligations under the Exchange Act are terminated; provided that the holders of Common Units receive consideration in connection therewith with a fair market value of no less than the Threshold Price per Common Unit if prior to January 1, 2021, or 82.5% of the Threshold Price per Common Unit if January 1, 2021 or later, if such event or series of events is a merger, consolidation, share exchange or similar transaction.

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“ Pro Rata Repurchases ” means any purchase of Common Units by the Partnership or any Affiliate thereof pursuant to (i) any tender offer or exchange offer directed to all of the holders of Common Units subject to Section 13(e) or 14(e) of the Exchange Act or Regulation 14E promulgated thereunder or (ii) any other tender offer available to substantially all holders of Common Units, in the case of both (i) and (ii), whether for cash, shares of Capital Stock of the Partnership, other securities of the Partnership, evidences of indebtedness of the Partnership or any other Person or any other property (including shares of Capital Stock, other securities or evidences of indebtedness of a subsidiary), or any combination thereof, effected while the Warrants are outstanding. The “Effective Date” of a Pro Rata Repurchase means the date of purchase with respect to any Pro Rata Purchase.
“ Public Stock ” means common stock listed on a recognized U.S. national securities exchange.
“ Register ” has the meaning assigned to such term in Section 2.07(a).
“ Restricted Legend ” means the legend set forth in Exhibit B .
“ Rule 144 ” means Rule 144 promulgated under the Securities Act.
“ Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“ Specified Distribution ” means:
(1)
any dividend or distribution referred to in Section 5.01(a)(i);
(2)
any rights, options or warrants referred to in Section 5.01(a)(ii);
(3)
any dividend of shares of Capital Stock of any class or series, or similar equity interests, of or relating to a subsidiary or other business unit in the case of certain spin-off transactions as described in Section 5.01(a)(iv);
(4)
any distribution in connection with the liquidation, dissolution or winding up of the Partnership, whether voluntary or involuntary; and
(5)
any quarterly dividend or distribution paid in cash to the extent such dividend or distribution is no more than the Initial Distribution Amount; provided , however , that this clause (5) shall not include any dividends or distributions to the extent that any such dividend or distribution is paid at a rate that exceeds 107.5% of the quarterly distribution rate for the immediately preceding fiscal quarter of the Partnership, on a per unit basis, in which case the amount of such dividend or distribution in excess of 107.5% of such quarterly distribution rate shall be deemed to not be a Specified Distribution under this clause (5).
“ Threshold Price ” has the meaning assigned to such term in Section 3.01(a).

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“ Trading Day ” means a day during which trading in securities generally occurs on the New York Stock Exchange or, if the Common Units are not listed on the New York Stock Exchange, on the principal other national or regional securities exchange on which the Common Units are then listed or, if the Common Units are not listed on a national or regional securities exchange, on the principal other market on which the Common Units are then traded. If the Common Units are not so listed or traded, “Trading Day” means a Business Day.
“ Transfer Agent ” has the meaning assigned to such term in Section 4.04(b).
“ Trigger Event ” has the meaning assigned to such term in Section 5.01(a)(vii).
“ VWAP ” per Common Unit on any Trading Day means the per unit volume-weighted average price as displayed on Bloomberg page “ TOO US Equity AQR ” (or its equivalent successor if such page is not available) in respect of the period from 9:30 a.m. to 4:00 p.m., New York City time, on such Trading Day; or, if such price is not available, “VWAP” means the market value Common Unit on such Trading Day as determined, using a volume-weighted average method, by a nationally recognized independent investment banking firm retained by the Partnership for this purpose.
“ Warrant Exercise ” has the meaning assigned to such term in Section 3.01(b).
“ Warrant Units ” has the meaning assigned to such term in the Recitals.
“ Warrants ” has the meaning assigned to such term in the Recitals and includes Warrants issued on the Issue Date.
Section 1.02      Rules of Construction . Unless the context otherwise requires:
(a)      a term has the meaning assigned to it;
(b)      an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;
(c)      “or” is not exclusive;
(d)      words in the singular include the plural, and words in the plural include the singular;
(e)      “herein,” “hereof” and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision;
(f)      when the words “includes” or “including” are used herein, they shall be deemed to be followed by the words “without limitation”;
(g)      all references to Sections or Articles or Exhibits refer to Sections or Articles or Exhibits of or to this Agreement unless otherwise indicated; and

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(h)      references to agreements or instruments, or to statutes or regulations, are to such agreements or instruments, or statutes or regulations, as amended from time to time (or to successor statutes and regulations).
ARTICLE 2.     
THE WARRANTS
Section 2.01      Issuance and Acquisition of Warrants . In connection with the Investment Agreement, and as a condition thereunder, the Partnership hereby agrees to issue, subject to the conditions and restrictions contained in this Agreement, to the Investor, and the Investor hereby agrees to acquire from the Partnership, 3,059,055 Warrants. One Warrant certificate may be issued for multiple Warrants.
Section 2.02      Form and Dating; Legends.
(a)      The Warrants will be substantially in the form attached as Exhibit A . The terms and provisions contained in the form of the Warrant attached as Exhibit A constitutes, and are hereby expressly made, a part of this Agreement.
(b)      Except as otherwise provided in Section 2.02(c) or Section 2.08, each Warrant will bear the Restricted Legend.
(c)      (i) If the Partnership determines (upon the advice of counsel and such other certifications and evidence as the Partnership may reasonably require) that a Warrant is eligible for resale pursuant to Rule 144 under the Securities Act (or a successor provision) without the need to satisfy current information or other requirements therein and that the Restricted Legend is no longer necessary or appropriate in order to ensure that subsequent transfers of the Warrant are effected in compliance with the Securities Act, or (ii) after a Warrant is sold pursuant to an effective registration statement under the Securities Act, then, in each case, the Partnership may cancel the Warrant and issue to the Holder thereof (or to its transferee) a new Warrant of like tenor, registered in the name of the Holder thereof (or its transferee), that does not bear the Restricted Legend.
(d)      By its acceptance of any Warrant bearing the Restricted Legend, each Holder thereof and each owner of a beneficial interest therein acknowledges the restrictions on transfer of such Warrant set forth in this Agreement and in the Restricted Legend and agrees that it will transfer such Warrant only in accordance with this Agreement and such legend.
Section 2.03      Execution . An Officer shall execute the Warrants for the Partnership by facsimile or manual signature in the name and on behalf of the Partnership, and a Warrant will be valid upon such execution. If an Officer whose signature is on a Warrant no longer holds that office at the time the Warrant is countersigned, the Warrant will still be valid.
Section 2.04      Replacement Warrants. The Partnership shall issue replacement Warrants for those certificates alleged to have been lost, stolen or destroyed, upon receipt by the Partnership of (i) evidence reasonably satisfactory to the Partnership of such loss, theft or destruction of such Warrants, and (ii) indemnity satisfactory to the Partnership (unless waived by the Partnership). The

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Partnership may, at its option, issue replacement Warrants for mutilated certificates upon presentation thereof without such indemnity.
Section 2.05      Outstanding Warrants .
(a)      Warrants outstanding at any time are all Warrants that have been executed by the Partnership except for:
(i)      Warrants canceled by the Partnership or delivered to the Partnership for cancellation;
(ii)      Warrants exercised by the Holder thereof; and
(iii)      any Warrant which has been replaced pursuant to Section 2.04 unless and until the Partnership receives proof satisfactory to it that the replaced Warrant is held by a bona fide purchaser, in which case the replacement Warrant issued pursuant to Section 2.04 shall be automatically canceled.
Section 2.06      Cancellation . Notwithstanding any Warrants canceled in accordance with Section 3.01, the Partnership must promptly cancel any Warrants previously executed and delivered hereunder which the Partnership may have acquired in any manner whatsoever, and may cancel any Warrants previously executed hereunder which the Partnership has not issued and sold. The Partnership will cancel all Warrants surrendered for transfer, exchange or cancellation in accordance with customary procedures. The Partnership may not issue new Warrants to replace Warrants that have been exercised or delivered to the Partnership for cancellation.
Section 2.07      Registration, Transfer and Exchange .
(a)      The Partnership shall maintain a register (the “ Register ”) for registering the record ownership of the Warrants by the Holders and transfers and exchanges of the Warrants. Each Warrant will be registered in the name of the Holder thereof or its nominee.
(b)      Subject to compliance with Section 2.08, a Holder may transfer a Warrant to another Person or exchange a Warrant for another Warrant by presenting to the Partnership a written request therefor stating the name of the proposed transferee or requesting such an exchange, accompanied by any certification, opinion or other document required by this Agreement. The Partnership will promptly register any transfer or exchange that meets the requirements of this Section and Section 2.08 by noting the same in the Register maintained by the Partnership for such purpose; provided that no transfer or exchange will be effective until it is registered in the Register. Prior to the registration of any transfer, the Partnership and its agents will treat the Person in whose name the Warrant is registered as the owner and Holder thereof for all purposes, and will not be affected by notice to the contrary.
From time to time the Partnership will execute Warrants as necessary in order to permit the registration of a transfer or exchange in accordance with this Section. All Warrants issued upon

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transfer or exchange shall be the duly authorized, executed and delivered Warrants of the Partnership entitled to the benefits of this Agreement.
No service charge will be imposed in connection with any transfer or exchange of any Warrant, but the Partnership may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith. The Partnership shall have no obligation to effect an exchange or register a transfer unless and until it is satisfied that any payments required by the immediately preceding sentence have been made.
(c)      Subject to compliance with Section 2.08(b), if a Warrant is transferred or exchanged for another Warrant, the Partnership will (i) cancel the Warrant being transferred or exchanged, (ii) deliver one or more new Warrants which (in the aggregate) reflect the amount equal to the amount of Warrants being transferred or exchanged to the transferee (in the case of a transfer) or the Holder of the canceled Warrant (in the case of an exchange), registered in the name of such transferee or Holder, as applicable, and (iii) if such transfer or exchange involves less than the entire amount of the canceled Warrant, deliver to the Holder thereof one or more Warrants which (in the aggregate) reflect the amount of the untransferred or unexchanged portion of the canceled Warrant, registered in the name of the Holder thereof.
Section 2.08      Restrictions on Transfer and Exchange .
(a)      The transfer or exchange of any Warrant may only be made in accordance with this Section 2.08 and Section 2.07. The Person requesting the transfer or exchange must deliver or cause to be delivered to the Partnership such certifications and evidence as the Partnership may reasonably require in order to determine that the proposed transfer or exchange is being made in compliance with the Securities Act and any applicable securities laws of any state of the United States.
(b)      No certification is required in connection with any transfer or exchange of any Warrant (or a beneficial interest therein):
(i)      after such Warrant is eligible for resale pursuant to Rule 144 under the Securities Act (or a successor provision) without the need to satisfy current information or other requirements therein; provided that the Partnership may require from any Person requesting a transfer or exchange in reliance upon this clause (i) any other reasonable certifications and evidence in order to support such certificate; or
(ii)      sold pursuant to an effective registration statement.
Any Warrant delivered in reliance upon this paragraph will not bear the Restricted Legend.
ARTICLE 3.     
SEPARATION OF WARRANTS; TERMS OF WARRANTS; EXERCISE OF WARRANTS
Section 3.01      Terms of Warrants; Exercise of Warrants .
(a)      Subject to the terms of this Agreement, each Warrant shall be exercisable for one Common Unit (prior to giving effect to Net Unit Settlement), at the election of the Holder thereof,

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either in full or from time to time in part during the period commencing on the first date that the Market Value per Common Unit is equal to or greater than $4.00, subject to the adjustments provided in Article 5 (the “ Threshold Price ”), and until 5:00 p.m., New York City time, on September 25, 2024 (the “ Expiration Time ”), and shall entitle the Holder thereof to receive from the Partnership Warrant Units pursuant to Section 3.01(c). If all or any of the Warrants are exercised following the declaration of a distribution on Common Units, no decrease to or rescindment of any such declared but unpaid distribution will be made. Each Warrant not exercised prior to the Expiration Time shall become void and all rights thereunder and all rights in respect thereof under this agreement shall cease as of such time.
(b)      In order to exercise all or any of the Warrants (each, a “ Warrant Exercise ”), the Holder thereof must deliver to the Partnership (i) such Warrants and (ii) the form of election to exercise on the reverse thereof duly filled in and signed (the “ Exercise Notice ”).
(c)      If a Holder provides an Exercise Notice pursuant to Section 3.01(b), then the Warrant Exercise shall be “net unit settled” (a “ Net Unit Settlement ”) whereupon the Warrants that are exercised will be converted into Common Units pursuant to a cashless exercise, after which the Partnership will issue to the Holder the Warrant Units equal to the result obtained by (i) subtracting B from A, (ii) dividing the result by A, and (iii) multiplying the quotient by C as set forth in the following equation:
X = ((A - B)/A) × C
where:
X =
the Warrant Units issuable upon exercise pursuant to this paragraph (c).
A =
the Market Value on the day immediately preceding the date on which the Holder delivers the applicable Exercise Notice.
B =
the Exercise Price.
C =
the number of Common Units as to which the Warrants are then being exercised (the “ Exercise Units ”).
If the foregoing calculation results in a negative number, then no Common Units shall be issued upon exercise pursuant to this paragraph (c). For the avoidance of doubt, each Warrant entitles the Holder upon exercise at any time from the first date that the Threshold Price is met until the Expiration Time, to receive one Common Unit, prior to giving effect to Net Unit Settlement.
(d)      Upon compliance with the provisions set forth above, the Partnership shall deliver or cause to be delivered with all reasonable dispatch, to or upon the written order of the Holder and in such name or names as the Holder may designate, a certificate or certificates for the number of whole Warrant Units issuable upon the exercise of such Warrants or other securities or property to which such Holder is entitled, together with cash in lieu of fractional units as provided in Section 5.02 hereof. Such certificate or certificates or other securities or property shall be deemed to have

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been issued, and any person so designated to be named therein shall be deemed to have become a holder of record of such Warrant Units or other securities or property, as of the date of the surrender of such Warrants, notwithstanding that the unit transfer books of the Partnership shall then be closed or the certificates or other securities or property have not been delivered.
(e)      If less than all the Warrants represented by a Warrant certificate are exercised, such Warrant certificate shall be surrendered and a new Warrant certificate of the same tenor and for the number of Warrants which were not exercised shall be executed by the Partnership and registered in such name or names as may be directed in writing by the Holder (subject to Section 2.08) and shall deliver the new Warrant certificate to the Person or Persons entitled to receive the same.
(f)      All Warrant certificates surrendered upon exercise of Warrants shall be canceled by the Partnership. Such canceled Warrant certificates shall then be disposed of by the Partnership in accordance with its standard procedures.
(g)      The Partnership shall keep copies of this Agreement and any notices given or received hereunder available for inspection by the Holders during normal business hours at its office upon reasonable notice to the Partnership by a Holder seeking inspection.
(h)      Certificates, if any, representing Warrant Units shall bear a Restricted Legend (with all references to Warrants therein replaced by references to Common Units, and with such changes thereto as the Partnership may deem appropriate in its reasonable judgment) if (i) the Warrants for which they were issued carried a Restricted Legend or (ii) the Warrant Units are issued in a transaction exempt from registration under the Securities Act (other than the exemption provided by Section 3(a)(9) of the Securities Act), in each case until and unless the circumstances set forth in Section 2.02(c) apply to such Warrant Units, and any transfers thereof shall comply with the Restricted Legend.
Section 3.02      Conditional Exercise . Notwithstanding any other provision hereof, if an exercise of any portion of a Warrant is to be made in connection with a public offering or a sale of the Partnership (pursuant to a merger, sale of assets, or otherwise), such exercise may at the election of the Holder be conditioned upon the consummation of such transaction, in which case such exercise shall not be deemed to be effective until immediately prior to the consummation of such transaction.
Section 3.03      Privatization Event . Upon the occurrence of a Privatization Event, the Partnership shall pay to such Holder of outstanding Warrants as of the date of such Privatization Event, an amount in immediately available funds equal to the Cash Redemption Value for such Warrants, not later than the date which is ten (10) Business Days after such Privatization Event and the Warrants shall thereafter be cancelled. The cash redemption value for any Warrant (the “ Cash Redemption Value ”) will equal the fair value of the Warrant as of the date of such Privatization Event as determined by an Independent Financial Expert. The Cash Redemption Value of the Warrants shall be due and payable within ten (10) Business Days after the date of the applicable Privatization Event.
Section 3.04      Cost Basis Information . For purposes of Section 6045B of the Code and the Treasury Regulations thereunder, the Partnership shall record the cost basis for Warrant Units issued

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pursuant to a cashless exercise at the time the Partnership confirms the number of Warrant Units issuable in connection with the cashless exercise.
ARTICLE 4.     
COVENANTS OF THE PARTNERSHIP
Section 4.01      Maintenance of Office or Agency . The Partnership will maintain in the United States an office or agency where Warrants may be surrendered for registration of transfer or exchange or for presentation for exercise. The Partnership hereby initially designates the Corporate Trust Office of Computershare Trust Company, N.A., a federally chartered trust company, as such office of the Partnership. The Partnership will give prompt written notice to the Holders of any change in the location of such office or agency. The Partnership may also from time to time designate one or more other offices or agencies where the Warrants may be surrendered or presented for any of such purposes and may from time to time rescind such designations. The Partnership will give prompt written notice to the Holders of any such designation or rescission and of any change in the location of any such other office or agency.
Section 4.02      Payment of Taxes . The Partnership will pay all documentary, stamp or similar issue or transfer taxes in respect of the issuance or delivery of Warrant Units upon the exercise of Warrants; provided that the exercising Holder shall be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issue of any Warrants or any Warrant Units in a name other than that of the registered holder of a Warrant surrendered upon exercise.
Section 4.03      Rule 144 Information . For so long as any of the Warrants or Warrant Units remain outstanding and constitute “restricted securities” under Rule 144, the Partnership will (i) make and keep public information available, as those terms are understood and defined in Rule 144, at all times after the date of this Agreement; (ii) so long as a Holder owns any Warrants or Warrant Units, furnish to the Holder upon written request a written statement by the Company as to its compliance with the reporting requirements of the Exchange Act; and (iii) cooperate with the Holders in any sale or transfer of Warrants or Warrant Units pursuant to Rule 144.
Section 4.04      Reservation of Warrant Units .
(a)      The Partnership will at all times reserve and keep available for issuance and delivery, free and clear of all liens, security interests, charges and other encumbrances or restrictions on sale and free and clear of all preemptive rights, such number of its Common Units or other securities of the Partnership as will from time to time be sufficient to permit the exercise in full of all outstanding Warrants pursuant to Net Unit Settlements.
(b)      The Partnership will keep a copy of this Agreement on file with the transfer agent for the Common Units (the “ Transfer Agent ”) and with every subsequent transfer agent for any of the Partnership’s securities issuable upon the exercise of the Warrants. The Partnership will supply such Transfer Agent with duly executed certificates for such purposes and will provide or otherwise make available any cash which may be payable as provided in Section 3.01 or Section 5.02 hereof. The Partnership will furnish such Transfer Agent a copy of all notices of adjustments, and certificates related thereto, transmitted to each Holder pursuant to Section 5.01(d) hereof.

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ARTICLE 5.     
ADJUSTMENTS
Section 5.01      Adjustments . The Threshold Price and the number of Warrant Units issuable upon the exercise of each Warrant pursuant to a Net Unit Settlement are subject to adjustment from time to time upon the occurrence of the events enumerated in this Section 5.01.
In the event that, at any time as a result of the provisions of this Section 5.01, the Holders of the Warrants shall become entitled upon subsequent exercise to receive any shares of Capital Stock of the Partnership other than Common Units, the number of such other shares so receivable upon exercise of this Warrant pursuant to a Net Unit Settlement shall thereafter be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions contained herein.
(a)      Adjustments for Change in Capital Stock .
(i)      If the Partnership pays a dividend (or other distribution) in Common Units to all holders of Common Units, then (A) the Warrant Units in effect immediately following the record date for such dividend (or distribution) shall be multiplied by the following fraction and (B) the Threshold Price in effect immediately following the record date for such dividend (or distribution) shall be divided by the following fraction:
OS 1
OS 0
where:
OS 0
=
the number of Common Units outstanding immediately prior to the record date for such dividend or distribution.
OS 1
=
the sum of (A) the number of Common Units outstanding immediately prior to the record date for such dividend or distribution and (B) the total number of Common Units constituting such dividend.
In any such event, the number of Warrant Units issuable upon exercise of each Warrant at the time of the record date for such dividend or distribution shall be proportionately adjusted so that the Holder, after such date, shall be entitled to purchase the number of Common Units that such Holder would have owned or been entitled to receive in respect of the Common Units subject to the Warrant after such date had the Warrant been exercised immediately prior to such date.
(ii)      If the Partnership issues to all holders of Common Units rights, options or warrants entitling them to subscribe for or purchase Common Units at less than the Market Value determined on the Ex-Date for such issuance, then (A) the Warrant Units in effect immediately following the close of business on the Ex-Date for such issuance shall be multiplied by the following fraction and (B) the Threshold Price in effect immediately following the close of business on the Ex-Date for such issuance shall be divided by the following fraction:

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OS 0  + X
OS 0  + Y
where:
OS 0
=
the number of Common Units outstanding at the close of business on the record date for such issuance.
X
=
the total number of Common Units issuable pursuant to such rights, options or warrants.
Y
=
the number of Common Units equal to the aggregate price payable to exercise such rights, options or warrants divided by the Market Value determined as of the Ex-Date for such issuance.
In any such event, the number of Warrant Units issuable upon the exercise of each Warrant immediately prior to the date of the agreement on pricing of such rights, options or warrants (the “ Initial Number ”) shall be increased to the number obtained by multiplying the Initial Number by a fraction (i) the numerator of which shall be the sum of (x) the number of Common Units outstanding on such date and (y) the number of additional Common Units issuable in connection with such rights, options or warrants and (ii) the denominator of which shall be the sum of (1) the number of Common Units outstanding on such date and (2) the number of Common Units that the aggregate consideration receivable by the Partnership for the total number of Common Units so issuable in connection with such rights, options or warrants would purchase at the Market Value on the last trading day preceding the date of the agreement on pricing such rights, options or warrants.
To the extent that such rights, options or warrants are not exercised in full prior to their expiration or Common Units are otherwise not delivered in full pursuant to such rights or warrants upon the exercise of such rights or warrants, then the number of Warrant Units and Threshold Price shall be readjusted to the number of Warrant Units and Threshold Price that would have then been in effect had the adjustment made upon the issuance of such rights, options or warrants been made on the basis of the delivery of only the number of Common Units actually delivered. If such rights, options or warrants are only exercisable upon the occurrence of certain triggering events, then the number of Warrant Units and Threshold Price shall not be adjusted until such triggering events occur. In determining the aggregate offering price payable for such Common Units, the Partnership shall take into account any consideration received for such rights, options or warrants and the value of such consideration (if other than cash, to be determined by the reasonable judgment of the Board of Directors).
(iii)      If the Partnership subdivides, combines or reclassifies the Common Units into a greater or lesser number of Common Units, then (A) the number of Warrant Units in effect immediately following the effective date of such unit subdivision, combination or reclassification shall be multiplied by the following fraction and (B) the Threshold Price in effect immediately following the effective date of such unit subdivision, combination or reclassification shall be divided by the following fraction:
OS 1
OS 0

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where:
OS 0
=
the number of Common Units outstanding immediately prior to the effective date of such unit subdivision, combination or reclassification.
OS 1
=
the number of Common Units outstanding immediately after the opening of business on the effective date of such unit subdivision, combination or reclassification.
In any such event, the number of Warrant Units issuable upon exercise of each Warrant at the time of the effective date of such subdivision, combination or reclassification shall be proportionately adjusted so that the Holder, after such date, shall be entitled to purchase the number of Common Units that such Holder would have owned or been entitled to receive in respect of the Common Units subject to the Warrant after such date had the Warrant been exercised immediately prior to such date.
(iv)      If the Partnership distributes to all holders of Common Units evidences of indebtedness, shares of Capital Stock (other than Common Units) or other assets (including cash, securities and any other property, but excluding any Specified Distributions), then (A) the number of Warrant Units in effect immediately following the close of business on the record date for such distribution shall be multiplied by the following fraction and (B) the Threshold Price in effect immediately following the close of business on the record date for such distribution shall be divided by the following fraction:
SP 0
SP 0  - FMV
where:
SP 0
=
the Closing Sale Price per Common Unit on the Trading Day immediately preceding the Ex-Date.
FMV
=
the fair market value of the portion of the distribution applicable to one Common Unit on the Trading Day immediately preceding the Ex-Date as determined by the Board of Directors.

In a spin-off, where the Partnership makes a distribution to all holders of Common Units consisting of Capital Stock of any class or series, or similar equity interests of, or relating to, a subsidiary or other business unit, (A) the number of Warrant Units shall be adjusted on the fourteenth Trading Day after the effective date of the distribution by multiplying the number of Warrant Units in effect immediately prior to such fourteenth Trading Day by the following fraction and (B) the Threshold Price shall be adjusted on the fourteenth Trading Day after the effective date of the distribution by dividing the Threshold Price in effect immediately prior to such fourteenth Trading Day by the following fraction:
MP 0 + MP s
MP 0

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where:
MP 0
=
the average of the Closing Sale Price of the Common Units over each of the first 10 Trading Days commencing on and including the fifth Trading Day following the effective date of such distribution.
MP S
=
the average of the closing sale price of the Capital Stock or equity interests representing the portion of the distribution applicable to one Common Unit over each of the first 10 Trading Days commencing on and including the fifth Trading Day following the effective date of such distribution, or, as reported in the principal securities exchange or quotation system or market on which such shares are traded, or if not traded on a national or regional securities exchange or over-the-counter market, the fair market value of the Capital Stock or equity interests representing the portion of the distribution applicable to one Common Unit on such date as determined by the Board of Directors.
In the event that such distribution described in this clause (iv) is not so made, the number of Warrant Units and Threshold Price shall be readjusted, effective as of the date the Board of Directors publicly announces its decision not to pay such dividend or distribution, to the number of Warrant Units that would then be in effect if such dividend distribution had not been declared.
(v)      In case the Partnership effects a Pro Rata Repurchase of Common Units, then (A) the number of Warrant Units shall be adjusted by dividing the number of Warrant Units in effect immediately prior to the effective date of such Pro Rata Repurchase by the following fraction and (B) the Threshold Price shall be adjusted by multiplying the Threshold Price in effect immediately prior to the effective date of such Pro Rata Repurchase by the following fraction: the numerator of such fraction shall be (i) the product of (x) the number of Common Units outstanding immediately before such Pro Rata Repurchase and (y) the Market Value of a Common Unit on the trading day immediately preceding the first public announcement by the Partnership or any of its Affiliates of the intent to effect such Pro Rata Repurchase, minus (ii) the aggregate purchase price of the Pro Rata Repurchase, and the denominator of such fraction shall be the product of (1) the number of Common Units outstanding immediately prior to such Pro Rata Repurchase minus the number of Common Units so repurchased and (2) the Market Value per Common Unit on the trading day immediately preceding the first public announcement by the Partnership or any of its Affiliates of the intent to effect such Pro Rata Repurchase.
(vi)      In case of any Business Combination or reclassification of Common Units (other than a reclassification of Common Units referred to in Section 5.01(a)(iii)), the Holder’s right to receive Warrant Units upon exercise of the Warrants shall be converted into the right to exercise the Warrants to acquire the number of shares of stock or other securities or property (including cash) that the Common Units issuable (at the time of such Business Combination or reclassification) upon exercise of each Warrant immediately prior to such Business Combination or reclassification would have been entitled to receive upon consummation of such Business Combination or reclassification; and in any such case, if necessary, the provisions set forth herein with respect to the rights and interests thereafter

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of the Holder shall be appropriately adjusted so as to be applicable, as nearly as may reasonably be, to the Holder’s right to exercise each Warrant in exchange for any shares of stock or other securities or property pursuant to this Section 5.01(a)(vi). In determining the kind and amount of stock, securities or the property receivable upon exercise of each Warrant following the consummation of such Business Combination, if the holders of Common Units have the right to elect the kind or amount of consideration receivable upon consummation of such Business Combination, then the Holder shall have the right to make a similar election (including being subject to similar proration constraints) upon exercise of each Warrant with respect to the number of shares of stock or other securities or property that the Holder will receive upon exercise of a Warrant.
(vii)      If the Partnership issues Common Units at less than 50% of the Threshold Price per Common Unit, then the Threshold Price in effect at the close of business on the day immediately preceding the issuance date for such issuance shall be divided by the following fraction:
OS 0  + X
OS 0  + Y
where:
OS 0
=
the number of Common Units outstanding at the close of business on the day immediately preceding the issuance date for such issuance.
X
=
the total number of Common Units issued in such issuance.
Y
=
the number of Common Units equal to the aggregate price paid as consideration for the Common Units issued in such issuance divided by 56.25% of the Threshold Price per Common Unit as of the issuance date for such issuance.

The provisions of this clause (vii) shall not apply to an issuance unless such issuance has been approved by a committee of the Board of Directors composed solely of two or more directors who are Independent Directors (as such term is defined in the Second Amended and Restated Limited Liability Company Agreement of the General Partner, as in effect on the date hereof). No adjustment pursuant to this clause (vii) shall be made if such adjustment would result in an increase of the Threshold Price then in effect.

For purposes of this clause (vii), if the Partnership grants, issues or sells Options or Convertible Securities, and the lowest price per unit for which one Common Unit is issuable upon the conversion, exchange or exercise thereof is less than 50.0% of the Threshold Price per Common Unit, then such Common Unit shall be deemed to be outstanding and to have been issued and sold by the Partnership at the time of the issuance of such security for such price per unit. For purposes of this paragraph , the “lowest price per unit for which one Common Unit is issuable upon the conversion, exchange or exercise thereof” shall be equal to the sum of the lowest

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amounts of consideration (if any) received or receivable by the Partnership with respect to any one Common Unit upon the issuance of such security and upon conversion, exchange or exercise thereof less any consideration paid or payable by the Partnership with respect to such one Common Unit upon the issuance of such security and upon conversion, exchange or exercise thereof. No further adjustment of the Threshold Price shall be made upon the actual issuance of such Common Units upon the conversion, exchange or exercise or such security or upon the actual issuance of such Common Unit.

For purposes of this clause (vii), if the purchase price provided for in any Options, the additional consideration, if any, payable upon the issue, conversion, exercise or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertible into or exercisable or exchangeable for Common Units increases or decreases at any time, the Threshold Price in effect at the time of such increase or decrease shall be adjusted to the Threshold Price which would have been in effect at such time had such Options or Convertible Securities provided for such increased or decreased purchase price, additional consideration or increased or decreased conversion rate, as the case may be, at the time initially granted, issued or sold. For purposes of this paragraph, if the terms of any Option or Convertible Security that was outstanding as of the date of this Agreement are increased or decreased in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the Common Units deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such increase or decrease. No adjustment pursuant to this paragraph shall be made if such adjustment would result in an increase of the Threshold Price.

For purposes of this clause (vii), in case any Option is issued in connection with the issue or sale of other securities of the Partnership, together comprising one integrated transaction, (A) the Options will be deemed to have been issued for the Option Value of such Options and (B) the other securities issued or sold in such integrated transaction shall be deemed to have been issued for the difference of (x) the aggregate consideration received by the Partnership less any consideration paid or payable by the Partnership pursuant to the terms of such other securities of the Partnership, less (y) the Option Value. If any Common Units, Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the net amount received by the Partnership therefor. If any Common Units, Options or Convertible Securities are issued or sold for consideration other than cash, the amount of such consideration received by the Partnership will be the fair market value of such consideration, except where such consideration consists of securities, in which case the amount of consideration received by the Partnership will be the closing sale price of such security on the date of receipt. If any Common Units, Options or Convertible Securities are issued to the owners of the non-surviving entity in connection with any merger in which the Partnership is the surviving entity, the amount of consideration therefor will be deemed to be the fair market value of such portion of the net assets and business of

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the non-surviving entity as is attributable to such Common Units, Options or Convertible Securities, as the case may be.


(viii)      The Partnership reserves the right to make such reductions in the Exercise Price or increases to the number of Warrant Units as it considers advisable in order that any event treated for Federal income tax purposes as a dividend of stock or stock rights will not be taxable to the recipients. In the event the Partnership elects to make such a reduction in the Exercise Price or increase in the number of Warrant Units, the Partnership shall comply with the requirements of Rule 14e-1 under the Exchange Act, and any other securities laws and regulations thereunder if and to the extent that such laws and regulations are applicable in connection with the reduction of the Exercise Price or increase in the number of Warrant Units.
(ix)      Notwithstanding any other provisions of this Section 5.01(a), rights or warrants distributed by the Partnership to all holders of Common Units entitling the holders thereof to subscribe for or purchase shares of the Partnership’s Capital Stock (either initially or under certain circumstances), which rights or warrants, until the occurrence of a specified event or events (“ Trigger Event ”): (A) are deemed to be transferred with such Common Units; (B) are not exercisable; and (C) are also issued in respect of future issuances of Common Units, shall be deemed not to have been distributed for purposes of this Section 5.01(a) (and no adjustment to the number of Warrant Units or Threshold Price under this Section 5.01(a) will be required) until the occurrence of the earliest Trigger Event, whereupon such rights and warrants shall be deemed to have been distributed and an appropriate adjustment (if any is required) to the number of Warrant Units and Threshold Price shall be made under Section 5.01(a)(ii). In addition, in the event of any distribution (or deemed distribution) of rights or warrants, or any Trigger Event or other event with respect thereto that was counted for purposes of calculating a distribution amount for which an adjustment to the number of Warrant Units and Threshold Price under this Section 5.01(a) was made, (1) in the case of any such rights or warrants that shall all have been redeemed or repurchased without exercise by any holders thereof, the number of Warrant Units and Threshold Price shall be readjusted upon such final redemption or repurchase to give effect to such distribution or Trigger Event, as the case may be, as though it were a cash distribution, equal to the per unit redemption or repurchase price received by a holder or holders of Common Units with respect to such rights or warrants (assuming such holder had retained such rights or warrants), made to all holders of Common Units as of the date of such redemption or repurchase, and (2) in the case of such rights or warrants that shall have expired or been terminated without exercise thereof, the number of Warrant Units and Threshold Price shall be readjusted as if such expired or terminated rights and warrants had not been issued. To the extent that the Partnership has a rights plan or agreement in effect upon exercise of the Warrants, which rights plan provides for rights or warrants of the type described in this clause, then upon exercise of the Warrants pursuant to a Net Unit Settlement, the Holder will receive, in addition to the Common Units to which he is entitled, a corresponding number of rights in accordance with the rights plan, unless a Trigger Event has occurred and the adjustments to the number of Warrant Units with respect thereto have

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been made in accordance with the foregoing. In lieu of any such adjustment, the Partnership may amend such applicable unitholder rights plan or agreement to provide that upon exercise of the Warrants pursuant to a Net Unit Settlement, the Holders will receive, in addition to the Common Units issuable upon such exercise, the rights that would have attached to such Common Units if the Trigger Event had not occurred under such applicable unitholder rights plan or agreement.
(b)      Notwithstanding anything to the contrary in Section 5.01, no adjustment to the number of Warrant Units shall be made with respect to any distribution or other transaction if Holders are entitled to participate in such distribution or transaction as if they held a number of Common Units issuable upon exercise of the Warrants pursuant to a Net Unit Settlement immediately prior to such event, without having to exercise their Warrants.
(c)      If the Partnership shall take a record of the holders of its Common Units for the purpose of entitling them to receive a dividend or other distribution, and shall thereafter (and before the dividend or distribution has been paid or delivered to unitholders) abandon its plan to pay or deliver such dividend or distribution, then thereafter no adjustment in the number of Warrant Units or Threshold Price then in effect shall be required by reason of the taking of such record.
(d)      Notice of Adjustment. Whenever the number of Warrant Units is adjusted, the Partnership shall provide the notices required by Section 5.03 hereof.
(e)      Fair Market Value Determination . Notwithstanding anything to the contrary herein, whenever the Board of Directors is permitted or required to determine fair market value, such determination shall be made in good faith. If the Board of Directors is unable to determine the fair market value, or if the Holders of more than fifty percent (50%) of all of the Warrants then outstanding (collectively, the “ Requesting Holders ”) disagree with the Board of Director’s determination of fair market value by written notice delivered to the Partnership within thirty (30) days after the determination thereof by the Board of Directors is communicated to the Holders affected thereby, which notice specifies the Requesting Holders’ determination of such fair market value, then following a thirty (30) day period in which the Partnership and the Requesting Holders shall attempt to resolve the differences in their fair market value determinations, an Independent Financial Expert shall determine such fair market value. Such Independent Financial Expert’s determination of such fair market value shall be final, binding and conclusive on the Partnership and the Holders. Any and all costs and fees of such Independent Financial Expert shall be split equally between the Partnership, on the one hand, and the Requesting Holders, on the other.
(f)      When Issuance or Payment May be Deferred . In any case in which this Section 5.01 shall require that an adjustment in the number of Warrant Units be made effective as of a record date for a specified event, the Partnership may elect to defer until the occurrence of such event (i) issuing to the Holder of any Warrant exercised after such record date the number of Warrant Units and other Capital Stock of the Partnership, if any, issuable upon such exercise and pursuant to a Net Unit Settlement over and above the Warrant Units and other Capital Stock of the Partnership, if any, issuable upon such exercise and (ii) paying to such Holder any amount in cash in lieu of a fractional unit pursuant to Section 5.02 hereof; provided that the Partnership shall deliver to such Holder a due bill or other appropriate instrument evidencing such Holder’s right to receive such

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additional Warrant Units, other Capital Stock and cash upon the occurrence of the event requiring such adjustment.
(g)      Form of Warrants . Irrespective of any adjustments in the number of Warrant Units or the number of units purchasable upon the exercise of the Warrants, Warrants theretofore or thereafter issued may continue to express the same price and number and kind of units as are stated in the Warrants initially issuable pursuant to this Agreement.
Section 5.02      Fractional Interests . The Partnership shall not issue fractional Warrant Units or scrip representing fractional units on the exercise of Warrants. If more than one Warrant shall be presented for exercise in full at the same time by the same Holder, the number of full Warrant Units which shall be issuable upon the exercise thereof shall be computed on the basis of the aggregate number of Warrant Units issuable on exercise of the Warrants so presented. If any fraction of a Warrant Unit would, except for the provisions of this Section 5.02, be issuable on the exercise of any Warrants (or specified portion thereof), the Partnership shall pay an amount in cash equal to the current Closing Sale Price per Warrant Unit, as determined on the date the Warrant is presented for exercise, multiplied by such fraction, computed to the nearest whole U.S. cent.
Section 5.03      Notices to Warrantholders .
(a)      Upon any adjustment of the number of Warrant Units pursuant to Section 5.01 hereof, the Partnership shall promptly thereafter cause to be delivered to each of the Holders written notice, by first-class mail, postage prepaid, setting forth the number of Warrant Units after such adjustment and setting forth in reasonable detail the method of calculation and the facts upon which such calculations are based and setting forth the number of Warrant Units (or portion thereof) or other securities or property issuable after such adjustment, upon exercise of a Warrant. Where appropriate, such notice may be given in advance and included as a part of the notice required to be mailed under the other provisions of this Section 5.03.
(b)      In case:
(i)      the Partnership shall authorize the issuance to all holders of Common Units of rights, options or warrants to subscribe for or purchase Common Units or of any other subscription rights or warrants;
(ii)      the Partnership shall authorize the distribution to all holders of Common Units of evidences of its indebtedness or assets (other than dividends or distributions referred to in Section 5.01(a) hereof);
(iii)      of any reclassification or change of Common Units issuable upon exercise of the Warrants, or a tender offer or exchange offer for Common Units by the Partnership;
(iv)      of the voluntary or involuntary dissolution, liquidation or winding up of the Partnership; or

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(v)      the Partnership proposes to take any action which would require an adjustment of the number of Warrant Units pursuant to Section 5.01 hereof;
then the Partnership shall cause to be given to each of the Holders, at least 10 days prior to any applicable record date, or promptly in the case of events for which there is no record date, by first-class mail, postage prepaid, a written notice stating (x) the date as of which the holders of record of Common Units to be entitled to receive any such rights, options, warrants or distribution are to be determined, (y) the initial expiration date set forth in any tender offer or exchange offer for Common Units, or (z) the date on which any such consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up is expected to become effective or consummated, and the date as of which it is expected that holders of record of Common Units shall be entitled to exchange such units for securities or other property, if any, deliverable upon such reclassification, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up. The failure to give the notice required by this Section 5.03 or any defect therein shall not affect the legality or validity of any distribution, right, option, warrant, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up, or the vote upon any action.
Section 5.04      No Rights as Unitholders . Nothing contained in this Agreement or the Warrants shall be construed as conferring upon the holders of Warrants the right to vote or to consent or to receive notice as unitholders in respect of the meetings of unitholders or any other matter, or any rights whatsoever, including the right to receive dividends, as unitholders of the Partnership, or the right to share in the assets of the Partnership in the event of its liquidation, dissolution or winding up, except in respect of Common Units received following exercise of Warrants. In addition, nothing contained in this Agreement or the Warrants shall be construed as imposing any liabilities on the Holder as a unitholder of the Partnership, whether such liabilities are asserted by the Partnership or by creditors of the Partnership.
ARTICLE 6.     
MISCELLANEOUS
Section 6.01      Warrantholder Actions .
(a)      Any notice, consent to amendment, supplement or waiver provided by this Agreement to be given by a Holder (an “ act ”) may be evidenced by an instrument signed by the Holder delivered to the Partnership.
(b)      Any act by the Holder of any Warrant binds that Holder and every subsequent Holder of a Warrant certificate that evidences the same Warrant of the acting Holder, even if no notation thereof appears on the Warrant certificate. Subject to Section 6.02(c), a Holder may revoke an act as to its Warrants, but only if the Partnership receives the notice of revocation before the date the amendment or waiver or other consequence of the act becomes effective.
(c)      The Partnership may, but is not obligated to, fix a record date for the purpose of determining the Holders entitled to act with respect to any amendment or waiver or in any other regard. If a record date is fixed, those Persons that were Holders at such record date and only those Persons will be entitled to act, or to revoke any previous act, whether or not those Persons continue

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to be Holders after the record date. No act will be valid or effective for more than 90 days after the record date, unless an earlier date is required by the Partnership Agreement.
Section 6.02      Notices .
(a)      All notices, requests and other communications to any party hereunder shall be in writing and shall be deemed given if delivered personally, by facsimile (which is confirmed), emailed (which is confirmed) or sent by overnight courier (providing proof of delivery) to the parties at the following addresses:
If to the Partnership :
Teekay Offshore Partners L.P.
4th Floor, Belvedere Building
69 Pitts Bay Road
Hamilton HM 08, Bermuda
Attention:    Corporate Secretary
Facsimile:    (441) 292-3931
Email:         Edie.Robinson@teekay.com
If to the Investor:
Teekay Shipping Limited
4th Floor, Belvedere Building
69 Pitts Bay Road
Hamilton HM 08, Bermuda
Attention:    President
Facsimile:    (441) 292-3931
Email:         Edie.Robinson@teekay.com

with a copy to (which copy alone shall not constitute notice):

Vinson & Elkins LLP
666 Fifth Avenue, 26th Floor
New York, NY 10103-0040
Attention:     Mike Rosenwasser
Facsimile:     (917) 206-8100
Email:         mrosenwasser@velaw.com

If to a Holder:
The address of such Holder as provided by the Holder to the Partnership.
The Partnership by notice to the Investor and Holders, and the Investor and each Holder by written notice to the Partnership, may designate additional or different addresses for subsequent notices or communications. All such notices, requests and other communications shall be deemed

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received on the date of actual receipt by the recipient thereof if received prior to 5:00 p.m. local time in the place of receipt and such day is a Business Day in the place of receipt. Otherwise, any such notices, requests and other communications shall be deemed not to have been received until the next succeeding Business Day in the place of receipt.
(b)      Defect in mailing a notice or communication to any particular Holder will not affect its sufficiency with respect to other Holders.
(c)      Where this Agreement provides for notice, the notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and the waiver will be the equivalent of the notice.
Section 6.03      Supplements and Amendments .
(a)      The Partnership and the Investor may amend or supplement this Agreement or the Warrants without notice to or the consent of any Holder (other than the Investor):
(i)      to cure any ambiguity, omission, inconsistency or mistake in this Agreement or the Warrants in a manner that is not inconsistent with the provisions of this Agreement and that does not adversely affect the rights, preferences and privileges of the Warrants or any Holder; or
(ii)      to make any other change that does not adversely affect the rights of any Holder.
(b)      Except as otherwise provided in paragraphs (a) or (c), this Agreement and the Warrants may be amended only by means of a written amendment signed by the Partnership, the Investor and the Holders of 66 2 / 3 % of the outstanding Warrants; provided , however , that any such amendment, modification or supplement to, this Agreement that would materially and adversely affect the economic terms of the Warrants of any Holder shall require the affirmative vote or consent of the holders of at least 80% of the outstanding Warrants. Any amendment or modification of or supplement to this Agreement or the Warrants, any waiver of any provision of this Agreement, and any consent to any departure by the Partnership, the Investor or any Holder from the terms of any provision of this Agreement shall be effective only in the specific instance and for the specific purpose for which such amendment, supplement, modification, waiver or consent has been made or given. In addition, any term of a specific Warrant may be amended or waived with the written consent of the Partnership and the Holder of such Warrant.
(c)      Notwithstanding the provisions of paragraph (b), without the consent of each Holder affected, an amendment or waiver may not:
(i)      increase the Exercise Price;
(ii)      reduce the term of the Warrants;
(iii)      make a material and adverse change that does not equally affect all Warrants; or

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(iv)      decrease the number of Common Units, cash or other securities or property issuable upon exercise of the Warrants,
except, in each case, for adjustments expressly provided for in this Agreement.
(d)      It is not necessary for Holders to approve the particular form of any proposed amendment, supplement or waiver if their consent approves the substance thereof.
(e)      An amendment, supplement or waiver under this Section will become effective on receipt by the Partnership of written consents from the Holders of the requisite percentage of the outstanding Warrants. After an amendment, supplement or waiver under this Section becomes effective, the Partnership will send to the Holders affected thereby a notice describing the amendment, supplement or waiver in reasonable detail. Any failure of the Partnership to send such notice, or any defect therein, will not, however, in any way impair or affect the validity of any such supplemental indenture or waiver.
(f)      After an amendment, supplement or waiver becomes effective, it will bind every Holder unless it is of the type requiring the consent of each Holder affected. If the amendment, supplement or waiver is of the type requiring the consent of each Holder affected, the amendment, supplement or waiver will bind each Holder that has consented to it and every subsequent Holder of a Warrant with respect to which consent was granted.
(g)      If an amendment, supplement or waiver changes the terms of a Warrant, the Partnership may require the Holder to deliver it to the Partnership so that the Partnership may place an appropriate notation of the changed terms on the Warrant and return it to the Holder, or exchange it for a new Warrant that reflects the changed terms. However, the effectiveness of the amendment, supplement or waiver is not affected by any failure to annotate or exchange Warrants in this fashion.
Section 6.04      Governing Law . This Agreement and the Warrants shall be governed by, and construed in accordance with, the laws of the State of New York without regard to principles of conflicts of laws. Any action against any party relating to the foregoing shall be brought in any federal or state court of competent jurisdiction located within the State of New York, and the parties hereto hereby irrevocably submit to the non-exclusive jurisdiction of any federal or state court located within the State of New York over any such action. The parties hereby irrevocably waive, to the fullest extent permitted by applicable law, any objection which they may now or hereafter have to the laying of venue of any such dispute brought in such court or any defense of inconvenient forum for the maintenance of such dispute. Each of the parties hereto agrees that a judgment in any such dispute may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.
Section 6.05      No Adverse Interpretation of Other Agreements . This Agreement may not be used to interpret another agreement of the Partnership, and no such agreement may be used to interpret this Agreement.
Section 6.06      Successors and Assigns . All agreements of the Partnership in this Agreement and the Warrants will bind its successors and assigns. Subject to the transfer conditions referred to

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in any legend in effect as set forth herein and Section 2.07 and Section 2.08, each Holder may freely assign its Warrants and its rights under this Agreement, in whole or in part, to any Person.
Section 6.07      Duplicate Originals . The parties may sign any number of copies of this Agreement. Each signed copy shall be deemed an original, but all of them together represent the same agreement. A signature to this agreement executed/transmitted electronically will have the same authority, effect and enforceability as an original signature.
Section 6.08      Separability . In case any provision in this Agreement or in the Warrants is invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions will not in any way be affected or impaired thereby.
Section 6.09      Table of Contents and Headings . The Table of Contents and headings of the Articles and Sections of this Agreement have been inserted for convenience of reference only, are not to be considered a part of this Agreement and in no way modify or restrict any of the terms and provisions of this Agreement.
Section 6.10      Benefits of this Agreement . Nothing in this Agreement shall be construed to give to any Person other than the Partnership, the Investor and the registered holders of Warrants any legal or equitable right, remedy or claim under this Agreement. This Agreement shall be for the sole and exclusive benefit of the Partnership, the Investor and the registered holders of Warrants.
Section 6.11      Good Faith Determinations . Notwithstanding anything to the contrary herein, whenever the Board of Directors is permitted or required to determine fair market value, such determination shall be made in good faith.
Section 6.12      Obligations Limited to Parties to Agreement . Each of the parties hereto covenants, agrees and acknowledges that, other than as set forth herein, no Person other than the Investor, the Holders, their respective permitted assignees and the Partnership shall have any obligation hereunder and that, notwithstanding that one or more of such Persons may be a corporation, partnership or limited liability company, no recourse under this Agreement or under any documents or instruments delivered in connection herewith shall be had against any former, current or future director, officer, employee, agent, general or limited partner, manager, member, stockholder or Affiliate of any of such Persons or their respective permitted assignees, or any former, current or future director, officer, employee, agent, general or limited partner, manager, member, stockholder or Affiliate of any of the foregoing, whether by the enforcement of any assessment or by any legal or equitable proceeding, or by virtue of any applicable law, it being expressly agreed and acknowledged that no personal liability whatsoever shall attach to, be imposed on or otherwise be incurred by any former, current or future director, officer, employee, agent, general or limited partner, manager, member, stockholder or Affiliate of any of such Persons or any of their respective assignees, or any former, current or future director, officer, employee, agent, general or limited partner, manager, member, stockholder or Affiliate of any of the foregoing, as such, for any obligations of such Persons or their respective permitted assignees under this Agreement or any documents or instruments delivered in connection herewith or for any claim based on, in respect of or by reason of such obligation or its creation, except, in each case, for any assignee of any Holder hereunder.

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Section 6.13      Confidentiality . The Partnership agrees that all books, records, information and data pertaining to the Holders, including inter alia, personal, non-public warrant holder information, which are exchanged or received pursuant to the negotiation or the carrying out of this Agreement shall remain confidential, and shall not be voluntarily disclosed to any other Person, except as may be required by law, including pursuant to subpoenas from state or federal government authorities ( e.g. , in divorce and criminal actions).
Section 6.14     

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IN WITNESS WHEREOF , the parties hereto have caused this Agreement to be duly executed, as of the day and year first above written.

TEEKAY OFFSHORE PARTNERS L.P.
 
By:
Teekay Offshore GP L.L.C.,
 
its general partner
 
By:
/s/ Edith Robinson
 
Name: Edith Robinson
 
Title: Secretary


TEEKAY SHIPPING LIMITED
 
By
/s/ Edith Robinson
 
Name: Edith Robinson
 
Title: President




Signature Page to Warrant Agreement

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EXHIBIT A
[Face of Warrant Certificate]
[Insert legend, if applicable]
September 25, 2017
No.__________    Warrants
Warrant Certificate
This Warrant Certificate certifies that _____________________ or its registered assigns, is the registered holder of _____________________ Warrants (the “ Warrants ”), exercisable for common units (the “ Common Units ”) representing limited partnership interests in Teekay Offshore Partners L.P., a Republic of the Marshall Islands limited partnership (the “ Partnership ”). Each Warrant entitles the registered holder upon exercise at any time from the first date that the Market Value per Common Unit is equal to or greater than four dollars and zero cents ($4.00), subject to the adjustments provided in the Warrant Agreement (the “ Threshold Price ”) until 5:00 p.m., New York City time, on September 25, 2024 (the “ Expiration Time ”), to receive from the Partnership a number of fully paid and nonassessable Common Units (the “ Warrant Units ”) at an exercise price (the “ Exercise Price ”) of zero dollars and one cent ($0.01) pursuant to a Net Unit Settlement, subject to the conditions and terms set forth herein and in the Warrant Agreement referred to on the reverse hereof. The number of Warrant Units issuable is subject to adjustment upon the occurrence of certain events set forth in the Warrant Agreement.
Reference is hereby made to the further provisions of this Warrant Certificate set forth on the reverse hereof and such further provisions shall for all purposes have the same effect as though fully set forth at this place.

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IN WITNESS WHEREOF, the Partnership has caused this Warrant Certificate to be signed below by its duly authorized officer as of the date first set forth above.

TEEKAY OFFSHORE PARTNERS L.P.
By:    Teekay Offshore GP L.L.C.,
its general partner
By:        

    Name:    

    Title:    

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TEEKAY OFFSHORE PARTNERS L.P.
[Reverse of Warrant Certificate]
1.
Warrant Agreement
The Warrants evidenced by this Warrant Certificate are part of a duly authorized issue of Warrants issued or to be issued pursuant to a Warrant Agreement dated as of September 25, 2017 (the “ Warrant Agreement ”), between the Partnership and Teekay Shipping Limited, a Bermuda corporation (the “ Investor ”), which Warrant Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to for a description of the rights, limitation of rights, obligations, duties and immunities thereunder of the Partnership, the Investor and the holders (the words “ holders ” or “ holder ” meaning the registered holders or registered holder) of the Warrants. In the event of an inconsistency or conflict between the terms of this Warrant and the Warrant Agreement, the terms of the Warrant Agreement will prevail.
2.
Exercise
Warrants may be exercised at any time from the first date the Market Value per Common Unit is equal to or greater than the Threshold Price until the Expiration Time. In order to exercise all or any of the Warrants represented by this Warrant Certificate, the holder must deliver to the Partnership this Warrant Certificate and the form of election to exercise on the reverse hereof duly completed. The exercise of Warrants is subject to certain restrictions on exercise as described in the Warrant Agreement.
The Partnership, pursuant to the terms of the Warrant Agreement, will net settle the Warrants which are exercised into Common Units as provided in the Warrant Agreement. No Warrant may be exercised after the Expiration Time, and to the extent not exercised by such time the Warrants shall become void.
3.
Adjustments
The Warrant Agreement provides that, upon the occurrence of certain events, the number of Common Units issuable upon the exercise of each Warrant and the Threshold Price shall be adjusted.
4.
No Fractional Units
No fractions of Common Units will be issued upon the exercise of any Warrant, but the Partnership will pay the cash value thereof determined as provided in the Warrant Agreement.
5.
Registered Form; Transfer and Exchange
The Warrants have been issued in registered form. Warrant Certificates, when surrendered at the office or agency of the Partnership by the registered holder thereof, may be exchanged, in

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the manner and subject to the limitations provided in the Warrant Agreement, but without payment of any service charge (except as specified in the Warrant Agreement), for another Warrant Certificate or Warrant Certificate of like tenor evidencing in the aggregate a like number of Warrants.
Upon due presentation for registration of transfer of this Warrant Certificate at the office or agency of the Partnership a new Warrant Certificate or Warrant Certificate of like tenor and evidencing in the aggregate a like number of Warrants shall be issued to the transferee(s) in exchange for this Warrant Certificate, subject to the limitations provided in the Warrant Agreement, without charge except for any tax or other governmental charge imposed in connection therewith.
The Partnership may deem and treat the registered holder(s) thereof as the absolute owner(s) of this Warrant Certificate (notwithstanding any notation of ownership or other writing hereon made by anyone), for the purpose of any exercise hereof, of any distribution to the holder(s) hereof, and for all other purposes. This Warrant Certificate does not entitle any holder hereof to any rights of a unitholder of the Partnership.
6.
Governing Law; Jurisdiction
This Warrant shall be governed by and construed in accordance with the internal laws of the State of New York without regard to principles of conflicts of laws. The Partnership and the Holder of this Warrant each hereby irrevocably and unconditionally:
(i) submits for itself and its property in any legal action or proceeding relating solely to this Warrant or the transactions contemplated hereby, to the non-exclusive jurisdiction of the courts of the state of New York and the Federal courts of the United States of America located within the State of New York, and appellate courts thereof;
(ii)      consents that any such action or proceeding may be brought in such courts, and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same to the extent permitted by applicable law;
(iii)      agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to the party, as the case may be, at its address set forth in the Register or at such other address of which the other party shall have been notified pursuant thereto;
(iv)      agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction for recognition and enforcement of any judgment or if jurisdiction in the courts referenced in the foregoing clause (i) are not available despite the intentions of the parties hereto;
(v)      agrees that final judgment in any such suit, action or proceeding brought in such a court may be enforced in the courts of any jurisdiction to which such party is subject

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by a suit upon such judgment, provided that service of process is effected upon such party in the manner specified herein or as otherwise permitted by law;
(vi)      agrees that to the extent that such party has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process with respect to itself or its property, such party hereby irrevocably waives such immunity in respect of its obligations under this Warrant Certificate, to the extent permitted by law; and
(vii)      IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING IN RELATION TO THIS AGREEMENT AND THE WARRANT ISSUED.
A copy of the Warrant Agreement may be obtained by the holder hereof upon written request to the Partnership.

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[Form of Exercise Notice]
(To Be Executed Upon Exercise of Warrant)
The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate for _______________________ Common Units to be net unit settled pursuant to the Net Unit Settlement procedures set forth in the Warrant Agreement.
In a Net Unit Settlement, the undersigned requests that a certificate for such units be registered in the name of _______________________, whose address is _____________________ and that such units be delivered to _______________________, whose address is _______________________. If said number of units is less than all of the Common Units issuable hereunder, the undersigned requests that a new Warrant representing the remaining balance of such units be registered in the name of _______________________, whose address is _________________, and that such Warrant be delivered to _______________________, whose address is _______________________.

By          
NOTICE: The signature to this assignment must correspond with the name as written upon the face of the within-mentioned instrument in every particular, without alteration or any change whatsoever.

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[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s), assign(s) and transfer(s) unto ________________________________________________ (the “ Assignee ”).                (Please type or print block letters)
        

    (Please print or typewrite name and address including zip code of assignee)
the within Warrant and all rights thereunder (the “ Securities ”), hereby irrevocably constituting and appointing
    

attorney to transfer said Warrant Certificate on the books of the Partnership with full power of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED ON ALL CERTIFICATES BEARING A RESTRICTED LEGEND]
In connection with any transfer of this Warrant Certificate occurring prior to the removal of the Restricted Legend, the undersigned confirms (i) the understanding that the Securities have not been registered under the Securities Act of 1933, as amended; and (ii) that such transfer is made without utilizing any general solicitation or general advertising.

Date:          
    

Seller
By          
NOTICE: The signature to this assignment must correspond with the name as written upon the face of the within-mentioned instrument in every particular, without alteration or any change whatsoever.



    A-7

KE 47847727
137013624.2


EXHIBIT B
RESTRICTED LEGEND
THIS WARRANT AND THE UNDERLYING COMMON UNITS THAT MAY BE ISSUED UPON ITS EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.




    B-1
KE 47847727
137013624.2
Exhibit 4.3

SECOND AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT

OF

TEEKAY OFFSHORE GP L.L.C.
A MARSHALL ISLANDS LIMITED LIABILITY COMPANY
Dated as of September 25, 2017
THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS INSTRUMENT IS SUBJECT TO THE CONDITIONS SPECIFIED IN THIS LIMITED LIABILITY COMPANY AGREEMENT AMONG THE MEMBERS OF THE ISSUER.
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR TRANSFERRED IN ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER.






136199440.19  
 
 




 
TABLE OF CONTENTS
 
ARTICLE I Definitions
1

1.1
Definitions
1

1.2
Other Definitional Provisions
9

 
 
 
ARTICLE II Organization of the Company
9

2.1
Formation
9

2.2
Name
9

2.3
Registered Address; Agent
10

2.4
Principal Office
10

2.5
Term
10

2.6
Purposes and Powers
10

 
 
 
ARTICLE III Management of the Company
10

3.1
Board of Directors
10

3.2
Officers
20

3.3
Fiduciary Duties
22

3.4
Performance of Duties; Liability of Directors and Officers
22

3.5
Indemnification
23

3.6
Prospective Amendments
24

 
 
 
ARTICLE IV Members
24

4.1
Registered Members
24

4.2
Limitation of Liability
24

4.3
Withdrawal; Resignation
24

4.4
Death of a Member
24

4.5
Authority
25

4.6
Outside Activities
25

4.7
No Effect on Lending Relationship
25

 
 
 
ARTICLE V Shares; Membership
25

5.1
Shares Generally
26

5.2
Authorization of Shares
26

5.3
Issuance of Shares
26

5.4
New Members from the Issuance of Shares
26

5.5
Option Exercise; Right of Repurchase; Right of First Offer
31

5.6
Drag Rights
31

5.7
Share Ownership
31

5.8
Preemptive Rights    
32









i
 



 
TABLE OF CONTENTS (contd.)
 
ARTICLE VI Capital Contributions and Capital Accounts
32

6.1
Capital Contributions    
32

6.2
Capital Accounts
32

6.3
Negative Capital Accounts
34

6.4
No Withdrawal
34

6.5
Loans from Members    
34

6.6
Status of Capital Contributions
34

 
 
 
ARTICLE VII Distributions
34

7.1
Generally
34

7.2
Distributions
35

7.3
Withholding Taxes
35

 
 
 
ARTICLE VIII U.S. Tax Allocations
35

8.1
Allocations of Profits and Losses
35

8.2
Regulatory and Special Allocations
35

8.3
Curative Allocations
36

8.4
Tax Allocations
37

 
 
 
ARTICLE IX Elections and Reports
37

9.1
Generally
37

9.2
Fiscal Year
38

9.3
Bank Accounts
38

9.4
Tax Status
38

9.5
Reports
38

9.6
Tax Elections
38

9.7
Tax Controversies
39

9.8
Passive Foreign Investment Company
39

 
 
 
ARTICLE X Dissolution and Liquidation
40

10.1
Dissolution
40

10.2
Liquidation
40

 
 
 
ARTICLE XI Transfer of Shares
42

11.1
Restrictions
42

11.2
General Restrictions on Transfer
42

11.3
Procedures for Transfer
43

11.4
Legend
43

11.5
Limitations
43

 
 
 
ARTICLE XII Certain Agreements
44

12.1
Financial Statements and Confidentiality.
44







136199440.19  
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ARTICLE XIII Miscellaneous Provisions
46

13.1
Notices
46

13.2
Governing Law
46

13.3
No Action for Partition
46

13.4
Headings and Sections
46

13.5
Amendments
46

13.6
Interpretation
47

13.7
Binding Effect
47

13.8
Counterparts; Email and Facsimile
47

13.9
Severability
47

13.10
Remedies
47

13.11
Business Days
48

13.12
Waiver of Jury Trial
48

13.13
No Strict Construction
48

13.14
Entire Agreement and Incorporation by Reference
48

13.15
Parties in Interest
48

13.16
Venue and Submission to Jurisdiction
48

13.17
Further Assurances
49

13.18
Compliance
49

13.19
No Vote to Remove the General Partner
49

13.20
Successor Corporation
49

 
 
 
SCHEDULES :
 
Schedule A
Members Schedule as of September 25, 2017
 
Schedule B
Officers of the Company as of September 25, 2017
 
Schedule C
Consents
 
 
 
 
EXHIBITS :
 
Exhibit A
Certificate of Formation
 
Exhibit B
Form of Joinder to Second Amended and Restated Limited LiabilityCompany Agreement
 
 
 
 










136199440.19  
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SECOND AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
TEEKAY OFFSHORE GP L.L.C.
This SECOND AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (this “ Agreement ”), dated as of September 25, 2017 (the “ Effective Date ”), of Teekay Offshore GP L.L.C., a Marshall Islands non-resident domestic limited liability company (the “ Company ”), is by and among Teekay Holdings Limited, a Bermuda corporation (“ TK ”), and Brookfield TK TOGP L.P., a Bermuda limited partnership (“ Brookfield ”).
WHEREAS, the Company was formed on August 25, 2006 pursuant to the Act, subject to a Limited Liability Company Agreement, dated as of August 25, 2006 (as subsequently amended and restated on December 19, 2006 and further amended on February 25, 2008 and February 29, 2008, the “ Limited Liability Company Agreement ”);
WHEREAS, TK and Brookfield are parties to that certain Investment Agreement, dated as of July 26, 2017 (the “ Investment Agreement ”), pursuant to which, among other things, TK has agreed to sell, transfer and assign, and Brookfield has agreed to purchase, 49% of the limited liability company interests in the Company;
WHEREAS, TK, as the existing sole Member, and Brookfield now desire to amend and restate the Limited Liability Company Agreement in its entirety upon the terms and conditions stated below and, upon the execution and delivery of this Agreement, TK and Brookfield will represent all of the Members of the Company, each holding such percentage of Shares as set forth next to its name on Schedule A attached hereto;
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein made and other good and valuable consideration, the Limited Liability Company Agreement is hereby amended and restated in its entirety as follows:
ARTICLE I
Definitions
1.1      Definitions. The following terms used in this Agreement shall have the following meanings (unless otherwise expressly provided in this Agreement):
“ Act ” means the Marshall Islands Limited Liability Company Act of 1996 of the Republic of the Marshall Islands Associations Law, as the same may be amended from time to time.
“ Adjusted Capital Account Deficit ” means, with respect to any Member, the deficit balance, if any, in such Member's Capital Account as of the end of the relevant Taxable Year, after giving effect to the following adjustments:






136199440.19  
 
 



(i)      Crediting to such Capital Account any amount which such Member is obligated to restore or is deemed to be obligated to restore pursuant to Treasury Regulation Sections 1.704‑1(b)(2)(ii)( c ), 1.704‑2 (g)(1), and 1.704‑2(i); and
(ii)      Debiting to such Capital Account the items described in Treasury Regulation Section 1.704‑1(b)(2)(ii)( d )( 4 ), ( 5 ) and ( 6 ).
“ Affiliate ” means, with respect to any specified Person, any other Person directly or indirectly controlling or controlled by, or under direct or indirect common control with, such specified Person; provided , that (i) the Company and its Subsidiaries shall not be deemed to be Affiliates of the Brookfield Members or any of their respective Affiliates, (ii) Teekay Corporation and its Subsidiaries shall not be deemed to be Affiliates of the Brookfield Members or any of their respective Affiliates, and (iii) portfolio companies (provided such portfolio companies have material operations other than the operations of the Company and the Limited Partnership) in which any of the Brookfield Members or any of their respective Affiliates has an investment (whether as debt or equity) shall not be deemed an Affiliate of the Brookfield Members or the Brookfield Members’ respective Affiliates. For the purposes of this definition, “ control ”, when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “ controlling, ” “ controlled, ” “ controlled by ” and “ under common control with ” have meanings correlative to the foregoing..
“ Bankruptcy ” means, with respect to a Member, that (i) such Member has (A) made an assignment for the benefit of creditors; (B) filed a voluntary petition in bankruptcy; (C) been adjudged bankrupt or insolvent, or had entered against such Member an order of relief in any bankruptcy or insolvency proceeding; (D) filed a petition or an answer seeking for such Member any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any statute, law or regulation or filed an answer or other pleading admitting or failing to contest the material allegations of a petition filed against such Member in any proceeding of such nature; or (E) sought, consented to, or acquiesced in the appointment of a trustee, receiver or liquidator of such Member or of all or any substantial part of such Member's properties; (ii) 120 days have elapsed after the commencement of any proceeding against such Member seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any statute, law or regulation and such proceeding has not been dismissed; or (iii) 90 days have elapsed since the appointment without such Member's consent or acquiescence of a trustee, receiver or liquidator of such Member or of all or any substantial part of such Member's properties and such appointment has not been vacated or stayed or the appointment is not vacated within 90 days after the expiration of such stay.
“ BCA ” means the Business Corporations Act of the Republic of the Marshall Islands.
“ Book Value ” means, with respect to any Company asset, the adjusted basis of such asset for U.S. federal income tax purposes, except as follows:






136199440.19  
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(a)      The initial Book Value of any Company asset contributed or deemed contributed by a Member to the Company shall be the gross Fair Market Value of such Company asset as of the date of such contribution;
(b)      The Book Value of each Company asset may be adjusted to equal its respective gross Fair Market Value, as of the following times: (i) the acquisition of an additional interest in the Company by any new or existing Member in exchange for more than a de minimis Capital Contribution if the Board reasonably determines in good faith that such adjustment is necessary or appropriate to reflect the Members’ relative economic interests in the Company; (ii) the distribution by the Company to a Member of more than a de minimis amount of Company assets (other than cash) as consideration for all or part of its Shares unless the Board reasonably determines in good faith that such adjustment is not necessary to reflect the relative economic interests of the Members in the Company; (iii) the liquidation of the Company within the meaning of Treasury Regulations Section 1.704‑1(b)(2)(ii)( g ); and (iv) such other times as the Board shall reasonably determine in good faith are necessary or advisable to comply with the Treasury Regulations under Subchapter K of Chapter 1 of the Code;
(c)      The Book Value of a Company asset distributed to any Member shall be the Fair Market Value of such Company asset as of the date of distribution thereof;
(d)      The Book Value of each Company asset shall be increased or decreased, as the case may be, to reflect any adjustments to the adjusted basis of such Company asset pursuant to Section 734(b) or Section 743(b) of the Code, but only to the extent that such adjustments are taken into account in determining Capital Account balances pursuant to Treasury Regulations Section 1.704‑1(b)(2)(iv)( m ); provided , that Book Values shall not be adjusted pursuant to this subparagraph (d) to the extent that an adjustment pursuant to subparagraph (b) above is made in conjunction with a transaction that would otherwise result in an adjustment pursuant to this subparagraph (d); and
(e)      If the Book Value of a Company asset has been determined or adjusted pursuant to subparagraphs (a), (b) or (d) above, such Book Value shall thereafter be adjusted to reflect the Depreciation taken into account with respect to such Company asset for purposes of computing Profits and Losses.
“ Brookfield Majority Holders ” means, at any time, a Brookfield Member or Brookfield Members that own a majority of the Shares owned by all of the Brookfield Members at such time.
“ Brookfield Member ” means, collectively, any Member that is either Brookfield or a controlled Affiliate of Brookfield (including any investment fund, co-investment vehicles and/or similar vehicles or accounts, in each case managed by Brookfield Capital Partners LLC or its Affiliates) or any of their respective successors (but not including, however, any portfolio companies of any of the foregoing).






136199440.19  
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“ Business Day ” means any day that is not a Saturday, Sunday, or other day on which commercial banks are authorized or required to close in the State of New York.
“ Canadian Tax Act ” means the Income Tax Act (Canada), R.S.C. 1985, 5th Supplement, c.1, as amended from time to time.
“ Capital Account ” means the capital account maintained for a Member pursuant to Section 6.2.
“ Capital Contribution ” means any contribution to the capital of the Company in cash or property by a Member, whenever made.
“ Certificate ” means the Certificate of Formation (as herein defined) of the Company, as such Certificate of Formation may be amended, supplemented or restated from time to time.
“ Certificate of Limited Partnership ” means the Certificate of Limited Partnership of the Limited Partnership, dated as of August 30, 2006.
“ Code ” means the United States Internal Revenue Code of 1986, as the same may be amended from time to time.
“ Common Units ” means the common units of the Limited Partnership having the powers, preferences and rights, and the qualifications, limitations and restrictions, as set forth in the Limited Partnership Agreement.
“ Company Minimum Gain ” has the meaning set forth for “partnership minimum gain” in Treasury Regulation Section 1.704‑2(d).
“ Depreciation ” means, for each Taxable Year, an amount equal to the depreciation, amortization, or other cost recovery deduction allowable with respect to an asset for such Taxable Year, except that if the Book Value of an asset differs from its adjusted basis for U.S. federal income tax purposes at the beginning of such Taxable Year, Depreciation shall be an amount which bears the same ratio to such beginning Book Value as the U.S. federal income tax depreciation, amortization, or other cost recovery deduction for such Taxable Year bears to such beginning adjusted tax basis; provided , that if the adjusted basis for U.S. federal income tax purposes of an asset at the beginning of such Taxable Year is zero and the Book Value of the asset is positive, Depreciation shall be determined with reference to such beginning Book Value using any permitted method selected by the Board.
“ Director Qualification Standards ” means (a) any requirements generally applicable to all of the Directors regarding service as a Director of the Company under applicable law or the rules and regulations of any securities exchange of which the Company or the Limited Partnership is then subject, as the same may be amended, modified or supplemented, and (b) any additional qualification standards established by the Board for eligibility of individuals to serve as Directors (there being none under this clause (b) as of the date hereof).






136199440.19  
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“ Equity Interest ” means the ownership interest (including the limited liability company interest) of a Member in the Company, including such Member’s right (A) to distributions from the Company, including on a liquidation of the Company, (B) to an allocation of Profits, Losses, and other items of income, gain, loss, deduction and credits of the Company for U.S. tax purposes, (C) to vote on, consent to or otherwise participate in any decision of the Members and (D) to any and all other benefits to which such Member may be entitled as provided in this Agreement or the Act.
“ Exercise Date ” has the meaning set forth in Section 5.5(a) .
“ Fair Market Value ” of any asset as of any date means the purchase price which a willing buyer having all relevant knowledge would pay a willing seller for such asset in an arm's‑length transaction, as reasonably determined in good faith by the Board based on such factors as the Board, in the exercise of its reasonable business judgment, considers relevant.
“ General Partner Interest ” means the ownership interest of the Company in the Limited Partnership in its capacity as a general partner and without reference to any limited partner interest in the Limited Partnership held by the Company or its Affiliates.
“ Governmental Entity ” means any (i) federal, state or local, domestic or foreign governmental or regulatory (including any stock exchange) authority, agency, court, commission or other entity or self-regulatory organization or (ii) arbitral body (public or private).
“ Incentive Distribution Right ” means Incentive Distribution Right as defined in the Limited Partnership Agreement.
“ Independent Director ” means a Director who would be considered an “independent director” under (a) NYSE Rule 303A.02 in effect at the time such Person is elected to the Board as such rule may be amended, supplemented or replaced from time to time (whether by final rule or otherwise), (b) the Company’s corporate governance guidelines or similar policy and (c) any other applicable law, rule or regulation mandating the independence of one or more members of the Board, excluding, in each case, requirements that relate to “independence” only for members of a particular Board committee or directors fulfilling a particular function. In no event will any Person be deemed an Independent Director who is, or at any time during the previous three years was, an officer or employee of the Company, the Limited Partnership or their respective Subsidiaries. For purposes of Section 3.1(c)(i) hereof, in no event will any Person be deemed an Independent Director who is, or at any time during the previous three years was, an officer, director, employee, consultant or contractor of, or who otherwise has or had during the previous three years a material business or financial relationship with Teekay Corporation or any of its Affiliates.
“ Licensing Agreement ” means the Licensing Agreement, dated as of the date hereof, among the Limited Partnership and Teekay Corporation.
“ Liens ” means any pledges, liens, charges, mortgages, encumbrances or security interests of any kind or nature.






136199440.19  
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“ Limited Partnership ” means Teekay Offshore Partners L.P., a Republic of the Marshall Islands limited partnership.
“ Limited Partnership Agreement ” means the Limited Partnership’s Fifth Amended and Restated Agreement of Limited Partnership, dated as of June 29, 2016, as amended from time to time.
“ Losses ” has the meaning set forth in Section 6.2 .
“ Majority of the Board ” means, at any time, a combination of any of the then Directors constituting at least a majority of the votes of all of the Directors who are then elected and qualified and remaining on the Board.
“ Majority of the Committee ” means, with respect to any committee of the Board, at any time, a combination of any of the then Directors constituting at least a majority of the votes of all of the Directors who are then appointed and qualified and remaining on such Committee.
“ Managers ” has the meaning set forth in Section 3.1(a) .
“ Master Services Agreement ” means that master services agreement among the Limited Partnership, the Company, Teekay Corporation and Brookfield TK TOLP L.P. dated as of the date hereof.
“ Member ” means each Person identified on the Members Schedule as of the date hereof who is a party to or is otherwise bound by this Agreement and each Person who may hereafter be admitted as a Member in accordance with the terms of this Agreement. The Members shall constitute the “members” (as that term is defined in the Act) of the Company.
“ Member Minimum Gain ” with respect to each Member Nonrecourse Debt, means the amount of Company Minimum Gain (as determined according to Treasury Regulation Section 1.704‑2(d)(1)) that would result if such Member Nonrecourse Debt was treated as a nonrecourse liability, determined in accordance with Treasury Regulation Section 1.704‑2(i)(3).
“ Member Nonrecourse Debt ” has the meaning set forth in Treasury Regulation Section 1.704‑2(b)(4), substituting the term “Company” for the term “partnership” and the term “Member” for the term “partner” as the context requires.
“ Member Nonrecourse Deduction ” has the meaning set forth in Treasury Regulation Section 1.704‑2(i), substituting the term “Member” for the term “partner” as the context requires.
“ Nonrecourse Deductions ” has the meaning set forth in Treasury Regulation Section 1.704‑2(b), substituting the term “Company” for the term “partnership” as the context requires.
“ Partnership Tax Audit Rules ” means Sections 6221 through 6241 of the Code, as amended by the Bipartisan Budget Act of 2015, together with any guidance issued thereunder or successor provisions and any similar provision of state or local tax laws.






136199440.19  
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“ Person ” means any individual, corporation, partnership, limited liability company, trust, joint venture, Governmental Entity or other unincorporated entity, association or group.
“ Principal Market ” means the New York Stock Exchange, or such other U.S. national securities exchange on which the Common Units are then listed (or admitted to trading).
“ Profits ” has the meaning set forth in Section 6.2 .
“ Registration Rights Agreement ” means the registration rights agreement between the Limited Partnership, Teekay Corporation and Brookfield TK TOLP L.P. dated as of the date hereof.
“ Share ” means a share representing a fractional portion of the Equity Interests of all the Members and having the rights set forth in this Agreement and the Equity Interests represented by such Share shall be determined in accordance with such rights and the other terms of this Agreement. There shall only be a single class, and no series, of Shares of the Company.
“ Subsidiary ” means, with respect to any Person, another Person, an amount of the voting securities, other voting rights or voting partnership interests of which is sufficient to elect at least a majority of its board of directors or other governing body (or, if there are no such voting interests, more than 50% of the equity interests of which) is owned directly or indirectly by such first Person.
“ Tax Matters Partner ” has the meaning set forth in Section 9.7.
“ Taxable Year ” means the Company's taxable year ending on December 31 (or part thereof in the case of the Company's first and last taxable year), or such other year as is (i) required by Section 706 of the Code or (ii) determined by the Board (if no year is so required by Section 706 of the Code).
“ Teekay Corporation ” means Teekay Corporation, a Republic of the Marshall Islands corporation.
“ TK Event of Default ” means, with respect to any TK Member:
(a)      Bankruptcy;
(b)      the entry of a plea of guilty or no contest or finding or admission of guilt, or agreement to a non-prosecution agreement, deferred prosecution agreement, leniency agreement, civil, criminal, or regulatory settlement or administrative order or acceptance of any fine with respect to a charge by a Governmental Entity that, in each case, could reasonably be expected to have a material and adverse impact on the business, operations, or reputation of the Company or the Limited Partnership; or
(c)      a material violation or breach of, or default under, this Agreement or the Master Services Agreement by the TK Member or any of its Affiliates if such violation,






136199440.19  
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breach or default is not curable or, if curable, is not cured on or prior to the date which is 30 days following written notice thereof given by Brookfield to TK.
“ TK Majority Holders ” means, at any time, a TK Member or TK Members that own a majority of the Shares owned by all of the TK Members at such time.
“ TK Member ” means, collectively, any Member that is TK, Teekay Corporation or a controlled Affiliate thereof.
“ Transfer ” means any sale, transfer, conveyance, assignment, gift, delivery or other disposition.
“ Treasury Regulations ” means the final or temporary regulations that have been issued by the U.S. Department of Treasury pursuant to its authority under the Code, and any successor regulations.
“ VWAP Price ” means, as of the applicable date of determination, the dollar volume-weighted average price of a Common Unit on the Principal Market during the period beginning at 9:30:01 a.m., New York time (or such other time as the Principal Market publicly announces is the official open of trading), and ending at 4:00:00 p.m., New York time (or such other time as the Principal Market publicly announces is the official close of trading), as reported by Bloomberg through its “Volume at Price” function or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30:01 a.m., New York time (or such other time as the Principal Market publicly announces is the official open of trading), and ending at 4:00:00 p.m., New York time (or such other time as the Principal Market publicly announces is the official close of trading), as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in the “pink sheets” by OTC Markets LLC, in each case for the thirty (30) most recent trading days. If the VWAP Price cannot be calculated for a security on a particular date on any of the foregoing bases, the VWAP Price of such security on such date shall be the fair market value as mutually determined by the Company and the applicable Member. If the Company and the applicable Member are unable to agree upon the fair market value of such security, then the VWAP Price will be determined by an independent accounting, appraisal, investment banking firm or consultant of nationally recognized standing in the United States retained by the Company and approved by the applicable Member for such purpose. All such determinations shall be appropriately adjusted for any unit distribution, unit split, unit combination or other similar transaction during the applicable calculation period. When applying VWAP to a Member’s Equity Interest in the Company, the economic interest shall be valued on the basis of a Common Unit in the Limited Partnership.
“ Warrants ” means warrants issued by the Limited Partnership pursuant to the terms and provisions of (i) the Warrant Agreement, dated as of September 25, 2017, between the Limited Partnership and Brookfield TK TOLP L.P. and (ii) the Warrant Agreement, dated as of September 25, 2017, between the Limited Partnership and Teekay Shipping Limited.






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1.2      Other Definitional Provisions. Capitalized terms used in this Agreement which are not defined in this Article I have the meanings contained elsewhere in this Agreement. Defined terms used in this Agreement in the singular shall import the plural and vice versa.
ARTICLE II     
Organization of the Company
2.1      Formation.
(a)      The Company was formed on August 25, 2006 as a Marshall Islands non-resident domestic limited liability company upon the filing of the certificate of formation, as attached as Exhibit A hereto (the “ Certificate of Formation ”), pursuant to the Act with the Republic of the Marshall Islands Registrar of Corporations. This Agreement shall constitute the “limited liability company agreement” (as that term is used in the Act) of the Company. The rights, powers, duties, obligations and liabilities of the Members shall be determined pursuant to the Act and this Agreement. To the extent that the rights, powers, duties, obligations and liabilities of any Member are different by reason of any provision of this Agreement than they would be in the absence of such provision, this Agreement shall, to the extent permitted by the Act, control.
(b)      Any officer of the Company as an “authorized person” within the meaning of the Act, is hereby authorized, at any time that the applicable Member(s) have approved an amendment to the Certificate in accordance with the terms hereof, to promptly execute, deliver and file such amendment in accordance with the Act.
(c)      The Company shall, to the extent permissible, elect to be treated as a partnership for United States federal, state and local income tax purposes. Each Member and the Company shall file all United States tax returns and shall otherwise take all United States tax and financial reporting positions in a manner consistent with such treatment and no Member shall take any action inconsistent with such treatment. To the extent permitted by law, the Company shall not be deemed a partnership or joint venture for any purpose other than for U.S. federal, state and local income tax purposes.
2.2      Name. The name of the Company is “Teekay Offshore GP L.L.C.” or such other name or names as the Board may from time to time designate; provided, that the name shall always contain the words “Limited Liability Company”, “LLC” or “L.L.C.”.
2.3      Registered Address; Agent. Except as the Board of Directors may designate from time to time in the manner provided by law, the address of the Company’s registered agent in the Marshall Islands shall be the Trust Company Complex, Ajeltake Islands, Ajeltake Road, Majuro, Marshall Islands MH 96960, and the name of the Company’s registered agent at such address shall be the Trust Company of the Marshall Islands, Inc.
2.4      Principal Office. The principal office and the mailing address of the Company shall be Fourth Floor, Belvedere Building, 69 Pitts Bay Road, Hamilton, HM 08 Bermuda.






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2.5      Term. The Company commenced on August 25, 2006 and shall have perpetual existence, unless the Company is dissolved in accordance with the Act.
2.6      Purposes and Powers. The purposes and character of the business of the Company shall be to transact any or all lawful business for which limited liability companies may be organized under the Act, provided such business is, in the reasonable discretion of the Board, necessary or appropriate to facilitate its role as general partner of the Limited Partnership. The Company shall have any and all powers which are necessary or desirable to carry out the purposes and business of the Company, including the ability to incur and guaranty indebtedness, to the extent the same may be legally exercised by limited liability companies under the Act. Notwithstanding anything herein to the contrary, nothing set forth herein shall be construed as authorizing the Company to possess any purpose or power, or to do any act or thing, forbidden by law to a limited liability company organized under the laws of the Republic of the Marshall Islands.
ARTICLE III     
Management of the Company
3.1      Board of Directors.
(a)      Establishment . There is hereby established a committee (the “ Board ” or the “ Board of Directors ”) comprised of natural Persons (the “ Directors ”) having the authority and duties set forth in this Agreement. Each Director shall be entitled to one vote. Directors need not be residents or citizens of the Marshall Islands. Each Director shall constitute a “manager” of the Company for purposes of the Act (collectively, the “ Managers ”), provided that at all times each of the Managers shall act in conformity with the authority and duties of the Directors and/or Board as specified in this Agreement.
(b)      Powers of the Board . Subject to (and except as set forth in) Section 3.1(h) and except for decisions or actions requiring the approval of the Members by non-waivable provisions of the Act or applicable law, the business and affairs of the Company shall be managed by or under the direction of the Board, and all actions outside of the ordinary course of business of the Company to be taken by or on behalf of the Company shall require the approval of a Majority of the Board. Notwithstanding anything in this Agreement to the contrary, the Board shall conduct the affairs and governance of the Company so that (i) the Company is not a resident of Canada for purposes of the Canadian Tax Act, (ii) neither the Company nor the Limited Partnership is carrying on business in Canada for purposes of the Canadian Tax Act and (iii) the Company is not doing business in the Republic of the Marshall Islands.
(c)      Number of Directors; Term of Office . As of the date hereof, and at all times prior to the Exercise Date, the authorized number of Directors of the Board is, and shall be, nine Directors. On and after the Exercise Date, the authorized number of Directors of the Board may be changed by a Majority of the Board to any of five to fifteen Directors (inclusive). The Directors shall, except as hereinafter otherwise provided for, be elected (and removed and replaced, if applicable) by Members holding a majority of the outstanding Shares and shall hold office until their respective successors are elected and qualified or until their earlier death, resignation or






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removal. As of the date hereof, the Directors are Bill Utt, Kenneth Hvid, John J. Peacock, Ian Craig, David L. Lemmon, David Levenson, Jim Reid, Walter Weathers and Bradley Weismiller, and each such Person shall hold office as a Director until his respective successor is elected and qualified or until his earlier death, resignation or removal. Notwithstanding the foregoing:
(i)      At all times prior to the Exercise Date, the TK Majority Holders will have the right to elect five Directors (each Director elected pursuant to the terms hereof by the TK Majority Holders, a “ TK Director ”), provided that three of such TK Directors must be Independent Directors and must be approved by the Brookfield Majority Holders (which approval shall not be unreasonably withheld); on and after the Exercise Date, for so long as the TK Members own at least 10% of the outstanding Common Units, on a fully-diluted basis, the TK Majority Holders will have the right to elect two TK Directors; on and after the later of (a) the Exercise Date and (b) the date on which the TK Members first no longer own 10% of the outstanding Common Units, on a fully-diluted basis, for so long as the Licensing and Franchising Agreement has not been terminated, the TK Majority Holders will have the right to elect one TK Director. The TK Directors as of the date hereof are Bill Utt, Kenneth Hvid, John J. Peacock, Ian Craig and David L. Lemmon, of whom John J. Peacock, Ian Craig and David L. Lemmon represent Independent Directors. The election rights set forth in this clause (i) are referred to as the “ TK Election Rights .”
(ii)      At all times prior to the Exercise Date, the Brookfield Majority Holders will have the right to elect four Directors (each, a “ Brookfield Director ”) and, on and after the Exercise Date, for so long as the Brookfield Members own at least 10% of the outstanding Common Units, on a fully-diluted basis, the Brookfield Majority Holders will have the right to elect two Brookfield Directors. The Brookfield Directors as of the date hereof are David Levenson, Jim Reid, Walter Weathers and Bradley Weismiller. The election rights set forth in this clause (ii) are referred to as the “ Brookfield Election Rights .”
(iii)      Each Member, upon the request of any other Member, shall vote (or, if requested by the Company, execute a written consent with respect to) all Shares over which such Member has control and shall promptly take all other necessary or desirable actions within such Member’s control to elect to the Board any individual elected pursuant to subclauses (i) or (ii) above.
(iv)      Subject to other provisions of this clause (iv), TK Directors may be removed and replaced by, and only by, the TK Majority Holders, with or without cause, subject to the provisos in clause (c)(i) above. If the number of TK Directors then in office exceeds the number of TK Directors that the TK Majority Holders then may elect pursuant to the TK Election Rights, then, at the written request of the Brookfield Majority Holders, one of the TK Directors, as specified by the TK Majority Holders (or, if the TK Majority Holders fails to do so within five (5) Business Days of such requirement not being satisfied, as specified by the Brookfield Majority Holders), shall immediately resign, and the Members shall cause such TK Director immediately to resign, from the Board effective as of the receipt of such notice, and if such TK Director does not resign, the TK Members shall remove such TK Director. The same shall be repeated until the number of TK Members does not exceed






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the number of TK Directors that the TK Majority Holders then may elect pursuant to the TK Election Rights. Subject to the other provisions of this clause (iv), Brookfield Directors may be removed and replaced by, and only by, the Brookfield Majority Holders, with or without cause. If the number of Brookfield Directors then in office exceeds the number of Brookfield Directors that the Brookfield Majority Holders then may elect pursuant to the Brookfield Election Rights, then, at the written request of the TK Majority Holders, one of the Brookfield Directors, as specified by the Brookfield Majority Holders (or, if the Brookfield Majority Holders fails to do so within five (5) Business Days of such requirement not being satisfied, as specified by the TK Majority Holders), shall immediately resign, and the Members shall cause such Brookfield Director immediately to resign, from the Board effective as of the receipt of such notice, and if such Brookfield Director does not resign, the Brookfield Members shall remove such Brookfield Director. Each TK Director and each Brookfield Director shall satisfy the Director Qualification Standards.
(v)      A Director may resign at any time by giving written notice to such effect to the Board. Any such resignation shall take effect at the time of the receipt of that notice or any later effective time specified in that notice and, unless otherwise specified in such notice, the acceptance of the resignation shall not be necessary to make it effective. Any vacancy caused by any such resignation or by the death of any Director or any vacancy for any other reason (including due to the authorization by the Board of a newly created directorship) and not filled by the Person(s) with the right to elect such Director pursuant to Sections 3.1(c)(i) or 3.1(c)(ii) may be filled by a majority of the votes of the Directors then in office, although less than a quorum, and any Director so elected to fill any such vacancy shall hold office until his successor is elected and qualified pursuant to Sections 3.1(c)(i) or 3.1(c)(ii) or until his earlier death, resignation or removal; provided that such Director can be removed with or without cause and replaced by the Person or Persons, if any, which have the right to elect such Director pursuant to Sections 3.1(c)(i) or 3.1(c)(ii), as the case may be.
(vi)      Notwithstanding anything in this Agreement to the contrary, (i) each Director shall be a natural person and (ii) at all times a majority of the Directors shall be persons who are not residents of Canada for the purposes of the Canadian Tax Act (except in the case of the death, resignation or dismissal of one or more Directors who are not residents of Canada for purposes of the Canadian Tax Act, provided that within 21 days of any such death, resignation or dismissal either (1) one or more new non-resident Directors shall be elected to replace each non-resident Director who died, resigned or was dismissed or (2) one or more Directors who are residents of Canada for purposes of the Canadian Tax Act shall resign to achieve the required non-resident majority).
(d)      Meetings of the Board . The Board shall meet at such time and at such place as the Board may designate; provided that all meetings of the Board shall take place outside of Canada. Special meetings of the Board shall be held on the call of the Chairman (as herein defined), any Director or the Company’s Chief Executive Officer or President upon at least three Business Days (if the meeting is to be held in person) or forty-eight hours (if the meeting is to be held by telephone communications or video conference) written notice to the Directors, or upon such shorter notice






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as may be approved by all of the Directors. Subject to the second sentence of clause (i) below, any director may participate in any Board (or Board committee) meeting by telephone communications or video conference. Any Director may waive such notice as to himself or herself before or after the meeting. A record shall be maintained by the Company of each meeting of the Board.
(i)      Conduct of Meetings . Any meeting of the Directors may be held in person, telephonically or by video conference. Any Board meeting held telephonically or by video conference must originate outside of Canada and a majority of the Directors participating in such meeting in person or by call or video must participate from or at a location outside Canada, and such meeting shall be deemed held at the place from where such call or video conference originated.
(ii)      Quorum . A Majority of the Board shall constitute a quorum of the Board for purposes of conducting business; provided , however , that such quorum shall be properly constituted only if a majority of the Directors included in such quorum are not residents of Canada for purposes of the Canadian Tax Act; provided , further , that, prior to the Exercise Date, a Brookfield Director must be present for such Directors to constitute a quorum, subject to the last sentence of this Section 3.1(d)(ii) . A Director may vote or be present at a meeting either in person or by proxy. At all times when the Board is conducting business at a meeting of the Board, a quorum of the Board must be present at such meeting and a majority of the Directors participating at such meeting must not be residents of Canada for purposes of the Canadian Tax Act. If a quorum shall not be present at any meeting of the Board, then the Directors present at the meeting may adjourn the meeting from time to time and shall promptly give notice to the Directors not present at the meeting of when the meeting will be reconvened. If such notice is given and the reconvened meeting is held at least 48 hours after the suspended meeting at which a quorum was not present and notice was given, then, at such reconvened meeting, the presence of at least one Brookfield Director will not be required in order for a quorum to be present (so long as all other quorum requirements provided for in this Section 3.1(d)(ii) are met); provided , however , that the only business that may be conducted at such reconvened meeting is the business specifically set forth in the original agenda for the suspended meeting.
(iii)      Attendance and Waiver of Notice . Attendance of a Director at any meeting shall constitute a waiver of notice of such meeting, except where a Director attends a meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board need be specified in the notice or waiver of notice of such meeting.
(iv)      Actions Without a Meeting . Notwithstanding any provision contained in this Agreement, any action of the Board may be taken by written consent (which may include consent by electronic transmission, including email) of all of the Directors; provided , however , that the last Director to execute such consent shall not have done so while in Canada and each such consent shall include the location and the date of such Consent. Subject to any applicable requirements of Section 3.1(h) , any such action taken






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by the Board without a meeting shall be effective only if the consent or consents set forth the actions so taken and are in writing and are consented by each member of the Board. For purposes of this Section 3.1(d)(iv) , an “action” of the Board shall include any approval, consent or authorization of, or any other action taken by, the Board.
(e)      Compensation of the Directors . Any Director who is not an employee of the Company or any of its Subsidiaries (including the Limited Partnership) (“ Outside Directors ”) shall be entitled to receive such reasonable compensation (if any) from the Company for his or her services as such a Director of the Company as may be from time to time approved by the Board, which compensation may include a fixed sum. Each Director shall be entitled to reimbursement from the Company for reasonable and documented out‑of‑pocket expenses of attendance at each regular or special meeting of the Board pursuant to the terms of any expense reimbursement policy approved by the Board (if any). The Company shall maintain, in full force and effect, directors’ and officers’ liability insurance on customary terms. Each Director shall be covered as an insured director, in such a manner as to provide each Director in his capacity as a Director with rights and benefits under all directors’ and officers’ insurance policies no less favorable than those provided to any other Directors. The Company shall enter into indemnification agreements with each Director to agree to indemnify such Director, to the fullest extent permitted by law, subject to customary terms and provisions, from and against all liabilities, costs, expenses, losses, claims, damages or similar events related to the fact that such person is or was a Director. Each Director shall be entitled to indemnification rights pursuant to his respective indemnification agreement no less favorable than indemnification rights provided to any other Director. Any Director that is not an Outside Director shall not receive any salary or other compensation for his or her service as a Director, provided, that nothing contained in this Agreement shall be construed to preclude any Director (including the Chief Executive Officer) from serving the Company, the Limited Partnership or any of their respective Subsidiaries in any other capacity and receiving compensation for such service or from being reimbursed by the Company or any of its Subsidiaries for reasonable and documented out-of-pocket expenses of such Director in connection with being a member of the Board.
(f)      Chairman of the Board . A Majority of the Board may appoint one of the Directors to serve as the Chairman of the Board (the “ Chairman ”). The Chairman shall be a natural person who is not a resident of Canada for purposes of the Canadian Tax Act, and shall be authorized to, and shall, act in such capacity only outside of Canada. At any time, the Chairman, if any, can be removed from his or her position as Chairman by a Majority of the Board. The Chairman, in his or her capacity as the Chairman of the Board, shall not have any of the rights or powers of an officer of the Company, nor shall the Chairman have any additional voting rights. The Chairman shall preside at all meetings of the Board and at all meetings of the Members at which he or she shall be present.
(g)      Committees of the Board .
(i)      The Board may create such committees of the Board as it may, from time to time, deem necessary, appropriate or advisable, in its sole discretion, to carry on the affairs of the Company. Subject to the other provisions of this Section 3.1(g) , the Board, in its sole discretion, may establish and change the authority and responsibilities of such






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committees and may adopt one or more charters governing the size, authority and responsibilities, among other things, of such committee.
(ii)      With respect to any committee of the Board, a Majority of the Committee shall constitute a quorum of such committee for purposes of conducting business; provided , however , that such quorum shall be properly constituted only if (A) a majority of the Directors included in such quorum are not residents of Canada for purposes of the Canadian Tax Act and (B) if a Brookfield Director is a member of such committee, at least one of the Directors included in such quorum is a Brookfield Director. A Director may vote or be present at a meeting of a committee of the Board either in person or by proxy. At all times when a committee of the Board is conducting business at a meeting of such committee, a quorum of the committee must be present at such meeting and a majority of the Directors participating at such meeting must not be residents of Canada for purposes of the Canadian Tax Act. If a quorum shall not be present at any meeting of a committee of the Board, then the Directors present at the meeting may adjourn the meeting from time to time and shall promptly give notice to the committee members not present at the meeting of when the meeting will be reconvened. If such notice is given and the reconvened meeting is held at least 48 hours after the suspended meeting at which a quorum was not present and notice was given, then, at such reconvened meeting, the presence of at least one Brookfield Director will not be required in order for a quorum to be present (so long as all other quorum requirements provided for in this Section 3.1(g)(ii) are met); provided , however , that the only business that may be conducted at such reconvened meeting is the business specifically set forth in the original agenda for the suspended meeting.
(iii)      Any meeting of a committee of the Board may be held in person, telephonically or by video conference. Any in person meeting of a committee of the Board shall be held outside Canada. Any meeting of a committee of the Board held telephonically or by video conference must originate outside of Canada and a majority of the Directors participating in such meeting in person or by call or video must participate from or at a location outside Canada, and such meeting shall be deemed held at the place from where such call or video conference originated.
(iv)      Notwithstanding any provision contained in this Agreement to the contrary, any action of a committee of the Board may be taken by written consent (which may include consent by electronic transmission, including email) of all of the Directors comprising such committee without a meeting; provided , however , that the last Director to execute such consent shall not have done so while in Canada and each such consent shall include the location and the date of such Consent. Subject to any applicable requirements of Section 3.1(h) , any such action taken by any such committee of the Board without a meeting shall be effective only if the consent or consents set forth the actions so taken and are in writing and are consented by each member of such committee of the Board. For purposes of this Section 3.1(g)(iv) , an “action” of a committee of the Board shall include any approval, consent or authorization of, or any other action taken by, such committee of the Board.






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(v)      Notwithstanding anything in this Agreement to the contrary, each member of the Conflicts Committee (as defined in the Limited Partnership Agreement) shall meet the independence requirements for service on such committee set forth in the Limited Partnership Agreement and neither the Brookfield Members nor the TK Members shall have any right to appoint observers to the Conflicts Committee.
(vi)      The Board may appoint and remove (with or without cause), upon the affirmative vote of a majority of all the Directors then in office, the members of such committees; provided , however , that:
A.      such committees shall be comprised only of Directors;
B.      subject to compliance with the applicable requirements of the New York Stock Exchange (or any subsequent stock exchange on which the Limited Partnership’s equity securities are listed), any such committee shall be comprised of at least one Brookfield Director (provided the Brookfield Election Rights are still applicable) and one TK Director (provided the TK Election Rights are still applicable and TK has the right to elect at least two TK Directors) and the number of Brookfield Directors and the number of TK Directors on such committee shall be proportional (rounding up to the nearest whole number, as applicable, unless otherwise agreed by the TK Majority Holders and the Brookfield Majority Holders) to the number of Brookfield Directors and TK Directors on the Board;
C.      in the event that no Brookfield Directors are members of such a committee, the Brookfield Majority Holders shall have the right to appoint a non-voting observer to such committee (provided the Brookfield Election Rights are still applicable);
D.      in the event that no TK Directors are members of such a committee, the TK Majority Holders shall have the right to appoint a non-voting observer to such committee (provided the TK Election Rights are still applicable and TK has the right to elect at least two TK Directors); and
E.      notwithstanding anything in this Agreement to the contrary, at all times a majority of the Directors constituting any committee of the Board shall be persons who are not residents of Canada for the purposes of the Canadian Tax Act (except in the case of the death, resignation or dismissal of one or more Directors who are not residents of Canada for purposes of the Canadian Tax Act, provided that within 21 days of any such death, resignation or dismissal either (1) one or more new non-resident Directors shall be appointed to the applicable committee to replace each non-resident Director who died, resigned or was dismissed or (2) one or more Directors who are residents of Canada for purposes of the Canadian Tax Act shall resign from the applicable committee to achieve the required non-resident majority).






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(h)      Actions that require Brookfield Approval . Until the Brookfield Directors constitute a majority of the number of Directors on the Board following the Exercise Date, the following direct and indirect actions will require the prior approval of the Brookfield Majority Holders acting in their sole discretion (and, for the avoidance of doubt, the Company and the TK Directors will not cause, authorize or permit the Company, the Limited Partnership or any of the Company’s or the Limited Partnership’s Subsidiaries to undertake any such actions without the prior approval of the Brookfield Majority Holders):
(i)      authorize, issue, split, combine, subdivide or reclassify any of the Company’s or the Limited Partnership’s equity interests, or securities exercisable for, exchangeable for or convertible into the Company’s or the Limited Partnership’s equity interests, or other equity or voting interests of the Company or the Limited Partnership other than issuances of equity interests, or securities exercisable for, exchangeable for or convertible into equity interests, of the Limited Partnership pursuant to (A) the Teekay Offshore Partners L.P. 2006 Long-Term Incentive Plan as of the date hereof and (B) the Warrants issued to an Affiliate of Brookfield on the date hereof;
(ii)      any incurrence by the Company or the Limited Partnership or any of their respective Subsidiaries of indebtedness for borrowed money (including through capital leases, the issuance of debt securities or the guarantee of indebtedness of another Person) (other than (A) in connection with the refinancing or refunding of then-existing indebtedness which is then due and payable, (B) to finance an acquisition, investment or expenditure that does not require the prior approval of the Brookfield Majority Holders under Section 3.1(h)(iv)(A) or (B) ) in excess of $50 million in the aggregate at any time outstanding;
(iii)      any amendment, modification or waiver of the Certificate, this Agreement, the Certificate of Limited Partnership, the Limited Partnership Agreement, the Director Qualification Standards established under clause (b) of such definition, if any, or the corporate governance policies, ethics policies or anti-corruption policies applicable to the Company, the Limited Partnership or their respective Subsidiaries, or the conversion of either the Company or the Limited Partnership into a corporation or other form of organization;
(iv)      (A) acquiring or investing in, in a single transaction or a series of related transactions, any business or Person, by merger or consolidation, purchase of assets, properties, claims or rights or equity interests, or by any other manner, for an aggregate purchase price, including the assumption of liabilities, in excess of $50 million, (B) making capital expenditures in excess of $50   million in any fiscal year or (C) divesting, in a single transaction or a series of related transactions, any assets, properties, claims or rights or equity interests (excluding any depreciating assets that have reached the last 10% of their useful lives and are sold by the Company at fair market value) for an aggregate sales price in excess of $50 million;
(v)      the entry into or termination of, or material amendment or waiver of, the Master Services Agreement or any contract or transaction between the Company, the Limited Partnership or their respective Subsidiaries, on the one hand, and any Affiliate or






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Affiliates of the Limited Partnership, on the other, in excess of $1 million in the aggregate in any single transaction or series of related transactions;
(vi)      except as expressly permitted by any other clauses of this Section 3.1(h) , the entry into or termination of, or material amendment or waiver of, by the Company, the Limited Partnership or any of their respective Subsidiaries, any contract or other agreement (or series of related contracts or other agreements), including any joint ventures, partnerships or similar arrangements, involving an amount (which may consist of cash, property, equity or other assets) exceeding $50 million;
(vii)      the entry into or termination of, or material amendment or waiver of, by the Company, the Limited Partnership or any of their respective Subsidiaries, any contract or other agreement (or series of related contracts or other agreements), including any joint ventures, partnerships or similar arrangements, that obligates the Company, the Limited Partnership or any of their respective Subsidiaries to conduct business on an exclusive or preferential basis or that contains a non-compete or “most favored nation” provision benefiting a party other than the Company, the Limited Partnership or any of their respective Subsidiaries (or modifying or waiving such a provision benefiting the Company, the Limited Partnership or any of their respective Subsidiaries);
(viii)      the institution or settlement by the Company, the Limited Partnership or any of their respective Subsidiaries of any litigation, arbitration, mediation or other dispute resolution proceeding with an amount in controversy in excess of $5 million or which subjects the Company, the Limited Partnership or any of their respective Subsidiaries to non-monetary relief;
(ix)      any (A) merger, amalgamation or consolidation of the Company or the Limited Partnership or their respective Subsidiaries with any other entity (other than as permitted by clause (iv) above), (B) spinoff or split-off of a business or assets of the Company or the Limited Partnership (other than as permitted by clause (iv) above) or (C) other action that requires approval by holders of the Common Units of the Limited Partnership;
(x)      increase or decrease of the size of the Board;
(xi)      hire or terminate a chief executive officer; chief financial officer; president or other principal executive officer of Teekay Offshore Production; president or other principal executive officer of Teekay Offshore Logistics; managing director or other principal executive officer of ALP Maritime Services B.V; or any president or principal executive officer of any business line or reporting segment, in each case, of the Limited Partnership;
(xii)      approve a business plan or an annual budget of the Limited Partnership involving an increase in expenditures in excess of five (5%) percent over the prior fiscal year;






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(xiii)      any material change, through any acquisition, disposition of assets or otherwise, in the nature of the business or operations of the Company or the Limited Partnership and their respective Subsidiaries as of the date of this Agreement;
(xiv)      the declaration or payment by the Company of all dividends or other distributions in respect of its common equity or by the Limited Partnership of dividends or other distributions in respect of the common equity or preferred equity of the Company or the Limited Partnership, excluding, in the case of dividends declared and paid by the Limited Partnership, ordinary quarterly dividends of no more than $0.01 per unit;
(xv)      redeem, purchase or otherwise acquire any common equity or preferred equity of the Company or the Limited Partnership (other than from employees, directors and consultants performing services pursuant to an agreement under which the Company has the option to purchase such equity at or below the fair market value of such equity upon the occurrence of termination, retirement, death or disability or similar event);
(xvi)      any (A) Transfer by the Company of its General Partner Interest or Incentive Distribution Rights or (B) decision or action (including the giving of notice with respect thereto) by the Company to withdraw as general partner of the Limited Partnership;
(xvii)      with respect to the Company or the Limited Partnership, (A) commencing a voluntary case under the U.S. bankruptcy code or any applicable bankruptcy, insolvency or other similar law now or hereafter in effect in the United States or a non-U.S. jurisdiction, (B) consenting to the entry of an order for relief in an involuntary case, or the conversion of an involuntary case to a voluntary case, under any such law, (C) consenting to the appointment of or taking possession by a receiver, trustee or other custodian for all or a substantial part of its property, or (D) making a general assignment for the benefit of creditors;
(xviii)      any Board action authorized by Sections 6.2(a)(iv) , 7.3 , 8.3 , 8.4 , 9.6 , and 9.7 ; and
(xix)      agreeing, authorizing, resolving or recommending, whether in writing or otherwise, to do, or take any action reasonably likely to lead to or result in, any of the foregoing.
The Company will take all necessary actions to cause the Limited Partnership and the Limited Partnership’s Subsidiaries and their respective officers and directors to comply with the intentions of the parties as set forth in Section 3.1(h) , including, upon the Brookfield Majority Holders’ request, the removal and replacement of any director or officer of the Company, the Limited Partnership or any of their respective Subsidiaries who knowingly and willingly authorizes, approves or attempts to implement any of the actions listed in clauses (i) through (xviii) above without the requisite approval under this Section 3.1(h) .






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3.2      Officers.
(a)      Appointment of Officers . Subject to Section 3.1(h) , the Board may appoint individuals as officers (“ officers ”) of the Company, which may include a Chief Executive Officer, a President, a Chief Financial Officer, a Secretary and such other officers (such as a Chief Operating Officer, a Treasurer or any number of Vice Presidents or Assistant Secretaries) as the Board deems advisable. Each Officer shall be a natural person who is not a resident of Canada for purposes of the Canadian Tax Act, and shall be authorized to, and shall, act in such capacity only outside of Canada. No officer need be a Member or a Director. An individual may be appointed to more than one office. The officers of the Company as of the date hereof are listed on the attached Schedule B .
(b)      Duties of Officers Generally . Under the direction of and at all times subject to the authority of the Board and the terms of this Agreement, the officers shall have full and complete discretion to manage and control the day‑to‑day business, operations and affairs of the Company in the ordinary course of its business, to make all decisions affecting the day‑to‑day business, operations and affairs of the Company in the ordinary course of its business, and to take all such actions as they deem necessary or appropriate to accomplish the foregoing, in each case, unless the Board shall have previously restricted (specifically or generally) such powers. In addition, the officers shall have such other powers and duties as may be prescribed by the Board or this Agreement. The Chief Executive Officer and the President shall have the power and authority to delegate to any agents or employees of the Company rights and powers of officers of the Company to manage and control the day‑to‑day business, operations and affairs of the Company in the ordinary course of its business, as the Chief Executive Officer or the President may deem appropriate from time to time, in each case, unless the Board shall have previously restricted (specifically or generally) such powers.
(c)      Authority of Officers . Subject to Section 3.2(a) and Section 3.2(b) , any officer of the Company shall have the right, power and authority to transact business in the name of the Company or to act for or on behalf of or to bind the Company. With respect to all matters within the ordinary course of business of the Company, third parties dealing with the Company may rely conclusively upon any certificate of any officer to the effect that such officer is acting on behalf of the Company.
(d)      Removal, Resignation and Filling of Vacancy of Officers . Subject to Section 3.1(h) , the Board may remove any officer, for any reason or for no reason, at any time. Any officer may resign at any time by giving written notice to the Board, and such resignation shall take effect at the date of the receipt of that notice or any later time specified in that notice; provided, that unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective. Any such resignation shall be without prejudice to the rights, if any, of the Company or such officer under this Agreement. A vacancy in any office because of death, resignation, removal or otherwise shall be filled in the manner prescribed in this Agreement for regular appointments to that office.
(e)      Compensation of Officers . Subject to Section 3.1(h) , an officer of the Company shall be entitled to receive compensation from the Company (if any) as determined unanimously by the Board.






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(f)      Chief Executive Officer . Under the direction of and, at all times, subject to the authority of the Board and the terms of this Agreement, the Chief Executive Officer shall have general supervision over the day‑to‑day business, operations and affairs of the Company and shall perform such duties and exercise such powers as are incident to the office of chief executive officer of a corporation organized under the BCA. The Chief Executive Officer shall have such other powers and perform such other duties as may from time to time be prescribed by the Board.
(g)      President . Under the direction of and, at all times, subject to the authority of the Board and the terms of this Agreement, the President, if any, shall perform such duties and exercise such powers as are incident to the office of president of a corporation organized under the BCA. In the absence of the Chief Executive Officer, the President shall perform the duties of the Chief Executive Officer. The President shall have such other powers and perform such other duties as may from time to time be prescribed by the Board.
(h)      Chief Financial Officer . The Chief Financial Officer shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of the Company, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital and Shares, and, in general, shall perform all the duties incident to the office of the chief financial officer of a corporation organized under the BCA. The Chief Financial Officer shall have the custody of the funds and securities of the Company, and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Company. The Chief Financial Officer shall have such other powers and perform such other duties as may from time to time be prescribed by the Board, the Chief Executive Officer and/or the President.
(i)      Secretary . The Secretary shall (i) keep the minutes of the meetings of the Members and the Board in one or more books provided for that purpose; (ii) see that all notices to be given by the Company are duly given in accordance with the provisions of this Agreement and as required by law; (iii) be custodian of the Company records; (iv) keep a register of the addresses of each Member which shall be furnished to the Secretary by such Member; (v) have general charge of the Members Schedule; and (vi) in general perform all duties incident to the office of the secretary of a corporation organized under the BCA. The Secretary shall have such other powers and perform such other duties as may from time to time be prescribed by the Board, the Chief Executive Officer and/or the President.
(j)      Other Officers . All other officers of the Company shall have such powers and perform such duties as may from time to time be prescribed by the Board and/or the Chief Executive Officer.
(k)      Execution of Documents . Any agreements, contracts or other documents or correspondence executed by the Company, either on its own behalf or in its capacity as the general partner of the Limited Partnership, or by any Member in its capacity as a Member, shall be executed only outside of Canada.
3.3      Fiduciary Duties. Except as otherwise permitted by Section 3.1(h), the Directors, in the performance of their duties as such, shall owe to the Company and, through the Company, to the Members duties of loyalty and care of the type owed by the directors of






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a corporation to such corporation under the laws of the Republic of the Marshall Islands; provided , however , that, notwithstanding anything contained herein to the contrary, to the fullest extent permitted by law no Director shall have any duty or obligation to bring any “corporate opportunity” to the Company. The officers, in the performance of their duties as such, shall owe to the Members duties of loyalty and care of the type owed by the officers of a corporation to such corporation under the laws of the Republic of the Marshall Islands; provided , however , that, notwithstanding anything contained herein to the contrary, to the fullest extent permitted by law no officer shall have any duty or obligation to bring any “corporate opportunity” to the Company.
3.4      Performance of Duties; Liability of Directors and Officers. In performing his or her duties, each of the Directors and the officers shall be entitled to rely in good faith on the provisions of this Agreement and on information, opinions, reports, or statements (including financial statements and information, opinions, reports or statements as to the value or amount of the assets, liabilities, Profits or Losses of the Company or any facts pertinent to the existence and amount of assets from which distributions to Members might properly be paid), of the following other Persons or groups: (a) one or more officers or employees of the Company; (b) any attorney, independent accountant, or other Person employed or engaged by the Company; or (c) any other Person who has been selected with reasonable care by or on behalf of the Company, in each case as to matters which such relying Person reasonably believes to be within such other Person's professional or expert competence. The preceding sentence shall in no way limit any Person's right to rely on information to the extent provided in Section 29 of the Act. No individual who is a Director or an officer of the Company, or any combination of the foregoing, shall be personally liable under any judgment of a court, or in any other manner, for any debt, obligation, or liability of the Company, whether that liability or obligation arises in contract, tort, or otherwise, solely by reason of being a Director or an officer of the Company or any combination of the foregoing. To the full extent that the Act permits the limitation or elimination of liability of Directors, a Director shall not be liable to the Company or its Members for monetary damages for breach of fiduciary duty as a Director.
3.5      Indemnification. Notwithstanding Section 3.3, the Directors and officers of the Company shall not be liable, responsible or accountable for damages or otherwise to the Company, or to the Members, and, to the fullest extent allowed by law, each Director and each officer of the Company shall be indemnified and held harmless by the Company, including advancement of reasonable attorneys' fees and other expenses from and against all claims, liabilities, and expenses arising out of any management of Company affairs; provided that (A) such Director's or officer's course of conduct was pursued in good faith and believed by him to be in the best interests of the Company and was reasonably believed by him to be within the scope of authority conferred on such Director or officer pursuant to this Agreement and (B) such course of conduct did not constitute gross negligence, willful misconduct or fraud on the part of such Director or officer and otherwise was in accordance with the terms of this Agreement (including compliance with the relevant fiduciary duties), as determined by a final and non-appealable judgment entered by a court of competent jurisdiction. The rights of indemnification provided in this Section 3.5 are intended to provide indemnification of the Directors and the officers to the fullest extent permitted by the Act regarding a limited liability






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company’s indemnification of its directors and officers (subject to the proviso contained in the previous sentence) and will be in addition to any rights to which the Directors or officers may otherwise be entitled by contract or as a matter of law (subject to the proviso contained in the previous sentence) and shall extend to such Director's or officer's heirs, personal representatives and assigns. The absence of any express provision for indemnification herein shall not limit any right of indemnification existing independently of this Section 3.5. Each Director's and each officer's right to advancement of expenses (including legal fees and other expenses) pursuant to this Section 3.5 may be conditioned upon the delivery by such Director or such officer of a written undertaking to repay such amount if such individual is determined pursuant to this Section 3.5 or adjudicated to be ineligible for indemnification, which undertaking shall be an unlimited general obligation. It is acknowledged and agreed that the Company shall be solely liable for indemnification and expense advancement obligations to each Director and each officer (notwithstanding any other right to indemnification or advancement of expenses that such Director or officer may have) and that no Member shall be obligated to contribute, advance or lend money to the Company to pay any indemnification and expense advancement obligations pursuant to this Section 3.5.
3.6      Prospective Amendments. No amendment, modification or repeal of Section 3.4 or Section 3.5 or any provision hereof shall in any manner terminate, reduce or impair the right of any past, present or future person entitled to be indemnified by the Company hereunder, nor the obligations of the Company to indemnify any such person under and in accordance with the provisions of this Agreement as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted.
ARTICLE IV     
Members
4.1      Registered Members. The Company shall be entitled to treat the owner of record of any Share as the owner in fact of such Share for all purposes, and accordingly shall not be bound to recognize any equitable or other claim to or interest in such Share on the part of any other Person, whether or not it shall have express or other notice of such claim or interest, except as expressly provided by this Agreement or the laws of the Republic of the Marshall Islands.
4.2      Limitation of Liability. No Member will be obligated personally for any debt, obligation or liability of the Company or of any of its Subsidiaries or other Members by reason of being a Member, whether arising in contract, tort or otherwise. No Member will have any responsibility to restore any negative balance in his or her Capital Account or to contribute to or in respect of the liabilities or obligations of the Company or of any of its Subsidiaries or return distributions made by the Company. No Member or group of Members (unless such Member is a Director or officer of the Company, and then only in such capacity as a Director or officer of the Company) shall have any fiduciary or other duty to the Company, its






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Subsidiaries or any other Member with respect to the business and affairs of the Company and its Subsidiaries or otherwise.
4.3      Withdrawal; Resignation. A Member shall not cease to be a Member as a result of the Bankruptcy of such Member or as a result of any other events specified in Section 21 of the Act. So long as a Member continues to own or hold any Shares, such Member shall not have the ability to resign as a Member prior to the dissolution and winding up of the Company and any such resignation or attempted resignation by a Member prior to the dissolution or winding up of the Company shall be null and void. As soon as any Person who is a Member ceases to own or hold any Shares, such Person shall no longer be a Member.
4.4      Death of a Member. The death of any Member shall not cause the dissolution of the Company. In such event the Company and its business shall be continued by the remaining Member or Members and the Shares owned by the deceased Member shall automatically be transferred to such Member's heirs (provided that, within a reasonable time after such transfer, the applicable heirs shall sign a joinder to this Agreement substantially in the form of Exhibit B attached hereto).
4.5      Authority. No Member, in its capacity as a Member, shall have the power to act for or on behalf of, or to bind the Company.
4.6      Outside Activities. Subject to the terms of any written agreement by or between any Member or any Affiliate of any Member to the contrary (including the Amended and Restated Omnibus Agreement dated as of December 19, 2006, among the Limited Partnership, Teekay Corporation and certain of their respective Affiliates, as amended from time to time), to the fullest extent permitted by law (a) a Member may have business interests and engage in business activities in addition to those relating to the Company, including business interests and activities which compete with the Company or its Subsidiaries, and (b) no Member or group of Members (unless such Member is an employee of the Company or one of its Subsidiaries, and then only in such capacity as an employee) shall have any duty or obligation to bring any “corporate opportunity” to the Company or any of its Subsidiaries. Subject to the terms of any written agreement by any Member or any Affiliate of any Member to the contrary, none of the Company, its Affiliates or any other Member shall have any rights by virtue of this Agreement in any business interests or activities of any other Member or any Affiliate of any other Member.
4.7      No Effect on Lending Relationship. Notwithstanding anything herein to the contrary, nothing contained in this Agreement shall affect, limit or impair the rights and remedies of any lender in their capacity as a lender to the Company, the Limited Partnership or any of their respective Subsidiaries pursuant to any agreement which the Company, the Limited Partnership or any of their respective Subsidiaries has borrowed money. Without limiting the generality of the foregoing, any such Person, in exercising its rights as a lender, including making its decision on whether to foreclose on any collateral security, shall have no duty to consider (a) its or any of its Affiliates’ status as a direct or indirect equityholder of the Company, (b) the interests of the Company or the Limited Partnership or (c) any duty it or any of its Affiliates may have hereunder or otherwise to any other direct or indirect






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equityholder of the Company or the Limited Partnership, except as may be required under the applicable loan documents or by commercial law applicable to creditors generally.
ARTICLE V     
Shares; Membership
5.1      Shares Generally. The Equity Interests of the Members shall be represented by issued and outstanding Shares (which shall not be certificated unless otherwise determined by the Board). The Company shall maintain a schedule of all Members from time to time setting forth the percentage of Shares held by them (as the same may be amended, modified or supplemented from time to time, the “Members Schedule”), a copy of which as of the execution of this Agreement is attached hereto as Schedule A. Ownership of a Share (or fraction thereof) shall not, to the extent permitted by law, entitle a Member to call for a partition or division of any property of the Company or for any accounting.
5.2      Authorization of Shares. The Company is hereby authorized to issue Shares only.
5.3      Issuance of Shares. The Company shall not, without the prior written approval of the TK Majority Holders and the Brookfield Majority Holders, have the right to issue additional Shares after the date of this Agreement. Subject to the immediately preceding sentence, the Company shall not issue any Shares to any Person that is not already a Member unless such Person has executed and delivered to the Company the documents described in Section 5.4. Upon the issuance of Shares authorized pursuant to this Agreement, the Company shall adjust the Capital Accounts of the Members as necessary in accordance with Section 6.2.
5.4      New Members from the Issuance of Shares. In order for a Person to be admitted as a Member of the Company pursuant to the issuance (subject to Section 5.3) or permitted transfer of Shares to such Person, such Person shall have executed and delivered to the Company a written undertaking to be bound by the terms and conditions of this Agreement substantially in the form of Exhibit B hereto. Upon the amendment of the Members Schedule by the Company and the satisfaction of any other applicable conditions set forth in this Agreement, including, if a condition, the receipt by the Company of payment for the issuance of the applicable Shares, such Person shall be admitted as a Member and deemed listed as such on the books and records of the Company and thereupon shall be issued his or its Shares. The Company shall also adjust the Capital Accounts of the Members as necessary in accordance with Section 6.2.
5.5      Option Exercise; Right of Repurchase; Right of First Offer.
(a)      Upon the earliest of (i) the date on which the consents set forth on Schedule C are obtained (in the reasonable judgment of the Board), (ii) the date the Board waives the requirement in clause (i) above, and (iii) a TK Event of Default, Brookfield (or such Brookfield Member or Brookfield Members as Brookfield shall designate) shall have the option to purchase from TK two percent (2%) of the then outstanding Shares in consideration of one million (1,000,000) Warrants (or, if TK does not own sufficient Shares, to purchase from TK Members in proportion to the TK






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Members’ ownership of Shares). The option provided by this Section 5.5(a) shall not terminate or expire until exercised by Brookfield (or such Brookfield Member or Brookfield Members as Brookfield shall designate). Within three (3) Business Days following the date on which Brookfield (or such Brookfield Member or Brookfield Members as Brookfield shall designate) notifies TK in writing that Brookfield (or such Brookfield Member or Brookfield Members as Brookfield shall designate) intends to exercise its option pursuant to this Section 5.5(a), TK shall sell and deliver to Brookfield two percent (2%) of the then outstanding Shares and, in exchange therefor, Brookfield shall sell and deliver to TK (or the TK Members, if applicable) one million (1,000,000) Warrants, and the Company shall update Schedule A to reflect such Transfer (the date such transactions are consummated pursuant to this Section 5.5(a) , the “Exercise Date”). The Shares and the Warrants sold and delivered pursuant to this Section 5.5(a) shall be sold free and clear of any Liens. The Company shall use its reasonable best efforts to obtain any consents, including making payments that are not material and adverse to the Company in connection with such consents, required to permit the Brookfield Holders to exercise the option set forth in this Section 5.5(a) without breaching, violating or contravening any contracts, instruments or agreements or, in the case of debt, the Company shall repay or refinance, or cause the Partnership to repay or refinance, any indebtedness required to be repaid or refinanced to permit the Brookfield Holders to exercise the option set forth in this Section 5.5(a) without breaching, violating or contravening any contracts, instruments or agreements if such a consent or an amendment thereof is not obtained, provided that doing so would not be reasonably likely to have a material adverse impact on the Company, the Limited Partnership and their respective Subsidiaries, taken as a whole. If requested by the Brookfield Majority Holders, the Board shall waive the requirements of clause (i) in the first sentence of this Section 5.5(a) unless the Board determines that such waiver is reasonably likely to have a material adverse impact on the Company, the Limited Partnership and their respective Subsidiaries, taken as a whole (it being understood that in measuring any such material adverse impact, the Board shall take into account mitigating actions that may be taken, including refinancing or repaying debt or paying a fee to obtain a consent). Without Brookfield’s prior written consent, TK will, at all times following the date of this Agreement, unless purchased pursuant to this Section 5.5 , not Transfer or pledge any Shares if such Transfer or pledge would result in TK owning less than 2% of the then outstanding Shares free and clear of any Liens.
(b)      Following the Exercise Date, Brookfield (or such Brookfield Member or Brookfield Members as Brookfield shall designate) shall have the option to sell to TK two percent (2%) of the then outstanding Shares in consideration of 80% of the VWAP Price per Share (and, if TK shall be unable to purchase such Shares, Brookfield shall sell to the TK Members in proportion to the TK Members’ ownership of Shares). The option provided by this Section 5.5(b) shall not terminate or expire until exercised by Brookfield (or such Brookfield Member or Brookfield Members as Brookfield shall designate). Within three (3) Business Days following the date on which Brookfield (or such Brookfield Member or Brookfield Members as Brookfield shall designate) notifies TK in writing that Brookfield (or such Brookfield Member or Brookfield Members as Brookfield shall designate) intends to exercise its put option pursuant to this Section 5.5(b) , Brookfield (or such Brookfield Member or Brookfield Members as Brookfield shall designate) shall sell and deliver to TK (or such other TK Members, as applicable) two percent (2%) of the then outstanding Shares and, in exchange therefor, TK shall pay the Brookfield Members 80% of the VWAP Price per Share by wire transfer to a bank account designated in writing by the






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Brookfield Members within two Business Days following the date on which Brookfield notifies TK in writing that Brookfield (or such Brookfield Member or Brookfield Members as Brookfield shall designate) intends to exercise its put option pursuant to this Section 5.5(b) , in immediately available funds, and the Company shall update Schedule A to reflect such Transfer. The Shares sold and delivered pursuant to this Section 5.5(b) shall be sold free and clear of any Liens. Following the exercise of such put option, TK (or such other TK Members, as applicable) shall have such rights as existed prior to the Exercise Date, and Brookfield (or such Brookfield Member or Brookfield Members as Brookfield shall designate) shall have such rights as existed prior to the Exercise Date, including but not limited to the rights set forth in Section 3.1 , Section 5.5 and Section 5.7 ; provided that following such put option (i) Section 5.5(a)(i) shall refer to any consents required to permit the Brookfield Holders to exercise the option set forth in Section 5.5(a) without resulting in a loss or termination of rights under any contract or instrument of the Limited Partnership or any of its Subsidiaries (without reference to Schedule C ) and (ii) the consideration to be paid to exercise the option in Section 5.5(a) shall be the VWAP Price per Share (rather than 1,000,000 Warrants). Without limiting the foregoing, this put option may be exercised by Brookfield in connection with the transfer of Shares by Brookfield or Brookfield’s successor under Section 13.7.
(c)      If the TK Members own at least fifteen percent (15%) in the aggregate of the outstanding Common Units of the Limited Partnership, on a fully-diluted basis, and any of the Brookfield Members propose to sell (the “ Brookfield Offering Members ”) any of their respective interests in the Company (the “ Offered Interests ”), then, subject to the terms and conditions specified in this Section 5.5(c) :
(i)      Prior to any such sale, the Brookfield Offering Members proposing to sell the Offered Interests shall notify TK in writing (the “ Offering Holder Notice ”) of such proposed sale, stating its bona fide intention to transfer the Offered Interests and identifying the percentage of Shares and Offered Common Units (as defined below) being offered, but excluding the price of such Offered Interests;
(ii)      Within fifteen (15) Business Days from the date of receipt of the Offering Holder Notice, TK may submit an offer in writing (the “ ROFO Offer Notice ,” and the offer contained in such ROFO Offer Notice, the “ ROFO Offer ”), which offer shall remain open for at least sixty (60) calendar days from the date of delivery of the ROFO Offer Notice (the “ ROFO Offer Period ”), to purchase all, but not less than all, of the Offered Interests for cash at the price specified in such ROFO Offer Notice (the “ ROFO Offer Price ”); provided that such ROFO Offer must include an offer to purchase any Common Units (the “ Offered Common Units ”) for cash at the price specified in such ROFO Offer Notice that the Brookfield Offering Members intend to sell in connection with the sale of the Offered Interests and specified in the Offering Holder Notice. Any ROFO Offer contained in any ROFO Offer Notice so delivered shall be binding upon delivery thereof and shall be irrevocable;
(iii)      During the ROFO Offer Period (which period may be extended by the Brookfield Offering Members, by written notice to TK, for a reasonable time not to exceed, in the aggregate, one hundred and eighty (180) calendar days (from the date of






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delivery of the ROFO Offer Notice), to the extent necessary to execute definitive documentation and obtain any required regulatory or governmental approvals (provided that the ROFO Offer is revocable by TK following the first 60 calendar days)), the Brookfield Offering Members may (but are not required to) sell the Offered Interests (A) to TK at the ROFO Offer Price or (B) to another Person at a price that equals or exceeds the ROFO Offer Price (it being understood that representations, warranties and other terms (other than price) of the sale of the Offered Securities may be as negotiated without reference to ROFO Offer); and
(iv)      If the Brookfield Offering Members do not receive a ROFO Offer Notice within fifteen (15) Business Days from the date of receipt of the Offering Holder Notice, TK shall be deemed to have waived all rights to purchase the Offered Interests under this Section 5.5(c) and the Brookfield Offering Members shall thereafter be free to sell the Offered Interests for the sixty (60) calendar day period following such fifteen (15) Business Day period (which period may be extended by the Brookfield Offering Members, by written notice to TK, for a reasonable time not to exceed, in the aggregate, one hundred and eighty (180) calendar days following such fifteen (15) Business Day period, to the extent necessary to execute definitive documentation and obtain any required regulatory or governmental approvals) without any further obligation to TK pursuant to this Section 5.5(c) .
(v)      If the Brookfield Offering Members do not sell the Offered Interests to TK or another Person pursuant to Section 5.5(c)(iii) or (iv) within the applicable time periods set forth in such Sections, they may not subsequently sell the Offered Interests without complying with the provisions of Section 5.5 with respect to each such sale .
(vi)      The right of first offer set forth in this Section 5.5(c) shall not apply to common shares of the Company or the Limited Partnership if the Company or the Limited Partnership is converted into a corporation.
(d)      Provided that the TK Members own at least fifteen percent (15%) in the aggregate of the outstanding Common Units of the Limited Partnership, on a fully-diluted basis, upon the Brookfield Members owning less than fifteen percent (15%) in the aggregate of the outstanding Common Units of the Limited Partnership, on a fully-diluted basis, TK shall have the option to purchase all, but not less than all, of the Shares then held by all of the Brookfield Members in consideration of the VWAP Price per Share; provided that such option may not be exercised until following the consummation of any Transfer that causes the Brookfield Members to own less than fifteen percent (15%) in the aggregate of the outstanding Common Units of the Limited Partnership, on a fully-diluted basis. Brookfield shall inform TK within two (2) Business Days of the date on which the Brookfield Members own less than fifteen percent (15%) in the aggregate of the outstanding Common Units of the Limited Partnership, on a fully-diluted basis. The option provided by this Section 5.5(d) shall terminate fifteen (15) Business Days following the date on which Brookfield notifies TK in writing that the Brookfield Members own less than fifteen percent (15%) in the aggregate of the outstanding Common Units of the Limited Partnership, on a fully-diluted basis. Within three (3) Business Days following the date on which TK notifies the Brookfield Members in writing that TK intends to exercise its option pursuant to this Section 5.5(d) , the






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Brookfield Members shall sell and deliver to TK all of their Shares and, in exchange therefor, TK shall pay the Brookfield Members the VWAP Price per Share by wire transfer to a bank account designated in writing by the Brookfield Members within two Business Days following the date on which TK notifies the Brookfield Members in writing that TK intends to exercise its option pursuant to this Section 5.5(d) , in immediately available funds, and the Company shall update Schedule A to reflect such Transfer. The Shares sold and delivered pursuant to this Section 5.5(d) shall be sold free and clear of any Liens.
(e)      Provided that the Brookfield Members own at least fifteen percent (15%) in the aggregate of the outstanding Common Units of the Limited Partnership, upon the TK Members owning less than ten percent (10%) in the aggregate of the outstanding Common Units of the Limited Partnership, on a fully-diluted basis, Brookfield (or such Brookfield Member or Brookfield Members as Brookfield shall designate) shall have the option to purchase all, but not less than all, of the Shares then held by all of the TK Members in consideration of the VWAP Price per Share. TK shall inform Brookfield within two (2) Business Days of the date on which the TK Members own less than ten percent (10%) in the aggregate of the outstanding Common Units of the Limited Partnership, on a fully-diluted basis. The option provided by this Section 5.5(e) shall terminate fifteen (15) Business Days following the date on which TK notifies Brookfield in writing that the TK Members own less than ten percent (10%) in the aggregate of the outstanding Common Units of the Limited Partnership, on a fully-diluted basis. Within three (3) Business Days following the date on which Brookfield (or such Brookfield Member or Brookfield Members as Brookfield shall designate) notifies the TK Members in writing that Brookfield (or such Brookfield Member or Brookfield Members as Brookfield shall designate) intends to exercise its option pursuant to this Section 5.5(e) , the TK Members shall sell and deliver to Brookfield (or such Brookfield Member or Brookfield Members as Brookfield shall designate) all of their Shares and, in exchange therefor, Brookfield (or such Brookfield Member or Brookfield Members as Brookfield shall designate) shall pay the TK Members the VWAP Price per Share by wire transfer to a bank account designated in writing by the TK Members within two Business Days following the date on which Brookfield (or such Brookfield Member or Brookfield Members as Brookfield shall designate) notifies the TK Members in writing that Brookfield (or such Brookfield Member or Brookfield Members as Brookfield shall designate) intends to exercise its option pursuant to this Section 5.5(e) , in immediately available funds, and the Company shall update Schedule A to reflect such Transfer. The Shares sold and delivered pursuant to this Section 5.5(e) shall be sold free and clear of any Liens.
(f)      On and following the Exercise Date, if a TK Event of Default has occurred, Brookfield (or such Brookfield Member or Brookfield Members as Brookfield shall designate) shall have the option to purchase from the TK Member all, but not less than all, of the TK Members’ Shares in consideration the VWAP Price per Share. The option provided by this Section 5.5(f) shall not terminate or expire until exercised by Brookfield (or such Brookfield Member or Brookfield Members as Brookfield shall designate). Within three (3) Business Days following the date on which Brookfield (or such Brookfield Member or Brookfield Members as Brookfield shall designate) notifies TK in writing that Brookfield (or such Brookfield Member or Brookfield Members as Brookfield shall designate) intends to exercise its option pursuant to this Section 5.5(f) , the TK Members shall sell and deliver to Brookfield all of their respective Shares and, in exchange therefor, Brookfield shall pay the TK Members the VWAP Price per Share by wire transfer to a






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bank account designated in writing by TK within two Business Days following the date on which Brookfield notifies TK in writing that Brookfield (or such Brookfield Member or Brookfield Members as Brookfield shall designate) intends to exercise its option pursuant to this Section 5.5(f) , in immediately available funds, and the Company shall update Schedule A to reflect such Transfer. The Shares sold and delivered pursuant to this Section 5.5(f) shall be sold free and clear of any Liens.
5.6      Drag Rights. In the event that the Brookfield Members agree to sell all or substantially all of their Common Units of the Limited Partnership and Shares of the Company, the Brookfield Members shall have the right to initiate a sale of the Company and to require each other Member to participate in a sale of the Company on the same terms and conditions as the Brookfield Members, with each other Member being entitled to be paid its pro rata share of the aggregate consideration paid to all Members in such sale of the company.
5.7      Share Ownership. Notwithstanding anything herein or in the Registration Rights Agreement to the contrary, without the prior written consent of the Brookfield Majority Holders, (a) until the time at which the transition of the Schedule 2 companies shall have occurred as provided for in the Master Services Agreement Term Sheet attached to the Investment Agreement (or in a manner which is the equivalent in all material respects to that provided for in the Master Services Agreement Term Sheet and reasonably acceptable to Brookfield), no TK Member or any controlled Affiliate of Teekay Corporation will Transfer or hedge its Common Units or Warrants of the Limited Partnership, and (b) until the second anniversary of the date of this Agreement, neither Teekay Corporation nor its controlled Affiliates may Transfer, pledge, encumber or hedge its Common Units or its Warrants in the Limited Partnership, if such Transfer, pledge, encumbrance or hedge would result in Teekay Corporation and its controlled Affiliates, collectively, owning, and having economic exposure to (immediately after such Transfer, pledge, creating such encumbrance or hedge), Common Units with a Fair Market Value of less than $100 million (if then listed or admitted to trading on a securities exchange, based on the most recent closing price on the Principal Market for the Common Units) (which economic exposure must be to the Common Units without giving credit to the Warrants); provided, however, even if the events described above in clauses (a) and/or (b) have not occurred, the TK Members and controlled Affiliates of Teekay Corporation, collectively, may Transfer Common Units and Warrants that, as a percentage of the outstanding Common Units and Warrants (on an as-converted basis) owned by them immediately following the Closing of the purchase of Common Units and Warrants pursuant to the Investment Agreement, is no more than the percentage that Brookfield and its Affiliates, collectively, have Transferred or are contemporaneously Transferring as a percentage of their Common Units and Warrants (on an as-converted basis) owned immediately following the Closing of the purchase of Common Units and Warrants pursuant to the Investment Agreement. Further, notwithstanding the above, any restriction herein shall not apply to (i) any enforcement of the liens and security interests provided for in that certain Margin Loan Agreement dated as of December 21, 2012 among Teekay Finance Limited, the lenders party thereto, and Citibank, N.A., as administrative agent, and Teekay Corporation, as such may be amended, refinanced or replaced from time to time, even if the amount borrowed or the collateral provided thereunder is increased as a result of such amendment, refinancing or






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replacement, (ii) a sale in connection with a tender offer, merger or similar transaction involving the Limited Partnership, (iii) any recapitalization involving the Limited Partnership or (iv) any Transfer of Common Units or Warrants between or among TK, Teekay Corporation or its controlled Affiliates; provided that, the case of clauses (ii) and (iii), such transaction has been approved by the Board, or in the case of clause (ii), such tender offer is with respect to the purchase of a majority of the outstanding Common Units.
5.8      Preemptive Rights. Brookfield and TK agree that preemptive rights granted to the Company pursuant to Section 5.7 of the Limited Partnership Agreement (or any additional preemptive or similar rights otherwise granted to Brookfield, any Brookfield Members or their controlled Affiliates or to TK, any TK Members or their controlled Affiliates, in each case with respect to securities of the Limited Partnership) shall be allocated between Brookfield and its controlled Affiliates and TK and its controlled Affiliates, respectively, based on the relative percentages of the Limited Partnership’s Common Units and Warrants (on an as-converted basis) owned by each of (a) Brookfield and its controlled Affiliates and (b) TK and its controlled Affiliates on the date such rights first become exercisable with respect to a proposed issuance of securities by the Limited Partnership.
ARTICLE VI     
Capital Contributions and Capital Accounts
6.1      Capital Contributions.
(a)      Ownership of Shares as of the Date Hereof . Contemporaneously with the execution of this Agreement, each Member as of the date hereof is deemed to have made the Capital Contribution and own the percentage, type, series and class of Shares, in each case, in the amounts set forth opposite such Member's name on the Members Schedule as in effect on the date hereof.
(b)      No Other Rights or Obligations . No Member shall make or be required to make any additional contributions to the Company with respect to such Member's Shares. Except as expressly provided herein, no Member, in its capacity as a Member, shall have the right to receive any cash or any other property of the Company.
6.2      Capital Accounts.
(a)      Maintenance Rules . The Company shall maintain for each Member a separate capital account (a “ Capital Account ”) in accordance with this Section 6.2(a) . Each Capital Account shall be maintained in accordance with the following provisions:
(i)      Such Capital Account shall be increased by the cash amount or Book Value of any property contributed or deemed contributed by such Member to the Company pursuant to this Agreement, such Member's allocable share of Profits and any items in the nature of income or gains which are specially allocated to such Member pursuant to Section 8.2 or Section 8.3, and the amount of any liabilities of the Company assumed by such Member or which are secured by any property distributed to such Member.






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(ii)      Such Capital Account shall be decreased by the cash amount or Book Value of any property distributed to such Member pursuant to this Agreement, such Member's allocable share of Losses and any items in the nature of deductions or losses which are specially allocated to such Member pursuant to Section 8.2 or Section 8.3 and the amount of any liabilities of such Member assumed by the Company or which are secured by any property contributed by such Member to the Company.
(iii)      If all or any portion of a Share is transferred in accordance with the terms of this Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent it relates to the transferred Share (or portion thereof).
(iv)      If a new or existing Member contributes money or property to the Company (other than a de minimis amount as determined by the Board) as consideration for the issuance by the Company of any Shares after the date hereof, if a retiring or existing Member receives a distribution of money or property as consideration for any Shares of the Company after the date hereof, or upon any other events described in Treasury Regulations Section 1.704-1(b)(2)(iv)( f ), the Capital Accounts of the Members may be adjusted in accordance with Treasury Regulation Section 1.704‑1(b)(2)(iv)( f ), in the discretion of the Board.
The foregoing provisions and the other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Section 1.704‑1(b) of the Treasury Regulations and shall be interpreted and applied in a manner consistent with such Treasury Regulations. If the Board determines that it is prudent to modify the manner in which the Capital Accounts, or any increases or decreases to the Capital Accounts, are computed in order to comply with such Treasury Regulations, the Board may authorize such modifications.
(b)      Definition of Profits and Losses . “ Profits ” and “ Losses ” mean, for each Taxable Year or other period, an amount equal to the Company's taxable income or loss, respectively, for such Taxable Year or other period, determined in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss), with the following adjustments:
(i)      The computation of all items of income, gain, loss and deduction shall include tax‑exempt income and those items described in Treasury Regulation Section 1.704‑1(b)(2)(iv)( i ), without regard to the fact that such items are not includable in gross income or are not deductible for U.S. federal income tax purposes.
(ii)      If the Book Value of any Company property is adjusted pursuant to Treasury Regulation Section 1.704‑1(b)(2)(iv)( e ) or ( f ), the amount of such adjustment shall be taken into account as gain or loss from the disposition of such property (provided that if the Book Value of any Company property is adjusted pursuant to Treasury Regulation Section 1.704‑1(b)(2)(iv)( f )(5)(i), the allocation of gain or loss shall be made immediately prior to the related acquisition of the interest in the Company).






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(iii)      Items of income, gain, loss or deduction attributable to the disposition of Company property having a Book Value that differs from its adjusted basis for tax purposes shall be computed by reference to the Book Value of such property.
(iv)      Items of depreciation, amortization and other cost recovery deductions with respect to Company property having a Book Value that differs from its adjusted basis for tax purposes shall be computed by reference to the property's Book Value in accordance with Treasury Regulation Section 1.704‑1(b)(2)(iv)( g ).
(v)      To the extent an adjustment to the adjusted tax basis of any Company property pursuant to Code Sections 732(d), 734(b) or 743(b) is required, pursuant to Treasury Regulation Section 1.704‑1(b)(2)(iv)( m ), to be taken into account in determining Capital Accounts, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis).
(vi)      Items specially allocated pursuant to Sections 8.2 and 8.3 shall be excluded from the computation of Profits and Losses.
6.3      Negative Capital Accounts. If any Member has a deficit balance in its Capital Account, such Member shall have no obligation to restore such negative balance or to make any Capital Contributions to the Company by reason thereof, and such negative balance shall not be considered an asset of the Company or of any Member.
6.4      No Withdrawal. No Member will be entitled to withdraw any part of his or its Capital Contribution or Capital Account or to receive any distribution from the Company, except as expressly provided in this Agreement.
6.5      Loans from Members. Loans by Members to the Company shall not be considered Capital Contributions.
6.6      Status of Capital Contributions.
(a)      No Member shall receive any interest, salary or drawing with respect to its Capital Contributions or its Capital Account, except as otherwise specifically provided in this Agreement.
(b)      No Member shall be required to lend any funds to the Company or to make any additional Capital Contributions to the Company. No Member shall have any personal liability for the repayment of any Capital Contribution of any other Member.
ARTICLE VII     
Distributions
7.1      Generally.
(a)      Subject to Sections 3.1(h) , 7.1(b) , 7.2 and 7.3 , the Board shall distribute all available cash to the holders of Shares, subject to the retention and establishment of reserves, or






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payment to third parties, of such funds as the Board deems necessary with respect to the reasonable business needs of the Company which shall include the payment or the making of provision for the payment when due of the Company's obligations, including the payment of any management or administrative fees and expenses or any other obligations.
(b)      Notwithstanding any provision to the contrary contained in this Agreement, the Company shall not make any distribution to the holders of Shares if such distribution would violate Section 40 of the Act or other applicable law.
7.2      Distributions. Subject to Section 3.1(h)(xiv), distributions of available cash shall be distributed on a quarterly basis to all of the holders of Shares, pro rata. Assets other than available cash (taking such other assets into account at their Fair Market Value at the time of distributions) shall be distributed, at such times and in such amounts as the Board determines in its sole discretion, to all of the holders of Shares, pro rata.
7.3      Withholding Taxes. If the Company is required by law to make any payment on behalf of a Member in his, her or its capacity as such (including in respect of withholding taxes, personal property taxes, and unincorporated business taxes, or an imputed underpayment as defined under Section 6225 of the Code, etc.), then the Company will reduce current or subsequent distributions which would otherwise be made to such Member until the Company has recovered the amount paid on behalf of such Member (and the amount of such reduction will be deemed to have been distributed to such Member for all purposes of this Agreement), as determined in the discretion of the Board.
ARTICLE VIII     
U.S. Tax Allocations
8.1      Allocations of Profits and Losses. The Company's Profit and Loss for any fiscal period shall be allocated among the Members for U.S. tax purposes in such a manner that, as of the end of such fiscal period and to the extent possible, the Capital Account of each Member shall be equal to the respective net amount which would be distributed to such Member under this Agreement, determined as if the Company were to (a) liquidate the assets of the Company for an amount equal to their Book Value as of the end of such fiscal period and (b) distribute the proceeds in liquidation in accordance with Section 10.2.
8.2      Regulatory and Special Allocations. Notwithstanding the provisions of Section 8.1:
(a)      If there is a net decrease in Company Minimum Gain (determined according to Treasury Regulation Section 1.704‑2(d)(1)) during any Taxable Year, each Member shall be specially allocated Profits for such Taxable Year (and, if necessary, subsequent Taxable Years) in an amount equal to such Member's share of the net decrease in Company Minimum Gain, determined in accordance with Treasury Regulation Section 1.704‑2(g). The items to be so allocated shall be determined in accordance with Treasury Regulation Section 1.704‑2(f)(6) and 1.704‑2(j)(2). This paragraph is intended to comply with the minimum gain chargeback requirement in Treasury Regulation Section 1.704‑2(f) and shall be interpreted consistently therewith.






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(b)      Member Nonrecourse Deductions shall be allocated in the manner required by Treasury Regulation Section 1.704‑2(i). Except as otherwise provided in Treasury Regulation Section 1.704‑2(i)(4), if there is a net decrease in Member Minimum Gain during any Taxable Year, each Member that has a share of such Member Minimum Gain shall be specially allocated Profits for such Taxable Year (and, if necessary, subsequent Taxable Years) in an amount equal to that Member's share of the net decrease in Member Minimum Gain. Items to be allocated pursuant to this paragraph shall be determined in accordance with Treasury Regulation Sections 1.704‑2(i)(4) and 1.704‑2(j)(2). This paragraph is intended to comply with the minimum gain chargeback requirements in Treasury Regulation Section 1.704‑2(i)(4) and shall be interpreted consistently therewith.
(c)      In the event any Member unexpectedly receives any adjustments, allocations or distributions described in Treasury Regulation Section 1.704‑1(b)(2)(ii)( d )( 4 ), ( 5 ) or ( 6 ), Profits shall be specially allocated to such Member in an amount and manner sufficient to eliminate the Adjusted Capital Account Deficit created by such adjustments, allocations or distributions as quickly as possible. This paragraph is intended to comply with the qualified income offset requirement in Treasury Regulation Section 1.704‑1(b)(2)(ii)( d ) and shall be interpreted consistently therewith.
(d)      The allocations set forth in paragraphs (a), (b) and (c) above (the “ Regulatory Allocations ”) are intended to comply with certain requirements of the Treasury Regulations under Code Section 704. Notwithstanding any other provisions of this Article VIII (other than the Regulatory Allocations), the Regulatory Allocations shall be taken into account in allocating Profits and Losses among Members so that, to the extent possible, the net amount of such allocations of Profits and Losses and other items and the Regulatory Allocations to each Member shall be equal to the net amount that would have been allocated to such Member if the Regulatory Allocations had not occurred.
8.3      Curative Allocations. If the Board determines, after consultation with counsel experienced in U.S. income tax matters, that the allocation of any item of Company income, gain, loss, deduction or credit is not specified in this Article VIII (an “unallocated item”), or that the allocation of any item of Company income, gain, loss, deduction or credit hereunder is clearly inconsistent with the Members' economic interests in the Company (determined by reference to the general principles of Treasury Regulation Section 1.704‑1(b) and the factors set forth in Treasury Regulation Section 1.704‑1(b)(3)(ii)) (a “misallocated item”), then the Board may allocate such unallocated items, or reallocate such misallocated items, to reflect such economic interests; provided that no such allocation will be made without the prior consent of each Member that would be affected thereby (which consent no such Member may unreasonably withhold) and provided further that no such allocation shall have any material effect on the amounts distributable to any Member, including the amounts to be distributed upon the complete liquidation of the Company.
8.4      Tax Allocations.
(a)      All income, gains, losses, deductions and credits of the Company shall be allocated, for U.S. federal, state and local income tax purposes, among the Members in accordance with the allocation of such income, gains, losses, deductions and credits among the Members for






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computing their Capital Accounts, except that if any such allocation for tax purposes is not permitted by the Code or other applicable law, the Company's subsequent income, gains, losses, deductions and credits shall be allocated among the Members for tax purposes, to the extent permitted by the Code and other applicable law, so as to reflect as nearly as possible the allocation set forth herein in computing their Capital Accounts. Each item of income, gain, loss, deduction and credit realized by the Company in any Taxable Year shall be allocated pro rata to the Members according to the amount of Profit or Loss, as the case may be, allocated to them in such year.
(b)      Items of Company taxable income, gain, loss and deduction with respect to any property contributed to the capital of the Company shall be allocated among the Members in accordance with Code Section 704(c) using any method permitted by the Treasury Regulations and selected by the Board, so as to take account of any variation between the adjusted basis of such property to the Company for U.S. federal income tax purposes and its Book Value.
(c)      If the Book Value of any Company property is adjusted pursuant to Section 6.2(a)(iv), subsequent allocations of items of taxable income, gain, loss and deduction with respect to such property shall take account of any variation between the adjusted basis of such property for federal income tax purposes and its Book Value for purposes of Code Section 704(c) using any method permitted by the Treasury Regulations and selected by the Board.
(d)      Allocations of tax credit, tax credit recapture, and any items related thereto shall be allocated to the Members according to their interests in such items as determined by the Board taking into account the principles of Treasury Regulation Section 1.704‑1(b)(4)(ii).
Allocations pursuant to this Section 8.4 are solely for purposes of U.S. federal, state and local taxes and shall not affect, or in any way be taken into account in computing, any Member's Capital Account or share of Profits, Losses, distributions or other items pursuant to any provisions of this Agreement.
ARTICLE IX     
Elections and Reports
9.1      Generally. The Company will keep appropriate books and records with respect to the Company's business, including all books and records required to be kept, maintained or retained pursuant to the Act or other applicable law or necessary to provide any information, lists and copies of documents required to be provided pursuant to Section 9.3. Access to the books and records of the Company shall be granted to Members and Managers as provided in the Act. Such books and records shall be kept at the principal office of the Company or at such other location outside of Canada.
9.2      Fiscal Year. Unless otherwise determined by the Board, the Company’s books and records shall be kept on a December 31 calendar year basis.
9.3      Bank Accounts. All funds of the Company will be deposited in its name in an account or accounts maintained outside Canada. Checks shall be drawn upon the Company account or accounts only for the purposes of the Company and may be signed by such persons






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as may be designated by the Board, subject to the other restrictions contained in this Section 9.3. All banking and finance activities (apart from those of a purely administrative nature) of the Company shall be conducted outside of Canada. Without limiting the foregoing: (a) no person who is resident in Canada for purposes of the Canadian Tax Act shall have sole signing authority with respect to any bank account of the Company; (b) if a person who is resident in Canada for purposes of the Canadian Tax Act has signing authority with respect to a bank account of the Company, no funds may be drawn on such bank account without authorization from one or more co-signatories who are non-residents of Canada for purposes of the Canadian Tax Act; (c) each person (other than a Canadian-resident co-signatory) who has signing authority with respect to a bank account of the Company shall exercise such signing authority only outside of Canada; and (d) treasury personnel of the Company and its Affiliates (through subcontracting arrangements) may be given electronic access to bank accounts of the Company, but only for purposes of processing payments as directed or approved by the applicable Director or officer of the Company.
9.4      Tax Status. The Members intend that the Company be treated as a partnership for United States federal, state and local income tax purposes, and the Company and each Member shall file all tax returns on the basis consistent therewith. The Company has filed, or shall file within 74 days of the Effective Date, an IRS Form 8832 electing to be treated as “disregarded as an entity separate from its owner” (within the meaning of Treasury Regulation Section 301.7701-3(b)(2)(i)(C)), which election is effective no later than the day prior to the Effective Date.
9.5      Reports. The Company will use reasonable best efforts to deliver or cause to be delivered, as soon as reasonably practicable following the end of each taxable year of the Company (and, in any event, will deliver not later than March 20) of each year, to each Person who was a Member at any time during the previous Taxable Year, all information (including a Schedule K‑1) reasonably necessary for the preparation of such Person's United States federal income tax returns and any state, local and foreign income tax returns which such Person is required to file as a result of the Company being engaged in a trade or business within such state, local or foreign jurisdiction, including a statement showing such Person's share of income, gains, losses, deductions and credits for such year for United States federal income tax purposes (and, if applicable, state, local or foreign income tax purposes). In addition, the Company will use reasonable best efforts to provide the Investor with the Form 1099 received by the Company in respect of its investment in the Limited Partnership no later than February 15 of each taxable year. The Company will cooperate with the Investor to provide any information with respect to the Company or the Limited Partnership that the Investor reasonably requests to satisfy any U.S. federal, state, local or non-U.S. tax reporting requirements of the Investor.
9.6      Tax Elections. The Board will determine whether to make or revoke any available election for the Company pursuant to the Code. Each Member will upon request supply the information necessary to give proper effect to any such election. At the request of the any Member, the Company will make an election under Section 754 of the Code, and any corresponding election under state, local or non-U.S. tax law.






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9.7      Tax Controversies. The Board shall designate the “tax matters partner” (as such term is defined in Code Section 6231 to the extent applicable for taxable years beginning before January 1, 2018) for the Company and the “partnership representative” for purposes of the Partnership Tax Audit Rules for the Company (in each case, the “Tax Matters Partner”), provided that the Board may replace the Tax Matters Partner at any time. The Tax Matters Partner is authorized and required to represent the Company (at the Company's expense) in connection with all examinations of the Company's affairs by tax authorities, including resulting administrative and judicial proceedings, and to expend Company funds for professional services and costs associated therewith, in each case, at the direction of the Board. Each Member agrees to cooperate with the Tax Matters Partner and/or the Board and to do or refrain from doing any or all things reasonably requested by the Tax Matters Partner and/or the Board with respect to the conduct of such proceedings. Subject to the foregoing proviso, the Board will have sole discretion to determine whether the Company will contest or continue to contest any tax deficiencies assessed or proposed to be assessed by any taxing authority. The Board may cause the Tax Matters Partner to take, or cause the Company to take, such other actions as may be necessary or advisable pursuant to U.S. Department of Treasury Regulations or other guidance to ratify the designation, pursuant to this Section 9.7, of the Tax Matters Partner; and each other Member agrees to take such other actions as may be requested by the Tax Matters Partner and/or the Board to ratify or confirm any such designation pursuant to this Section 9.7.
9.8      Passive Foreign Investment Company. The Board shall use reasonable best efforts to cause the Limited Partnership to determine, on an annual basis, based on the advice of the Limited Partnership’s accountant or other tax advisor, whether the Limited Partnership or any of the Limited Partnership’s Subsidiaries is a passive foreign investment company, within the meaning of Section 1297 of the Code. If the Board determines in accordance with the preceding sentence that the Limited Partnership or any of the Limited Partnership’s Subsidiaries is a passive foreign investment company, within the meaning of Section 1297 of the Code, the Board shall for that year and thereafter use its reasonable best efforts to cause the Limited Partnership, on an annual basis, to provide to the Brookfield Members such information that (a) the Brookfield Members (or their direct or indirect owners) reasonably request to enable the Brookfield Members (or their direct or indirect owners) to complete their U.S. Internal Revenue Service Forms 8621 with respect to any of their investments in the Limited Partnership and (b) will enable the Brookfield Members (or their direct or indirect owners) to make and/or maintain a “qualified electing fund” election with respect to any of their investments in the Limited Partnership, as such terms are defined in Section 1295 of the Code and the Treasury Regulations thereunder.
ARTICLE X     
Dissolution and Liquidation
10.1      Dissolution. Subject to Section 3.1(h) and Section 46 of the Act, the Company shall be dissolved and its affairs wound up only upon the happening of any of the following events:






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(a)      Upon the election to dissolve the Company upon approval by all of the parties hereto; or
(b)      The entry of a decree of judicial dissolution under Section 47 of the Act; provided , that, notwithstanding anything contained herein to the contrary, no Member shall make an application for the dissolution of the Company pursuant to Section 47 of the Act without the approval of the Board.
Dissolution of the Company shall be effective on the day on which the event occurs giving rise to the dissolution, but the Company shall not terminate until the winding up of the Company has been completed, the assets of the Company have been distributed as provided in Section 10.2 and the Certificate shall have been canceled.
10.2      Liquidation.
(a)      Liquidator . Upon dissolution of the Company, the Board will appoint a Person (who shall not be a resident of Canada for purposes of the Canadian Tax Act) to act as the “ Liquidator ,” and such Person shall act as the Liquidator unless and until a successor Liquidator is appointed as provided in this Section 10.2 . The Liquidator will agree not to resign at any time without 30 days' prior written notice to the Board. The Liquidator may be removed at any time, with or without cause, by notice of removal and appointment of a successor Liquidator approved by the Board. Any successor Liquidator will succeed to all rights, powers and duties of the former Liquidator. The right to appoint a successor or substitute Liquidator in the manner provided in this Section 10.2 will be recurring and continuing for so long as the functions and services of the Liquidator are authorized to continue under the provisions of this Agreement, and every reference in this Agreement to the Liquidator will be deemed to refer also to any such successor or substitute Liquidator appointed in the manner provided in this Section 10.2 . The Liquidator will receive as compensation for its services (1) no additional compensation, if the Liquidator is an employee of the Company or any of its Subsidiaries or of any of the Members, or (2) if the Liquidator is not such an employee, such compensation as the Board may approve, plus, in either case, reimbursement of the Liquidator's out‑of‑pocket expenses in performing its duties.
(b)      Liquidating Actions . The Liquidator will liquidate the assets of the Company and apply and distribute the proceeds of such liquidation, in the following order of priority, unless otherwise required by mandatory provisions of the Act or other applicable law:
(i)      First , to the payment of the Company's debts and obligations to its creditors (including Members and Managers), including sales commissions and other expenses incident to any sale of the assets of the Company, in order of the priority provided by the Act and other applicable law;
(ii)      Second , to the establishment of and additions to such reserves as the Board deems necessary or appropriate; and
(iii)      Third , to the Members, in accordance with Section 7.2 .






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The reserves established pursuant to clause (ii) above will be paid over by the Liquidator to a bank or other financial institution, to be held in escrow for the purpose of paying any such contingent or unforeseen liabilities or obligations and, at the expiration of such period as the Board deems advisable, such reserves will be distributed to the Members in the manner provided above in this Section 10.2(b) . The allocations and distributions provided for in this Agreement are intended to result in the Capital Account of each Member immediately prior to the distribution of the Company's assets pursuant to this Section 10.2(b) being equal to the amount distributable to such Member pursuant to this Section 10.2(b) .
(c)      Distribution in Kind . Notwithstanding the provisions of Section 10.2(b) which require the liquidation of the assets of the Company, but subject to the order of priorities set forth in Section 10.2(b) , if upon dissolution of the Company the Board determines that an immediate sale of part or all of the Company's assets would be impractical or could cause undue loss to the Members, the Board may, in its sole discretion, defer the liquidation of any assets except those necessary to satisfy Company liabilities and reserves, and may, in its absolute discretion, distribute to the Members, in lieu of cash, as tenants in common and in accordance with the provisions of Section 10.2(b) , undivided interests in such Company assets as the Liquidator deems not suitable for liquidation. Any such distribution in kind will be subject to such conditions relating to the disposition and management of such properties as the Liquidator deems reasonable and equitable and to any agreements governing the operating of such properties at such time. For purposes of any such distribution, any property to be distributed will be valued at its Fair Market Value.
(d)      Reasonable Time for Winding Up . A reasonable time will be allowed for the orderly winding up of the business and affairs of the Company and the liquidation of its assets pursuant to Section 10.2(b) in order to minimize any losses otherwise attendant upon such winding up. Distributions upon liquidation of the Company (or any Member's interest in the Company) and related adjustments will be made by the end of the Taxable Year of the liquidation (or, if later, within 90 days after the date of such liquidation) or as otherwise permitted by Treasury Regulation Section 1.704‑1(b)(2)(ii)( b ).
(e)      Termination . Upon completion of the distribution of the assets of the Company as provided in Section 10.2(b) , the Company shall be terminated and the Liquidator shall cause the cancellation of the Certificate in the Republic of the Marshall Islands and of all qualifications and registrations of the Company as a foreign limited liability company in jurisdictions other than the Republic of the Marshall Islands and shall take such other actions as may be necessary to terminate the Company.
ARTICLE XI     
Transfer of Shares
11.1      Restrictions.
(a)      Transfers by TK Members . A TK Member may Transfer Shares only if such Transfer has been approved in writing by the Brookfield Majority Holders (which approval the Brookfield Majority Holders shall provide only in their sole discretion); provided , that a TK Member may Transfer Shares to Affiliates controlled by Teekay Corporation without the approval of the






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Brookfield Majority Holders subject to this Article XI . Each TK Member agrees that, if TK is unable to fulfill any obligation relating to communications or determinations hereunder, the TK Member that owns the greatest percentage of Shares of the TK Members shall fulfill TK’s obligation therefor.
(b)      Void Transfers . Each TK Member acknowledges and agrees that, to the fullest extent permitted by applicable law, such TK Member shall not Transfer any Share(s) except in accordance with the provisions of this Article XI . Any attempted Transfer in violation of the preceding sentence shall, to the fullest extent permitted by applicable law, be deemed null and void for all purposes, and the Company will not record any such Transfer on its books or treat any purported transferee as the owner of such Share(s) for any purpose.
11.2      General Restrictions on Transfer.
(a)      Notwithstanding anything to the contrary in this Agreement, no transferee of any Share(s) received pursuant to a Transfer (but excluding transferees that were Members immediately prior to such a Transfer, who shall automatically become a Member with respect to any additional Shares they so acquire) shall become a Member in respect of or be deemed to have any ownership rights in the Share(s) so Transferred unless the purported transferee is admitted as a Member as set forth in Section 11.3 .
(b)      Following a Transfer of any Share(s) that is permitted under this Article XI, the transferee of such Share(s) shall succeed to the Capital Account associated with such Share(s) and shall receive allocations and distributions under Articles VI, VII, VIII and X in respect of such Share(s). Notwithstanding the foregoing, Profits, Losses and other items will be allocated between the transferor and the transferee according to Code Section 706.
(c)      Any Member who Transfers all of his or its Shares (i) shall cease to be a Member upon such Transfer, and (ii) shall no longer possess or have the power to exercise any rights or powers of a Member of the Company.
(d)      Brookfield shall be permitted to Transfer its Shares to a transferee who executes and delivers to the Company a joinder to this Agreement substantially in the form of Exhibit B attached hereto.
11.3      Procedures for Transfer.
(a)      The Board shall cause the Company to modify the Members Schedule from time to time to reflect any Transfer permitted under this Article XI and the admittance of any such new Member.
(b)      Subject in all events to the general restrictions on Transfers contained in Sections 11.1 , 11.2 and 11.5 , no Transfer of Share(s) may be completed to a Person that is not already a Member until the prospective transferee is admitted as a Member of the Company by executing and delivering to the Company a written undertaking to be bound by the terms and conditions of this Agreement substantially in the form of Exhibit B hereto. Upon the amendment of the Members






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Schedule by the Company, such prospective transferee shall be admitted as a Member and deemed listed as such on the books and records of the Company.
11.4      Legend. Any certificates or instruments representing the Shares, if any, will bear the following legend or one that is in similar form:
“THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE OR INSTRUMENT IS SUBJECT TO THE CONDITIONS SPECIFIED IN A LIMITED LIABILITY COMPANY AGREEMENT AMONG THE ISSUER AND ITS MEMBERS. A COPY OF SUCH LIMITED LIABILITY COMPANY AGREEMENT AS IN EFFECT FROM TIME TO TIME WILL BE FURNISHED WITHOUT CHARGE BY THE ISSUER TO THE HOLDER HEREOF UPON WRITTEN REQUEST.”
11.5      Limitations.
(a)      In order to permit the Company to qualify for the benefit of a “safe harbor” under Code Section 7704, notwithstanding anything to the contrary in this Agreement, no Transfer of any Share shall be permitted or recognized by the Company (within the meaning of Treasury Regulation Section 1.7704‑1(d)) and the Company shall not issue any Shares if and to the extent that such Transfer or issuance would cause the Company to have more than 100 partners (within the meaning of Treasury Regulation Section 1.7704‑1(h), including the look‑through rule in Treasury Regulation Section 1.7704‑1(h)(3)).
(b)      Notwithstanding anything to the contrary in this Agreement, no Share may be Transferred and the Company may not issue any Share unless (i) such Transfer or issuance, as the case may be, shall not affect the Company's existence or qualification as a limited liability company under the Act, (ii) such Transfer or issuance, as the case may be, shall not cause the Company to be classified as other than a partnership for United States federal income tax purposes, (iii) such Transfer or issuance, as the case may be, shall not result in a termination of the Company under Code Section 708, unless the Board determines that any such termination will not have a material adverse impact on the Members and (iv) such Transfer or issuance, as the case may be, shall not cause the application of the tax‑exempt use property rules of Code Sections 168(g)(l)(B) and 168(h) to the Company or its Members.
ARTICLE XII     
Certain Agreements
12.1      Financial Statements and Confidentiality.
(a)      In addition to, and without limiting, any other rights the Brookfield Members may have under the Act or other applicable law, until the Brookfield Directors constitute a majority of the Board following the Exercise Date, the Company agrees to provide each Brookfield Member the following:






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(i)      not less than 7 days prior to the end of each fiscal quarter (including for certainty the end of the fourth fiscal quarter (the end of the fiscal year)), a summary of any significant transaction and affiliate transaction entered into or completed, or expected to be entered into or completed, within such quarter;
(ii)      within 7 days after the end of each fiscal quarter (including for certainty the end of the fourth fiscal quarter (the end of the fiscal year)), a draft financial report in the form of the reporting template provided to the Company by the Brookfield Members (the “ Draft Quarterly Report ”);
(iii)      within 14 days of the end of each fiscal quarter (including for certainty the end of the fourth fiscal quarter (the end of the fiscal year)), a second financial report in the form of the reporting template provided to the Company by the Brookfield Members (the “Updated Quarterly Report”), which Updated Quarterly Report will include any updates or revisions to the Draft Quarterly Report provided by the Company in respect of such quarter;
(iv)      within 30 days of the end of each fiscal quarter (including for certainty the end of the fourth fiscal quarter (the end of the fiscal year)), the auditor of the Company and of the Limited Partnership will respond to the referral instructions provided by the Brookfield Members’ auditor;
(v)      within 60 days after the end of each fiscal year, consolidated financial statements (which shall include a consolidated balance sheet and consolidated statements of income and cash flows) for the Limited Partnership for such fiscal year audited by a firm of independent certified public accountants of recognized national standing selected by the Board in accordance with United States generally accepted accounting principles as in effect from time to time;
(vi)      within 60 days after the end of each fiscal quarter (other than the fourth fiscal quarter as set forth in clause (i) above), consolidated financial statements (which shall include a consolidated balance sheet and consolidated statements of income and cash flows) for the Limited Partnership, reviewed in accordance with AU Section 722 by a firm of independent certified public accountants of recognized national standing, in accordance with United States generally accepted accounting principles as in effect from time to time;
(vii)      within 30 days after the end of each calendar month, unaudited consolidated monthly financial reports showing income from vessel operations for the business units of the Limited Partnership for such calendar month;
(viii)      45 days following the end of each fiscal quarter (including for certainty the end of the fourth fiscal quarter (the end of the fiscal year)), a forecast in respect of the succeeding quarter;
(ix)      prior to the end of the third fiscal quarter in each fiscal year, a forecast, budget and business plan for the Limited Partnership for the succeeding five fiscal years,






136199440.19  
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including (A) projected quarterly statements of income and (B) projected statements of cash flows and liquidity for the Limited Partnership;
(x)      any additional information reasonably required by any Brookfield Member for purposes of fulfilling its disclosure and reporting obligations pursuant to (i) any rules and regulations of the Toronto Stock Exchange or the New York Stock Exchange; (ii) the provisions of the Ontario Securities Act and any regulations promulgated thereunder; (iii) any rules or regulations of the Securities and Exchange Commission, and (iv) the requirements, the rules and regulations promulgated thereunder of the Securities Act of 1933, as amended, the Securities and Exchange Act of 1934, as amended, and the Sarbanes-Oxley Act of 2002, as amended, including in all cases where information is required for the purposes of evaluating and certifying adequate internal controls over financial reporting;
(xi)      any additional financial and operational information required by any Brookfield Member for purposes of fulfilling its public reporting requirements and/or its obligations in respect of any private fund investor reporting requirements;
(xii)      (iv)(x)    reasonable access to the auditor of the Company and of the Limited Partnership, including for purposes of discussing each Draft Quarterly Report and each Updated Quarterly Report, which Updated Quarterly Reports shall each receive sign off from the auditor of the Company and of the Limited Partnership;
(xiii)      reasonable access to the offices and the properties of each of the Company, the Limited Partnership and their respective Subsidiaries, including its and their books and records, all upon reasonable notice and at such reasonable times and as often as the Brookfield Member may reasonably request;
(xiv)      an opportunity to receive and discuss with senior management of the Limited Partnership on a regular basis, during normal business hours and without unduly interfering with the operation of the business, monthly reports regarding financial, operating, strategic and such other matters relating to the management of the Limited Partnership as may be mutually acceptable to management and the Limited Partnership in good faith, including for certainty, a quarterly call with members of the Brookfield Members’ finance team within 10 days following the end of each fiscal quarter (including for certainty the end of the fourth fiscal quarter (the end of the fiscal year)); and
(xv)      copies of all substantive materials provided to the Board at substantially the same time as such materials are provided to the Board.
Notwithstanding any provision in this Section 12.1(a) to the contrary, the information and materials described in this paragraph shall only be furnished to Brookfield Members who have provided such representations, warranties and assurances, as the Company may reasonably request that such documents (and the contents thereof) are not required by any law to be disclosed to any other Person and that such Brookfield Member will not disclose such documents (or any contents thereof) to any other Person who may be required by law to disclose such documents (or any contents thereof), in each case other than disclosure permitted by Section 12.1(b) or required by the Act.






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(b)      Confidentiality . All information disclosed by the Company pursuant to Section 12.1(a) or otherwise pursuant to this Agreement shall be confidential information of the Company (other than information which is publicly available not pursuant to a breach of this Section 12.1(b) ) and, unless otherwise provided in this Agreement or consented to by the Board in writing in advance, shall not be disclosed to any third party other than (i) employees, consultants, advisors, accountants, attorneys and other representatives of such Member recipient or its respective Affiliates on a need‑to‑know basis, (ii) in the case of any Member that is (or is controlled by) a private equity fund or other investment fund, the disclosure in a customary manner by such Member of any such information in confidence to such Member's investors, (iii) the disclosure by such Member of any such information to any prospective purchaser of Shares pursuant to a customary confidentiality agreement and (iv) subject to the next sentence, as required by law or court order. The obligations of the Members hereunder shall not apply to the extent that the disclosure of information otherwise determined to be confidential is required by applicable law, regulations, stock exchange rules or regulations, subpoena, civil investigative demand or other proceeding; provided that (x) as soon as reasonably practicable and to the extent permitted by law, such Member shall notify the Company thereof, which notice shall include the basis upon which such Member believes the information is required to be disclosed and (y) such Member shall, if requested by the Company and at the sole cost and expense of the Company, reasonably cooperate with the Company to protect the continued confidentiality thereof.
ARTICLE XIII     
Miscellaneous Provisions
13.1      Notices.
(a)      All notices, requests and other communications hereunder must be in writing and will be deemed to have been duly given only if delivered personally against written receipt or by electronic transmission (including facsimile or email) against electronic delivery confirmation or mailed by internationally recognized overnight courier prepaid, to (i) any Member, at such Member's address set forth on the Members Schedule attached hereto or as most recently delivered to all Members by the Company, and (ii) the Company, to the Company's Chief Executive Officer, President and Secretary at the Company's principal place of business (or in any case to such other address as the addressee may from time to time designate in writing to the sender).
(b)      All such notices, requests and other communications will (i) if delivered personally to the address as provided in Section 13.1(a) be deemed given upon delivery, (ii) if delivered by electronic transmission to the facsimile number or email as provided for in Section 13.1(a) , be deemed given upon delivery if delivered on a Business Day by 5:00 p.m., New York City time, or otherwise on the next Business Day and (iii) if delivered by overnight courier to the address as provided in Section 13.1(a) , be deemed given on the earlier of the first Business Day following the date sent by such overnight courier or upon receipt (in each case regardless of whether such notice, request or other communication is received by any other person to whom a copy of such notice is to be delivered pursuant to this Section 13.1 ).
13.2      Governing Law. All issues and questions concerning the application, construction, validity, interpretation and enforcement of this Agreement and the exhibits and






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schedules to this Agreement shall be governed by, and construed in accordance with, the laws of the Republic of the Marshall Islands, and specifically the Act, without giving effect to any choice of law or conflict of law rules or provisions (whether of the Republic of the Marshall Islands or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the Republic of the Marshall Islands; provided that Sections 5.5, 5.6, 5.7 and 12.1(b) shall be governed by and construed in accordance with the internal laws of the State of New York applicable to agreements made and to be performed entirely within such State, without regard to the conflicts of law principles of such State.
13.3      No Action for Partition. No Member shall have any right to maintain any action for partition with respect to the property of the Company.
13.4      Headings and Sections. The headings in this Agreement are inserted for convenience only and are in no way intended to describe, interpret, define, or limit the scope, extent or intent of this Agreement or any provision of this Agreement. Unless the context requires otherwise, all references in this Agreement to Sections, Articles, Exhibits or Schedules shall be deemed to mean and refer to Sections, Articles, Exhibits or Schedules of or to this Agreement.
13.5      Amendments. Except as otherwise expressly set forth in this Agreement (including Section 11.3(a)), the Certificate and this Agreement may be amended or restated only upon the written consent of both the Brookfield Majority Holders and the TK Majority Holders, and any such amendment or restatement to which such written consent is obtained will be binding upon the Company and each Member.
13.6      Interpretation. The term “this Agreement” means this Agreement together with all Schedules and Exhibits hereto, as the same may from time to time be amended, modified, supplemented or restated in accordance with the terms hereof. The use in this Agreement of the term “including” and other words of similar import mean “including, without limiting the generality of the foregoing” and where specific language is used to clarify by example a general statement contained herein, such specific language shall not be deemed to modify, limit or restrict in any manner the construction of the general statement to which it relates. References to Sections, Articles, Schedules and Exhibits are referenced to Sections or Articles of, or schedules or Exhibits to, as the case may be, this Agreement. The words “herein,” “hereof,” “hereunder” and other words of similar import refer to this Agreement as a whole, including the Schedules and Exhibits, and not to any particular section, subsection, paragraph, subparagraph or clause contained in this Agreement. Where the context so indicates, the masculine shall include the feminine, the neuter shall include the masculine and feminine, and the singular shall include the plural. References to “$” are to United States dollars.
13.7      Binding Effect . Except as otherwise provided to the contrary in this Agreement, this Agreement shall be binding upon and inure to the benefit of the Members, their respective successors and permitted assigns. All of the rights and privileges of Brookfield under this Agreement are automatically assigned to a transferee of any Brookfield Member who purchases a majority of the aggregate Shares, and a majority of the aggregate Common Units, held by all the Brookfield Members and executes and delivers to the Company a joinder to this Agreement substantially in






136199440.19  
46
 



the form of Exhibit B attached hereto and such transferee shall thereafter be Brookfield’s successor under this Agreement and all references in this Agreement to Brookfield shall thereafter refer to such transferee, including such transferee and its controlled Affiliates succeeding to the rights, privileges and obligations of the “Brookfield Members” under this Agreement.
13.8      Counterparts; Email and Facsimile. This Agreement may be executed in multiple counterparts, each of which shall be deemed to be an original and shall be binding upon the Member who executed the same, but all of such counterparts shall constitute the same agreement.
13.9      Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision shall to the fullest extent permitted by law be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement.
13.10      Remedies. Each of the parties to this Agreement shall to the fullest extent permitted by law be entitled to enforce its rights under this Agreement specifically, to recover damages and costs (including reasonable attorney's fees) caused by any breach of any provision of this Agreement and to exercise all other rights existing in its favor. The Members agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any party may in its sole discretion apply to any court of law or equity of competent jurisdiction (without posting any bond or deposit, any requirement for which is hereby waived) for specific performance and/or other injunctive relief in order to enforce or prevent any violations of the provisions of this Agreement.
13.11      Business Days. If any time period for giving notice or taking action under this Agreement expires on a day which is a Saturday, Sunday or other day that is not a Business Day, the time period shall be automatically extended to the Business Day immediately following such Saturday, Sunday or other day.
13.12      Waiver of Jury Trial. EACH PARTY TO THIS AGREEMENT HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TRIAL BY JURY IN ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS AGREEMENT OR THE VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR ENFORCEMENT THEREOF.
13.13      No Strict Construction. The parties to this Agreement have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties to this Agreement, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement.
13.14      Entire Agreement and Incorporation by Reference. Except as otherwise expressly set forth in this Agreement, this Agreement embodies the complete agreement and understanding among the parties to this Agreement with respect to the subject matter of this






136199440.19  
47
 



Agreement and supersedes and preempts any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter of this Agreement in any way.
13.15      Parties in Interest. Nothing herein shall be construed to be to the benefit of or enforceable by any third party including, but not limited to, any creditor of the Company.
13.16      Venue and Submission to Jurisdiction. ANY AND ALL SUITS, LEGAL ACTIONS OR PROCEEDINGS ARISING OUT OF THIS AGREEMENT (INCLUDING AGAINST ANY DIRECTOR OR OFFICER OF THE COMPANY) SHALL TO THE FULLEST EXTENT PERMITTED BY LAW BE BROUGHT SOLELY IN THE SUPREME COURT OF THE STATE OF NEW YORK, NEW YORK COUNTY, OR THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND EACH MEMBER HEREBY TO THE FULLEST EXTENT PERMITTED BY LAW IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO AND ACCEPTS THE EXCLUSIVE JURISDICTION OF SUCH COURTS FOR THE PURPOSE OF SUCH SUITS, LEGAL ACTIONS OR PROCEEDINGS; PROVIDED THAT IF THE COURTS LISTED ABOVE DO NOT HAVE JURISDICTION OR VENUE OVER ANY SUIT, LEGAL ACTION OR PROCEEDING (OR OTHERWISE REFUSE TO ADJUDICATE SUCH SUIT, LEGAL ACTION OR PROCEEDING) ARISING OUT OF THIS AGREEMENT (INCLUDING AGAINST ANY DIRECTOR OR OFFICER OF THE COMPANY), SUCH MATTER SHALL BE BROUGHT SOLELY BEFORE THE COURTS OF THE REPUBLIC OF THE MARSHALL ISLANDS AND EACH MEMBER HEREBY TO THE FULLEST EXTENT PERMITTED BY LAW IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO AND ACCEPTS THE EXCLUSIVE JURISDICTION OF SUCH COURTS FOR THE PURPOSE OF SUCH SUITS, LEGAL ACTIONS OR PROCEEDINGS. IN ANY SUCH SUIT, LEGAL ACTION OR PROCEEDING, EACH MEMBER IRREVOCABLY AND UNCONDITIONALLY TO THE FULLEST EXTENT PERMITTED BY LAW WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS AND AGREES THAT SERVICE THEREOF MAY BE MADE BY CERTIFIED OR REGISTERED MAIL DIRECTED TO IT AT ITS ADDRESS SET FORTH IN THE BOOKS AND RECORDS OF THE COMPANY. TO THE FULLEST EXTENT PERMITTED BY LAW, EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OR ANY SUCH SUIT, LEGAL ACTION OR PROCEEDING IN ANY SUCH COURT AND HEREBY FURTHER WAIVES ANY CLAIM THAT ANY SUIT, LEGAL ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
13.17      Further Assurances. Each party to this Agreement shall execute and deliver such further instruments and take such additional actions as any other party may reasonably request to effect, consummate, confirm or evidence the transactions contemplated by this Agreement.






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48
 



13.18      Compliance. Each Member hereby covenants that it will not, and will cause its Subsidiaries not to, intentionally violate Anticorruption Laws in furtherance of the business of the Company and the Limited Partnership and their respective Subsidiaries. In the event the Company becomes aware of any violation of Anticorruption Laws, it will promptly notify its Members of any violation. For purposes of this Section 13.18, “Anticorruption Laws” means, collectively, the U.S. Foreign Corrupt Practices Act, the UK Bribery Act of 2010, the Brazilian Anti-Corruption Act (Law No. 12,846 of August 1, 2013 ruled by Decree No. 8420, of March 18, 2015), the Brazilian Improbity Law (Law No. 8,429 of June 2, 1992), the Canadian Corruption of Foreign Public Officials Act (S.C. 1998 c. 34, as amended June 19, 2013) and any other applicable anti-bribery or anti-corruption laws under any applicable jurisdictions.
13.19      No Vote to Remove the General Partner. As long as a TK Member has rights under this Agreement, none of the Brookfield Members shall vote Common Units in the Limited Partnership to remove the Company as the general partner of the Limited Partnership pursuant to Section 11.2 of the Limited Partnership Agreement, or elect another Person as a general partner of the Limited Partnership. As long as a Brookfield Member has rights under this Agreement, none of the TK Members shall vote Common Units in the Limited Partnership to remove the Company as the general partner of the Limited Partnership pursuant to Section 11.2 of the Limited Partnership Agreement, or elect another Person as a general partner of the Limited Partnership
13.20      Successor Corporation. If the Company undergoes any recapitalization or restructuring or change in form of organization or the Company forms a new entity to succeed to its ownership interest in the Limited Partnership, the terms of this Agreement shall apply to the recapitalized, restructured or successor entity mutatis mutandis to the extent reasonably practicable to provide the Members hereof with as nearly equivalent rights as are provided hereunder, and the Members shall make such related further changes to this Agreement as are reasonably required to achieve such nearly equivalent rights.
* * * *







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49
 



IN WITNESS WHEREOF, the undersigned, have executed this Second Amended and Restated Limited Liability Company Agreement of Teekay Offshore GP L.L.C. as of the Effective Date.

TEEKAY HOLDINGS LIMITED



By:         /s/ Edith Robinson        
Name: Edith Robinson
Title: President









136199440.19  
 
 



BROOKFIELD TK TOGP L.P., BY ITS GENERAL PARTNER, BROOKFIELD CAPITAL PARTNERS (BERMUDA) LTD.



By:         /s/ Gregory E A Morrison    
Name: Gregory E A Morrison
Title: Director








136199440.19  
 
 



Schedule A
Teekay Offshore GP L.L.C.
Members Schedule
(as of September 25, 2017)

 
 
% of Shares
4th Floor, Belvedere Building
69 Pitts Bay Road
Hamilton, HM 08, Bermuda
Attn. Corporate Secretary
Facsimile:     (441) 298-2530
Email:        Edie.Robinson@teekay.com

With a copy to (which copy alone shall not constitute notice):
Perkins Coie LLP
1120 NW Couch St., Tenth Floor
Portland, OR 97209
Attention:    David S. Matheson
Gina K. Eiben
Facsimile:    (503) 346-2008
Email:    DMatheson@perkinscoie.com
GEiben@perkinscoie.com


 
51
%
Brookfield TK TOLP G.P.
c/o Brookfield Capital Partners (Bermuda) Ltd.
73 Front Street, 5th Floor
Hamilton HM 12, Bermuda
Attention: Manager - Corporate Services
Facsimile: (441) 296-4475
Email: Jane.Sheere@brookfield.com

With a copy to (which copy alone shall not constitute notice):

Brookfield TK TOLP G.P.
c/o Brookfield Capital Partners Ltd.
Brookfield Place, Suite 300
181 Bay Street
Toronto, Ontario, M5J 2T3
Attention:     Ryan Szainwald, Senior Vice President
Facsimile:    (416) 369-2301
Email:        Ryan.Szainwald@brookfield.com

With a copy to (which copy alone shall not constitute notice):

Kirkland & Ellis LLP
601 Lexington Avenue
New York, NY 10022
Attention:    Joshua N. Korff, Esq.
Elazar Guttman, Esq.
Ross M. Leff, Esq.
Facsimile:    (212) 446-4900
Email:        JKorff@kirkland.com
Elazar.Guttman@kirkland.com
Ross.Leff@kirkland.com

 
49
%
 
 
 
Total
 
100
%






136199440.19  
 
 



Schedule B


Officers of Teekay Offshore GP L.L.C.
(as of September 25, 2017)
Edith Robinson, Corporate Secretary






136199440.19  
 
 



Schedule C
CONSENTS
The consents in respect of the contracts described in Section 6.03(l)(E) of the Company Disclosure Letter delivered pursuant to that certain Investment Agreement, dated July 26, 2017, by and between the Limited Partnership and Brookfield.






136199440.19  
 
 




Exhibit A
CERTIFICATE OF FORMATION
(Attached)






136199440.19  
 
 



Exhibit B
FORM OF JOINDER TO
SECOND AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
THIS JOINDER to the Second Amended and Restated Limited Liability Company Agreement of Teekay Offshore GP L.L.C., a Marshall Islands limited liability company (the “ Company ”), dated as of September 25, 2017, as amended or restated from time to time, by and among the Members of the Company (the “ Agreement ”), is made and entered into as of _________ by and between the Company and ________________ (“ Holder ”). Capitalized terms used herein but not otherwise defined shall have the meanings set forth in the Agreement.
WHEREAS, on the date hereof, Holder has acquired ______ Shares from _____________ and the Agreement and the Company require Holder, as a holder of such Shares, to become a party to the Agreement, and Holder agrees to do so in accordance with the terms hereof.
NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Joinder hereby agree as follows:
1.      Agreement to be Bound . Holder hereby (i) acknowledges that it has received and reviewed a complete copy of the Agreement and (ii) agrees that upon execution of this Joinder, it shall become a party to the Agreement and shall be fully bound by, and subject to, all of the covenants, terms and conditions of the Agreement as though an original party thereto and shall be deemed, and is hereby admitted as, a Member for all purposes thereof and entitled to all the rights incidental thereto.
2.      Members Schedule . For purposes of the Members Schedule, the address of the Holder is as follows:
[Name]

[Address]
3.      Governing Law . This Agreement and the rights of the parties hereunder shall be interpreted in accordance with the laws of the Republic of the Marshall Islands, and all rights and remedies shall be governed by such laws without regard to principles of conflicts of laws.
4.      Counterparts . This Joinder may be executed in separate counterparts each of which shall be an original and all of which taken together shall constitute one and the same agreement.
5.      Descriptive Headings . The descriptive headings of this Joinder are inserted for convenience only and do not constitute a part of this Joinder.






136199440.19  
 
 










136199440.19  
 
 



IN WITNESS WHEREOF, the parties hereto have executed this Joinder to the Second Amended and Restated Limited Liability Company Agreement of Teekay Offshore GP L.L.C. as of the date set forth in the introductory paragraph hereof.
TEEKAY OFFSHORE GP L.L.C.



By:                         
Name:
Title:

[HOLDER]



By:                         
Name:
Title:








136199440.19  
 
 

Exhibit 4.4


REGISTRATION RIGHTS AGREEMENT
by and among
TEEKAY OFFSHORE PARTNERS L.P.,
TEEKAY CORPORATION
and
BROOKFIELD TK TOLP L.P.
Dated as of September 25, 2017




136252302.7


 
TABLE OF CONTENTS
 
 
 
Page

 
 
 
 
 
 
 
ARTICLE I  
 
 
Resale Shelf Registration
 
Section 1.1
Resale Shelf Registration Statement
1

Section 1.2
Effectiveness Period
2

Section 1.3
Subsequent Shelf Registration Statement
2

Section 1.4
Supplements and Amendments
2

Section 1.5
Subsequent Holder Notice
2

Section 1.6
Underwritten Offering
3

Section 1.7
Take-Down Notice
4

Section 1.8
Piggyback Registration
4

 
 
 

 
ARTICLE II  
 
 
Additional Provisions Regarding Registration Rights
 
Section 2.1
Registration Procedures
5

Section 2.2
Suspension
9

Section 2.3
Expenses of Registration
9

Section 2.4
Information by Holders
10

Section 2.5
Subsequent Registration Rights
10

Section 2.6
Holdback Agreement
10

 
ARTICLE III  
 
 
Indemnification
 
Section 3.1
Indemnification by Company
11

Section 3.2
Indemnification by Holders
12

Section 3.3
Notification
12

Section 3.4
Contribution
13

 
 
 
 
ARTICLE IV
 
 
Transfer and Termination of Registration Rights
 
Section 4.1
Indemnification by Company
14

Section 4.2
Indemnification by Holders
14



i
136252302.7



 
 
 
 
ARTICLE V
 
 
Miscellaneous
 
Section 5.1
Amendments and Waivers
14

Section 5.2
Extension of Time, Waiver, Etc
14

Section 5.3
Assignment
14

Section 5.4
Counterparts
14

Section 5.5
Entire Agreement; No Third Party Beneficiary
15

Section 5.6
Governing Law; Jurisdiction
15

Section 5.7
Specific Enforcement
15

Section 5.8
Waiver of Jury Trial
16

Section 5.9
Notices
16

Section 5.10
Severability
18

Section 5.11
Expenses
18

Section 5.12
Interpretation
18

 
 
 



ii
136252302.7


REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this “ Agreement ”) is entered into as of September 25, 2017, by and between TEEKAY OFFSHORE PARTNERS L.P., a Republic of The Marshall Islands limited partnership (the “ Company ”), BROOKFIELD TK TOLP L.P., a Bermuda limited partnership (the “ Purchaser ”) and TEEKAY CORPORATION, a Republic of The Marshall Islands corporation (“ TK ”). Capitalized terms used but not defined elsewhere herein are defined in Exhibit A .
WHEREAS, the Company and the Purchaser are parties to the Investment Agreement, dated as of July 26, 2017 (as amended from time to time, the “ Investment Agreement ”), pursuant to which the Company is selling to the Purchaser, and the Purchaser is purchasing from the Company, (i) an aggregate of 244,000,000 Common Units (as defined below) and (ii) an aggregate of 62,440,945 Warrants (as defined below);
WHEREAS, the Purchaser and TK are parties to the Amended and Restated Subordinate Promissory Note, dated as of the date hereof, pursuant to which the Purchaser is selling to TK, and TK is purchasing from the Purchaser, an aggregate of 11,440,945 Warrants;
WHEREAS, the Company and Teekay Holdings Limited, an Affiliate of TK (“ Holdings ”), are parties to an Investment Agreement dated as of July 26, 2017 (as amended from time to time, the “ TK Investment Agreement ”), pursuant to which the Company is selling to Holdings and Holdings is purchasing from the Company, (i) an aggregate of 12,000,000 Common Units and (ii) an aggregate of 3,059,055 Warrants;
WHEREAS, TK or its Affiliates, as the owner of the Company’s general partner, currently has certain registration rights under the Fifth Amended and Restated Agreement of Limited Partnership of the Company (the “ LP Agreement ”);
WHEREAS, the Purchaser upon its acquisition of ownership interests in the Company’s general partner in connection with its investment pursuant to the Investment Agreement will have certain registration rights under the LP Agreement;
WHEREAS, both the Purchaser and TK are willing to suspend their registration rights under the LP Agreement for as long as this Agreement remains in effect; and
WHEREAS, as a condition to the obligations of (a) the Company and the Purchaser under the Investment Agreement, and (b) the Company and Holdings under the TK Investment Agreement, the Company, the Purchaser and TK are entering into this Agreement for the purpose of granting certain registration and other rights to the Purchaser, TK and the respective Affiliates of the Purchaser and TK that hold Registrable Securities, and the Purchaser, TK, the respective Affiliates of the Purchaser and TK that hold Registrable Securities and any other party that may become a party hereto pursuant to Section 4.1 and that holds Registrable Securities are referred to collectively as the “ Investors ” or “ Holders ” and individually each as an “ Investor ” or “ Holder ”.

136252302.7


NOW, THEREFORE, in consideration of the mutual covenants and agreements contained in this Agreement, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement hereby agree as follows:
Article I

Resale Shelf Registration
Section 1.1      Resale Shelf Registration Statement . Subject to the other applicable provisions of this Agreement, the Company shall, at the request of any Investor, prepare and file within twelve (12) months after the date hereof a registration statement covering the sale or distribution from time to time by the Investors, on a delayed or continuous basis pursuant to Rule 415 of the Securities Act, of all of the Registrable Securities on Form F-3 or Form S-3 (except if the Company is not then eligible to register for resale the Registrable Securities on Form F-3 or Form S-3, then such registration shall be on another appropriate form and shall provide for the registration of such Registrable Securities for resale by the Investors in accordance with any reasonable method of distribution elected by the Investors) (the “ Resale Shelf Registration Statement ”) and shall cause such Resale Shelf Registration Statement to be declared effective by the SEC within twelve (12) months after the date hereof (it being agreed that the Resale Shelf Registration Statement shall be an automatic shelf registration statement that shall become effective upon filing with the SEC pursuant to Rule 462(e) if Rule 462(e) is available to the Company for the resale of the Registrable Securities in a firmly underwritten offering and in an offering that is not firmly underwritten).
Section 1.2      Effectiveness Period . On and following the date that is the 12-month anniversary of the date hereof, the Company shall, subject to the other applicable provisions of this Agreement, use its reasonable best efforts to cause the Resale Shelf Registration Statement to be continuously effective and usable until such time as there are no longer any Registrable Securities (the “ Effectiveness Period ”).
Section 1.3      Subsequent Shelf Registration Statement . If any Shelf Registration Statement ceases to be effective under the Securities Act for any reason at any time during the Effectiveness Period, the Company shall use its reasonable best efforts to as promptly as is practicable cause such Shelf Registration Statement to again become effective under the Securities Act (including obtaining the prompt withdrawal of any order suspending the effectiveness of such Shelf Registration Statement), and shall use its reasonable best efforts to as promptly as is practicable amend such Shelf Registration Statement in a manner reasonably expected to result in the withdrawal of any order suspending the effectiveness of such Shelf Registration Statement or file an additional registration statement (a “ Subsequent Shelf Registration Statement ”) for an offering to be made on a delayed or continuous basis pursuant to Rule 415 of the Securities Act registering the resale from time to time by the Holders thereof of all securities that are Registrable Securities as of the time of such filing. If a Subsequent Shelf Registration Statement is filed, the Company shall use its reasonable best efforts to (a) cause such Subsequent Shelf Registration Statement to become effective under the Securities Act as promptly as is practicable after the filing thereof (it being agreed that the Subsequent Shelf Registration Statement shall be an automatic shelf registration statement that shall become effective upon filing with the SEC pursuant to Rule 462(e) if Rule

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462(e) is available to the Company for the resale of the Registrable Securities in a firmly underwritten offering and in an offering that is not firmly underwritten) and (b) keep such Subsequent Shelf Registration Statement continuously effective and usable until the end of the Effectiveness Period. Any such Subsequent Shelf Registration Statement shall be a registration statement on Form F-3 or Form S-3 to the extent that the Company is eligible to use such form. Otherwise, such Subsequent Shelf Registration Statement shall be on another appropriate form and shall provide for the registration of such Registrable Securities for resale by the Holders in accordance with any method of distribution elected by the Investors.
Section 1.4      Supplements and Amendments . The Company shall supplement and amend any Shelf Registration Statement if required by the Securities Act or the rules, regulations or instructions applicable to the registration form used by the Company for such Shelf Registration Statement.
Section 1.5      Subsequent Holder Notice . If a Person entitled to the benefits of this Agreement becomes a Holder of Registrable Securities after a Shelf Registration Statement becomes effective under the Securities Act, the Company shall, as promptly as is reasonably practicable following delivery of written notice to the Company of such Person becoming a Holder and requesting for its name to be included as a selling securityholder in the prospectus related to the Shelf Registration Statement (a “ Subsequent Holder Notice ”):
(a)      if required and permitted by applicable law, file with the SEC a supplement to the related prospectus or a post-effective amendment to the Shelf Registration Statement so that such Holder is named as a selling securityholder in the Shelf Registration Statement and the related prospectus in such a manner as to permit such Holder to deliver a prospectus to purchasers of the Registrable Securities in accordance with applicable law;
(b)      if, pursuant to Section 1.5(a) , the Company shall have filed a post-effective amendment to the Shelf Registration Statement that is not automatically effective, use its reasonable best efforts to cause such post-effective amendment to become effective under the Securities Act as promptly as is practicable; and
(c)      notify such Holder as promptly as is reasonably practicable after the effectiveness under the Securities Act of any post-effective amendment filed pursuant to Section 1.5(a) .
Section 1.6      Underwritten Offering .
(a)      An Investor may, on or after the date that is twelve (12) months after the date hereof, deliver, from time to time, a written notice to the Company (the “ Underwritten Offering Notice ”) specifying that the sale of some or all of such Investor’s Registrable Securities subject to the Shelf Registration Statement, is intended to be conducted through an underwritten offering (the “ Underwritten Offering ”) in which Registrable Securities are sold to one or more underwriters on a firm commitment basis for reoffering to the public, or an offering that is a “bought deal” or “block trade; provided , that the Registrable Securities of such Investor requested to be included in such Underwritten Offering must have an aggregate value as of the date of such Underwritten Offering

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Notice of no less than the lesser of (i) $25 million and (ii) all of such Investor’s and its Affiliates Registrable Securities. Upon delivery of such Underwritten Offering Notice to the Company, the Company shall as soon as reasonably practicable (but in no event later than one Business Day following the date of delivery of the Underwritten Offering Notice to the Company) deliver notice of such Underwritten Offering Notice to all other Holders, who shall then have three Business Days (or two Business Days in the case of an underwritten “bought deal” or “block trade”) from the date that such notice is given to them to notify the Company in writing of the number of Registrable Securities held by such Holder that they want to be included in such Underwritten Offering. Upon receipt of an Underwritten Offering Notice, the Company shall as soon as reasonably practicable use its reasonable best efforts to facilitate such Underwritten Offering.
(b)      In the event of an Underwritten Offering, the Investors owning a majority of the Registrable Securities proposed to be sold in such Underwritten Offering shall select the underwriter(s) to administer the Underwritten Offering (subject to the consent of the Company which shall not be unreasonably withheld, conditioned or delayed). The Company and the Holders of Registrable Securities participating in an Underwritten Offering will enter into an underwriting agreement in customary form with the managing underwriter or underwriters selected for such offering.
(c)      The Company will not include in any Underwritten Offering pursuant to this Section 1.6 any securities that are not Registrable Securities without the prior written consent of the Investors (which shall not be unreasonably withheld, conditioned or delayed) owning a majority of the Registrable Securities proposed to be sold in such Underwritten Offering. If the managing underwriter or underwriters advise the Company and the Investors participating in such Underwritten Offering in writing that in its or their good faith opinion the number of Registrable Securities (and, if permitted hereunder, other securities requested to be included in such offering) exceeds the number of securities which can be sold in such offering in light of market conditions or is such so as to adversely affect the success of such offering, the Company will include in such offering only such number of securities that can be sold without adversely affecting the marketability of the offering, which securities will be so included in the following order of priority: (i) first, the Registrable Securities of the Investors that have requested to participate in such Underwritten Offering, allocated pro rata among such Investors on the basis of the total number of Registrable Securities then-held by such Investors, and (ii) second, any other securities of the Company that have been requested to be so included.
Section 1.7      Take-Down Notice . Subject to the other applicable provisions of this Agreement, at any time that any Shelf Registration Statement is effective, if an Investor delivers a notice to the Company (a “ Take-Down Notice ”) stating that it intends to effect a sale or distribution of all or part of its Registrable Securities included by it on any Shelf Registration Statement (a “ Shelf Offering ”) and stating the number of the Registrable Securities to be included in such Shelf Offering, then the Company shall amend, subject to the other applicable provisions of this Agreement, or supplement the Shelf Registration Statement as may be necessary in order to enable such Registrable Securities to be sold and distributed pursuant to the Shelf Offering.
  

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Section 1.8      Piggyback Registration .
(a)      If the Company proposes to file a registration statement under the Securities Act with respect to an offering of Common Units or securities convertible into, or exchangeable or exercisable for, Common Units, whether or not for sale for its own account (other than a registration statement (i) on Form F-4, Form S-8 or any successor forms thereto or (ii) filed to effectuate an exchange offer or any employee benefit or dividend reinvestment plan) (a “ Company-Initiated Registration ”), then the Company shall give prompt written notice of such filing, which notice shall be given no later than three (3) Business Days prior to the filing date (the “ Piggyback Notice ”) to the Investors. The Piggyback Notice shall offer such Investors the opportunity to include (or cause to be included) in such registration statement the number of Registrable Securities as each such Investor may request (each, a “ Piggyback Registration Statement ”). Subject to Section 1.8(b), the Company shall include in each Piggyback Registration Statement with respect to a Company-Initiated Registration all Registrable Securities with respect to which the Company has received written requests for inclusion therein (each, a “ Piggyback Request ”) within two (2) Business Days after the date of the Piggyback Notice.
(b)      If any of the securities to be registered pursuant to the registration giving rise to the rights under this Section 1.8 are to be sold in an underwritten offering, the Company shall use reasonable best efforts to cause the managing underwriter or underwriters of a proposed underwritten offering to permit Holders of Registrable Securities who have timely submitted a Piggyback Request, in connection with such offering to include in such offering all Registrable Securities included in each Holder’s Piggyback Request, on the same terms and subject to the same conditions as any other units of capital stock, if any, of the Company included in the offering. Notwithstanding the foregoing, if the managing underwriter or underwriters of such underwritten offering advise the Company in writing that in its or their good faith opinion the number of securities exceeds the number of securities which can be sold in such offering in light of market conditions or is such so as to adversely affect the success of such offering, the Company will include in such offering only such number of securities that can be sold without adversely affecting the marketability of the offering, which securities will be so included in the following order of priority: (i) first, the securities proposed to be sold by the Company for its own account; (ii) second, the Registrable Securities of the Investors that have requested to participate in such underwritten offering, allocated pro rata among such Investors on the basis of the total number of Registrable Securities then-held by such Investors; and (iii) third, any other securities of the Company that have been requested to be included in such offering; provided , that Holders may, prior to the time at which the offering price or underwriter’s discount is determined with the managing underwriter or underwriters, withdraw their request to be included in such registration pursuant to this Section 1.8 .
ARTICLE II     

Additional Provisions Regarding Registration Rights
Section 2.1      Registration Procedures . Subject to the other applicable provisions of this Agreement, in the case of each registration of Registrable Securities effected by the Company pursuant to Article I , the Company will:

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(a)      prepare and promptly file with the SEC a registration statement with respect to such securities and use reasonable best efforts to cause such registration statement to become and remain effective for the period of the distribution contemplated thereby, in accordance with the applicable provisions of this Agreement;
(b)      prepare and file with the SEC such amendments (including post-effective amendments) and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to keep such registration statement effective for the period specified in paragraph (a) above and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement in accordance with the Holders’ intended method of distribution set forth in such registration statement for such period;
(c)      furnish to the Holders’ legal counsel copies of the registration statement and the prospectus included therein (including each preliminary prospectus) proposed to be filed and provide such legal counsel a reasonable opportunity to review and comment on such registration statement;
(d)      if requested by the managing underwriter or underwriters, if any, or the Holders, promptly include in any prospectus supplement or post-effective amendment such information as the managing underwriter or underwriters, if any, or the Holders may reasonably request in order to permit the intended method of distribution of such securities and make all required filings of such prospectus supplement or post-effective amendment as soon as practicable after the Company has received such request;
(e)      in the event that the Registrable Securities are being offered in an Underwritten Offering, furnish to the Holders and to the underwriters of the securities being registered such reasonable number of copies of the registration statement, preliminary prospectus and final prospectus as the Holders or such underwriters may reasonably request in order to facilitate the public offering or other disposition of such securities;
(f)      immediately notify the Holders at any time when a prospectus relating thereto is required to be delivered under the Securities Act or of the Company’s discovery of the occurrence of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading or incomplete in the light of the circumstances then existing, and, subject to Section 2.2 , at the request of the Holders, prepare as promptly as is practicable and furnish to the Holders a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading or incomplete in the light of the circumstances then existing;
(g)      use its reasonable best efforts to register and qualify (or exempt from such registration or qualification) the securities covered by such registration statement under such other securities or “blue sky” laws of such jurisdictions within the United States as shall be reasonably

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requested in writing by the Holders; provided , however , that the Company shall not be required in connection therewith or as a condition thereto to (i) qualify to do business in any jurisdictions where it would not otherwise be required to qualify but for this subsection or (ii) take any action that would subject it to general service of process in any such jurisdictions;
(h)      in the event that the Registrable Securities are being offered in an underwritten public offering, enter into an underwriting agreement in accordance with the applicable provisions of this Agreement;
(i)      in connection with an Underwritten Offering, the Company shall use its reasonable best efforts to cause its officers to support the marketing of the Registrable Securities covered by such offering (including participation by the Company’s management in “ road shows ” or other similar marketing efforts);
(j)      use its reasonable best efforts to furnish, on the date that such Registrable Securities are delivered to the underwriters for sale, if such securities are being sold through underwriters, (i) an opinion dated such date of the legal counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, if any, (ii) a “negative assurances letter”, dated such date of the legal counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering and (iii) a letter dated such date from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters;
(k)      list the Registrable Securities covered by such registration statement with any securities exchange on which the Common Units are then listed;
(l)      provide a transfer agent and registrar for all such Registrable Securities not later than the effective date of such registration statement;
(m)      in connection with a customary due diligence review, make available for inspection by the Holders, any underwriter participating in any such disposition of Registrable Securities, if any, and any counsel or accountants retained by the Holders or underwriter (collectively, the “ Offering Persons ”), at the offices where normally kept, during reasonable business hours, all financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries, and cause the officers, directors and employees of the Company and its subsidiaries to supply all information and participate in customary due diligence sessions in each case reasonably requested by any such representative, underwriter, counsel or accountant in connection with such Registration Statement; provided , however , that any information that is not generally publicly available at the time of delivery of such information shall be kept confidential by such Offering Persons unless (i) disclosure of such information is required by court or administrative order or in connection with an audit or examination by, or a blanket document request from, a regulatory or self-regulatory authority, bank examiner or auditor, (ii) disclosure of such information, in the reasonable judgment of the Offering Persons, is required by law or applicable legal process (including in connection with the offer and sale of securities pursuant to the rules and regulations

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of the SEC), (iii) such information is or becomes generally available to the public other than as a result of a non-permitted disclosure or failure to safeguard by such Offering Persons in violation of this Agreement or (iv) such information (A) was known to such Offering Persons (prior to its disclosure by the Company) from a source other than the Company when such source, to the knowledge of the Offering Persons, was not bound by any contractual, legal or fiduciary obligation of confidentiality to the Company with respect to such information, (B) becomes available to the Offering Persons from a source other than the Company when such source, to the knowledge of the Offering Persons, is not bound by any contractual, legal or fiduciary obligation of confidentiality to the Company with respect to such information or (C) was developed independently by the Offering Persons or their respective representatives without the use of, or reliance on, information provided by the Company. In the case of a proposed disclosure pursuant to (i) or (ii) above, such Person shall be required to give the Company written notice of the proposed disclosure prior to such disclosure (except in the case of (ii) above when a proposed disclosure was or is to be made in connection with a registration statement or prospectus under this Agreement and except in the case of clause (i) above when a proposed disclosure is in connection with a routine audit or examination by, or a blanket document request from, a regulatory or self-regulatory authority, bank examiner or auditor);
(n)      cooperate with the Holders and each underwriter or agent participating in the disposition of Registrable Securities and their respective counsel in connection with any filings required to be made with FINRA, including the use of its reasonable best efforts to obtain FINRA’s pre-clearance or pre-approval of the registration statement and applicable prospectus upon filing with the SEC; and
(o)      as promptly as is practicable notify the Holders (i) when the prospectus or any prospectus supplement or post-effective amendment has been filed and, with respect to such registration statement or any post-effective amendment, when the same has become effective, (ii) of any request by the SEC or other federal or state governmental authority for amendments or supplements to such registration statement or related prospectus or to amend or to supplement such prospectus or for additional information, (iii) of the issuance by the SEC of any stop order suspending the effectiveness of such registration statement or the initiation of any proceedings for such purpose, (iv) if at any time the Company has reason to believe that the representations and warranties of the Company contained in any agreement contemplated by Section 2.1(f) above relating to any applicable offering cease to be true and correct or (v) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any proceeding for such purpose.
The Holders agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 2.1(f) , 2.1(o)(ii) or 2.1(o)(iii) , the Holders shall discontinue disposition of any Registrable Securities covered by such registration statement or the related prospectus until receipt of the copies of the supplemented or amended prospectus, which supplement or amendment shall, subject to the other applicable provisions of this Agreement, be prepared and furnished as soon as practicable, or until the Holder is advised in writing by the Company that the use of the applicable prospectus may be resumed, and have received copies of any amended or

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supplemented prospectus or any additional or supplemental filings which are incorporated, or deemed to be incorporated, by reference in such prospectus (such period during which disposition is discontinued being an “ Interruption Period ”) and, if requested by the Company, the each Holder shall use its commercially reasonable efforts to return to the Company all copies then in their possession, of the prospectus covering such Registrable Securities at the time of receipt of such request. As soon as practicable after the Company has determined that the use of the applicable prospectus may be resumed, the Company will notify the Holders thereof. In the event the Company invokes an Interruption Period hereunder and in the reasonable discretion of the Company the need for the Company to continue the Interruption Period ceases for any reason, the Company shall, as soon as practicable, provide written notice to the Holders that such Interruption Period is no longer applicable.
Section 2.2      Suspension . (a) The Company shall be entitled from time to time on no more than two occasions of up to 60 days each in any twelve (12) month period and for a period of time not to exceed in the aggregate ninety (90) days in any twelve (12) month period, to (x) defer any registration of Registrable Securities and shall have the right not to file and not to cause the effectiveness of any registration covering any Registrable Securities, (y) suspend the use of any prospectus and registration statement covering any Registrable Securities and (z) require the Holders of Registrable Securities to suspend any offerings or sales of Registrable Securities pursuant to a registration statement, if the Company delivers to the Holders a certificate signed by an executive officer certifying that such registration and offering would (i) require the Company to make an Adverse Disclosure or (ii) materially interfere with any bona fide material financing, acquisition, disposition or other similar transaction involving the Company or any of its subsidiaries then under consideration. Such certificate shall contain a statement of the reasons for such suspension and an estimate of the anticipated length of such suspension. The Holders shall keep the information contained in such certificate confidential subject to the same terms set forth in Section 2.1(m) . If the Company defers any registration of Registrable Securities in response to a Underwritten Offering Notice or requires the Investors or the Holders to suspend any Underwritten Offering, the Investors shall be entitled to withdraw such Underwritten Offering Notice and if they do so, such request shall not be treated for any purpose as the delivery of an Underwritten Offering Notice pursuant to Section 1.6 .
Section 2.3      Expenses of Registration . All Registration Expenses incurred in connection with any registration pursuant to Article I shall be borne by the Company. All Selling Expenses relating to securities registered on behalf of the Holders shall be borne by the Holders of the Registrable Securities included in such registration.
Section 2.4      Information by Holders . The Holder or Holders of Registrable Securities included in any registration shall furnish to the Company such information regarding such Holder or Holders and their Affiliates, the Registrable Securities held by them and the distribution proposed by such Holder or Holders and their Affiliates as the Company or its representatives may reasonably request and as shall be required in connection with any registration, qualification or compliance referred to in this Agreement. It is understood and agreed that the obligations of the Company under Article I are conditioned on the timely provisions of the foregoing information by such Holder or

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Holders and, without limitation of the foregoing, will be conditioned on compliance by such Holder or Holders with the following:
(a)      such Holder or Holders will, and will cause their respective Affiliates to, cooperate with the Company in connection with the preparation of the applicable registration statement and prospectus and, for so long as the Company is obligated to keep such registration statement effective, such Holder or Holders will and will cause their respective Affiliates to, provide to the Company, in writing and in a timely manner, for use in such registration statement (and expressly identified in writing as such), all information regarding themselves and their respective Affiliates and such other information as may be required by applicable law to enable the Company to prepare or amend such registration statement, any related prospectus and any other documents related to such offering covering the applicable Registrable Securities owned by such Holder or Holders and to maintain the currency and effectiveness thereof;
(b)      during such time as such Holder or Holders and their respective Affiliates may be engaged in a distribution of the Registrable Securities, such Holder or Holders will, and they will cause their Affiliates to, comply with all laws applicable to such distribution; and
(c)      on receipt of any notice from the Company of the occurrence of any of the events specified in Section 2.1(f) or clauses (ii) or (iii) of Section 2.1(o) , or that otherwise requires the suspension by such Holder or Holders and their respective Affiliates of the offering, sale or distribution of any of the Registrable Securities owned by such Holder or Holders, such Holders shall, and they shall cause their respective Affiliates to, cease offering, selling or distributing the Registrable Securities owned by such Holder or Holders until the offering, sale and distribution of the Registrable Securities owned by such Holder or Holders may recommence in accordance with the terms hereof and applicable law.
Section 2.5      Rule 144 Reporting . With a view to making available the benefits of Rule 144 to the Holders, the Company agrees that, for so long as an Investor owns Registrable Securities, the Company will:
(a)      use its reasonable best efforts to make and keep public information available, as those terms are understood and defined in Rule 144, at all times after the date of this Agreement;
(b)      so long as an Investor owns any Common Units or Warrants, furnish to the Investor upon written request a written statement by the Company as to its compliance with the reporting requirements of the Exchange Act; and
(c)      cooperate with the Investors in any sale or transfer of Registrable Securities pursuant to Rule 144.
Section 2.6      Subsequent Registration Rights . So long as the Investors hold any Registrable Securities in respect of which registration rights provided for in Article I of this Agreement remain in effect, the Company will not, directly or indirectly, without the prior written consent of each of the Investors, grant to any Person or agree to otherwise become obligated in respect of (i) the rights of registration in the nature or substantially in the nature of those set forth

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in Article I of this Agreement that would have priority over or parity with the Registrable Securities with respect to the inclusion of such securities in any registration or (ii) demand registration rights exercisable prior to such time as the Investors can first exercise its rights under Article I .
Section 2.7      Holdback Agreement . If during the Effectiveness Period, the Company shall file a registration statement (other than in connection with the registration of securities issuable pursuant to an employee stock option, stock purchase or similar plan or pursuant to a merger, exchange offer or a transaction of the type specified in Rule 145(a) under the Securities Act) with respect to an underwritten public offering of Common Units or securities convertible into, or exchangeable or exercisable for, such securities or otherwise informs the Holders that it intends to conduct such an offering utilizing an effective registration statement or pursuant to an underwritten Rule 144A and/or Regulation S offering and provides such Holder the opportunity to participate in such offering as provided in Article I , the Holders shall, if requested by the managing underwriter or underwriters, enter into a customary “lock-up” agreement relating to the sale, offering or distribution of Registrable Securities, in the form reasonably requested by the managing underwriter or underwriters, covering the period commencing on the date of the prospectus pursuant to which such offering may be made and continuing until up to 90 days from the date of such prospectus (or such shorter period for which a lock-up shall apply to the Company).
ARTICLE III     

Indemnification
Section 3.1      Indemnification by Company . To the extent permitted by applicable law, the Company will, with respect to any Registrable Securities covered by a registration statement or prospectus, or as to which registration, qualification or compliance under applicable “blue sky” laws has been effected pursuant to this Agreement, indemnify and hold harmless each Holder, each Holder’s current and former officers, directors, partners, members, managers, shareholders, accountants, attorneys, agents and employees, and each Person controlling such Holder within the meaning of Section 15 of the Securities Act (collectively, the “ Company Indemnified Parties ”), from and against any and all expenses, claims, losses, damages, costs (including costs of preparation and reasonable attorney’s fees and any legal or other fees or expenses actually incurred by such party in connection with any investigation or proceeding), judgments, fines, penalties, charges, amounts paid in settlement and other liabilities, joint or several, (or actions in respect thereof) (collectively, “ Losses ”) to the extent arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any registration statement, prospectus, preliminary prospectus, offering circular, “issuer free writing prospectus” (as such term is defined in Rule 433 under the Securities Act) or other document, in each case related to such registration statement, or any amendment or supplement thereto, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, or any violation by the Company of the Securities Act, the Exchange Act, any state securities law or any rules or regulations thereunder applicable to the Company and (without limiting the preceding portions of this Section 3.1 ), the Company will reimburse each of the Company Indemnified Parties for any reasonable and documented out-of-pocket legal expenses and any other reasonable and documented out-of-pocket

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expenses actually incurred in connection with investigating, defending or, subject to the last sentence of this Section 3.1 , settling any such Losses or action, as such expenses are incurred; provided that the Company’s indemnification obligations shall not apply to amounts paid in settlement of any Losses or action if such settlement is effected without the prior written consent of the Company (which consent shall not be unreasonably withheld or delayed), nor shall the Company be liable to a Holder in any such case for any such Losses or action to the extent that it arises out of or is based upon a violation or alleged violation of any state or federal law (including any claim arising out of or based on any untrue statement or alleged untrue statement or omission or alleged omission in the registration statement or prospectus) which occurs in reliance upon and in conformity with written information regarding such Holder furnished to the Company by such Holder or its authorized representatives expressly for use in connection with such registration by or on behalf of any Holder.
Section 3.2      Indemnification by Holders . To the extent permitted by applicable law, each Holder will, if Registrable Securities held by such Holder are included in the securities as to which registration or qualification or compliance under applicable “blue sky” laws is being effected, indemnify, severally and not jointly with any other Holders of Registrable Securities, the Company, each of its representatives, each Person who controls the Company or such underwriter within the meaning of Section 15 of the Securities Act (collectively, the “ Holder Indemnified Parties ”), against all Losses (or actions in respect thereof) to the extent arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any registration statement, prospectus, preliminary prospectus, offering circular, “issuer free writing prospectus” or other document, in each case related to such registration statement, or any amendment or supplement thereto, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, and will reimburse each of the Holder Indemnified Parties for any reasonable and documented out-of-pocket legal expenses and any other reasonable and documented out-of-pocket expenses actually incurred in connection with investigating, defending or, subject to the last sentence of this Section 3.2 , settling any such Losses or action, as such expenses are incurred, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement, prospectus, offering circular, “issuer free writing prospectus” or other document in reliance upon and in conformity with written information regarding such Holder furnished to the Company by such Holder or its authorized representatives and stated to be specifically for use therein; provided , however, that in no event shall any indemnity under this Section 3.2 payable by any Holder exceed an amount equal to the net proceeds received by such Holder in respect of the Registrable Securities sold pursuant to the registration statement. The indemnity agreement contained in this Section 3.2 shall not apply to amounts paid in settlement of any Losses or action if such settlement is effected without the prior written consent of the applicable Holder (which consent shall not be unreasonably withheld or delayed).
Section 3.3      Notification . If any Person shall be entitled to indemnification under this Article III (each, an “ Indemnified Party ”), such Indemnified Party shall give prompt notice to the party required to provide indemnification (each, an “ Indemnifying Party ”) of any claim or of the commencement of any proceeding as to which indemnity is sought. The Indemnifying Party shall

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have the right, exercisable by giving written notice to the Indemnified Party as promptly as reasonably practicable after the receipt of written notice from such Indemnified Party of such claim or proceeding, to assume, at the Indemnifying Party’s expense, the defense of any such claim or litigation, with counsel reasonably satisfactory to the Indemnified Party and, after notice from the Indemnifying Party to such Indemnified Party of its election to assume the defense thereof, the Indemnifying Party will not (so long as it shall continue to have the right to defend, contest, litigate and settle the matter in question in accordance with this paragraph) be liable to such Indemnified Party hereunder for any legal expenses and other expenses subsequently incurred by such Indemnified Party in connection with the defense thereof; provided, however, that an Indemnified Party shall have the right to employ separate counsel in any such claim or litigation, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless the Indemnifying Party shall have failed within a reasonable period of time to assume such defense and the Indemnified Party is or would reasonably be expected to be materially prejudiced by such delay. The failure of any Indemnified Party to give notice as provided herein shall relieve an Indemnifying Party of its obligations under this Article III only to the extent that the failure to give such notice is materially prejudicial or harmful to such Indemnifying Party’s ability to defend such action. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the prior written consent of each Indemnified Party (which consent shall not be unreasonably withheld or delayed), consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. The indemnity agreements contained in this Article III shall not apply to amounts paid in settlement of any claim, loss, damage, liability or action if such settlement is effected without the prior written consent of the Indemnifying Party, which consent shall not be unreasonably withheld or delayed. The indemnification set forth in this Article III shall be in addition to any other indemnification rights or agreements that an Indemnified Party may have. An Indemnifying Party who is not entitled to, or elects not to, assume the defense of a claim will not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such Indemnifying Party with respect to such claim, unless in the reasonable judgment of any Indemnified Party a conflict of interest may exist between such Indemnified Party and any other Indemnified Parties with respect to such claim.
Section 3.4      Contribution . If the indemnification provided for in this Article III is held by a court of competent jurisdiction to be unavailable to an Indemnified Party, other than pursuant to its terms, with respect to any Losses or action referred to therein, then, subject to the limitations contained in this Article III , the Indemnifying Party, in lieu of indemnifying such Indemnified Party hereunder, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Losses or action in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party, on the one hand, and the Indemnified Party, on the other, in connection with the actions, statements or omissions that resulted in such Losses or action, as well as any other relevant equitable considerations. The relative fault of the Indemnifying Party, on the one hand, and the Indemnified Party, on the other hand, shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made (or omitted) by, or relates to information supplied by such Indemnifying Party or such Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent any such

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action, statement or omission. The Company and the Holders agree that it would not be just and equitable if contribution pursuant to this Section 3.4 was determined solely upon pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding sentence of this Section 3.4 . Notwithstanding the foregoing, the amount each Holder will be obligated to contribute pursuant to this Section 3.4 will be limited to an amount equal to the net proceeds received by such Holder in respect of the Registrable Securities sold pursuant to the registration statement which gives rise to such obligation to contribute. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.
ARTICLE IV     

Transfer and Termination of Registration Rights
Section 4.1      Transfer of Registration Rights . Any rights granted to the Purchaser or Investor under this Agreement may be transferred or assigned to any Person in connection with a transfer of Common Units or Warrants to such Person; provided, however, that (i) prior written notice of such assignment of rights is given to the Company, (ii) such

Person that becomes the owner of any Registrable Securities executes and delivers to the Company a joinder to this Agreement substantially in the form of Exhibit B attached hereto and (iii) such transfer is (A) with respect to Common Units or Warrants (on an as-exercised basis), collectively, that represents five percent (5%) or more of the aggregate outstanding Common Units of the Limited Partnership or (B) of Registrable Securities then held by any Investor to an Investor or an Affiliate of an Investor.
Section 4.2      Termination of Registration Rights . The rights of any particular Holder to cause the Company to register securities under Article I shall terminate with respect to such Holder upon the date upon which such Holder no longer holds any Registrable Securities.
Section 4.3      Suspension of Registration Rights Under LP Agreement. For so long as this Agreement remains in effect, the registration rights contained in this Agreement supersede the registration rights in the LP Agreement set forth in Section 7.12 of the LP Agreement and the Investors agree to suspend their rights to exercise registration rights pursuant to Section 7.12 of the LP Agreement and agree not to transfer their Registrable Securities to any Affiliate unless such Affiliate agrees to suspend its rights to exercise registration rights pursuant to Section 7.12 of the LP Agreement upon and following the transfer of such Registrable Securities.
ARTICLE V     

Miscellaneous
Section 5.1      Amendments and Waivers . Subject to compliance with applicable law, this Agreement may be amended or supplemented in any and all respects by written agreement of the

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Company and the Purchaser; provided that (a) no amendment or supplement that may adversely affect a Holder with respect to a term differently than the consenting Holders may be effected without the written consent of each affected Holder (other than insofar as such terms are different from the outset) and (b) no consent to an amendment or supplement need be obtained from any non-affected Holder; provided , however , so long as TK or its Affiliates own Registrable Securities, TK’s rights hereunder may not be adversely affected without TK’s or its Affiliates’ consent, as applicable.

Section 5.2      Extension of Time, Waiver, Etc . The parties hereto may, subject to applicable law, (a) extend the time for the performance of any of the obligations or acts of the other party or (b) waive compliance by the other party with any of the agreements contained herein applicable to such party or, except as otherwise provided herein, waive any of such party’s conditions. Notwithstanding the foregoing, no failure or delay by the parties hereto in exercising any right hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right hereunder. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party.
Section 5.3      Assignment . Except as provided in Section 4.1 , neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned, in whole or in part, by operation of law or otherwise, by any of the parties hereto without the prior written consent of the other party hereto.
Section 5.4      Counterparts . This Agreement may be executed in one or more counterparts (including by facsimile or electronic mail), each of which shall be deemed to be an original but all of which taken together shall constitute one and the same agreement, and shall become effective when one or more counterparts have been signed by each of the parties hereto and delivered to the other parties hereto.
Section 5.5      Entire Agreement; No Third Party Beneficiary . This Agreement, including the Transaction Documents (as defined in the Investment Agreement), constitutes the entire agreement, and supersedes all other prior agreements and understandings, both written and oral, among the parties and their Affiliates, or any of them, with respect to the subject matter hereof and thereof. No provision of this Agreement shall confer upon any Person other than the parties hereto and their permitted assigns any rights or remedies hereunder.
Section 5.6      Governing Law; Jurisdiction .
(a)      This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts executed in and to be performed entirely within that State, regardless of the laws that might otherwise govern under any applicable conflict of laws principles.
(b)      All legal or administrative proceedings, suits, investigations, arbitrations or actions (“ Actions ”) arising out of or relating to this Agreement shall be heard and determined in

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the Supreme Court of the State of New York, New York County, and the United States District Court for the Southern District of New York, and the parties hereto hereby irrevocably submit to the exclusive jurisdiction and venue of such courts in any such Action and irrevocably waive the defense of an inconvenient forum or lack of jurisdiction to the maintenance of any such Action. The consents to jurisdiction and venue set forth in this Section 5.6 shall not constitute general consents to service of process in the State of New York and shall have no effect for any purpose except as provided in this paragraph and shall not be deemed to confer rights on any Person other than the parties hereto. Each party hereto agrees that service of process upon such party in any Action arising out of or relating to this Agreement shall be effective if notice is given by overnight courier at the address set forth in Section 5.9 of this Agreement. The parties hereto agree that a final judgment in any such Action shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by applicable law; provided , however , that nothing in the foregoing shall restrict any party’s rights to seek any post-judgment relief regarding, or any appeal from, a final trial court judgment.
Section 5.7      Specific Enforcement . The parties acknowledge and agree that (a) the parties shall be entitled to an injunction or injunctions, specific performance or other equitable relief to enforce specifically the terms and provisions hereof in the courts described in Section 5.6 without proof of damages or otherwise, this being in addition to any other remedy to which they are entitled under this Agreement and (b) the right of specific enforcement is an integral part of this Agreement and without that right, neither the Company, the Invesor nor TK would have entered into this Agreement. The parties hereto agree not to assert that a remedy of specific enforcement is unenforceable, invalid, contrary to law or inequitable for any reason, and agree not to assert that a remedy of monetary damages would provide an adequate remedy or that the parties otherwise have an adequate remedy at law. The parties hereto acknowledge and agree that any party seeking an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in accordance with this Section 5.7 shall not be required to provide any bond or other security in connection with any such order or injunction.
Section 5.8      Waiver of Jury Trial . EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (C) IT MAKES SUCH WAIVER VOLUNTARILY AND (D) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVER AND CERTIFICATIONS IN THIS SECTION 5.8 .

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Section 5.9      Notices . All notices, requests and other communications to any party hereunder shall be in writing and shall be deemed given if delivered personally, by facsimile (which is confirmed), emailed (which is confirmed) or sent by overnight courier (providing proof of delivery) to the parties at the following addresses:
If to the Company, to it at:
Teekay Offshore Partners L.P
4th Floor, Belvedere Building
69 Pitts Bay Road
Hamilton HM 08, Bermuda
Attention:     Corporate Secretary
Facsimile:     (441) 292-3931
Email:        Edie.Robinson@teekay.com

with a copy to (which copy alone shall not constitute notice):
Vinson & Elkins LLP
666 Fifth Avenue, 26th Floor
New York, NY 10103-0040
Attention:     Mike Rosenwasser
Facsimile:     (917) 206-8100
Email:        mrosenwasser@velaw.com

If to the Purchaser, to it at:
Brookfield TK TOLP L.P.
c/o Brookfield Business Partners L.P.
181 Bay Street PO Box 762
Toronto, Ontario, M5J 2T3
Attention:     Ryan Szainwald
Lyndsay Hatlelid
Facsimile:    (416) 369-2301
Email:        Ryan.Szainwald@brookfield.com
Lyndsay.Hatlelid@brookfield.com

with a copy (which shall not constitute notice) to:
Kirkland & Ellis LLP
601 Lexington Avenue
New York, NY 10022
Attention:    Joshua N. Korff, Esq.
        Elazar Guttman, Esq.
        Ross M. Leff, Esq.
Facsimile:    (212) 446-4900
Email:        JKorff@kirkland.com
Elazar.Guttman@kirkland.com

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Ross.Leff@kirkland.com

If to an Investor, other than the Purchaser, to such address of the Investor as the Investor specifies by notice to the other parties hereto.

If to TK, to it at:
Teekay Corporation
4th Floor, Belvedere Building
69 Pitts Bay Road
Hamilton HM 08, Bermuda
Attention:     Corporate Secretary
Facsimile:     (441) 298-2530
Email:        Edie.Robinson@teekay.com

with a copy to (which copy alone shall not constitute notice):
Perkins Coie LLP
1120 N.W. Couch Street, 10th Floor
Portland, Oregon 97209-4128
Attention:     David Matheson
                    Gina Eiben
Facsimile:     (503) 346-2008
Email:                     dmatheson@perkinscoie.com
                     geiben@perkinscoie.com

or such other address, email address or facsimile number as such party may hereafter specify by like notice to the other parties hereto. All such notices, requests and other communications shall be deemed received on the date of actual receipt by the recipient thereof if received prior to 5:00 p.m. local time in the place of receipt and such day is a Business Day in the place of receipt. Otherwise, any such notice, request or communication shall be deemed not to have been received until the next succeeding Business Day in the place of receipt.
Section 5.10      Severability . If any term, condition or other provision of this Agreement is determined by a court of competent jurisdiction to be invalid, illegal or incapable of being enforced by any rule of law or public policy, all other terms, provisions and conditions of this Agreement shall nevertheless remain in full force and effect. Upon such determination that any term, condition or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible to the fullest extent permitted by applicable law.
Section 5.11      Expenses . Except as provided in Section 2.3 , all costs and expenses, including fees and disbursements of counsel, financial advisors and accountants, incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs and expenses.

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Section 5.12      Interpretation . The rules of interpretation set forth in Section 8.06 of the Investment Agreement shall apply to this Agreement, mutatis mutandis .
[ Signature pages follow ]



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IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first above written.
COMPANY:

TEEKAY OFFSHORE PARTNERS L.P.
   
By: Teekay Offshore GP L.L.C., its general partner


By:              /s/ Edith Robinson                             
       Name:  Edith Robinson
       Title:    Secretary

 






SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT
136252302.7


PURCHASER:

BROOKFIELD TK TOLP L.P.
   
By:              /s/Gregory E A Morrison                  
       Name:  Gregory E A Morrison
       Title:    Director


 




SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT
136252302.7




TEEKAY CORPORATION
    
By:              /s/ Edith Robinson                            
       Name:  Edith Robinson
       Title:    Assistant Corporate Secretary

SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT
136252302.7


EXHIBIT A

DEFINED TERMS
1. The following capitalized terms have the meanings indicated:
“ Adverse Disclosure ” means public disclosure of material non-public information that, in the reasonable judgment of the Company (after consultation with legal counsel): (i) would be required to be made in any registration statement filed with the SEC by the Company so that such registration statement would not be materially misleading; (ii) would not be required to be made at such time but for the filing, effectiveness or continued use of such registration statement; and (iii) the Company has a bona fide business purpose for not disclosing publicly.
“ Affiliate ” means, with respect to any specified Person, any other Person directly or indirectly controlling or controlled by, or under direct or indirect common control with, such specified Person; provided , that (i) the Company and its Subsidiaries shall not be deemed to be Affiliates of the Investor or any of its Affiliates, (ii) the Parent and its Subsidiaries shall not be deemed to be Affiliates of the Investor or any of its Affiliates, and (iii) portfolio companies in which the Investor or any of its Affiliates has an investment (whether as debt or equity) shall not be deemed an Affiliate of the Investor or the Investor’s Affiliates. For the purposes of this definition, “ control ”, when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “ controlling, ” “ controlled, ” “ controlled by ” and “ under common control with ” have meanings correlative to the foregoing.
“ Business Day ” means any day except a Saturday, a Sunday or other day on which the SEC or banks in the City of New York are authorized or required by law to be closed.
“ Common Units ” means all common units of the Company currently or hereafter existing.
“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and any successor statute thereto, and the rules and regulations of the SEC promulgated thereunder.
“ FINRA ” means the Financial Industry Regulatory Authority, Inc.
“ Person ” means any individual, corporation, limited liability company, partnership, joint venture, association, trust, unincorporated organization or any other entity, including a governmental authority.
“ register ”, “ registered ” and “ registration ” refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of the effectiveness of such registration statement or the automatic effectiveness of such registration statement, as applicable.
“ Registrable Securities ” means, as of any date of determination, (a) Common Units issued to the Purchaser pursuant to the Investment Agreement, (b) Common Units issued to TK or its Affiliates pursuant to the TK Investment Agreement and (c) Common Units beneficially owned by

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Purchaser or its Affiliates or TK or its Affiliates as of the date of this Agreement (in each case, whether or not subsequently transferred to any Investor) and any Common Units hereafter acquired by any Investor pursuant to the exercise of the Warrants, and any other securities issued or issuable with respect to any such Common Units or Warrants by way of unit split, unit dividend, distribution, recapitalization, merger, exchange, replacement or similar event or otherwise. As to any particular Registrable Securities, once issued, such securities shall cease to be Registrable Securities when (i) such securities are sold or otherwise transferred pursuant to an effective registration statement under the Securities Act, (ii) such securities shall have ceased to be outstanding, (iii) such securities have been transferred in a transaction in which the Holder’s rights under this Agreement are not assigned to the transferee of the securities pursuant to Section 4.1 or (iv) all of such Holder’s securities may be resold without restriction on manner of sale or volume within one three-month period pursuant to Rule 144, provided that any such security that ceases to be a Registrable Security under this clause (iv) will again be deemed a Registrable Security if a subsequent decrease in trading volume results in the holder thereof not being able to sell such securities during such period without restriction as to volume or manner of sale pursuant to Rule 144.
“ Registration Expenses ” means any and all expenses incident to the performance of or compliance with any registration or marketing of securities, including all (i) registration and filing fees, FINRA fees and all other fees and expenses payable in connection with the listing of securities on any securities exchange or automated interdealer quotation system, (ii) fees and expenses of compliance with any securities or “blue sky” laws (including reasonable fees and disbursements of counsel in connection with “blue sky” qualifications of the securities registered), (iii) expenses in connection with the preparation, printing, mailing and delivery of any Registration Statements, prospectuses and other documents in connection therewith and any amendments or supplements thereto, (iv) security engraving and printing expenses, (v) internal expenses of the Company (including all salaries and expenses of its officers and employees performing legal or accounting duties), (vi) fees and disbursements of counsel for the Company and customary fees and expenses for independent certified public accountants retained by the Company (including the expenses relating to any comfort letters or costs associated with the delivery by independent certified public accountants of any comfort letters to be provided pursuant to  Section 2.1  hereof), (vii) fees and expenses of any special experts retained by the Company in connection with such registration, (viii) reasonable fees and expenses of any counsel to the Holders, (ix) fees and expenses in connection with any review of the underwriting arrangements or other terms of the offering, and all fees and expenses of any “qualified independent underwriter” or other independent appraiser participating in any offering, including the fees and expenses of any counsel thereto, (x) fees and disbursements of underwriters customarily paid by issuers or sellers of securities, but excluding any underwriting fees, discounts and commissions attributable to the sale of Registrable Securities, (xi) costs of printing and producing any agreements among underwriters, underwriting agreements, any “blue sky” or legal investment memoranda and any selling agreements and other documents in connection with the offering, sale or delivery of the Registrable Securities, (xii) transfer agents’ and registrars’ fees and expenses and the fees and expenses of any other agent or trustee appointed in connection with such offering, (xiii) expenses relating to any analyst or investor presentations or any “road shows” undertaken in connection with the registration, marketing or selling of the Registrable Securities, (xiv) fees and expenses payable in connection with any ratings of the Registrable Securities, including expenses relating to any presentations to rating agencies, and

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(xv) all other costs and expenses incurred by the Company or its officers in connection with their compliance with the Company’s obligations under this Agreement.
“ Rule 144 ” means Rule 144 promulgated under the Securities Act and any successor provision.
“ Rule 462(e) ” means Rule 462(e) promulgated under the Securities Act and any successor provision.
“ Selling Expenses ” means all underwriting discounts, selling commissions and stock transfer taxes applicable to the securities registered by the Holders.
“ SEC ” means the U.S. Securities and Exchange Commission.
“ Securities Act ” means the Securities Act of 1933, as amended, and any successor statute thereto, and the rules and regulations of the SEC promulgated thereunder.
“ Shelf Registration Statement ” means the Resale Shelf Registration Statement or a Subsequent Shelf Registration Statement, as applicable.
“ Warrants ” means the warrants issued or transferred to the Purchaser and TK or its Affiliates pursuant to the Investment Agreement, the TK Investment Agreement or the Amended and Restated Promissory Note (as defined in the Investment Agreement), and all warrants issued upon division or combination of, or substitution in for, such warrants.


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2.      The following terms are defined in the Sections of the Agreement indicated:
INDEX OF TERMS

Term
Section
Actions
Section 5.6(b)
Agreement
Preamble
Company
Preamble
Company-Initiated Registration
Section 1.8(a)
Company Indemnified Parties
Section 3.1
Effectiveness Period
Section 1.2
Holder
Recitals
Holder Indemnified Parties
Section 3.2
Holders
Recitals
Indemnified Party
Section 3.3
Indemnifying Party
Section 3.3
Interruption Period
Section 2.1(o)
Investment Agreement
Recitals
Investor
Recitals
Investor-Initiated Registration
Section 1.8(b)
Investors
Recitals
Losses
Section 3.1
Offering Persons
Section 2.1(m)
Piggyback Notice
Section 1.8(a)
Piggyback Registration Statement
Section 1.8(a)
Piggyback Request
Section 1.8(a)
Purchaser
Preamble
Resale Shelf Registration Statement
Section 1.1
Shelf Offering
Section 1.7
Subsequent Holder Notice
Section 1.5
Subsequent Shelf Registration Statement
Section 1.3
Take-Down Notice
Section 1.7
TK Investment Agreement
Recitals
Underwritten Offering
Section 1.6(a)
Underwritten Offering Notice
Section 1.6(a)




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EXHIBIT B

FORM OF JOINDER TO
REGISTRATION RIGHTS AGREEMENT
THIS JOINDER (this “ Joinder ”) to the Registration Rights Agreement (the “ Agreement ”) dated as of September 25, 2017 by and among TEEKAY OFFSHORE PARTNERS L.P., a Delaware corporation (the “ Company ”), BROOKFIELD TK TOLP L.P., TEEKAY CORPORATION and the other parties thereto from time to time, is made and entered into as of _________ by and between the Company and _________________ (“ Holder ”). Capitalized terms used herein but not otherwise defined shall have the meanings set forth in the Agreement.
WHEREAS, Holder has acquired [ [ _____ Common Units] / [_______ Warrants] ] from ___________.
NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Joinder hereby agree as follows:
1.     Agreement to be Bound . Holder hereby (i) acknowledges that Holder has received and reviewed a complete copy of the Agreement and (ii) agrees that upon execution of this Joinder, Holder shall become a party to the Agreement and shall be fully bound by, and subject to, all of the covenants, terms and conditions of the Agreement as though an original party thereto as an Investor.
2.     Successors and Assigns . Except as otherwise provided in the Agreement, this Joinder shall bind and inure to the benefit of and be enforceable by the Company and Holder.
3.     Notices . For purposes of Section 5.9 of the Agreement, all notices, demands or other communications to the Holder shall be directed to:
[Name]

[Address]
4.     Counterparts; Facsimile Signatures . This Joinder may be executed in separate counterparts each of which shall be an original and all of which taken together shall constitute one and the same agreement. Facsimile counterpart signatures to this Agreement shall be acceptable and binding.
5.     Governing Law . This Joinder shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to any rules, principles or provisions of choice of law or conflict of laws.
6.     Descriptive Headings . The descriptive headings of this Joinder are inserted for convenience only and do not constitute a part of this Joinder.

B-1
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B-2
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IN WITNESS WHEREOF, the parties hereto have executed this Joinder to the Registration Rights Agreement as of the date set forth in the introductory paragraph hereof.

TEEKAY OFFSHORE PARTNERS L.P.
By:
Teekay Offshore GP L.L.C., its general partner
By:
__________________________________
 
Name:
 
Title:  

 
[HOLDER]
By:
__________________________________
 
Name:
 
Title:



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136252302.7
Exhibit 10.5


MASTER SERVICES AGREEMENT
This MASTER SERVICES AGREEMENT (this “ Agreement ”), dated as of September 25, 2017, is by and among (i) Teekay Corporation, a Marshall Islands corporation (“ TKC ”), on behalf of itself and any of its Affiliates which, as of the date of this Agreement or at any time hereafter for as long as this Agreement remains in effect, will provide services to Teekay Offshore Partners L.P., a Marshall Islands limited partnership (“ TOO ”) and its Subsidiaries, (ii) TOO, on behalf of itself and its Subsidiaries, and (iii) for purposes of Sections 2.2 , 4.3 , 6.1 , 8.2 , 9.1 and Article 10 , Brookfield TK TOLP L.P. (“ Investor ”), a Bermuda limited partnership. TKC, TOO and Investor are sometimes referred to as the “ Parties ”. Reference is made to that certain Investment Agreement, dated as of July 26, 2017, by and among Investor and TOO (the “ Investment Agreement ”). Capitalized terms used but not otherwise defined herein shall have the meanings set forth in the Investment Agreement.
WHEREAS, this Agreement is the Master Services Agreement referenced in the Investment Agreement and the entry into this Agreement is a condition precedent to Investor’s obligations to effect the Transactions and to effectuate the Closing;
WHEREAS, concurrently with the execution of the Investment Agreement, the Parties entered into a term sheet (the “ Term Sheet ”) with respect to this Agreement, which Term Sheet contained certain covenants and obligations of the Parties;
WHEREAS, after giving effect to the Closing of the transactions contemplated by the Investment Agreement, TKC is the beneficial owner of 51% of the issued and outstanding equity interests of Teekay Offshore GP L.L.C., a Marshall Islands limited liability company (“ TOO GP ”);
WHEREAS, TOO desires certain Persons to be transitioned to TOO, and TKC is willing to transition such Persons upon the terms and subject to the conditions set forth herein;
WHEREAS, TOO and TKC desire to set forth the general framework governing the provision of services between TOO and TKC from and after the date hereof; and
WHEREAS, each Party hereby acknowledges and confirms that such Party will, directly or indirectly, receive a substantial economic benefit as a result of the Transactions; NOW THEREFORE, in consideration of good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the Parties hereto, the Parties hereby agree as follows:
Article 1.
DEFINED TERMS
As used in this Agreement (including the recitals hereto), the following terms shall have the following meanings:
“ Adjustment Calculations ” shall have the meaning ascribed to such term in Section 2.3 .




“ Adjustment Dispute Notice ” shall have the meaning ascribed to such term in Section 2.3 .
“ Alternative Transfer ” shall have the meaning ascribed to such term in Section 2.2 .
“ Bankrupt ” means, with respect to a Person, that (i) such Person has (A) made a general assignment for the benefit of creditors; (B) filed a voluntary petition in bankruptcy; (C) been adjudged bankrupt or insolvent, or had entered against such Person an order of relief in any bankruptcy or insolvency proceeding; (D) filed a petition or an answer seeking for such Person any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief from its debts under any statute, law or regulation or filed an answer or other pleading admitting or failing to contest the material allegations of a petition filed against such Person in any proceeding of the nature of a bankruptcy proceeding or similar matter; or (E) sought, consented to, or acquiesced in the appointment of a trustee, receiver or liquidator of such Person or of all or any substantial part of such Person’s properties; (ii) 120 days have elapsed after the commencement of any proceeding against such Person seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any statute, law or regulation and such proceeding has not been dismissed; or (iii) 90 days have elapsed since the appointment without such Person’s consent or acquiescence of a trustee, receiver or liquidator of such Person or of all or any substantial part of such Person’s properties and such appointment has not been vacated or stayed or the appointment is not vacated within 90 days after the expiration of such stay.
“ Complaining Party ” shall have the meaning ascribed to such term in Section 6.2 .
“ Confidential Information ” shall have the meaning ascribed to such term in Section 7.02(a) .
“ Current Service Agreement ” shall have the meaning ascribed to such term in Section 4.1 .
“ Current Services ” shall have the meaning ascribed to such term in Section 4.1 .
“ Dedicated TNK Employee ” shall have the meaning ascribed to such term in Section 3.4 .
“ Disclosing Party ” shall have the meaning ascribed to such term in Section 7.02(a) .
“ Dispute ” shall have the meaning ascribed to such term in Section 6.2 .
“ Dispute Notice ” shall have the meaning ascribed to such term in Section 6.2 .
“ DOC ” shall mean a document of compliance issued in accordance with the requirements of the International Maritime Safety Code and the relevant flag state government.
“ DOC Issuance ” shall have the meaning ascribed to such term in Section 2.1 .
“ Entity Transfer ” shall have the meaning ascribed to such term in Section 2.2 .
“ Evaluation Period ” shall have the meaning ascribed to such term in Section 4.3(a) .
“ FPSO ” shall have the meaning ascribed to such term in Section 4.2(a) .

 
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“ Further Transition ” shall have the meaning ascribed to such term in Section 5.1 .
“ GAAP ” means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board Accounting Standards Codification or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect on the date hereof.
“ Historic Practice ” shall have the meaning ascribed to such term in Section 4.3(c) .
“ Indemnitee ” shall have the meaning ascribed to such terms in Section 9.4 .
“ Indemnitor ” shall have the meaning ascribed to such terms in Section 9.4(a) .
“ Initial Schedule 2 Entity Consideration Value ” shall have the meaning ascribed to such term in Section 2.2 .
“ Investment Agreement ” shall have the meaning ascribed to such term in the Preamble.
“ Investor ” shall have the meaning ascribed to such term in the Preamble.
“ Losses ” shall mean any claim, loss, liability, cost, damage, deficiency, assessment, fine, judgment, fee, cost or expense (including reasonable, duly-documented out-of-pocket legal fees and expenses and other reasonable, duly-documented out-of-pocket costs incurred in investigating, preparing and defending the foregoing).
“ LP Agreement ” shall mean the Fifth Amended and Restated Agreement of Limited Partnership of TOO, dated as of June 29, 2016, as amended, supplemented or otherwise modified.
“ New Service Agreement ” shall have the meaning ascribed to such term in Section 5.1 .
“ New Services ” shall have the meaning ascribed to such term in Section 5.3 .
“ Parties ” shall have the meaning ascribed to such term in the Preamble.
“ Pre-Closing Service ” shall have the meaning ascribed to such term in Section 3.2(e) .
“ Principal Representative ” shall have the meaning ascribed to such term in Section 6.1 .
“ Receiving Party ” shall have the meaning ascribed to such term in Section 7.02(a) .
“ Responding Party ” shall have the meaning ascribed to such term in Section 6.2 .
“ Response ” shall have the meaning ascribed to such term in Section 6.2 .
“ Schedule 1 Employees ” shall mean the employees, consultants and contractors of those Persons listed on Schedule 1 .
“ Schedule 2 Employees ” shall mean the employees, consultants and contractors of those Persons listed on Schedule 2 .
“ Schedule 2 Entities ” shall mean those Persons listed on Schedule 2 .
“ Schedule 2 Entity Consideration Difference ” shall have the meaning ascribed to such term in Section 2.3 .
“ Schedule 2 Entity Consideration Value ” shall have the meaning ascribed to such term in Section 2.3 .

 
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“ Schedule 2 Entity Financial Statements ” shall have the meaning ascribed to such term in Section 8.1 .
“ Schedule 3 Dedicated Employees ” shall mean those employees, consultants and contractors of the Schedule 3 Entities who, as of the date of the Investment Agreement, spent substantially all of their business time dedicated to the TOO Business.
“ Schedule 3 Entities ” shall mean those Persons listed on Schedule 3 .
“ Schedule 3 Services ” shall have the meaning ascribed to such term in Section 5.1 .
“ Schedule 3 Transferred Employee ” shall have the meaning ascribed to such term in Section 3.1 .
“ Service Provider ” shall have the meaning ascribed to such term in Section 4.1 .
“ Service Recipient ” shall have the meaning ascribed to such term in Section 4.1 .
“ Shared Service Evaluation ” shall have the meaning ascribed to such term in Section 5.1 .
“ Term Sheet ” shall have the meaning ascribed to such term in the Preamble.
“ Termination Costs ” shall have the meaning ascribed to such term in Section 4.3(b) .
“ TKC ” shall have the meaning ascribed to such term in the Preamble.
“ TKC Entities ” shall mean, collectively, TKC and its Subsidiaries (other than any TOO Entity).
“ TKC Indemnitees ” shall have the meaning ascribed to such term in Section 9.2 .
“ TNK ” shall have the meaning ascribed to such term in Section 3.4 .
“ TNOL ” shall mean Teekay Navion Offshore Loading Pte. Ltd.
“ TNOL Service Agreements ” shall have the meaning ascribed to such term in Section 4.2(b) .
“ TOO ” shall have the meaning ascribed to such term in the Preamble.
“ TOO Business ” shall mean the business of TOO and its Subsidiaries, (which shall include, for certainty, the services provided to the TOO Entities by the TKC Entities as of the Closing Date as well as any services provided by any TKC Entity or TKC Employee on behalf of TOO), including the Offshore Restricted Business (as defined in the Amended and Restated Omnibus Agreement among, inter alia, Teekay Shipping Corporation, Teekay LNG Partners L.P., TOO and TOO GP).
“ TOO Entities ” shall mean, collectively, TOO and its Subsidiaries. For the avoidance of doubt, each Schedule 2 Entity shall be a TOO Entity from and after the Transfer Date.
“ TOO GP ” shall have the meaning ascribed to such term in the Preamble.
“ TOO Indemnitees ” shall have the meaning ascribed to such term in Section 9.1 .
“ Transfer Date ” shall have the meaning ascribed to such term in Section 2.2 .
“ Transition Manager ” shall have the meaning ascribed to such term in Section 6.1 .
ARTICLE 2.     
REORGANIZATION

 
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Section 2.1      Document of Compliance . TKC and TOO shall use their respective commercially reasonable efforts to cause a DOC to be issued (the time such DOC is issued, the “ DOC Issuance ”) to either (as directed in writing to TKC by TOO) Teekay Shipping Norway AS as soon as practicable following the Closing, and TKC shall keep TOO informed of the progress of such issuance at all times. Until the DOC Issuance has occurred, TKC shall, and shall cause its Affiliates to, use its commercially reasonable efforts to do all things and take all actions necessary to maintain any current DOC and safety case reasonably necessary for the TOO Business in full force and effect. TOO shall bear all reasonable, duly-documented out-of-pocket costs and expenses incurred by the TKC Entities and the TOO Entities in obtaining such DOC. Transfer of Certain Entities. On January 1, 2018, TKC shall cause each Schedule 2 Entity to be transferred to a TOO Entity (including, for certainty, any new entity formed by TOO for such purpose, as directed in writing to TKC by TOO) by transferring all equity or other ownership interest issued by such Schedule 2 Entity to the designated TOO Entity (the “Entity Transfer”). The agreements and documents executed, delivered or filed in connection with each Entity Transfer shall be in a form and substance reasonably acceptable to TKC, TOO and Investor to reflect a valid transfer and shall include the form of purchase agreement (each, a “Purchase Agreement”) substantially in the form attached hereto as Exhibit B. In connection with an Entity Transfer, TOO shall pay to the relevant seller entity an amount in cash, or if the calculated value is negative, TKC shall pay, or cause to be paid, and TOO shall be entitled to receive, an amount in cash from the applicable seller entity, equal to such Schedule 2 Entity’s stockholder’s equity as of the Transfer Date, determined in accordance with GAAP on a basis consistent with past practice (the “Initial Schedule 2 Entity Consideration Value”), in each case, as of the time of the Entity Transfer, as estimated by TOO, taking into consideration any other reasonable adjustments as the Parties and Investor may agree based on commercial principles. Illustrative examples of the calculation of the consideration to be paid in connection with the Entity Transfers are set forth in Exhibit A hereto. To the extent that TKC and TOO reasonably agree that (A) any Entity Transfer is not commercially reasonable due to material adverse tax consequences or other material adverse commercial impacts, or (B) it may otherwise be materially beneficial to either party (and not materially detrimental to the other party) to effect an Alternative Transfer (as defined below), TKC shall take all steps reasonably necessary to transfer to TOO or a Subsidiary of TOO (as directed in writing to TKC by TOO and Investor) all employees, assets and liabilities related to the TOO Business (to the extent reflected on the balance sheet/financial statements of such Schedule 2 Entity as of the date of such transfer of the applicable Transferred Entity) for substantially similar consideration (the “Alternative Transfer”). All Entity Transfers and, to the extent there are any, Alternative Transfers shall be completed on January 1, 2018 (the “ Transfer Date ”).
Section 2.2      TK Event of Default . Notwithstanding anything in this Agreement to the contrary, upon the occurrence of a TK Event of Default (as defined in the Amended and Restated GP LLC Agreement), TKC shall use commercially reasonable efforts to immediately cause an Entity Transfer or Alternative Transfer with respect any or all of the Schedule 2 Entities (as directed in writing by TOO). Settlement of Intercompany Balances . At the Transfer Date, there shall be no intercompany balances (other than trade receivables and payables arising in the ordinary course of business) between any TKC Entity, on the one hand, and any Schedule 2 Entity, on the other hand.

 
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ARTICLE 3.     
EMPLOYEES
Section 3.1      Transition of Schedule 3 Dedicated Employees . At any time during the Evaluation Period, TOO may request that TKC permit and use commercially reasonable efforts to facilitate the transfer the employment or other engagement of any Person who is a Schedule 3 Dedicated Employee to a TOO Entity (as directed in writing by TOO) as soon as reasonably practicable following such request on substantially similar terms (each such person, a “Schedule 3 Transferred Employee”). All such requests and transfers of employment shall be made in accordance with applicable Law. TKC shall, and shall cause the other TKC Entities to, make all Schedule 3 Transferred Employees freely available for employment or other engagement by the TOO Entities. Except as set forth in this Article 3, TOO shall be responsible for the pro rata portion (based on the percentage of professional time such Schedule 3 Dedicated Employee devoted to the TOO Business in the one year period prior to the date hereof) of any and all Losses incurred by TKC or any of its Subsidiaries (other than TOO GP and its Subsidiaries) in connection with the termination of such Schedule 3 Transferred Employee and/or the process of offering such Schedule 3 Transferred Employee employment with TOO and the implementation of such offer.
(a)      TKC shall use, and shall cause its Subsidiaries (including, for certainty, any applicable Schedule 2 Entity) to use, their respective commercially reasonable efforts to cause the transfer of David Wong’s employment to a Schedule 2 Entity prior to the applicable Transfer Date.
Section 3.2      Continuation of Employment; Certain Benefits . TKC shall not, and shall cause the other TKC Entities not to, transfer any Schedule 2 Employee (prior to the Transfer Date) or Schedule 3 Dedicated Employee (in the case of any Schedule 3 Transferred Employee who has accepted an offer from a TOO Entity, prior to the date on which such person’s employment is transferred to a TOO Entity) to a Person not listed on the applicable schedule.
(a)      With respect to each Schedule 2 Employee, until the Transfer Date, TKC shall, and shall cause the other TKC Entities to, use their respective commercially reasonable efforts to cause such Schedule 2 Employees to continue to be dedicated to, and provide services to, the TOO Business consistent with past practice.
(b)      With respect to each Schedule 3 Dedicated Employee (in the case of any Schedule 3 Transferred Employee who has accepted an offer from a TOO Entity, prior to the date on which such person’s employment is transferred to a TOO Entity), TKC shall, and shall cause the other TKC Entities to, use their respective commercially reasonable efforts to cause such Schedule 3 Dedicated Employee to continue to be dedicated to, and provide services to, the TOO Business consistent with past practice.
(c)      TOO and TKC hereby agree (i) that each of them will cooperate and use commercially reasonable efforts to ensure (x) that the transfer of the Schedule 3 Transferred Employees shall not constitute or give rise to a severance of employment of any Schedule 3 Transferred Employee prior to or upon such consummation of such transfers and (y) that the Schedule 3 Transferred Employees will have continuous and uninterrupted employment immediately before and immediately after the date of their transfer and (ii) to comply, in all material respects, with the

 
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requirements under applicable Laws in respect of such transfers. TOO shall assume or retain all Losses in respect of claims made by any Schedule 3 Dedicated Employees for statutory, contractual or common law severance or other separation benefits (including claims for wrongful dismissal, notice of termination of employment or pay in lieu of notice) (“ Severance Compensation ”) arising out of, relating to or in respect of such Schedule 3 Dedicated Employee’s refusal to accept a transfer of employment to a TOO Entity or a Schedule 2 Entity in connection herewith.
(d)      From and after the applicable transfer time, TOO shall, and TOO shall cause the TOO Entities (including any Schedule 2 Entity after the Transfer Date) to, give each Transferred Schedule 3 Employee full credit for such Transferred Schedule 3 Employee’s service with the TKC Entities (and with any predecessor employer) (such service, “ Pre-Closing Service ”) for purposes of eligibility to participate, vesting (other than with respect to any equity based compensation plan) and determining level of benefits (in the case of paid time off, vacation and severance only) under any Company Plan and employment-related entitlements provided, sponsored, maintained or contributed to by any TOO Entity or any Schedule 2 Entity in which such Transferred Schedule 3 Employee is eligible to participate after the Closing Date, in each case, to the same extent such Pre-Closing Service was recognized by the TKC Entities immediately prior to the time such Person’s employment was transferred under a similar benefit plan, except to the extent such credit would result in duplication of benefits for the same period of service or with respect to benefit accruals under any defined benefit pension plan.
(e)      For purposes of determining the number of vacation days to which each Schedule 3 Transferred Employee shall be entitled during the calendar year in which the applicable transfer occurs, TOO shall, and shall cause the TOO Entities to, and TKC shall cause the Schedule 2 Entities to, honor all vacation days earned but not yet taken by such Schedule 3 Transferred Employee as of the applicable time their employment is transferred (as reasonably determined by TOO in good faith).
(f)      The TOO Entities shall assume or retain the pro rata portion (based on the percentage of professional time such Schedule 3 Transferred Employee devoted to the TOO Business in the one year period prior to the date hereof) of all Losses incurred by TKC or any of its Subsidiaries (other than TOO GP and its Subsidiaries) in respect of claims made by any Schedule 3 Transferred Employee for statutory, contractual or common law employment-related entitlements or other employment related claims arising out of, relating to or in respect of any such Schedule 3 Transferred Employee’s transfer of employment to a TOO Entity in connection herewith.  
Section 3.3      Talent Management . TKC and TOO agree that the parties will engage in good faith discussions at the Board level to review the talent within the TKC Entities and the TOO Entities with a goal of providing career development opportunities for key individuals within their respective organizations. Such opportunities could be by way of permanent transfer or temporary secondment or such other methodology as the parties consider appropriate in the circumstances. Provided, however, neither party shall hire or engage an employee from the other organization without the prior consent of the board of directors of the other party. This Section 3.3 shall cease to apply with respect to any Transferred Employee one year after such Transferred Employee ceases to be employed by any TKC Entity for any reason. TNOL Employees . TKC shall

 
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have the right to offer employment with TKC or one of its Subsidiaries to any employee of TNOL who the parties reasonably determine spends substantially all of his or her time providing services to Teekay Tankers Ltd. or one of its Subsidiaries (collectively, “ TNK ”) (such employee, a “ Dedicated TNK Employee ”). TKC shall bear all costs associated with the transfer of the employment of such Persons who accept employment with TKC, as well as any severance or other costs incurred by the TOO Entities in connection with the transfer or termination of such employment. TKC shall be responsible for all Losses incurred by the TOO Entities in connection with the termination of any Dedicated TNK Employee who has accepted an offer for employment pursuant to Section 3.4 hereof or the process of offering such Dedicated TNK Employee employment with TNK and the implementation of such offer.
Section 3.4      Current Service Agreements . The TKC Entities, on the one hand, and the TOO Entities and the Schedule 2 Entities, on the other hand, are as of the date of this Agreement, and will be as of the Closing Date, parties to service Contracts (the “ Current Service Agreements ”) pursuant to which the TKC Entities (in such capacity, the “ Service Provider ”) provide the TOO Entities and the Schedule 2 Entities (in such capacity, the “ Service Recipient ”) services related to the conduct of their respective businesses (the “ Current Services ”). Unless otherwise agreed by TKC and TOO in accordance with the terms of this Agreement or otherwise in writing, from and after the date hereof, TKC shall, and shall cause the other TKC Entities to, (x) maintain the Current Service Agreements in full force and effect, and (y) ensure the continued provision of all Current Services by the Service Providers to the Service Recipients in accordance with the terms (including with respect to costs) of the Current Service Agreements and this Agreement subject to such changes resulting from compliance with the terms of this Agreement. Other Services . As of the Closing Date, certain entities set forth on Schedules 1 and 2 provide services to TKC related to the TKC Entities’ businesses under certain existing service agreements. In that regard, the Parties agree as follows:
(a)      Tanker Services . After the Closing, TNOL shall continue to provide commercial management services in accordance with the terms of the service agreements listed on Exhibit C (the “ TNOL Service Agreements ”), consistent with past practices.
Section 3.5      Amendments to Current Service Agreements . Effective as of the Closing Date, all Current Service Agreements shall hereby be amended, automatically and without further action by the Parties or their respective Subsidiaries, such that, notwithstanding anything to the contrary in the Current Services Agreements or this Agreement, the following provisions shall apply with respect to all Current Services and Current Service Agreements: Termination of Services . Service Providers may not terminate any Current Service Agreement, or any Current Service provided thereunder, for any reason during the 12 month period following Closing (the “ Evaluation Period ”) other than with respect to an event of default by the Service Recipients under the applicable agreement. At any time following the Closing, a Service Recipient may terminate any Current Service Agreement, or any Current Service provided thereunder, for any reason or for no reason, whether during the Evaluation Period or otherwise, at any time upon at least thirty (30) days (or such shorter period to which the applicable Service Provider agrees in writing) prior written notice to the Service Provider; provided , however , that prior to the Exercise Date (as defined in the Amended and Restated GP LLC Agreement), Investor’s consent shall be required prior to any such termination.

 
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In the event a Service Recipient elects to terminate any Current Services, TKC shall, or shall cause the applicable Service Provider to, provide reasonable assistance necessary to ensure a smooth transition prior to the termination of such Current Services. For clarity, any termination of any Current Service Agreement or any Current Service shall not affect TOO’s rights to transfer or hire any Schedule 3 Dedicated Employees under Article 3 .
(a)      Cost of Termination. Any costs directly associated with the termination of any Current Services (including TOO’s pro rata share of any severance costs to be paid to any employee (based on the percentage of professional time such employee devoted to the TOO Business in the one (1) year period prior to the date hereof) who is made redundant, the costs of terminating software license seats or terminating leases for excess office space or sub-letting such space where software or space has been exclusively used in the TOO Business and costs associated with providing transition services to TOO, if any (collectively, “ Termination Costs ”), shall be borne by TOO. Notwithstanding the foregoing, if any such termination is due to the Service Provider’s material breach of the applicable Current Service Agreement, including the terms and conditions set forth in this Section 4.3 , which breach is not cured within thirty (30) days of Service Recipient’s notice to the applicable Service Provider describing such breach, the TKC Entities shall bear all Termination Costs associated with such termination. For clarity, in no event shall TOO be responsible for any costs associated with the termination of any Current Services in respect of any resources (such as employees, office lease space or software license seats) to the extent such resources are allocated to, or otherwise required to be held by, any TKC Entity in the operation of the business of the TKC Entities.
(b)      Service Level . TKC shall, and shall cause each Service Provider to, provide the Current Services, including with respect to the levels of care, quality, diligence and frequency, consistent with the conduct of the TOO Business during the 12-month period prior to the date hereof (such standard, “ Historic Practice ”) and, in any event, with not less than a reasonable degree of care, quality and diligence. In addition, TKC shall, and shall cause each Service Provider to, (i) establish and enforce policies that require performance of the Current Services in accordance with applicable Laws (including, for certainty, all Sanctions Laws, Money Laundering Laws, and Anticorruption Laws), (ii) give the Current Services substantially the same priority as it accords its own operations in the ordinary course of business, consistent with Historic Practice, (iii) assign sufficient resources and qualified personnel (based on education, training, experience and skill) to perform the Current Services, consistent with Historic Practice, and (iv) promptly notify the applicable Service Recipient of any staffing or resource problems that could reasonably be expected to materially affect the provision of the Current Services; provided that any such staffing or resource problems shall not affect or otherwise modify the obligations of such Service Provider to provide the applicable Current Services.
(c)      Cooperation . TKC shall, and shall cause the TKC Entities, on the one hand, and TOO shall, and shall cause the TOO Entities, on the other hand, to use good faith efforts to cooperate with each other in all matters relating to the provision and receipt of the Current Services.  Subject to the applicable Service Provider’s and Service Recipient’s information security, access, nondisclosure and confidentiality, and other reasonable policies and requirements, such cooperation will include exchanging information, providing necessary access to people, equipment and systems,

 
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cooperating with respect to obtaining and providing all consents, licenses, sublicenses, approvals, and/or rights reasonably necessary to permit the applicable Service Provider and Service Recipient to perform its obligations, and providing mutual assistance with respect to any actions necessary for the extension of Current Services.
(d)      Modified or Additional Services . In the event that, during the Evaluation Period, a Service Recipient identifies the need to modify a Current Service or add an additional service, TKC and TOO shall, and shall cause the TKC Entities and the TOO Entities, as applicable, to, promptly work together in good faith and use commercially reasonable efforts to modify such Current Service or add such additional service to the applicable Current Service Agreement, under which Service Provider shall provide (or arrange for the provision of) such modified or additional service (which shall be considered a Current Service) to Service Recipient.  The fees for such new or modified Current Service shall be determined on a “cost plus” basis in a manner consistent with the provision of other Current Services under the Current Services Agreements and the applicable OECD transfer pricing guidelines, and unless otherwise agreed by the Parties, such modified Current Service or additional service shall be provided consistent with the terms and conditions set forth in this Section 4.3 . 
(e)      Performance by Affiliates and Subcontractors . A Service Provider may use one or more of its Affiliates or third party subcontractors to perform all or any portion of Service Provider’s duties under any Current Service Agreement, provided that (i) such Service Provider shall use the same degree of care in selecting any such third party service providers as it would if such third party service providers were being retained to provide similar services to such Service Provider (and in no event lower than a reasonable degree of care), (ii) such Service Provider remains primarily responsible for the performance of such Affiliates and subcontractors as if it was performed by such Service Provider, including such Affiliates’ and subcontractors’ acts and omissions, and (iii) the applicable Service Recipient’s payment or reimbursement obligations are not changed by such use.
(f)      Records; Audits.   Each Service Provider shall maintain all books, records, receipts, invoices, reports, and other documents and information relating to the Current Services in accordance with its standard accounting practices and procedures.  Each Service Provider shall make such books, records, receipts, invoices and other documents and information reasonably available, on reasonable prior written notice and during ordinary business hours, to the applicable Service Recipient and its auditors during the term of the applicable Current Service Agreements and for one (1) year afterwards for purposes of confirming such Service Provider’s compliance with the terms of the applicable Current Service Agreements.  Each Service Provider will cooperate with the applicable Service Recipient and its auditors, as reasonably requested by such Service Recipient, in connection with any audit.
(g)      Dispute Resolution . Any disputes with respect to any Current Service or Current Service Agreement shall be resolved in accordance with the dispute resolution process in Article 6 hereof.
(h)      Compliance with Laws . In providing the Current Services, each Service Provider shall hold and maintain all Permits and insurance policies, and shall not (i) take any action

 
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(or make any omission) that violates, conflicts with, results in a breach of or constitutes a default under, its certificate of organization or other charter instrument or by-laws, (ii) take any action (or make any omission) that results in the suspension, termination, cancellation, non-renewal or adverse modification of any Permit or insurance policies or (iii) violate, in any material respect, any Law applicable to such Service Provider or Service Recipient (including, for certainty, all Sanctions Laws, Money Laundering Laws, and Anticorruption Laws).
(i)      GP Interest Option . For the avoidance of doubt, the exercise by Brookfield TK TOGP L.P. of its option to purchase 2% of the limited liability company interests in TOO GP shall not violate or constitute a default (or constitute an event which, with notice or lapse of time or both, would constitute a violation or default) under any of the terms, conditions or provisions of any Current Service Agreement or accelerate any obligations or rights under or give a right of termination of (whether or not with notice, lapse of time or both) any such Current Service Agreement.
The Parties acknowledge and agree that the foregoing amendments have been approved by the board of directors of each of TKC, TOO GP, the Conflicts Committee of TOO, Investor and the other parties to this Section 4.3.
Section 3.6      Further Amendments . The Parties agree to review the terms of the Current Services Agreements during the Evaluation Period and to negotiate in good faith any amendments to the Current Services Agreements that the Parties reasonably believe are required to reflect an arm’s length relationship between the Service Provider and the Service Recipient. The Parties acknowledge and agree that such amendments may include additions of, or changes to, provisions concerning payment terms, dispute resolution procedures, representations and warranties, indemnities, limitations of liability or termination rights, and any provisions added or changed by way of such amendment shall be consistent with such terms as would be reasonably expected to be included in an agreement governing the provision of similar services between arm’s length parties. The Parties acknowledge and agree that any material amendments to the Current Services Agreements contemplated by this Section 4.4 shall be subject to approval by the board of directors of each of TKC, TOO GP, the Conflicts Committee of TOO, and, prior to the Exercise Date, Investor, each such approval not to be unreasonably withheld, conditioned or delayed. Order of Precedence . In the event of any conflict between the terms of this Agreement and the Current Services Agreements, the terms of this Agreement shall prevail.
Section 3.7      Shared Service Evaluation; Further Transition . During the Evaluation Period, TOO shall evaluate, and TKC shall provide reasonable assistance to TOO in so evaluating, whether any of the Schedule 3 Entities should continue to provide Current Services (the “ Schedule 3 Services ”) to the TOO Entities and the Schedule 2 Entities, and, if so, on what terms and conditions, including with respect to duration (such actions, the “ Shared Service Evaluation ”). Based on the Shared Service Evaluation, the applicable TOO Entity and/or Schedule 2 Entity may elect any of the following (collectively, the “ Further Transition ”), whether during the Evaluation Period or otherwise: (i) termination of any Schedule 3 Services (or any portion thereof), (ii) continuation of any Schedule 3 Services under the applicable Current Service Agreement, or (iii) entry into one or more new service agreements with respect to any Schedule 3 Services or any other

 
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service reasonably required to conduct the TOO Business with the applicable TKC Entity (which may be in the form of an amendment to a Current Service Agreement) (each, a “ New Service Agreement ”). TKC and TOO shall cause the TKC Entities and the TOO Entities to use commercially reasonable efforts to complete the Shared Service Evaluation and enter into the applicable New Service Agreements or effect such other Further Transition within the Evaluation Period. In the event the applicable TOO Entity and/or Schedule 2 Entity elects to enter into one or more New Service Agreements, TKC and TOO shall cause the applicable TKC Entity and TOO Entity to negotiate in good faith the terms and conditions (including with respect to price and duration) under which any such Schedule 3 Services or other services will be provided on a going forward basis in accordance with this Article 5 . The Parties acknowledge and agree that any material amendments to the Current Services Agreements shall be subject to approval by the board of directors of each of TKC, TOO GP, the Conflicts Committee of TOO, and, prior to the Exercise Date, Investor, each such approval not to be unreasonably withheld, conditioned or delayed. Termination . In the event the applicable TOO Entity elects to terminate any Schedule 3 Services, TKC shall cause the applicable TKC Entity to provide reasonable assistance necessary to ensure a smooth transition prior to the termination of such Schedule 3 Services. Any costs associated with the termination of any Schedule 3 Services shall be allocated between the TKC Entities and the TOO Entities in accordance with Section 4.3(b) . For clarity, any termination of Schedule 3 Services shall not affect TOO’s rights to transfer or hire any Schedule 3 Dedicated Employees under Article 3 .
Section 3.8      Transition Managers; Principal Representatives . TKC and TOO shall each appoint one individual (the “ Transition Manager ”) (i) to have primary responsibility and oversight for the Shared Service Evaluation and to facilitate the Further Transition, and (ii) to be TKC’s or TOO’s primary point of contact for matters relating to the Current Service Agreements and this Agreement (including with respect to the Shared Service Evaluation, the Further Transition, and amendments to be made pursuant to Section 4.4 ). The initial Transition Managers will be Brock Wlad (for TKC) and David Wong (for TOO). Further, TKC and TOO shall each appoint one principal representative (the “ Principal Representative ”) to have overall responsibility for the management and administration of his or her Party’s activities with respect to the Shared Service Evaluation and overall rights and obligations with respect to the agreements or other transactions contemplated by the Current Service Agreements and this Agreement (including with respect to the Shared Service Evaluation, the Further Transition, and amendments to be made pursuant to Section 4.4 ). The initial Principal Representative will be Arthur Bensler (for TKC) and Ingvild Saether (for TOO). Each of TKC and TOO may appoint a new Transition Manager or Principal Representative by providing the other Party with prior written notice thereof; provided, that prior to the Exercise Date, any new Transition Manager or Principal Representative appointed by TOO shall require the prior written approval of Investor. Resolution by Transition Managers . To the extent that the applicable TKC Entity and TOO Entity do not agree on any terms or conditions for a New Service Agreement or how to effect a proposed Further Transition, or otherwise have any disputes under the Current Service Agreements or this Agreement (including with respect to the Shared Service Evaluation, the Further Transition), such dispute (a “ Dispute ”) will be initially referred to the Transition Managers by either Party (in such role, the “ Complaining Party ”) by delivering written notice (a “ Dispute Notice ”) to the Transition Manager of the other Party (the “ Responding Party ”) setting forth in reasonably sufficient detail the position of the Complaining Party with respect to the Dispute, including the factual basis of such position.  Within fifteen (15) days after delivery of the Dispute

 
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Notice, TKC or TOO, as applicable, will cause the Responding Party to submit to the Transition Manager of the Complaining Party a written response (the “ Response ”) setting forth in reasonably sufficient detail the Responding Party’s position concerning the Dispute. Within five (5) days after delivery of such a Response, the Transition Managers shall meet and confer at a mutually acceptable time, and thereafter as often as they deem reasonably necessary, in an effort to resolve the Dispute through good faith negotiation.  Such meetings may be by telephone or other means acceptable to each of the Transition Managers.  The Parties shall, and shall cause their respective Subsidiaries to, cooperate in good faith with respect to any reasonable requests for exchanges of information regarding the Dispute or a Response thereto for the purpose of engaging in such dispute resolution negotiations. 
Section 3.9      Timing; Delays; Adjustment of fees . In the event that any of the actions contemplated by this Agreement are frustrated or unduly delayed by TKC, all fees payable to TKC under any Current Service Agreement or New Service Agreement from and after such time and other fees related to employee or entity transfers shall be reduced by an amount to be agreed between the parties, acting reasonably. In the event that TKC incurs additional reasonable, duly-documented out-of-pocket costs in connection with the provision of services under any Current Services Agreement due to the requirements of this Agreement, the fees payable to TKC under such agreement will be adjusted by an amount agreed between the parties, acting reasonably, to take into consideration such additional reasonable, duly-documented out-of-pocket costs. Confidentiality .
(a)      Exclusions . Specifically excluded from the foregoing obligations is any and all information that the Receiving Party can show (i) is already known to the Receiving Party at the time of disclosure and is not known by the Receiving Party to be subject to a confidentiality obligation (other than any information that is transferred to Service Recipient under the Purchase Agreement) or thereafter is independently developed by the Receiving Party without breach of this Agreement; (i) is already in the public domain at the time of disclosure, or thereafter becomes publicly known other than as the result of a breach by the Receiving Party of its obligations under this Agreement; (i) is lawfully disclosed to the Receiving Party without breach of this Agreement; or (i) is independently developed by or for the Receiving Party without reference to or reliance upon the Confidential Information.
(b)      Required Disclosures . If, upon advice of counsel, any of Disclosing Party’s Confidential Information must be produced by the Receiving Party pursuant to applicable Law, then the Receiving Party shall promptly, if permissible, notify the Disclosing Party and, insofar as is permissible and reasonably practicable without placing the Receiving Party under penalty of applicable Law, give the Disclosing Party an opportunity to appear and to object to such production before producing the requested information.
(c)      Return of Confidential Information . Upon the termination or expiration of this Agreement, each Party, as a Receiving Party, shall, at the option of the other Party, as a Disclosing Party, return to such Disclosing Party all Confidential Information of such Disclosing Party or destroy such Confidential Information and provide a written certification of destruction with respect thereto to such Disclosing Party. In no event shall a Receiving Party be required to return or destroy any Confidential Information that is (i) required by applicable Law to be kept by the Receiving

 
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Party or (ii) retained in archival back-up tapes or similar storage media, which shall only be used by the Receiving Party for archival purposes.
Section 3.10      Compliance with Laws; Confidentiality and Data Protection . Each Party shall, and shall cause its Subsidiaries to, perform its obligations hereunder, under the Current Service Agreements and under the New Service Agreements in accordance with applicable Law. TKC shall cause the TKC Entities, on the one hand, and TOO shall cause the TOO Entities, on the other hand, to use good faith efforts to cooperate with each other to develop and put in place appropriate obligations with respect to confidentiality and data security in relation to the Current Service Agreements, including as is necessary or appropriate to comply with applicable Law.  Without limiting the foregoing, each of TKC and TOO hereby covenants that it will not, and will cause the TKC Entities and TOO Entities, as applicable, not to, violate Anticorruption Laws in connection with this Agreement. In the event TKC or TOO becomes aware of any such violation of this Section 7.3 , it will promptly notify the other Parties of any violation. Records; Audits . Each of TKC and TOO shall maintain all books, records, receipts, invoices, reports, and other documents and information relating to this Agreement in accordance with its standard accounting practices and procedures.  Each of TKC and TOO shall make such books, records, receipts, invoices and other documents and information reasonably available, during ordinary business hours, to the other Party and its auditors during the term of this Agreement and for one (1) year afterwards for purposes of confirming such Party’s compliance with the terms of this Agreement.  Each Party will cooperate with the other Party and its auditors, as reasonably requested by such other Party, in connection with any audit.
Section 3.11      Representations and Acknowledgements by TKC . TKC hereby represents, warrants, acknowledges and confirms to TOO that:
(i)      TKC has full power and authority to execute, deliver and perform its obligations under this Agreement;
(ii)      this Agreement constitutes a valid and binding obligation of TKC, as applicable, enforceable against TKC, as applicable, in accordance with its terms, except as enforceability hereof may be limited by bankruptcy, insolvency or other laws affecting creditor’s rights generally and limitations on the availability of equitable remedies;
(iii)      there are no material liabilities of any Schedule 2 Entity required to be disclosed pursuant to GAAP (including for certainty any unfunded liabilities under any defined benefits plan) other than those liabilities set forth on the face of TKC’s consolidated financial statements;
(iv)      Exhibit D contains a true and complete list of all Current Service Agreements;
(v)      the provision of Current Services to any Service Recipient by any Service Provider in accordance with any Current Service Agreement will not (i) violate, conflict with, result in a breach of or constitute a default under, its certificate of organization or other charter instrument, by-laws, or any Contract to which such Service Provider or Service Recipient is a party

 
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or by which such Service Provider or Service Recipient is otherwise bound, (ii) cause the suspension, termiantion, cancellation, non-renewal or adverse modification of any Permit or material insurance policies or (iii) violate, in any material respect, any Law applicable to such Service Provider or Service Recipient;
(vi)      the conduct of the TOO Business by the TOO Entities does not require any assets or services from the TKC Entities except for the Current Services provided pursuant to the Current Service Agreements;
(vii)      (A) Exhibit C contains a true and complete list of all TNOL Service Agreements, (B) Exhibit D contains a true and complete list of all service agreements pursuant to which any TKC Entity provides services to any TOO Entity or any Schedule 2 Entity,
(viii)      other than (A) pursuant to the TNOL Service Agreements set forth on Exhibit C and (B) from and after the Transfer Date, the TKC FPSO Service Agreements, no TOO Entity or Schedule 2 Entity provides services to any TKC Entity and
(ix)      As of the date hereof, no TKC Entity provides services to any TOO Entity or any Schedule 2 Entity other than pursuant to a service agreement set forth on Exhibit D;
(x)      the Schedule 2 Entity Financial Statements and the financial statements delivered pursuant to Section 2.3 hereof (A) have been or will be, as applicable, prepared in good faith based on assumptions believed by TKC to be reasonable as of the dates thereof and present fairly, in all material respects, the financial condition of each of the Schedule 2 Entities, in each case as of the respective dates thereof and their results of operations for the respective periods covered thereby, (B) are based or will be based, as applicable, on the historical accounting practices and policies of TKC and the Schedule 2 Entities and derived from the historical consolidated financial statements of TKC and its Subsidiaries, which are prepared in accordance with GAAP and (C) have been or will be, as applicable, prepared in accordance with GAAP (except, in the case of unaudited quarterly financial statements subject to normal year-end adjustments) applied on a consistent basis during the periods covered thereby;
(xi)      Schedules 2 and 3 collectively contain a true and complete list of all of TKC’s Affiliates (other than TOO GP, TOO and their respective Subsidiaries) that, as of the Closing Date, provide services, directly or indirectly (including, for clarity, by employing or otherwise engaging Persons that provide services to TOO and its Subsidiaries) to TOO and its Subsidiaries; and
(xii)      the lists of Schedule 2 Employees and Schedule 3 Employees contain all information regarding such person’s employment as is required by the Term Sheet and are, as of the date hereof, true, complete and correct in all respects;
(xiii)      subject to the DOC Issuance and receipt of similar approvals, neither the execution and delivery of this Agreement by TKC, nor the consummation by TKC of the transactions contemplated hereby, nor performance or compliance by TKC with any of the terms or provisions hereof or thereof, will (A) conflict with or violate any provision of (1) TKC’s

 
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organizational documents or (2) any similar organizational documents of any of the TKC Entities or (B) violate or constitute a default (or constitute an event which, with notice or lapse of time or both, would constitute a violation or default) under any of the terms, conditions or provisions of any Contract to which any TKC Entity is a party or accelerate any obligations or rights under or give a right of termination of (whether or not with notice, lapse of time or both) any such Contract, (C) violate any Law, judgment, writ or injunction of any Governmental Entity applicable to any TKC Entity or (D) result in the creation of any Lien on any properties or assets of any TKC Entity, except as, individually or in the aggregate, have not had and would not reasonably be expected to have a material adverse effect on TOO; and
(xiv)      subject to the DOC Issuance and receipt of similar approvals, no consent or approval of, or filing, license, permit or authorization, declaration or registration with, any Governmental Entity are necessary for the execution and delivery of this Agreement by TKC, the performance by TKC of its obligations hereunder and thereunder and the consummation by the TKC Entities of the transactions contemplated hereby, except in those cases as individually or in the aggregate would not reasonably be expected to have a material adverse effect on TOO.
Section 3.12      Representations and Acknowledgements by TOO and Investor . Each of TOO and Investor hereby severally represents, warrants, acknowledges and confirms to TKC that (a) such Person has full power and authority to execute, deliver and perform its obligations under this Agreement and (b) this Agreement constitutes a valid and binding obligation of such Person, enforceable against such Person, in accordance with its terms, except as enforceability hereof may be limited by bankruptcy, insolvency or other laws affecting creditor’s rights generally and limitations on the availability of equitable remedies.

INDEMNIFICATION
Section 3.13      TKC Indemnity . TKC shall indemnify, defend and hold harmless, and hereby releases, TOO GP, TOO, each Subsidiary of TOO, Investor and each of their respective officers, directors, affiliates, employees, stockholders (other than any TKC Entities), consultants, contractors, agents, and other representatives, and each of the successors and assigns of any of the foregoing (collectively, the “ TOO Indemnitees ”), from and against: any and all Losses arising from or relating to third party claims arising from or relating any breach of this Agreement or failure to provide the services contemplated hereby, in each case, by any TKC Entity (except solely if, and only to the extent due to a breach of this Agreement by the TOO Entities or that is due to the gross negligence or willful misconduct on the part of the TOO Entities); and
(a)      No remedy shall be available hereunder to the extent it is duplicative of a remedy actually received pursuant to a Purchase Agreement. Indemnification Procedures . In order to receive the benefits of the indemnity under this Article 9 , a Person seeking indemnification (each, an “ Indemnitee ”) must:
(b)      allow the Indemnitor to assume the control of the defense and settlement (including all decisions relating to litigation, defense and appeal) of any such claim; provided that : (A) the Indemnitor has confirmed its indemnification obligation with respect to such claim to the

 
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Indemnitee under this Article 9 , (B) no such settlement may adversely affect the rights or obligations of such Indemnitee under this Agreement without the Indemnitee’s prior written consent; and (C) any settlement reached without the prior written consent of such Indemnitee shall be for monetary damages only (which amount shall be fully indemnified hereunder by the Indemnitor) and not for any equitable relief and shall not include any admission or ongoing obligation or restriction on the part of such Indemnitee; and
(c)      reasonably cooperate with the Indemnitor, at the Indemnitor’s request and expense, in its defense of the claim (including making documents and records available for review and copying and making Persons within such Indemnitee’s control available for pertinent interview and testimony), including by negotiating appropriate joint defense agreements and similar arrangements to, as fully as possible, provide such cooperation without vitiating any legal privilege to which such Indemnitee is entitled.
(d)      If the Indemnitor defends the claim, the Indemnitee may at its sole expense and using attorneys of its choice, participate in, but shall not have any control of, the defense of such claim. The Indemnitor shall have no liability under, as applicable, Section 9.1 or Section 9.2 as to any claim for which settlement or compromise of such claim, or an offer of settlement or compromise of such claim, is made by an Indemnitee without the prior written consent of the Indemnitor.
(e)      All reasonable, duly-documented, out-of-pocket costs and expenses incurred by an Indemnitee in connection with enforcement of this Article 9 shall also be reimbursed by the Indemnitor (net of reasonable costs and expenses of recovery).
(f)      For the purposes of the indemnification provisions set forth in this Article 9 , any amounts payable hereunder or thereunder shall be determined on the basis of the net effect after giving effect to any actual cash payments, setoffs or recoupment or any payments in each case actually received, realized or retained by the indemnified Party (including any amounts recovered by the indemnified Party under insurance policies, but excluding self-insurance arrangements) as a result of any event giving rise to a claim for such indemnification. If the amount for which an indemnifying Party is obligated to provide indemnity hereunder is reduced due to recoveries by the applicable indemnified Parties under one or more insurance policies, then to the extent required by the terms of such policies, the applicable insurance indemnitors shall be subrogated to the rights of the indemnified Parties hereunder with respect to the claims giving rise to such amount payable under this Article 9 ; provided that in no event shall such insurance indemnitors be entitled to seek a recovery from the indemnifying Party in excess of the amount by which such amount payable under this Article 9 had been reduced.
Section 3.14      Limitations of Liability . UNDER NO CIRCUMSTANCES WHATSOEVER SHALL ANY PARTY, ITS AFFILIATES, OR ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, STOCKHOLDERS, AGENTS AND REPRESENTATIVES, OR ANY OF THE SUCCESSORS OR ASSIGNS OF ANY OF THE FOREGOING PERSONS, BE LIABLE TO THE OTHER PARTY OR ANY OF ITS AFFILIATES IN CONTRACT, TORT, NEGLIGENCE, BREACH OF STATUTORY DUTY OR OTHERWISE FOR ANY INDIRECT, CONSEQUENTIAL, SPECIAL, INCIDENTAL OR PUNITIVE

 
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DAMAGES OR ANY LOST PROFITS, LOSS OF USE, DAMAGE TO GOODWILL OR LOSS OF BUSINESS IN CONNECTION WITH THIS AGREEMENT, EVEN IF IT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, AND EACH PARTY, ON BEHALF OF ITSELF AND EACH OF ITS AFFILIATES HEREBY WAIVES ON BEHALF OF ITSELF AND ITS AFFILIATES ANY AND ALL CLAIMS FOR SUCH DAMAGES, INCLUDING ANY CLAIM FOR LOST PROFITS, LOSS OF USE, DAMAGE TO GOODWILL OR LOSS OF BUSINESS WHETHER ARISING IN CONTRACT, TORT OR OTHERWISE. NOTHING CONTAINED HEREIN SHALL LIMIT THE INDEMNITY OBLIGATIONS SET FORTH IN THIS SECTION 9.5 WITH RESPECT TO ANY LOSSES PAYABLE TO ANY THIRD PARTY IN CONNECTION WITH ANY THIRD PARTY CLAIMS. The Parties intend that no double remedies or recoveries are intended or permitted under this Agreement and that claims asserted under one Section or subsection of this Agreement may not also be asserted under another such subsection of this Agreement or under the Investment Agreement or the Related Agreements if such assertion would result in double recovery.

MISCELLANEOUS
Section 3.15      Notices . All notices, requests, permissions, waivers or other communications required or permitted to be given under this Agreement shall be in writing and shall be delivered by hand or sent by facsimile or email or sent, postage prepaid, by registered, certified or express mail or overnight courier service and shall be deemed given when so delivered by hand, by facsimile (which is confirmed), by email (which is confirmed) or if mailed, three days after mailing (one Business Day in the case of express mail or overnight courier service) to the Parties at the following addresses or facsimiles or emails (or at such other address or facsimile or email for a Party as shall be specified by like notice):(a)    If to TKC:
Teekay Corporation
c/o Teekay Shipping (Canada) Ltd. Suite 2000, 550 Burrard Street
Vancouver, BC, V6C 2K2
Attention:    Arthur Bensler
Facsimile:    (604) 609-6447
Email:        art.bensler@teekay.com
with a copy to (which copy alone shall not constitute notice):
Teekay Corporation
c/o Teekay Shipping (Canada) Ltd. Suite 2000, 550 Burrard Street
Vancouver, BC, V6C 2K2
Attention:    Brock Wlad
Facsimile:    (604) 609-6447
Email:        Brock.Wlad@teekay.com

 
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(b)    If to the Investor:
Brookfield TK TOLP L.P.
c/o Brookfield Capital Partners (Bermuda) Ltd.
73 Front Street, 5th Floor
Hamilton HM 12, Bermuda
Attention: Manager - Corporate Services
Facsimile:     (441) 296-4475
Email:          Jane.Sheere@brookfield.com
with a copy to (which copy alone shall not constitute notice):
Brookfield TK TOLP L.P.
c/o Brookfield Business Partners L.P.
181 Bay Street PO Box 762
Toronto, Ontario, M5J 2T3
Attention:     Ryan Szainwald
        Lyndsay Hatlelid
Facsimile:    (416) 369-2301
Email:        Ryan.Szainwald@brookfield.com
        Lyndsay.Hatlelid@brookfield.com
and a copy to (which copy alone shall not constitute notice):
Kirkland & Ellis LLP
601 Lexington Avenue
New York, NY 10022
Attention:    Elazar Guttman, Esq.
        Ross M. Leff, Esq.
Facsimile:    (212) 446-4900
Email:        Elazar.Guttman@kirkland.com
         Ross.Leff@kirkland.com
(c)    If to TOO:
4 th Floor, Belvedere Building
69 Pitts Bay Road
Hamilton HM 08, Bermuda
Attention:     Corporate Secretary
Facsimile:     (441) 292-3931
Email:         Edie.Robinson@teekay.com

 
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with copies (which copies alone shall not constitute notice) to (i) Investor and (ii):
Kirkland & Ellis LLP
601 Lexington Avenue
New York, NY 10022
Attention:    Elazar Guttman, Esq.
        Ross M. Leff, Esq.
Facsimile:    (212) 446-4900
Email:        Elazar.Guttman@kirkland.com
         Ross.Leff@kirkland.com
Section 3.16      Amendments, Waivers, Etc . This Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and signed by the Party against whom such amendment or waiver shall be enforced. The failure of any Party hereto to exercise any right, power or remedy provided under this Agreement or otherwise available in respect hereof at law or in equity, or to insist upon compliance by any other party hereto with its obligations hereunder, shall not constitute a waiver by such Party of its right to exercise any such other right, power or remedy or to demand such compliance. Counterparts and Facsimile . This Agreement may be executed in two or more identical counterparts (including by facsimile or electronic transmission), each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument, and shall become effective when one or more counterparts have been signed by each of the parties hereto and delivered (by facsimile, electronic transmission or otherwise) to the other parties.
(a)      Without prejudice to any other rights or remedies the Parties may have, each Party acknowledges and agrees that damages alone would not be an adequate remedy for any breach of the terms of this Agreement. Accordingly the Parties acknowledge that each Party shall be entitled to the remedies of injunction, specific performance or other equitable relief for any threatened or actual breach of the terms of the Agreement.
(b)      Each of the parties hereto irrevocably and unconditionally submits to the exclusive jurisdiction of the courts of England and Wales, for the purposes of any Action or other proceeding arising out of this Agreement and the rights and obligations arising hereunder, and irrevocably and unconditionally waives any objection to the laying of venue of any such Action or proceeding in any such court, and further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such Action or proceeding has been brought in an inconvenient forum. Each party hereto agrees that service of any process, summons, notice or document by registered mail to such party’s respective address set forth in Section 10.1 shall be effective service of process for any such Action or proceeding.
Section 3.17      Interpretation . When a reference is made in this Agreement to an Article or Section, such reference shall be to an Article or Section of this Agreement unless otherwise indicated. Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”. The words “hereof”, “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this

 
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Agreement as a whole and not to any particular provision of this Agreement. The words “date hereof” shall refer to the date of this Agreement. The word “or” shall not be exclusive. The word “extent” in the phrase “to the extent” shall mean the degree to which a subject or other thing extends, and shall not simply mean “if”. All references to “$” mean the lawful currency of the United States of America. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term. Except as specifically stated herein, any agreement, instrument or statute defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and references to all attachments thereto and instruments incorporated therein. Except as otherwise specified herein, references to a Person are also to its successors and permitted assigns. Each of the parties hereto has participated in the drafting and negotiation of this Agreement. If an ambiguity or question of intent or interpretation arises, this Agreement must be construed as if it is drafted by all the parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of authorship of any of the provisions of this Agreement. Severability . If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced because of any 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 any party hereto. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be effectuated as originally contemplated to the greatest extent possible.
Section 3.18      No Partnership . Nothing in this Agreement is intended to, or shall be deemed to, establish any partnership or joint venture between any of the Parties, constitute any Party the agent of another Party or authorize any Party to make or enter into any commitments for or on behalf of any other party.
[Signature pages follow]


 
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IN WITNESS WHEREOF, the Parties have executed this Master Services Agreement as of the date first above written.
TKC :
TEEKAY CORPORATION


By: /s/ Edith Robinson                
Name: Edith Robinson
Title: Assistant Corporate Secretary
TOO :
TEEKAY OFFSHORE PARTNERS, L.P., BY ITS GENERAL PARTNER, TEEKAY OFFSHORE GP, L.L.C.


By: /s/ Edith Robinson                
Name: Edith Robinson
Title: Secretary

[Signature Page to Master Services Agreement]


TEEKAY BUSINESS PROCESS SERVICES INC.


By: /s/ Alex Verchez                
Name: Alex Verchez
Title: President


[Signature Page to Master Services Agreement]


TEEKAY SHIPPING (AUSTRALIA) PTY LTD.


By: /s/     Yesheng Xia                
Name: Yesheng Xia
Title: Secretary


[Signature Page to Master Services Agreement]


TEEKAY SHIPPING (CANADA) LTD.


By: /s/ Arthur Bensler                
Name: Arthur Bensler
Title: President


[Signature Page to Master Services Agreement]


TEEKAY SHIPPING (GLASGOW) LTD.


By: /s/ Arthur Bensler                
Name: Arthur Bensler
Title: Director

[Signature Page to Master Services Agreement]


TEEKAY SHIPPING LIMITED


By: /s/ Edith Robinson                
Name: Edith Robinson
Title: President & Secretary


[Signature Page to Master Services Agreement]


TEEKAY SHIPPING (UK) LTD.


By: /s/ Anne Liversedge                
Name: Anne Liversedge
Title: Director

[Signature Page to Master Services Agreement]


TEEKAY SHIPPING PHILIPPINES, INC.


By: /s/ John Adams                
Name: John Adams
Title: Director


[Signature Page to Master Services Agreement]


TEEKAY SHIPPING (INDIA) PVT. LTD.


By: /s/ John Adams                
Name: John Adams
Title: Director





[Signature Page to Master Services Agreement]


for purposes of Sections 2.2 , 4.3 , 6.1 , 8.2 , 9.1 and Article 10 :
INVESTOR :

BROOKFIELD TK TOLP L.P., BY ITS GENERAL PARTNER, BROOKFIELD CAPITAL PARTNERS (BERMUDA) LTD.


By: /s/ Gregory E. A. Morrison            
Name: Gregory E. A. Morrison
Title: Director



[Signature Page to Master Services Agreement]



Schedule 1
Teekay (Atlantic) Management ULC
Teekay Petrojarl Producao Petrolifera do Brasil Ltda.
Teekay Piranema Servicios de Petroleo Ltda.
OOG-TKP Producao de Petroleo Ltda.
OOGTK Libra Producao de Petroleo Ltda.
ALP Maritime Services B.V.
Teekay Petrojarl I Servicios de Petroleo Ltda.
Teekay Navion Offshore Loading Pte. Ltd.








Schedule 2
Transferred Entities
Teekay Shipping Norway AS
Teekay Petrojarl Production AS
Teekay Petrojarl UK Limited
Teekay do Brasil Servicios Maritimos Ltda.
Teekay Offshore Crewing AS
Teekay Norway (Marine HR) AS
Teekay Petrojarl Offshore Crew AS








Schedule 3
Schedule 3 Entity
Description of Schedule 3 Services Provided
Teekay Shipping (Canada) Ltd.
Strategic services; procurement services; sales & purchase services, newbuildings and projects; market and industry research services; public company accounting & reporting, forecasting, accounting research services; legal services; taxation services, finance, treasury, debt & capital market services; investor relations services; long-term strategic planning & analysis services; global on-shore & offshore application support, network maintenance & support, cyber security, helpdesk & training services; internal audit, compliance and risk management services; HR services, global training services, equity compensation administration, corporate communication services; office & facilities management; insurance and claims services
Teekay Shipping Philippines Inc.
Marine HR and global seafarer training services
Teekay Business Process Services Inc.
Procurement services; HSEQ services; document management services; CAD services; shuttle simulator services; AP/AR transaction processing and back-office accounting services; global on-shore & offshore application support, network maintenance and support, cyber security, helpdesk & training services; HR services; office & facilities management services
Teekay Shipping (Australia) Pty. Ltd.
FSO operational services; FSO business development services
Teekay Corporation
Legal services
Teekay Shipping (Glasgow) Ltd.
Procurement services; marine HR services; technical management services; global on-shore & offshore application support, network maintenance & support, cyber security, helpdesk & training services; internal audit, risk management & compliance services
Teekay Shipping (UK) Ltd.
Technical management services, legal services.
Teekay Shipping (India) Pvt. Ltd.
HSEQ services
Teekay Shipping Limited
Construction supervision services
 
 





Exhibit A

Illustrative calculations of Entity Transfer consideration




Exhibit B

Form of Transfer Agreement





Exhibit C

TKC Service Agreements relating to TNOL





Exhibit D

Service Agreements relating to provision of services to TOO



Exhibit 10.6



Trademark License Agreement
This Trademark License Agreement (this “ Agreement ”), dated as of September 25, 2017 (the “ Effective Date ”), is entered into by and between:
Teekay Corporation , a corporation organized and existing under the laws of the Marshall Islands with its registered address at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands and an address for service of legal process at 4th Floor, Belvedere Building, 69 Pitts Bay Road, Hamilton, HM08, Bermuda (“ Teekay ”); and
Teekay Offshore Partners L.P. , a limited partnership organized and existing under the laws of the Marshall Islands, with its registered address at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands and an address for service of legal process at 4th Floor, Belvedere Building, 69 Pitts Bay Road, Hamilton, HM08, Bermuda (“ TOO ”) (each of Teekay and TOO a “ Party ” and, collectively, the “ Parties ”).
Recitals
A.    Teekay owns or otherwise possesses rights in the Licensed Marks, and Teekay has the right to grant a license of the Licensed Marks to TOO under the terms set forth herein;
B.    Prior to the consummation of the transactions contemplated by that certain Investment Agreement (the “ Investment Agreement ”), effective as of July 26, 2017, by and between TOO and Brookfield TK TOLP L.P.(the “ Investor ”), TOO used the Licensed Marks in connection with its business (as further defined below, the “ TOO Business ”);
C.      Teekay continues to use and display the Licensed Marks in connection with several of Teekay’s businesses (as further defined below, the “ Retained Businesses ”); and
D.    In connection with the Investment Agreement, TOO desires to obtain a license to continue use of the Licensed Marks in connection with the operation of the TOO Business, subject to the terms and conditions set forth in this Agreement, and Teekay desires to grant a license of the Licensed Marks to TOO subject to the terms and conditions set forth in this Agreement.
NOW THEREFORE for valuable consideration, the receipt and sufficiency of which each of Teekay and TOO hereby acknowledges, Teekay and TOO agree as follows:
1.
Definitions.
Unless otherwise defined in this Agreement, capitalized terms used in this Agreement will have the meanings ascribed to them in the Investment Agreement. The terms “ Offshore Assets ” and “ Offshore Restricted Business ” will have the meaning ascribed to them in the Omnibus Agreement, dated May 10, 2005, between Teekay Shipping Corporation, Teekay LNG General Partner, Teekay LNG OLLC and Teekay LNG MLP, and related amendments (the “ Omnibus Agreement ”). As used in this Agreement (including the recitals hereto), the following terms shall have the following meanings:

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1.1      “ Affiliate ” means, as to any specified Party, any other Person, which directly or indirectly controls, is controlled by or is under common control with, such specified Party. For the purposes of this definition, “ control ”, when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “ controlling , ” “ controlled, ” “ controlled by ” and “ under common control with ” have meanings correlative to the foregoing.
1.2      “ Applicable Legal Requirement ” means any applicable foreign, state, federal and local laws, statutes, common laws, ordinances, acts, codes, rules, regulations, orders, executive orders, judgments, injunctions, rulings, penalties, fines, writs, decrees, governmental guidelines or interpretations having the force of law, permits and determinations of Governmental Entities having jurisdiction over any of the Parties.
1.3      “ Funnels ” means the smokestack or chimney of a Vessel.
1.4      “ Licensed Mark ” means (a) each registered and unregistered trademark and service mark of Teekay set forth in Schedule A (together with any new marks described in (c) below, the “ Teekay Trademarks ”), (b) vessel livery, uniform designs and other elements of trade dress used in the TOO Business prior to the Effective Date (together with any new trade dress as described in (c) below, the “ Licensed Trade Dress ”), and (c) any registered and unregistered trademark and service mark or trade dress adopted by Teekay for use in the Retained Businesses after the Effective Date.
1.5      “ Person ” means an individual, natural Person, corporation, limited liability company, general partnership, limited partnership, association, trust, governmental entity or other entity.
1.6      “ Retained Businesses ” means the businesses owned or controlled by Teekay or its Affiliates other than the TOO Business.
1.7      “ TOO Business ” means the business of TOO and its Subsidiaries as conducted during the 12-month period prior to the Effective Date (taking into account any services provided to TOO or any of its Subsidiaries by Teekay or its Affiliates as of the Closing Date), including the Offshore Restricted Business, and any expansions of such business in the same or substantially related fields subject, in all respects, to the restrictions of the Omnibus Agreement.
1.8      “ Vessel ” means each tanker vessel, FSO, FPSO or other vessel controlled and operated by TOO in connection with the TOO Business during the term of this Agreement, but excluding (a) the ALP towage vessels, and (b) any other vessel in-chartered by TOO where TOO does not have the right to place TOO markings and livery on the vessel.
2.
Trademark License.
2.1      Grant of License . Subject to the terms, conditions and limitations set forth in this Agreement, Teekay hereby grants to TOO under Teekay’s rights in each Licensed Mark, a non-transferable (except as provided in Section 9.8), irrevocable and perpetual (subject to Sections 6.2, 6.3, and 6.4), nonexclusive (except as provided in the Omnibus Agreement), world-wide, royalty-free right, effective during the term of this Agreement, with no right to grant sublicenses except (a) to its

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Subsidiaries engaged in the TOO Business, (b) to its Affiliates permitted to use the Teekay Trademarks pursuant to Section 2.5, and (c) as otherwise specified Section 2.3, in each case to use each Licensed Mark in connection with the TOO Business.
2.2      Use of the Licensed Marks. During the term of the Agreement:
(a)      Vessels . TOO will display the applicable Teekay Trademarks on the Funnel of each Vessel and elsewhere on the Vessel in a manner consistent with the use of each such Teekay Trademark in the operation of the TOO Business during the 12-month period prior to the Effective Date and the operation of the Retained Businesses following the Effective Date (“ Brand Practice ”), unless otherwise expressly provided in this Agreement or otherwise agreed in writing by the Parties, and will maintain the appearance of each Vessel (i) substantially in accordance with the applicable Licensed Trade Dress comprising vessel livery and (ii) in a manner consistent with Brand Practice, unless otherwise expressly provided in this Agreement or otherwise agreed in writing by the Parties.
(b)      Uniforms, Apparel and Related Soft Goods . TOO will display the applicable Teekay Trademarks and use the applicable Licensed Trade Dress comprising uniforms, apparel and soft good designs to provide such items to crew members and employees in a manner consistent with Brand Practice, unless otherwise expressly provided in this Agreement or otherwise agreed in writing by the Parties.
(c)      Stationary and Related Materials . Without limiting the license granted pursuant to Section 2.1, TOO may use the Licensed Marks on stationary (including letterhead, invoices and business forms, business cards) and related materials used in the operation of the TOO Business.
(d)      Advertising, Promotional Materials, and Facility Signage . Without limiting the license granted pursuant to Section 2.1, TOO may use the Licensed Marks to advertise, describe, solicit customers, engage third-parties, hire employees, and otherwise promote the TOO Business in all media now known or later developed.
2.3      Sublicensing . TOO may (itself or through its licensed Subsidiaries) sublicense the Licensed Marks to its Affiliates and other Persons providing services to TOO in connection with the TOO Business for use exclusively in (a) support of the TOO Business or (b) performing services on behalf of TOO or its licensed Subsidiaries that pertain to operation of the TOO Business. TOO may not enter into any other sublicensing arrangement without the prior written consent of Teekay, which consent may be granted or withheld in Teekay’s sole discretion and may be conditioned on and subject to additional terms and conditions established by Teekay. All sublicense agreements shall be in conformance with the requirements of this Agreement provided that TOO shall not be required to enter into written sublicenses with its Subsidiaries (or cause its Subsidiaries to enter into written sublicenses), and TOO will be liable for any misuse of the Licensed Marks by any sublicensee as if such misuse was committed by TOO itself. TOO will provide Teekay an annual report of any active sublicenses (other than sublicenses with TOO’s Subsidiaries) and the use for which each such sublicensee will use the Licensed Marks.
2.4      Style Guidelines . TOO shall use the Licensed Marks in accordance with the “Teekay Style Guidelines,” the current version of which is attached hereto as Schedule B (as may be modified by

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Teekay from time to time, the “ Style Guidelines ”). From time to time and without TOO’s approval, Teekay may modify certain elements of the Licensed Marks or the Style Guidelines. Accordingly, Teekay does not represent and warrant that the Licensed Marks or any of their elements will be maintained or used in any particular fashion. In the event that Teekay makes modifications to the Licensed Marks or the Style Guidelines, TOO will be subject to any such modifications effective upon reasonable written notification from Teekay; provided, however, that TOO shall be allowed a reasonable transition period to make such modifications to affected Vessels, to materials used in connection with the TOO Business bearing pre-modified Licensed Marks and with respect to any other uses of the Licensed Marks permitted hereunder. In no event shall TOO or its Subsidiaries or their respective sublicensees be required to comply with style guidelines or other restrictions with respect to the use of the Licensed Marks that do not generally apply to other entities using the Licensed Marks.
2.5      Specifically Prohibited Uses of the Teekay Trademarks . TOO may not use the Teekay Trademarks or any confusingly similar terms or marks in any corporate names, trade names, business names, domain names or URLs except (a) TOO may use any Teekay Trademark in the name of any of its Subsidiaries (whether now or hereafter existing) engaged in the TOO Business or in the name of investment entities that are Affiliated with the TOO Business but that do not directly operate the TOO Business, or (b) with the prior written consent of Teekay; provided, however, that the use of name “Teekay” in the name of TOO is expressly permitted. Notwithstanding the foregoing, in the event that TOO or any of its Subsidiaries desire to use any Teekay Trademark, or any portion or derivative thereof, in any domain name or URL (a “ Teekay Domain Name ”), TOO shall submit a written request to Teekay, setting forth the domain name or URL that it desires to use, and Teekay will (x) consider TOO’s request in good faith and shall not withhold its consent to such use unless Teekay reasonably believes that the use of such Teekay Domain Name would interfere with the conduct of the Retained Businesses or impair the goodwill associated with the Teekay Trademarks and (y) if such Teekay Domain Name is consented to, and is not already registered with a domain name authority, cooperate with TOO, at TOO’s cost, in registering such Teekay Domain Name, listing Teekay as the registrant, with a mutually agreeable domain name authority. Any use of any Teekay Domain Name consented to in accordance with this Section 2.5 shall be subject to all of the provisions of this Agreement that are applicable thereto, as if it were a “Teekay Trademark” hereunder with respect to such applicable provisions.
2.6      Prestige of Licensed Marks . TOO acknowledges that the Licensed Marks, and in particular the “Teekay” name, are world renowned, have established international prestige and goodwill, and hold a certain position in the marketplace, and that it is of great importance to Teekay that in the operation of the TOO Business, the high standards and reputation that Teekay has established and its position in the marketplace be maintained.  Accordingly, TOO shall comply with the terms of this Agreement with respect to the use of the Licensed Marks and the quality of the services offered in connection therewith and shall otherwise use commercially reasonable efforts to conduct the TOO Business in a manner that safeguards the prestige and goodwill of the Teekay Trademarks.
2.7      Obligations on Teekay. During the term of this Agreement, Teekay shall continue to use the Licensed Marks in the Retained Businesses (a) in a manner that is consistent with the standards and attributes described in Section 2.6 and (b) in connection with services that are of a quality that is at least as high as the quality of services required to be offered by TOO and its Subsidiaries under the Licensed Marks under the terms of this Agreement.

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2.8      Covenants by Teekay . During the term of this Agreement, Teekay shall not use the Licensed Marks in connection with any (a) Offshore Assets or Offshore Restricted Business other than in connection with any Offshore Assets or Offshore Restricted Business owned by Teekay or Affiliates engaged in the Retained Businesses as of the Effective Date or (b) activities expressly permitted pursuant to the Omnibus Agreement. Further, Teekay shall cause its Subsidiaries not to use the Licensed Marks in connection with the Offshore Assets or Offshore Restricted Business other than in connection with activities expressly provided for pursuant to the Omnibus Agreement. The restrictions set forth in this Section 2.8 will terminate and be of no further effect upon any termination of the Omnibus Agreement by TOO or the General Partner.
2.9      Non-Disparagement . During the term of the Agreement, each Party shall not knowingly injure, disparage, criticize or dilute the reputation of the other Party or the goodwill symbolized by the Licensed Marks, other than truthful statements or statements contained in and relevant to any claim or defense contained in a claim filed in connection with a dispute pursuant to Section 9.13 between the Parties including to enforce or judicially construe this Agreement.
2.10      Reservation of Rights . All rights not specifically granted to TOO herein are reserved by Teekay. Nothing in this Agreement shall restrict Teekay’s current or future commitments under secured lending or financing arrangements pledging the Licensed Marks as collateral under such obligations and TOO acknowledges that the Licensed Marks are (or may become) subject to liens and encumbrances, the terms of which may be amended from time to time, arising as a result of such obligations (“ Permitted Liens ”).
2.11      Removal of Teekay Trademarks from Vessels . TOO will remove each Teekay Trademark wherever it has been used on each Vessel (a) prior to transferring any controlling ownership interest in such Vessel to any Person (other than transfers to an Affiliate of TOO) or will contractually require such Person to promptly remove each Teekay Trademark upon assuming a controlling ownership interest in the Vessel; (b) prior to using such Vessel in connection with any business other than the TOO Business; and (c) prior to displaying anywhere on such Vessel any trademark or service mark other than a Teekay Trademarks or trademark, service mark or logo owned by or exclusively licensed to TOO or any of its Subsidiaries as of the Effective Date.
2.12      Modification or Replacement of Licensed Marks . Teekay reserves the right to modify, replace, or discontinue use of a Licensed Mark. In such an event, (a) Teekay will provide TOO a minimum of 3 months written notice of Teekay’s intent to modify, replace, or discontinue use of a Licensed Mark, other than the “Teekay” word mark, including, as applicable, providing TOO with samples of any modified or replacement Licensed Mark, and (b) the Parties will negotiate in good faith a transition plan for TOO’s implementation of such modification, replacement or discontinuance which will include a commercially reasonable amount of time to accomplish such transition in an orderly manner consistent with the transition plan and timing adopted by the Remaining Businesses.
3.
Ownership of Licensed Marks.
3.1      Protection of Licensed Marks . TOO shall not at any time during the term of this Agreement or thereafter do or permit to be done any act or thing which it knows, or reasonably should know, would impair the rights of Teekay with respect to such Licensed Marks. TOO will not represent

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that it has any ownership in the Licensed Marks or in any registration of them and shall not attempt to register a Licensed Mark alone or as part of its own trademark or service mark in any jurisdiction. TOO will use the Licensed Marks only in the manner permitted under this Agreement. TOO will not oppose or seek to cancel any registrations or applications for registration of the Licensed Marks or challenge the ownership or validity of any of the Licensed Marks in any United States or foreign court or agency, including the United States Patent and Trademark Office or the trademark office of any other jurisdiction.
3.2      Abandonment . Notwithstanding anything to the contrary herein, except in connection with a modification, replacement or discontinuance of a Licensed Mark pursuant to Section 2.12:
(a)      In the event that Teekay intends to abandon or abandons (due to lack of use for a period of three (3) years or longer) any Licensed Marks (including any registrations or applications for registration thereof), Teekay shall at TOO’s request, transfer all of its right, title and interest in and to such trademark or trade dress for nominal consideration and this Agreement shall terminate. Teekay will take all reasonably necessary actions requested by TOO, at TOO’s expense, to give full force and effect to the transfer of rights set out in this Section 3.2 in any jurisdiction in the world.
(b)      If Teekay intends not to renew or otherwise fails to maintain any registration for any Teekay Trademark, Teekay will use commercially reasonable efforts to timely notify TOO, and if TOO reasonably believes that the loss of the registration would be material to the TOO Business, upon TOO’s request and at TOO’s cost, Teekay will make all filings and take all other actions necessary to maintain the registration in full force and effect.
3.3      Confusingly Similar Marks . Except as permitted under this Agreement, during the term and during the three (3) year period following the termination of this Agreement, TOO shall not use or authorize the use of, or apply to register, any configuration, mark, name, design, ship livery, trade dress, logo or other designation identical or confusingly similar (as defined by Applicable Legal Requirements) to any Licensed Mark. During the Term of this Agreement, prior to adopting, registering, applying for registering, announcing or marketing any new trademark and trade dress for the TOO Business, TOO shall provide Teekay with an opportunity to review such trademark and trade dress in order to determine whether in Teekay’s view such new trademark or trade dress is confusingly similar (as defined by Applicable Legal Requirements) to any Licensed Mark.
3.4      Modifications By TOO . TOO shall not develop or authorize the development of variations or derivations of the Teekay Trademarks (each a “ Derivative Mark ”) without the prior express written consent of Teekay, which consent may be withheld in Teekay’s sole discretion, for any or no reason. In the event that Teekay grants the consent contemplated in this Section 3.4, any such Derivative Mark created shall be included in the Licensed Marks licensed hereunder, Teekay shall own all the rights in such Derivative Mark, and, upon Teekay’s reasonable request, TOO shall execute any documents required to transfer such rights to Teekay. All uses and rights of and to the Derivative Mark shall inure to the exclusive benefit of Teekay, and subject to Section 3.2(b), Teekay may register and protect the same in its own name, as it deems necessary or appropriate.
3.5      Goodwill . TOO recognizes the value of the publicity and goodwill associated with the Licensed Marks and that all related rights and goodwill belong exclusively to Teekay. Accordingly, TOO

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shall use commercially reasonable efforts in connection with its use of the Licensed Marks to safeguard the goodwill of the Licensed Marks at the level established and maintained by Teekay. All use of the Licensed Marks will inure to the sole benefit of Teekay and TOO will neither acquire or be allowed to claim any rights to the Licensed Marks.
3.6      Reasonable Assistance . TOO agrees to provide Teekay with such reasonable assistance as Teekay may require in protecting the Licensed Marks, provided that Teekay shall reimburse TOO for its out of pocket expenses incurred in providing such assistance, including executing all documents and completing any and all other actions reasonably requested by Teekay to perfect and/or maintain Teekay’s rights in each Licensed Mark.
3.7      Restrictions on Use of Each Licensed Mark . TOO will not use any Licensed Mark other than in compliance with the terms, conditions, limitations and provisions set forth in this Agreement.
4.
Quality Control.
4.1      General . During the term of this Agreement, TOO will operate the TOO Business under the Licensed Marks in accordance with the terms of this Agreement and in compliance with all Applicable Legal Requirements applicable to its conduct of the TOO Business and its performance of its obligations under this Agreement. As an integral part of Teekay’s control over the nature and quality of services rendered and goods sold under the Licensed Marks, the operation of the TOO Business, including all products, services and activities marketed, promoted, offered and provided under the Licensed Marks, shall be of a quality and nature comparable to the operation of the TOO Business, products, services and activities as provided by TOO prior to the Effective Date and to the operation of the Retained Businesses following the Effective Date or otherwise agreed in writing by the Parties.
4.2      Key Performance Indicators . Teekay has established a set of key performance indicators (each, a “ KPI ”), which are described in Schedule C attached hereto, relating to the performance of the TOO Business. Each KPI specifies the manner of data collection, analysis and reporting of performance against such KPI to be conducted. TOO will use commercially reasonable efforts to maintain performance of the TOO Business at levels substantially consistent with or exceeding the performance of the Retained Business as measured by the KPIs, but in any event, no more stringent than the KPIs achieved in the 12-month period prior to the Effective Date.
4.3      KPI Reporting and Evaluation . TOO will provide the board of the general partner of TOO (the “ General Partner ”) with periodic reports of the performance of the TOO Business against the KPIs, but in no event less frequently than quarterly. Teekay will provide the board of the General Partner with reports of the performance of the Retained Business against the same KPIs with at minimum the same frequency as above. TOO’s report will include a comparison of its KPI performance against targets and against the Teekay KPI performance and, in the event of any shortfall by TOO, proposed remediation measures. Within five days following provision of any KPI report to the board of the General Partner, TOO will provide Teekay with a copy of such KPI report, provided, however, Teekay will limit circulation of such KPI reports to Teekay personnel with a need to know such information in connection with their job functions, which personnel shall be made aware of the confidential nature of such information and shall agree not to disclose such information other than as expressly permitted under this Agreement.

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4.4      Force Majeure . In the event of any acts of God, strikes, acts of the sabotage, terrorism or war, blockades, insurrections, riots, epidemics, nuclear and radiation activity or fallout, lockouts or other labor issues directly or indirectly affecting the TOO Business, embargoes and shortages in labor or supplies, civil disturbances and explosions, any government action or other adverse event, in each case, which materially affects the operations of the TOO Business, Teekay shall not be deemed in breach of this Agreement for any failure to achieve any KPI (other than any KPI expressly measuring performance in connection with any such situation), but shall use commercially reasonable efforts to maintain performance of the TOO Business.
4.5      Inspection Rights . TOO will from time to time, as reasonably requested by Teekay, during regulator business hours and upon reasonable advance written notice, allow and assist Teekay in inspecting each Vessel on which a Licensed Mark is used and all facilities of TOO associated with the operation of the TOO Business to assist Teekay in exercising Teekay’s rights to control of the nature and quality of the products and services offered or provided by TOO associated with Licensed Marks; provided, however, that Teekay shall not conduct an inspection of any given Vessel or facility more than once in any 12-month period, unless during the prior 12-month period, Teekay was in breach of the quality control provisions of this Agreement. TOO will provide to Teekay, upon reasonable request, specimens of use by TOO of each Licensed Mark.
4.6      Personnel .
(a)      TOO shall ensure that all TOO personnel act and comport themselves in a manner substantially consistent with Brand Practice unless otherwise expressly provided in this Agreement or otherwise agreed in writing by the Parties. TOO personnel that are involved in the operation of the TOO Business will be required to comply with policies substantially similar to those set forth in the Teekay Operational Leadership Handbook set forth on Schedule D.
(b)      Notwithstanding the foregoing, TOO personnel will in no event be deemed employees of Teekay for any purpose and shall not be entitled to participate in any employee benefits, welfare or retirement plans or programs of Teekay (including medical insurance, life insurance, paid leave, vacation, sick leave, pension, profit sharing, disability). TOO is solely responsible for ensuring that all required forms and paperwork for passports, visas, work permits, and any other required documentation are complete, compliant with all Applicable Legal Requirements, and current for TOO and TOO’s personnel. No TOO personnel shall hold himself or herself out as an executive, officer or employee of Teekay or its Affiliates. TOO will be solely shall be responsible for payment of worker’s compensation, disability benefits or unemployment insurance for TOO personnel, as well as for withholding or paying employment related taxes. TOO will indemnify, defend, and hold harmless Teekay, its Affiliates, and their respective partners, directors, officers and employees from any and all claims of TOO’s personnel in connection with arising from or in connection with their employment or provision of services or their participation in any of the programs described in this Section 4.6 of TOO’s, including any claims for workers’ compensation.
5.
Enforcement of the Licensed Marks.

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5.1      Enforcement by Teekay . TOO shall promptly notify Teekay of (a) any claim that is asserted, and of any action or proceeding that is threatened or commenced, in which a third party alleges that any of the Licensed Marks infringe any trademark rights of such third party or any other Person, (b) of any action or proceeding that is threatened or commenced in which the revocation, cancellation, or declaration of invalidity of any registration for any of the Licensed Marks is sought, and (c) of any infringement of any Licensed Mark by any third party related to the TOO Business. Teekay shall be permitted (but not obligated) to handle and control any such claims or potential claims (or resulting action or proceeding) in such manner as Teekay, in its sole discretion and at its expense, shall determine; provided, however, that Teekay shall not resolve any dispute in any manner that would adversely affect the rights licensed to TOO hereunder without TOO’s prior written consent, such consent not to be unreasonably withheld. Teekay shall solely retain all recoveries in any such enforcement proceedings, provided that TOO shall be reimbursed for its out of pocket expenses incurred in connection therewith. TOO may, at its option and expense, participate, with counsel of its choice, in the settlement of, or defense against, such claim (or resulting action or proceeding), and Teekay shall consider TOO’s input in good faith, but control of the defense shall at all times remain with Teekay.
5.2      Enforcement by TOO . In the event that Teekay fails timely to defend or enforce any Licensed Mark (including any registration or application for registration thereof, but excluding any Licensed Mark that has been modified, replaced or discontinued pursuant to Section 2.12), TOO shall have the right (but not be obligated) to defend and enforce such Licensed Mark, at its sole expense, and Teekay shall, at TOO’s expense, provide TOO with all such reasonable assistance, cooperation, information and documentation that TOO reasonably requests in connection therewith, including by joining as a party to such action; provided, that TOO shall consult with Teekay in good faith prior to making any material filings. TOO shall solely retain all recoveries in any such enforcement proceedings, provided that Teekay shall be reimbursed for its out of pocket expenses incurred in connection therewith.
6.
Term & Termination.
6.1      Term of Agreement . This Agreement will become effective as of the Effective Date and will remain in effect until terminated in accordance with this Section 6.
6.2      Termination for Failure to Maintain Quality Standards or other Breach . Teekay may terminate this Agreement upon ninety (90) days’ prior written notice to TOO if: (a) TOO fails to comply with its obligations to use such Licensed Mark as set forth in Sections 2, 3 and 4 in any material respect, or otherwise uses such Licensed Mark in a manner not permitted under the terms of this Agreement, or otherwise materially breaches any provision of this Agreement, and b) TOO fails to cure such failure or breach, or take reasonable steps (in consultation with Teekay) to cure to such failure, within six (6) months following receipt of written notice from Teekay identifying such failure in reasonable detail.
6.3      Termination for Cause . Teekay may terminate this Agreement on thirty (30) days’ prior written notice to TOO:
(a)      if TOO (i) files a petition in bankruptcy, (ii) becomes or is adjudicated bankrupt or insolvent, (iii) makes a general assignment for the benefit of creditors as a result of actual or threatened insolvency or an arrangement pursuant to any bankruptcy law, (iv) permits or suffers a receiver to be appointed for its business or all or substantially all of its property, (v) permits or

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suffers any writ of attachment, garnishment or execution to be filed or levied against a substantial portion of its assets, and fails to have such writ, garnishment, or execution removed within sixty (60) days, or (vi) ceases to carry on all or substantially all of its business; or
(b)      in the event of a sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of TOO’s assets except to the extent the successor in interest to such assets will continue to conduct the TOO Business and agrees in writing to be bound by the terms of this Agreement.
6.4      Termination by TOO . TOO may terminate this Agreement for any reason upon thirty (30) days’ prior written notice to Teekay.
6.5      Post-Termination Transition . If this Agreement is terminated for any reason, the licenses granted by Teekay to TOO hereunder will terminate immediately, and TOO shall have a period of 12 months to remove the Licensed Marks from the Vessels and to cease using the Licensed Marks elsewhere in the TOO Business (the “ Transition Period ”). During the Transition Period, to the extent TOO continues to use the Licensed Marks, any such use shall be in compliance with terms of this Agreement.
7.
Liability, Indemnification and Warranties.
7.1      Waiver of Liability . Except as expressly set forth herein, to the fullest extent permitted by Applicable Legal Requirements, Teekay will not be liable to TOO or for any costs, expenses, loss or damage (whether direct, indirect or consequential) arising from TOO’s exercise of any rights granted under this Agreement or Applicable Legal Requirements.
7.2      Limitation of Liability . Under no circumstances will either Party be liable for any consequential, special, indirect, incidental or punitive damages whatsoever (including to the extent any of the foregoing arise in the form of lost profits) arising out of or in connection with this Agreement, even if the Party has been advised of the possibility of such damages.
7.3      Indemnification .
(a)      Each Party shall indemnify, defend and hold harmless the other Party, and such other Party’s Affiliates and their respective officers, directors, partners, shareholders, employees and agents, successors and assigns, from and against any and all third party claims, liabilities, demands, judgments or causes of action, and costs and expenses (including reasonable attorneys’ fees and costs) (the “ Losses ”) arising out of or as a result of any breach by such indemnifying Party of any agreement, representation, warranty, covenant and/or obligation made by such indemnifying Party pursuant to this Agreement.
(b)      Teekay shall indemnify, defend and hold harmless TOO and its Affiliates, respective officers, directors, partners, shareholders, employees and agents, successors and assigns, from and against any and all Losses related to trademark or trade dress infringement arising out of the use of the Licensed Marks by TOO in accordance with the terms of this Agreement.

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(c)      Subject to Teekay’s indemnification obligations under this Section 7.3, TOO shall indemnify, defend and hold harmless Teekay and its Affiliates, respective officers, directors, partners, shareholders, employees and agents, successors and assigns, from and against any and all Losses, arising out of the operation of the TOO Business or TOO’s compliance with its obligations under this Agreement, or the use of the Licensed Marks by TOO, including TOO’s unauthorized use of the Licensed Marks.
7.4      Mutual Representations and Warranties . Each Party represents and warrants to the other Party that: (a) it is duly organized, validly existing and in good standing as a corporation or other entity as represented herein under the Applicable Legal Requirement of its jurisdiction of incorporation, organization, or chartering; (b)(i) it has the full right, power and authority to enter into this Agreement, to grant the rights and licenses granted hereunder and to perform its obligations hereunder, and (ii) the execution of this Agreement by its representative whose signature is set forth at the end hereof has been duly authorized by all necessary corporate action of the Party; and (c) when executed and delivered by such Party, this Agreement will constitute the legal, valid and binding obligation of such Party, enforceable against such Party in accordance with its terms.
8.
Confidentiality.
8.1      Confidentiality Obligations . Except as provided in Section 8.2, each Party agrees not to disclose or otherwise make available to any third party any trade secrets or other confidential information of the other Party received in connection with each Party’s exercise of its rights or performance of its obligations under this Agreement, excluding any such information that becomes generally known to the public other than as a result of a Party’s breach of this Section 8.1. For the avoidance of doubt, any KPI reports that may be provided by each Party to the other pursuant to Section 4.3 shall be deemed confidential information for purposes of this Section 8.
8.2      Permitted Disclosures . Each Party may disclose such information (a) to its sublicensees, lenders, investors, potential acquirors, and legal, tax, accounting, business, regulatory, and financial advisors in connection with the evaluation, negotiation, and/or implementation of this Agreement, (b) to its personnel (including personnel of its Affiliates) having a need to know such confidential information in connection with such Party’s rights and obligations under this Agreement, (c) as required by any Applicable Legal Requirement, and (d) to the extent reasonably required in connection with the resolution of any dispute under Section 9.13; provided that any Persons receiving such confidential information will be obligated to comply with the confidentiality provisions in Section 8.1.
9.
Miscellaneous.
9.1      Entire Agreement . This Agreement constitutes the entire Agreement between Teekay and TOO with respect to the subject matter of this Agreement and merges all prior negotiations and discussions between Teekay and TOO with respect to the subject matter of this Agreement. Teekay will have no claim against TOO, and TOO will have no claim against Teekay, with respect to any agreement or understanding, written or oral, on the subject matter made prior to the Effective Date of this Agreement, and the Parties hereby agree that the Trademark Use Agreement, dated January 15, 2007, by and among TOO, Teekay and Teekay Offshore Partner, L.P. is terminated as of the Effective Date.

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Nothing in this Agreement shall limit the rights or obligations of the Parties under the Investment Agreement.
9.2      Termination Rights Under Omnibus Agreement . For the term of this Agreement, including any post termination transition period described in Section 6.5 hereof, TOO and the General Partner will not exercise any rights of termination under Section 8.4 of the Omnibus Agreement.
9.3      Independent Contractor Relationship . Nothing in this Agreement shall be interpreted or construed to make the Parties partners, joint venturers, representatives or agents of each other, nor shall either Party so represent to any third Person. The Parties are acting in performance of this Agreement as independent contractors engaged in the operation of their respective businesses. The Parties acknowledge and agree that this Agreement constitutes a license of trademark and intellectual property rights and does not give rise to a franchise relationship and neither Party will make any claims to the applicability of franchise or similar laws. Without limiting the foregoing, neither Party shall negotiate, enter into or sign any written or oral contract or agreement on behalf of the other Party or its Affiliates or otherwise bind the other Party or its Affiliates with respect to any liability or obligation.
9.4      Modification; Waiver . Subject to the right of Teekay to amend Schedule A by adding or deleting one or more Licensed Marks, this Agreement will not be modified except by a document signed and made part of this Agreement by an authorized signing officer of each of Teekay and TOO. No waiver by a Party of any breach of this Agreement will be effective unless it is in writing and the waiver will not prevent the subsequent enforcement of that provision, nor will it be deemed to be a waiver of any subsequent breach.
9.5      No Third Party Beneficiaries . Except for the rights of the indemnified parties under Section 7.3, nothing herein, expressed or implied, is intended or shall be construed to confer upon or give to any Person other than the Parties hereto any legal or equitable right, remedy, claim or other benefit under or by reason of this Agreement.
9.6      Amendment . This Agreement may be amended, supplemented or otherwise modified only by a written instrument executed by both Parties.
9.7      Severability . Any provision of this Agreement which is, or is deemed to be, unenforceable in any jurisdiction will be severable from this Agreement in that jurisdiction without in any way invalidating the remaining provisions of this Agreement, and that unenforceability will not make that provision unenforceable in any other jurisdiction.
9.8      Assignment; Successors . This Agreement will be binding on and inure to the benefit of the Parties, their successors, and permitted assigns. Neither Party may assign this Agreement, or any of its rights and obligations under this Agreement, to any third party without the prior written consent of the other Party; provided, however, that (a) Teekay shall be permitted to assign this Agreement to any subsequent owner of the Licensed Marks upon written notice to TOO provided that such Person agrees in writing to be bound by the terms and conditions of this Agreement, (b) TOO shall be permitted to assign this Agreement to an Affiliate or in connection with the sale of all or substantially of its assets, provided, that TOO notifies Teekay of such assignment and that any such successor in interest agrees in writing to

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be bound by the terms and conditions of this Agreement, and (c) TOO may pledge this agreement as collateral to any financing source.
9.9      Insolvency Matters .
(a)      All rights and licenses granted to TOO under or pursuant to this Agreement are, and will otherwise be deemed to be, for purposes of Title 11 of the United States Code, as amended from time to time (the “ Bankruptcy Code ”), a license of rights to “intellectual property” as defined under Section 101 of the Bankruptcy Code. The Parties agree that TOO will retain and may fully exercise all of their respective rights and elections as licensees of intellectual property under the Bankruptcy Code. The Parties further agree and acknowledge that enforcement by the Parties of their respective rights under Section 365(n) of the Bankruptcy Code in connection with this Agreement shall not violate the automatic stay of Section 362 of the Bankruptcy Code and waive any right to object on such basis.
(b)      To the extent any license of rights under or pursuant to this Agreement does not constitute a license to “intellectual property” as defined under Section 101 of the Bankruptcy Code, Teekay hereby acknowledges and agrees that: (i) this Agreement is a material inducement to TOO paying Teekay the consideration due under the Investment Agreement and TOO is relying on this Agreement in connection with its business and investment planning; (ii) this Agreement gives Teekay sufficient control over the quality of the products sold by TOO; (iii) Teekay (and any debtor-in-possession or trustee of the business of Teekay) cannot and shall not attempt to reject this Agreement pursuant to Section 365 of the U.S. Bankruptcy Code or any foreign equivalent; and (iv) in the event Teekay (or any debtor-in-possession or trustee of the business of Teekay) does seek to reject this Agreement and in the event such relief is granted, (w) the rejection shall be treated merely as breach of the contract by Teekay and not its avoidance, rescission, or termination, (x) does not terminate TOO’s right to use such license (subject, in all events, to TOO’s compliance with the terms and obligations of this Agreement and Teekay’s continued enforcement and quality control rights hereunder) and has no effect upon the contract’s continued existence, (y) TOO may elect rights under Section 365(n) of the U.S. Bankruptcy Code or any foreign equivalent, and (z) TOO shall be entitled to seek other equitable treatment relating to such rejection.
9.10      Counterparts . This Agreement may be executed in two counterparts with the same effect as if both Parties had signed the same document; both counterparts will be construed together and will constitute one and the same agreement.
9.11      Interpretation . When a reference is made in this Agreement to an Article or Section, such reference shall be to an Article or Section of this Agreement unless otherwise indicated. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”. The words “hereof”, “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The words “date hereof” shall refer to the date of this Agreement. The word “or” shall not be exclusive. The word “extent” in the phrase “to the extent” shall mean the degree to which a subject or other thing extends, and shall not

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simply mean “if”. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term. Except as specifically stated herein, any agreement, instrument or statute defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and references to all attachments thereto and instruments incorporated therein. Except as otherwise specified herein, references to a Person are also to its successors and permitted assigns. Each of the Parties has participated in the drafting and negotiation of this Agreement. If an ambiguity or question of intent or interpretation arises, this Agreement must be construed as if it is drafted by all the Parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of authorship of any of the provisions of this Agreement.
9.12      Further Assurances . Each Party shall execute and deliver on or after the Effective Date such further agreements and other documents and take such other actions as the other Party reasonably requests in order to carry out the intent and accomplish the purposes of this Agreement, including, where applicable, to record this Agreement with any Governmental Entity.
9.13      Dispute Resolution . In the event of dispute arising out of or in connection with this Agreement, including any question regarding its existence, validity or termination, is not resolved after good faith discussions between the Persons responsible for the administration of this Agreement, either Party may require that the dispute be referred to the CEOs of the respective Parties who shall attempt in good faith to resolve such dispute.     
(a)      If the CEOs cannot resolve such dispute within thirty (30) days of the matter being referred to them, either Party may refer such dispute for resolution by mediation in accordance with the then-current International Expedited Procedures of International Arbitration Rules of the International Centre for Dispute Resolution, as amended from time to time, or any successor thereto (the “ ICDR Rules ”).
(b)      If the dispute is not settled by mediation within sixty (60) days of the appointment of the mediator, or such other period as the Parties shall agree in writing, the dispute shall be referred to and finally resolved by final and binding arbitration conducted in English by one arbitrator in New York City, New York, U.S.A., in accordance with the ICDR Rules. The arbitrator shall promptly render a written decision, together with a written opinion setting forth in reasonable detail the grounds for such decision. The Parties shall bear the costs of the arbitration equally. Judgment may be entered in any court of competent jurisdiction to enforce the award entered by the arbitrator.
(c)      For clarity, Teekay shall not terminate this Agreement to the extent that a dispute over the basis for such termination remains pending under this Section 9.13.
(d)      Notwithstanding the foregoing, either Party may seek immediate injunctive relief or other interim relief from any court of competent jurisdiction as necessary to enforce the provisions of this Agreement.

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9.14      Jury Waiver . EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, CLAIM OR OTHER PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT. EACH PARTY HERETO (a) CERTIFIES THAT NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF ANY ACTION, CLAIM OR OTHER PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER AND (b) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.14.
9.15      Governing Law . This Agreement is governed by and construed in accordance with the internal laws of the State of New York, and each of the Parties irrevocably and unconditionally submits to the exclusive jurisdiction of the Supreme Court of the State of New York, New York County, and the United States District Court for the Southern District of New York.
[Signature Page Follows]


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IN WITNESS WHEREOF the Parties hereto have caused this Agreement to be executed by their duly authorized officers the day and year first above written.
TEEKAY CORPORATION
TEEKAY OFFSHORE PARTNERS L.P., BY ITS
    GENERAL PARTNER, TEEKAY OFFSHORE GP.
By: /s/ Edith Robinson        By: /s/ Edith Robinson    
Name: Edith Robinson         Name: Edith Robinson
Title: Assistant Corporate Secretary        Title: Secretary


[Signature Page to Trademark License Agreement]



Schedule A

Teekay Trademarks

[See attached]



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Schedule B

Teekay Style Guidelines

[See attached]


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Schedule C

KPIs

[See attached]

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Schedule D

Teekay Operational Leadership Handbook

[See attached]


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Exhibit 10.7


US$600,000,000 Secured Revolving Credit Facility Agreement
 
 
 
Dated September 8, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Teekay Shuttle Tankers L.L.C.

(as Borrower)
 
(2) The Banks, Financial Institutions and other Institutional Lenders listed in Schedule 1, Part I
(as Lenders)
 
(3) The Financial Institutions listed in Schedule 1, Part II
(as Mandated Lead Arrangers)
 
(4) The Financial Institutions listed in Schedule 1, Part III
(as Bookrunners)
 
(5) Nordea Bank AB (publ), New York Branch
(as Agent)
 
(6) The Financial Institutions listed in Schedule 1, Part IV
(as Swap Providers)



A600MILLOANAGREEMENTD_IMAGE1.JPG






Contents
 
Page

1
Definitions and Interpretation
1

2
The Loan and its Purposes
24

3
Conditions of Utilisation
25

4
Advance
27

5
Repayment
27

6
Prepayment
27

7
Interest
30

8
Indemnities
32

9
Fees
41

10
Security and Application of Moneys
41

11
Representations and Warranties
44

12
Undertakings and Covenants
49

13
Events of Default
58

14
Assignment and Sub-Participation
62

15
The Agent and the Lenders
65

16
Set-Off
77

17
Payments
77

18
Notices
80

19
Partial Invalidity
81

20
Remedies and Waivers
81

21
Miscellaneous
82

22
Confidentiality
83

23
Law and Jurisdiction
86

24
Patriot Act Notice
86

 
 
 
Schedule 1
 
88

Part I
The Lenders and the Commitments
88

Part II
MLAs
89

Part III
Bookrunners
91

Part IV
Swap Providers
93

 
 
 
Schedule 2
Conditions Precedent and Subsequent
94

Part I
Conditions precedent to service of Drawdown Notice
94

Part II
Conditions precedent to First Drawdown Date
96

Part III
Conditions subsequent to First Drawdown Date
100

 
 
 
Schedule 3
The JV Vessels
101

Schedule 4
Form of Drawdown Notice
102

Schedule 5
Form of Transfer Certificate
103

Schedule 6
Form of Compliance Certificate
106

Schedule 7
Existing Charters
108

Schedule 8
Earnings Accounts
109








Loan Agreement
Dated             2017
Between:
(1)
Teekay Shuttle Tankers L.L.C. , a limited liability company formed under the laws of the Republic of the Marshall Islands whose registered office is at The Trust Company Complex, Ajeltake Island, Majuro, The Marshall Islands, MH96960 (the " Borrower "); and
(2)
The Banks, Financial Institutions and other Institutional Lenders listed in Schedule 1, Part I, each acting through its office at the address indicated against its name in Schedule 1, Part I (together the " Lenders " and each a " Lender "); and
(3)
The Financial Institutions listed in Schedule 1, Part II as mandated lead arrangers (in that capacity the " MLAs " and each an " MLA "); and
(4)
The Financial Institutions listed in Schedule 1, Part III as bookrunners (in that capacity the " Bookrunners " and each a " Bookrunner "); and
(5)
Nordea Bank AB (publ), New York Branch acting as agent and security trustee through its office at 1211 Avenue of the Americas, 23 rd Floor, New York, NY 10036, United States of America (in those capacities the " Agent "); and
(6)
The Financial Institutions listed in Schedule 1, Part IV as Swap Providers (in that capacity the " Swap Providers " and each a "Swap Provider" .
Whereas:
Each of the Lenders has agreed to advance to the Borrower its Commitment (aggregating, with all the other Commitments, a revolving credit facility of up to six hundred million Dollars ($600,000,000)) to assist the Borrower with the refinancing of existing indebtedness in relation to the Vessels and its general corporate requirements.
It is agreed as follows:
1
Definitions and Interpretation
1.1
In this Agreement:
" Acceptable Bank " means a bank or financial institution which has a rating for its long-term unsecured and non-credit-enhanced debt originations of A+ or higher by Standard & Poor's Ranking Services or Fitch Ratings Ltd or A1 or higher by Moody's Investors Services Limited or a comparable rating from an internationally recognised credit rating agency.
" Account Holder " means DNB Bank ASA, New York Branch acting through its office at 200 Park Avenue, New York, NY10166-0396, United States of America, DNB Bank ASA acting through its head office in Oslo, DNB Bank ASA, London Branch acting through its office at The Walbrook Building, 25 Walbrook, London EC4N 8AF, United Kingdom or any other bank or financial institution which at any time, with the prior written consent of the Lenders, holds the Earnings Accounts.
" Account Security Deeds " means the account security deeds referred to in Clause 10.1.6 and " Account Security Deed " means any one of them.
" Accounts " means, in relation to the Borrower, the consolidated financial accounts of the Borrower, to be provided to the Agent pursuant to Clause 12.1.1 and Clause 12.1.3.

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" Administration " has the meaning given to it in paragraph 1.1.3 of the ISM Code.
" Affiliate " means, in relation to any person, a Subsidiary of that person, a Holding Company of that person or any other Subsidiary of that Holding Company.
" Annex VI " means Annex VI (Regulations for the Prevention of Air Pollution from Ships) to the International Convention for the Prevention of Pollution from Ships 1973 (as modified in 1978 and 1997).
" Approved Broker " means each of Braemar, Fearnleys, Clarkson Platou Securities AS and Simpson Spence & Young Shipbrokers Ltd. or such other reputable and independent consultancy or ship broker firm approved by the Agent (acting on the instructions of the Majority Lenders).
" Approved Managers " means (i) the Commercial Manager and (ii) the Technical Manager.
" Assignments " means all the forms of assignment referred to in Clause 10.1.2 and " Assignment " means any one of them.
" Authorisation " means an authorisation, consent, approval, resolution, licence, exemption, filing, notarisation or registration.
" Available Credit Lines " means any undrawn committed revolving credit lines, other than committed revolving credit lines with less than six (6) months to maturity, available to be drawn by any member of the Borrower Group, as reflected in the Borrower's most recent quarterly management accounts forming part of the Borrower's Accounts;
" Bail-In Action " means the exercise of any Write-down and Conversion Powers.
" Bail-In Legislation " means:
(a)
in relation to an EEA Member Country which has implemented, or which at any time implements, Article 55 of Directive 2014/59/EU establishing a framework for the recovery and resolution of credit institutions and investment firms, the relevant implementing law or regulation as described in the EU Bail-In Legislation Schedule from time to time; and
(b)
in relation to any other state, any analogous law or regulation from time to time which requires contractual recognition of any Write-down and Conversion Powers contained in that law or regulation.
" Balloon Amount " means the amount of one hundred million Dollars (US$100,000,000), as reduced from time to time pursuant to Clause 6.4, Clause 6.5, Clause 6.6 and Clause 7.11.3, to be paid by the Borrower on the Maturity Date.
" Bank Secrecy Act " means The Currency and Foreign Transactions Reporting Act of 1970 of the US.
" Borrower Group " means the Borrower and each of its Subsidiaries.
" Break Costs " means all sums payable by the Borrower from time to time under Clause 8.3.
" Business Day " means a day (other than a Saturday or Sunday) on which banks are open for business of a nature contemplated by this Agreement (and not authorised by law to close) in New York, London, Paris, Basel, Zurich, Stockholm and Oslo.
" Cash Cure Account " has the meaning giving to that term in Clause 12.2.
" Change of Control " means:
(a)
in relation to the Borrower, where TOO ceases to own, directly or indirectly, a minimum of fifty point one per cent (50.1%) of the voting rights in the Borrower; and

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(b)
in relation to any other Security Party, where there is a change in the direct or indirect legal or beneficial ownership of any such company from that advised to the Agent no later than on the date of this Agreement (other than where following such change the legal and beneficial ownership of that company remains, directly or indirectly, in the ownership of a member of the Borrower Group),
in each case unless the Borrower has requested the prior consent of the Lenders to a change of control and the Majority Lenders have consented to such request within thirty (30) days of such request being made.
" Charged Property " means all of the assets of the Security Parties which from time to time are, or are expressed to be, the subject of the Security Documents.
" Charter " means (i) each Existing Charter and (ii) any future time charter or other contract of employment in respect of a Teekay Vessel, which is for a period (inclusive of any extension option) in excess of or capable of exceeding two (2) years entered into between (i) a Teekay Owner or a Head Charterer and (ii) a Charterer.
" Charter Rights " means all rights and benefits accruing to a Teekay Owner or a Head Charterer under or pursuant to any relevant Charter and not forming part of the Earnings.
" Charterer " means any entity that is a charterer under a Charter (and is not a Head Charterer).
" Code " means the US Internal Revenue Code of 1986.
" Collateral Owners " means together the JV Owners and the Teekay Owners and " Collateral Owner " means any one of them.
" Collateral Vessels " means together the JV Vessels and the Teekay Vessels and " Collateral Vessel " means any one of them.
" Commercial Manager " means (i) the Borrower, (ii) any other member of the TOO Group or the Teekay Group or (iii) any other commercial manager approved by the Agent (acting on the instructions of the Majority Lenders, acting reasonably).
" Commitment " means, in relation to each Lender, the amount of the Loan which that Lender agrees to advance to the Borrower as its several liability as indicated against the name of that Lender in Schedule 1, Part I and/or, where the context permits, the amount of the Loan advanced by that Lender and, to the extent not cancelled or reduced under this Agreement, remaining outstanding and " Commitments " means more than one of them.
" Commitment Commission " means the commitment commission to be paid by the Borrower to the Agent on behalf of the Lenders pursuant to Clause 9.
" Compliance Certificate " means a certificate substantially in the form set out in Schedule 6.
" Confidential Information " means all information relating to any Security Party, any other member of the Borrower Group, the Finance Documents or the Loan of which a Finance Party becomes aware in its capacity as, or for the purpose of becoming, a Finance Party which is received by a Finance Party in relation to, or for the purpose of becoming a Finance Party under, the Finance Documents or the Loan from either:
(a)
any Security Party, any other member of the Borrower Group or any of its advisers; or
(b)
another Finance Party, if the information was obtained by that Finance Party directly or indirectly from any Security Party, any other member of the Borrower Group or any of its advisers,
in whatever form, and includes information given orally and any document, electronic file or any other way of representing or recording information which contains or is derived or copied from such information but excludes information that:
(i)
is or becomes public information other than as a direct or indirect result of any breach by that Finance Party of Clause 22; or

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(ii)
is identified in writing at the time of delivery as non-confidential by any Security Party, any other member of the Borrower Group or any of its advisers; or
(iii)
is known by that Finance Party before the date the information is disclosed to it in accordance with (a) or (b) or is lawfully obtained by that Finance Party after that date, from a source which is, as far as that Finance Party is aware, unconnected with any Security Party or any other member of the Borrower Group and which, in either case, as far as that Finance Party is aware, has not been obtained in breach of, and is not otherwise subject to, any obligation of confidentiality.
" Confidentiality Undertaking " means a confidentiality undertaking substantially in a recommended form of the Loan Market Association at the relevant time.
" Confirmation " has the meaning given in a Master Agreement.
" Cure Amount " has the meaning given to that term in Clause 12.2.
" Currency of Account " means, in relation to any payment to be made to a Finance Party under a Finance Document, the currency in which that payment is required to be made by the terms of that Finance Document.
" Deeds of Covenants " means the deeds of covenants referred to in Clause 10.1.1, if relevant, and " Deed of Covenant " means any one of them.
" Default " means an Event of Default or any event or circumstance specified in Clause 13.1 which would (with the expiry of a grace period, the giving of notice, the making of any determination under the Finance Documents or any combination of any of the foregoing) be an Event of Default.
" Defaulting Lender " means any Lender:
(a)
which has failed to make its participation in a Drawing available (or has notified the Agent or the Borrower (which has notified the Agent) that it will not make its participation in a Drawing available) by the relevant Drawdown Date in accordance with Clause 4.2; or
(b)
which has otherwise rescinded or repudiated a Finance Document; or
(c)
with respect to which an Insolvency Event has occurred and is continuing,
unless, in the case of (a):
(i)
its failure to pay is caused by:
(A)    administrative or technical error; or
(B)    a Disruption Event; and
payment is made within three Business Days of its due date; or
(ii)
the Lender is disputing in good faith whether it is contractually obliged to make the payment in question.
" Disruption Event " means either or both of:
(a)
a material disruption to those payment or communications systems or to those financial markets which are, in each case, required to operate in order for payments to be made in connection with the Loan (or otherwise in order for the transactions contemplated by the Finance Documents to be carried out) which disruption is not caused by, and is beyond the control of, any of the Parties; or
(b)
the occurrence of any other event which results in a disruption (of a technical or systems-related nature) to the treasury or payments operations of a Party preventing that, or any other Party:

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(i)
from performing its payment obligations under the Finance Documents; or
(ii)
from communicating with other Parties in accordance with the terms of the Finance Documents,
and which (in either such case) is not caused by, and is beyond the control of, the Party whose operations are disrupted.
" Dollars ", " US$ " and " $ " each means available and freely transferable and convertible funds in lawful currency of the United States of America.
" Drawdown Date " means the date on which the relevant Drawing is advanced under Clause 4.1.
" Drawdown Notice " means a notice substantially in the form set out in Schedule 4.
" Drawing " means any amount advanced or to be advanced pursuant to a Drawdown Notice or, where the context permits, the amount advanced and for the time being outstanding and " Drawings " means more than one of them.
" DSCR " has the meaning given to that term in Clause 12.2(c).
" Earnings " means all hires, freights, pool income and other sums payable to or for the account of a Teekay Owner and/or a Head Charterer in respect of a Teekay Vessel including (without limitation) all remuneration for salvage and towage services, demurrage and detention moneys, contributions in general average, compensation in respect of any requisition for hire, and damages and other payments (whether awarded by any court or arbitral tribunal or by agreement or otherwise) for breach, termination or variation of any contract for the operation, employment or use of a Teekay Vessel.
" Earnings Accounts " means the bank accounts held in the name of the relevant Teekay Owners and relevant Head Charterers with the Account Holder in respect of the Teekay Vessels as set out in Schedule 8 and " Earnings Account " means any one of them.
" EBITDA " means, on a consolidated basis and for any given period, (a) the sum of the Borrower's (i) net income; (ii) provisions for taxes based on income; (iii) interest expenses; (iv) amortisation or write-off of deferred financing costs to the extent deducted in determining consolidated net income; (v) losses on sale of assets (excluding sales in the ordinary course of business), (vi) depreciation and amortization; (vii) losses from asset impairments, (viii) restructuring charges, (ix) foreign currency losses, (x) unrealised losses on derivative instruments; and (x) realised losses on interest rate derivative instruments less (b) the sum of its (i) total interest income; (ii) gains from the sale of assets (excluding sales in the ordinary course of business), (iii) foreign currency gains, (iv) unrealised gains on derivative instruments; and (v) realised gains on interest rate derivative instruments; all in accordance with GAAP.
" EEA Member Country " means any member state of the European Union, Iceland, Liechtenstein and Norway.
" Encumbrance " means a mortgage, charge, assignment, pledge, lien, or other security interest securing any obligation of any person or any other agreement or arrangement having a similar effect.
" Environmental Approvals " means any present or future permit, licence, approval, ruling, variance, exemption or other authorisation required under the applicable Environmental Laws.
" Environmental Claim " means any and all enforcement, clean-up, removal, administrative, governmental, regulatory or judicial actions, orders, demands or investigations instituted or completed pursuant to any Environmental Laws or Environmental Approvals.

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" Environmental Incident " means:
(a)
any release, emission, spill or discharge from a Collateral Vessel or into or upon the air, sea, land or soils (including the seabed) or surface water of Environmentally Sensitive Material within or from a Collateral Vessel; or
(b)
any incident in which Environmentally Sensitive Material is released, emitted, spilled or discharged into or upon the air, sea, land or soils (including the seabed) or surface water from a vessel other than a Collateral Vessel and which involves a collision between a Collateral Vessel and such other vessel or some other incident of navigation or operation, in either case, in connection with which a Collateral Vessel is actually or potentially liable to be arrested, attached, detained or injuncted and/or a Collateral Vessel and/or any Security Party and/or any operator or manager of a Collateral Vessel is at fault or allegedly at fault or otherwise liable to any legal or administrative action; or
(c)
any other incident in which Environmentally Sensitive Material is released, emitted, spilled or discharged into or upon the air, sea, land or soils (including the seabed) or surface water otherwise than from a Collateral Vessel and in connection with which a Collateral Vessel is actually or potentially liable to be arrested and/or where any Security Party and/or any operator or manager of a Collateral Vessel is at fault or allegedly at fault or otherwise liable to any legal or administrative action, other than in accordance with an Environmental Approval.
" Environmental Laws " means any present and future laws, regulations, treaties and conventions of any applicable jurisdiction which:
(a)
have as a purpose or effect the protection of, and/or prevention of harm or damage to, the environment;
(b)
relate to the carriage of Environmentally Sensitive Material or to actual or threatened releases of Environmentally Sensitive Material;
(c)
provide remedies or compensation for harm or damage to the environment; or
(d)
relate to Environmentally Sensitive Materials or health or safety matters.
" Environmentally Sensitive Material " means (i) oil and oil products and (ii) any other waste, pollutant, contaminant or other substance (including any liquid, solid, gas, ion, living organism or noise) that may be harmful to human health or other life or the environment or a nuisance to any person or that may make the enjoyment, ownership or other territorial control of any affected land, property or waters more costly for such person to a material degree.
" EU Bail-In Legislation Schedule " means the document described as such and published by the Loan Market Association (or any successor person) from time to time.
" Event of Default " means any of the events or circumstances set out in Clause 13.1.
" Execution Date " means the date on which this Agreement is executed, and delivered by each of the parties hereto.
" Existing Charter " means each charter currently made between (i) the relevant Teekay Owner or Head Charterer and (ii) the relevant Charterer in respect of the relevant Teekay Vessel, as detailed in Schedule 7 ( Existing Charters ).
" Existing Loan " means the aggregate amount advanced and outstanding under each Existing Loan Agreement.
" Existing Loan Agreements " means:

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(a)
the $40,000,000 secured revolving credit facility agreement dated 28 June 2016 made between (1) TOO as borrower, (2) the banks, financial institutions and other institutional lenders listed in Schedule 1, Part I thereto as lenders, (3) the financial institutions listed in Schedule 1, Part II thereto as mandated lead arrangers, (4) DNB Markets, Inc. as coordinator and (5) DNB Bank ASA, New York Branch as agent and security trustee;
(b)
the $330,000,000 secured revolving credit facility agreement dated 14 October 2014 (as amended and/or supplemented by a first supplemental agreement dated 14 August 2015 and a second supplemental agreement dated 25 August 2015) made between (1) TOO as borrower, (2) the banks, financial institutions and other institutional lenders listed in Schedule 1, Part I thereto as lenders, (3) the entities listed in Schedule 1, Part II thereto as mandated lead arrangers, (4) DNB Markets, Inc. and another as bookrunners and (5) DNB Bank ASA, New York Branch as agent and security trustee;
(c)
the US$205,468,000 (increased from an initial amount of US$170,000,000) secured term loan facility agreement dated 28 May 2013 (as amended and restated by a first supplemental agreement dated 13 April 2016) made between (1) Samba Spirit L.L.C. and Lambada Spirit L.L.C. as joint and several borrowers, (2) the banks listed in Schedule 1, Part I thereto as lenders, (3) Credit Suisse AG as agent, (4) Credit Suisse AG as security agent and (5) Credit Suisse AG as swap provider;
(d)
the US$388,796,177 senior and US$60,000,000 junior secured loan facility agreement dated 21 February 2008 (as amended and supplemented by a first supplemental agreement dated 1 October 2010) made between (1) Amundsen Spirit L.L.C. (formerly known as Great North Hull No. 1749 L.L.C.), Nansen Spirit L.L.C. (formerly known as Great North Hull No. 1750 L.L.C.), Peary Spirit L.L.C. (formerly known as Great North Hull No. 1827 L.L.C.) and Scott Spirit L.L.C. (formerly known as Great North Hull No. 1828 L.L.C.) as joint and several borrowers, (2) the banks listed in Schedule 1, Part I thereto as senior lenders, (3) the banks listed in Schedule 1, Part II thereto as junior lenders, (4) Credit Agricole Corporate and Investment Bank (formerly known as Calyon) as agent, (5) Credit Agricole Corporate and Investment Bank (formerly known as Calyon) as security agent, (6) Credit Agricole Corporate and Investment Bank (formerly known as Calyon) as swap provider, and (7) Credit Agricole Corporate and Investment Bank (formerly known as Calyon) as Korea Export Insurance Corporation; and
(e)
the US$50,000,000 secured term loan facility agreement dated 21 June 2017 made between (1) TOO as borrower, (2) the banks, financial institutions and other institutional lenders listed in Schedule 1, Part I thereto as lenders, (3) the financial institutions listed in Schedule 1, Part II thereto as mandated lead arrangers, (4) the financial institutions listed in Schedule 1, Part III thereto as bookrunners and (5) DNB Bank ASA, New York Branch as agent and security trustee.
" Facility Office " means:
(a)
in respect of a Lender, the office or offices notified by that Lender to the Agent in writing on or before the date it becomes a Lender (or, following that date, by not less than five (5) Business Days' written notice) as the office or offices through which it will perform its obligations under this Agreement; or
(b)
in respect of any other Finance Party, the office in the jurisdiction in which it is resident for tax purposes.
" Facility Period " means the period beginning on the Execution Date and ending on the date when the whole of the Indebtedness has been repaid in full, all Commitments have been terminated and the Security Parties have ceased to be under any further actual or contingent liability to the Finance Parties under or in connection with the Finance Documents.

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" Fair Market Value " means the average of two (2) Valuations of the fair market value of a Collateral Vessel obtained from two (2) Approved Brokers.
" FATCA " means:
(a)
sections 1471 to 1474 of the Code or any associated regulations or other official guidance;
(b)
any treaty, law, regulation or other official guidance enacted in any other jurisdiction, or relating to an intergovernmental agreement between the US and any other jurisdiction, which (in either case) facilitates the implementation of paragraph (a) above; or
(c)
any agreement pursuant to the implementation of any treaty, law or regulation referred to in paragraphs (a) or (b) above with the US Internal Revenue Service, the US government or any governmental or taxation authority in any other jurisdiction.
" FATCA Application Date " means:
(a)
in relation to a "withholdable payment" described in section 1473(1)(A)(i) of the Code (which relates to payments of interest and certain other payments from sources within the US), 1 July 2014;
(b)
in relation to a "withholdable payment" described in section 1473(1)(A)(ii) of the Code (which relates to "gross proceeds" from the disposition of property of a type that can produce interest from sources within the US), 1 January 2019; or
(c)
in relation to a "passthru payment" described in section 1471(d)(7) of the Code not falling within paragraphs (a) or (b) above, 1 January 2019,
or, in each case, such other date from which such payment may become subject to a deduction or withholding required by FATCA as a result of any change in FATCA after the date of this Agreement.
" FATCA Deduction " means a deduction or withholding from a payment under a Finance Document required by FATCA.
" FATCA Exempt Party " means a Party that is entitled to receive payments free from any FATCA Deduction.
" FATCA FFI " means a foreign financial institution as defined in section 1471(d)(4) of the Code which, if any Finance Party is not a FATCA Exempt Party, could be required to make a FATCA Deduction.
" Fee Letter " means any letter or letters dated on or about the date of this Agreement between any of the Finance Parties and the Borrower setting out any fees referred to in Clause 9.
" Final Availability Date " means the date falling three (3) months prior to the Maturity Date.
" Finance Documents " means this Agreement, the Security Documents, the Fee Letter, each Master Agreement, any Transfer Certificate and any other document designated as such by the Agent and the Borrower and " Finance Document " means any one of them.
" Finance Parties " means the Agent, the MLAs, the Bookrunners, the Swap Providers and the Lenders and " Finance Party " means any one of them.
" Financial Indebtedness " means any indebtedness for or in respect of:
(a)
moneys borrowed;
(b)
any acceptance credit;
(c)
any bond, note, debenture, loan stock or other similar instrument;

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(d)
any redeemable preference share to the extent such shares can be redeemed before the Maturity Date;
(e)
any finance or capital lease;
(f)
receivables sold or discounted (otherwise than on a non-recourse basis);
(g)
any derivative transaction protecting against or benefiting from fluctuations in any rate or price (and, except for non-payment of an amount, the then mark to market value of the derivative transaction will be used to calculate its amount);
(h)
any other transaction (including any forward sale or purchase agreement) which has the commercial effect of a borrowing;
(i)
any counter-indemnity obligation in respect of any guarantee, indemnity, bond, letter of credit or any other instrument issued by a bank or financial institution; or
(j)
any guarantee, indemnity or similar assurance against financial loss of any person in respect of any item referred to in paragraphs (a) to (i) above.
" First Drawdown Date " means the date on which the first Drawing is advanced under Clause 4.
" Free Liquidity " means cash, cash equivalents and marketable securities of maturities less than six (6) months to which members of the Borrower Group shall have free, immediate and direct access each as reflected in the Borrower's most recent quarterly management accounts forming part of the Borrower's Accounts.
" GAAP " means generally acceptable accounting principles in the United States of America.
" Grand Banks " means Teekay Grand Banks Shipping AS, a corporation existing under the laws of Norway.
" Guarantee " means the guarantee and indemnity of each Guarantor referred to in Clause 10.1.3.
" Guarantors " means the Teekay Owners and the JV Partners and " Guarantor " means any one of them.
" Head Charterer " means (i) any entity acting as head charterer under an Existing Charter and (ii) any entity acting as disponent owner under any Charter in respect of a Teekay Vessel from time to time.
" Holding Company " means, in relation to any entity, any other entity in respect of which it is a Subsidiary.
" IAPPC " means a valid international air pollution prevention certificate for a Collateral Vessel issued under Annex VI.
" Impaired Agent " means the Agent at any time when:
(a)
it has failed to make (or has notified a Party that it will not make) a payment required to be made by it under the Finance Documents by the due date for payment;
(b)
the Agent otherwise rescinds or repudiates a Finance Document;
(c)
(if the Agent is also a Lender) it is a Defaulting Lender under (a) or (b) of the definition of "Defaulting Lender"; or
(d)
an Insolvency Event has occurred and is continuing with respect to the Agent;
unless, in the case of (a):
(i)
its failure to pay is caused by:
(A)      administrative or technical error; or

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(B)      a Disruption Event; and
payment is made within three (3) Business Days of its due date; or
(ii)
the Agent is disputing in good faith whether it is contractually obliged to make the payment in question.
" Indebtedness " means the aggregate from time to time of: the amount of the Loan outstanding; all accrued and unpaid interest on the Loan; and all other sums of any nature (together with all accrued and unpaid interest on any of those sums) which from time to time may be payable by the Borrower to any of the Finance Parties under all or any of the Finance Documents.
" Initial Reduction Amounts " means the amounts of twenty five million Dollars ($25,000,000) by which the Maximum Amount shall be reduced on each Reduction Date, as such Initial Reduction Amounts may be reduced from time to time in accordance with Clause 6.2, Clause 6.4, Clause 6.5, Clause 6.6 and Clause 7.11.3, and " Initial Reduction Amount " means any one of them.
" Insolvency Event " in relation to an entity means that the entity:
(a)
is dissolved (other than pursuant to a consolidation, amalgamation or merger);
(b)
becomes insolvent or is unable to pay its debts or fails or admits in writing its inability generally to pay its debts as they become due;
(c)
makes a general assignment, arrangement or composition with or for the benefit of its creditors;
(d)
institutes or has instituted against it, by a regulator, supervisor or any similar official with primary insolvency, rehabilitative or regulatory jurisdiction over it in the jurisdiction of its incorporation or organisation or the jurisdiction of its head or home office, a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors' rights, or a petition is presented for its winding-up or liquidation by it or such regulator, supervisor or similar official;
(e)
has instituted against it a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors' rights, or a petition is presented for its winding-up or liquidation, and, in the case of any such proceeding or petition instituted or presented against it, such proceeding or petition is instituted or presented by a person or entity not described in (d) and:
(i)
results in a judgment of insolvency or bankruptcy or the entry of an order for relief or the making of an order for its winding-up or liquidation; or
(ii)
is not dismissed, discharged, stayed or restrained in each case within thirty (30) days of the institution or presentation thereof;
(f)
has exercised in respect of it one or more of the stabilisation powers pursuant to Part 1 of the Banking Act 2009 and/or has instituted against it a bank insolvency proceeding pursuant to Part 2 of the Banking Act 2009 or a bank administration proceeding pursuant to Part 3 of the Banking Act 2009;
(g)
has a resolution passed for its winding-up, official management or liquidation (other than pursuant to a consolidation, amalgamation or merger);
(h)
seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official for it or for all or substantially all its assets (other than, for so long as it is required by law or regulation not to be publicly disclosed, any such appointment which is to be made, or is made, by a person or entity described in (d));

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(i)
has a secured party take possession of all or substantially all its assets or has a distress, execution, attachment, sequestration or other legal process levied, enforced or sued on or against all or substantially all its assets and such secured party maintains possession, or any such process is not dismissed, discharged, stayed or restrained, in each case within 30 days thereafter;
(j)
causes or is subject to any event with respect to it which, under the applicable laws of any jurisdiction, has an analogous effect to any of the events specified in (a) to (i); or
(k)
takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the foregoing acts.
" Insurances " means all policies and contracts of insurance (including all entries in protection and indemnity or war risks associations) which are from time to time taken out or entered into in respect of or in connection with a Teekay Vessel or her increased value or her Earnings and (where the context permits) all benefits under such contracts and policies, including all claims of any nature and returns of premium.
" Interest Payment Date " means each date for the payment of interest in accordance with Clause 7.7.
" Interest Period " means each period for the payment of interest selected by the Borrower or agreed by the Agent pursuant to Clause 7.
" Interpolated Screen Rate " means, in relation to LIBOR for any Drawing, the rate which results from interpolating on a linear basis between:
(a)
the applicable Screen Rate for the longest period (for which that Screen Rate is available) which is less than the relevant Interest Period of that Drawing; and
(b)
the applicable Screen Rate for the shortest period (for which that Screen Rate is available) which exceeds the relevant Interest Period of that Drawing,
each as of 11.00 a.m. London time on the Quotation Day.
" ISM Code " means the International Management Code for the Safe Operation of Ships and for Pollution Prevention.
" ISM Company " means, at any given time, the company responsible for a Collateral Vessel's compliance with the ISM Code under paragraph 1.1.2 of the ISM Code.
" ISPS Code " means the International Ship and Port Facility Security Code.
" ISPS Company " means, at any given time, the company responsible for a Collateral Vessel's compliance with the ISPS Code.
" ISSC " means a valid international ship security certificate for a Collateral Vessel issued under the ISPS Code.
" JV Owners " means the Norwegian shipping partnerships (being part owned by direct or indirect Subsidiaries of the Borrower) shown as owners of the JV Vessels in Schedule 3 and " JV Owner " means any one of them.
" JV Partners " means TNHI and Ugland Nordic Shipping AS, being the members of the Borrower Group that hold the Teekay Group's partnership interests in the relevant JV Owners and " JV Partner " means any one of them.
" JV Vessels " means the vessels specified in Schedule 3 owned by the JV Owners and " JV Vessel " means any one of them.
" law " or " Law " means any law, statute, treaty, convention, regulation, instrument or other subordinate legislation or other legislative or quasi-legislative rule or measure, or any order or decree of any government,

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judicial or public or other body or authority, or any directive, code of practice, circular, guidance note or other direction issued by any competent authority or agency (whether or not having the force of law).
" LIBOR " means, in relation to any Drawing:
(a)
the applicable Screen Rate; or
(b)
(if no Screen Rate is available for the relevant Interest Period) the Interpolated Screen Rate for that Drawing; or
(c)
(if (i) no Screen Rate is available for the currency of that Drawing or (ii) no Screen Rate is available for the relevant Interest Period and it is not possible to calculate an Interpolated Screen Rate for that Drawing) the Reference Bank Rate,
as of 11.00 a.m. London time on the Quotation Day for the offering of deposits in Dollars and for a period equal in length to the relevant Interest Period and, if that rate is less than zero, LIBOR shall be deemed to be zero.
" Loan " means the aggregate amount advanced or to be advanced by the Lenders to the Borrower under Clause 4 or, where the context permits, the principal amount advanced and for the time being outstanding.
" Majority Lenders " means a Lender or Lenders whose Commitments aggregate equal to or greater than sixty six and two thirds per cent (66 2 / 3 %) of the Total Commitments (or, if the Total Commitments have been reduced to zero, aggregated equal to or greater than 66 2 / 3 % of the Total Commitments immediately prior to the reduction).
" Management Agreements " in respect of the Teekay Vessels, means the agreement(s) for the commercial and/or technical management of the Teekay Vessels entered into between (i) the Teekay Owners or a Head Charterer and (ii) the Approved Managers (if the Approved Managers are not the Borrower or any other member of the Teekay Group or the TOO Group).
" Managers' Confirmations " in respect of the Teekay Vessels, means the written confirmations of the Approved Managers (if the Approved Managers are not the Borrower or any other member of the Teekay Group or the TOO Group) that throughout the Facility Period unless otherwise agreed by the Agent:
(a)
they will not, without the prior written consent of the Agent, subcontract or delegate the commercial or technical management of the Teekay Vessels (as the case may be) to any third party; and
(b)
following the occurrence of an Event of Default which is continuing unremedied and unwaived, all claims of the Approved Managers against the Teekay Owners and/or a Head Charterer (less any agreed reasonable deductible) shall be subordinated to the claims of the Finance Parties under the Finance Documents.
" Margin " means three per cent (3%) per annum.
" Master Agreement Liabilities " means, at any relevant time, all liabilities of the Borrower to the Swap Providers under or pursuant to the Master Agreements, whether actual or contingent, present or future.
" Master Agreement Proceeds " means any and all sums due and payable to the Borrower under each Master Agreement following an Early Termination Date (subject always to all rights of netting and set-off contained in that Master Agreement) and all rights to require and enforce the payment of those sums.
" Master Agreement Proceeds Charges " means the deeds of charge referred to in Clause 10.1.10 ( Security Documents ).
" Master Agreements " means each ISDA Master Agreement (or any other form of master agreement relating to interest or currency exchange transactions or other derivative products) entered, or to be entered, into

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between a Swap Provider and the Borrower before or during the Facility Period, including each Schedule to any Master Agreement and each Confirmation exchanged under any Master Agreement.
" Material Adverse Effect " means a material adverse change in, or a material adverse effect on:
(a)
the financial condition, assets, prospects or business of any Security Party or on the consolidated financial condition, assets, prospects or business of the Borrower Group;
(b)
the ability of any Security Party to perform and comply with its obligations under any Finance Document or to avoid any Event of Default;
(c)
the validity, legality or enforceability of any Finance Document; or
(d)
the validity, legality or enforceability of any security expressed to be created pursuant to any Security Document or the priority and ranking of any such security,
provided that, in determining whether any of the forgoing circumstances shall constitute such a material adverse change or material adverse effect for the purposes of this definition, the Finance Parties shall consider such circumstance in the context of (x) the Borrower Group taken as a whole and (y) the ability of the Borrower and the Guarantors to perform each of their obligations under the Finance Documents.
" Maturity Date " means the earlier of (i) the fifth anniversary of the First Drawdown Date and (ii) 30 September 2022.
" Maximum Amount " means an amount of up to the lesser of (i) sixty per cent (60%) of the Fair Market Value of the Vessels (in aggregate) calculated on the basis of Valuations issued no earlier than sixty (60) days prior to the Execution Date and (ii) six hundred million Dollars ($600,000,000), as reduced from time to time in accordance with Clause 3.6, Clause 6.1, Clause 6.2, Clause 6.4, Clause 6.5 and/or Clause 7.11.
" Mortgages " means the first priority statutory or first preferred mortgages (as the case may be) referred to in Clause 10.1.1 together with the Deeds of Covenants (if applicable) and " Mortgage " means any one of them.
" Necessary Authorisations " means all Authorisations of any person including any government or other regulatory authority required by applicable Law to enable it to:
(a)
lawfully enter into and perform its obligations under the Security Documents to which it is party;
(b)
ensure the legality, validity, enforceability or admissibility in evidence in England and, if different, its jurisdiction of incorporation or formation, of such Security Documents to which it is party; and
(c)
carry on its business from time to time.
" Negative Pledges " means the negative pledges from Teekay Offshore Operating Pte. Ltd. and each JV Partner referred to in Clause 10.1.5 and Clause 10.1.9 respectively and " Negative Pledge " means any one of them.
" Net Debt " means Total Debt less Free Liquidity.
" Net Debt to Total Capitalisation Ratio " means Net Debt / Total Capitalization
" Party " means a party to this Agreement.
" Patriot Act " means the United States Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Improvement and Reauthorization Act of 2005 (H.R. 3199).
" Permitted Encumbrance " means (i) any Encumbrance which has the prior written approval of the Agent acting on the instructions of all the Lenders or (ii) is created in favour of the Agent pursuant to any Security Document or (iii) any liens securing obligations incurred in the ordinary course of trading and/or operating a

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Collateral Vessel being not more than thirty (30) days overdue and no more than an aggregate amount of two million and five hundred thousand Dollars ($2,500,000) per Vessel.
" Petrobras Charter " means each Charter in respect of a Teekay Vessel made between the relevant Teekay Owner and a Charterer which is a member of the Petrobras group of companies or any of its Affiliates.
" Pledges of Receivable Rights " means the first priority pledges of the Receivable Rights referred to in Clause 10.1.7 and " Pledge of Receivable Rights " means any one of them.
" Pledgors " means the Borrower (for Lambada Spirit L.L.C., Samba Spirit L.L.C. and Navion Bergen L.L.C.) and Teekay Offshore Operating L.P. (for Amundsen Spirit L.L.C., Peary Spirit L.L.C., Nansen Spirit L.L.C. and Scott Spirit L.L.C.).
" Pre-Approved Classification Society " means any of DNV GL, Lloyds Register, America Bureau of Shipping (ABS) or Bureau Veritas or such other classification society that is a member of the International Association of Classification Societies and is approved by the Agent (acting on the instructions of the Majority Lenders, acting reasonably).
" Pre-Approved Flag " means Canada, Marshall Islands, Norwegian International Ship Registry, Liberia, Panama, Isle of Man, Bermuda, Bahamas or Singapore.
" Proportionate Share " means, at any time, the proportion which a Lender's Commitment (whether or not advanced) then bears to the aggregate Commitments of all the Lenders (whether or not advanced) being on the Execution Date the percentage indicated against the name of that Lender in Schedule 1.
" Protected Party " means a Finance Party which is or will be subject to any liability or required to make any payment for or on account of Tax in relation to a sum required or receivable (or any sum deemed for the purpose of Tax to be received or receivable) under a Finance Document.
" Quiet Enjoyment Letters " means, where applicable, the letters between the Agent and the relevant Charterer relating to the relevant Collateral Vessel, in form and substance reasonably satisfactory to the Agent (acting on behalf of the Lenders).
" Quotation Day " means, in relation to any period for which an interest rate is to be determined two (2) Business Days before the first day of that period, unless market practice differs in the Relevant Interbank Market, in which case the Quotation Day will be determined by the Agent in accordance with market practice in the Relevant Interbank Market (and if quotations would normally be given by leading banks in the Relevant Interbank Market on more than one day, the Quotation Day will be the last of those days).
" Receivable Rights " in respect of each JV Owner, means all rights of the relevant JV Partner to receive all distributions or other payments made or to be made by that JV Owner to its partners from time to time.
" Reduction Date " means the earlier of (i) the date falling three (3) months after the First Drawdown Date and (ii) 31 December 2017 and each date falling at consecutive three monthly intervals thereafter, the final such date falling on the Maturity Date.
" Reference Bank Rate " means the arithmetic mean of the rates (rounded upwards to four decimal places) as supplied to the Agent at its request by the Reference Banks as the rate at which each of the relevant Reference Bank could borrow funds in the Relevant Interbank Market in the relevant currency and for the relevant period, were it to do so by asking for and then accepting interbank offers for deposits in reasonable market size in that currency and for that period.
" Reference Banks " means, in relation to LIBOR, DNB Bank ASA, the principal New York offices of Nordea Bank AB (publ) and the principal London offices of Swedbank AB (publ) or such other banks as may be appointed by the Agent in consultation with the Borrower.

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" Related Fund " in relation to a fund (the " first fund "), means a fund which is managed or advised by the same investment manager or investment adviser as the first fund or, if it is managed by a different investment manager or investment adviser, a fund whose investment manager or investment adviser is an Affiliate of the investment manager or investment adviser of the first fund.
" Relevant Documents " means the Finance Documents, any Charters, the Quiet Enjoyment Letters and the Management Agreements (if any).
" Relevant Interbank Market " means the London interbank market or such other interbank market as agreed between the Borrower and the Agent (acting on the instructions of the Majority Lenders).
" Relevant Percentage " in relation to each JV Vessel, means the percentage indicated against the name of that JV Vessel in Schedule 3, as the same may increase or decrease from time to time.
" Relevant Proportion " means, in respect of any Collateral Vessel, the amount which is obtained by multiplying the amount of the Loan outstanding at the time of making the calculation by the Relevant Share for that Collateral Vessel.
" Relevant Reduction Amount " means, in relation to any Collateral Vessel, an amount equal to (X/Y) x Z,
where:
X means:
(i) in respect of a Teekay Vessel, the Fair Market Value of such Teekay Vessel sold or lost or relating to the Change of Control and (ii) in respect of a JV Vessel, the Relevant Percentage of the Fair Market Value of such JV Vessel sold or lost or relating to the Change of Control, calculated on the basis of the latest Valuations delivered by the Borrower pursuant to Clause 12.1.36;
Y means:
the aggregate of (i) the Fair Market Value of each Teekay Vessel and (ii) the Relevant Percentage of the Fair Market Value of each JV Vessel (including, in either case, the Teekay Vessel or JV Vessel sold or lost or relating to the Change of Control (as applicable)) at the time of making the calculation, calculated on the basis of the latest Valuations delivered by the Borrower pursuant to Clause 12.1.36; and
Z means:
the Maximum Amount at the time of making the calculation.
" Relevant Share " means, in relation to any Collateral Vessel, the percentage indicated against the name of that Collateral Vessel in Schedule 3 divided by the aggregate percentages shown against all Collateral Vessels subject to a Mortgage at the relevant date.
" Representative " means any delegate, agent, manager, administrator, nominee, attorney, trustee or custodian.
" Requisition Compensation " means all compensation or other money which may from time to time be payable to a Teekay Owner and/or Head Charterer as a result of a Teekay Vessel being requisitioned for title or in any other way compulsorily acquired (other than by way of requisition for hire).
" Resolution Authority " means any body which has authority to exercise any Write-down and Conversion Powers.
" Restricted Party " means a person (i) that is listed on any Sanctions List or is otherwise the target of any Sanctions, (ii) that is located, registered as located or resident in, or incorporated or organised under the laws of, a Sanctioned Country, (iii) that is directly or indirectly owned or controlled by, or acting on behalf of, a person referred to in (i) and/or (ii) above or (iv) with whom any Finance Party would be prohibited or restricted by law from engaging in trade, business or other activities as a result of Sanctions.
" Sanctioned Country " means a country or territory that is, or whose government is, the subject of country-wide or territory-wide Sanctions.

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" Sanctions " means the economic or trade sanctions laws, regulations, embargoes or restrictive measures administered, enacted or enforced by (i) the Norwegian Government, (ii) the United States Government, (iii) the United Nations, (iv) the European Union, (v) any member state of the European Union, (vi) the United Kingdom, (vii) Switzerland, (viii) Canada or (ix) the Republic of Singapore and with regard to (i)- (ix) above, the respective governmental institutions and agencies of any of the foregoing, including, without limitation, the Office of Foreign Assets Control of the US Department of Treasury (" OFAC "), the United States Department of State, Her Majesty's Treasury (" HMT "), the Office of the Superintendent of Financial Institutions in Canada (" OSFI "), the State Secretariat for Economic Affairs of Switzerland (" SECO ") and the United Nation's Security Council (together the " Sanctions Authorities ").
" Sanctions List " means the "Specially Designated Nationals and Blocked Persons" list, the "Sectoral Sanctions Identifications List" and the "List of Foreign Sanctions Evaders" each maintained by OFAC and the "Consolidated List of Financial Sanctions Targets" list and the "Investment Ban List" each maintained by HMT or any similar list maintained by, or public announcement of Sanctions designation made by, any of the Sanctions Authorities, including, but not limited to, the Norwegian Government, the European Union, the United Nations, the Government of Singapore or OSFI.
" Screen Rate " means the London interbank offered rate administered by ICE Benchmark Administration Limited (or any other person which takes over the administration of that rate) for the relevant currency and period displayed on pages LIBOR01 or LIBOR02 of the Thomson Reuters screen (or any replacement Thomson Reuters page which displays that rate) or on the appropriate page of such other information service which publishes that rate from time to time in place of Thomson Reuters. If such page or the service ceases to be available, the Agent may specify another page or service displaying the relevant rate after consultation with the Borrower.
" Security Documents " means the Guarantees, the Mortgages, the Deeds of Covenants (if relevant), the Assignments, the Share Pledges, the Negative Pledges, the Pledges of Receivable Rights, the Account Security Deeds, the Master Agreement Proceeds Charges, the Managers' Confirmations (if any), or (where the context permits) any one or more of them and any other agreement or document which may at any time be executed by any person as security for the payment of all or any part of the Indebtedness and " Security Document " means any one of them.
" Security Parties " means the Borrower, each Guarantor, each Head Charterer and each Pledgor and any other person who may at any time during the Facility Period be liable for, or provide security for, all or any part of the Indebtedness (but, for the avoidance of doubt, not any Approved Manager), and " Security Party " means any one of them.
" Share Pledges " means the pledge or pledges of the issued share capital or membership interests (as the case may be) of the Teekay Owners (except for TNOL) referred to in Clause 10.1.4 and " Share Pledge " means any one of them.
" SMC " means a valid safety management certificate issued for a Collateral Vessel by or on behalf of the Administration under paragraph 13.7 of the ISM Code.
" Subsidiary " means a subsidiary undertaking, as defined in section 1162 of the Companies Act 2006 or any analogous definition under any other relevant system of law.
" Tax " means any tax, levy, impost, duty or other charge or withholding of a similar nature (including any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same) and " Taxation " shall be interpreted accordingly.
" Technical Manager " means (i) the Borrower, (ii) any other member of the TOO Group or the Teekay Group or (iii) any other technical manager approved by the Agent (acting on the instructions of the Majority Lenders, acting reasonably).

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" Teekay " means Teekay Corporation, a corporation incorporated under the laws of the Republic of the Marshall Islands whose registered office is at The Trust Company Complex, Ajeltake Road, Ajeltake Island, P.O. Box 1405, Majuro, The Marshall Islands MH96960.
" Teekay Group " means Teekay and each of its Subsidiaries, which includes the Borrower and the Borrower Group.
" Teekay Owners " means the companies (being direct or indirect Subsidiaries of the Borrower) shown as owners of the Teekay Vessels in Schedule 3 and " Teekay Owner " means any one of them.
" Teekay Vessels " means the vessels specified in Schedule 3 owned by the Teekay Owners and " Teekay Vessel " means any one of them.
" TNHI " means Teekay Nordic Holdings Incorporated, a corporation incorporated under the laws of the Marshall Islands.
" TNOL " means Teekay Navion Offshore Loading Pte. Ltd, a company incorporated under the laws of Singapore.
" TOO " means Teekay Offshore Partners L.P., a limited partnership formed and existing under the laws of the Republic of the Marshall Islands.
" TOO Group " means TOO and each of its Subsidiaries, which includes the Borrower and the Borrower Group.
" Total Capitalisation " means the aggregate of: (a) Total Debt and (b) the amount of equity and preferred equity, each in accordance with GAAP, as shown on the pro forma consolidated balance sheet of the Borrower on the Execution Date and on the latest consolidated balance sheet of the Borrower at all other times during the Facility Period.
" Total Commitments " means the aggregate of the Commitments.
" Total Debt " means the aggregate of:
(a)
the amount calculated in accordance with GAAP shown as each of "long term debt", "short term debt" and "current portion of long term debt" on the latest consolidated balance sheet of the Borrower; and
(b)
the amount of any liability in respect of any lease or hire purchase contract entered into by the Borrower or any of its Subsidiaries which would, in accordance with GAAP, be treated as a finance or capital lease (excluding any amounts applicable to leases to the extent that the lease obligations are secured by a security deposit which is held on the balance sheet under " Restricted Cash ").
" Total Loss " means:
(a)
an actual, constructive, arranged, agreed or compromised total loss of a Collateral Vessel; or
(b)
the requisition for title or compulsory acquisition of a Collateral Vessel by any government or other competent authority (other than by way of requisition for hire); or
(c)
the capture, seizure, arrest, detention, hijacking, theft, condemnation as prize, confiscation or forfeiture of a Collateral Vessel (not falling within (b)), unless that Collateral Vessel is released and returned to the possession of the relevant Collateral Owner or Head Charterer within 180 days after the capture, seizure, arrest, detention, hijacking, theft, condemnation as prize, confiscation or forfeiture in question.
" Transfer Certificate " means a certificate substantially in the form set out in Schedule 5 or any other form agreed between the Agent and the Borrower.

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" Transfer Date " means, in relation to any Transfer Certificate, the date for the making of the transfer specified in the schedule to such Transfer Certificate.
" Trust Property " means:
(a)
all benefits derived by the Agent from Clause 10; and
(b)
all benefits arising under (including, without limitation, all proceeds of the enforcement of) each of the Security Documents,
with the exception of any benefits arising solely for the benefit of the Agent.
" UNS " means Ugland Nordic Shipping AS, a corporation existing under the laws of Norway.
" US " means the United States of America.
" US Tax Obligor " means:
(a)
a Security Party which is resident for tax purposes in the US; or
(b)
a Security Party some or all of whose payments under the Finance Documents are from sources within the US for US federal income tax purposes.
" Valuation " means, in relation to a Collateral Vessel, the written valuation of that Collateral Vessel addressed to the Agent, expressed in Dollars and prepared by one of the Approved Brokers to be nominated by the Borrower. Such valuation shall be prepared, without a physical inspection, on the basis of a sale for prompt delivery for cash at arm's length on normal commercial terms as between a willing buyer and a willing seller without the benefit of any charterparty or other engagement.



" VAT " means:
(a)
any tax imposed in compliance with the Council Directive of 28 November 2006 on the common system of value added tax (EC Directive 2006/112); and
(b)
any other tax of a similar nature, whether imposed in a member state of the European Union in substitution for, or listed in addition to, such tax referred to in (a), or imposed elsewhere.
" Write-down and Conversion Powers " means:
(a)
in relation to any Bail-In Legislation described in the EU Bail-In Legislation Schedule from time to time, the powers described as such in relation to that Bail-In Legislation in the EU Bail-In Legislation Schedule; and
(b)
in relation to any other applicable Bail-In Legislation:
(i)
any powers under that Bail-In Legislation to cancel, transfer or dilute shares issued by a person that is a bank or investment firm or other financial institution or affiliate of a bank, investment firm or other financial institution, to cancel, reduce, modify or change the form of a liability of such a person or any contract or instrument under which that liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation in

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respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary to any of those powers; and
(ii)
(ii)    any similar or analogous powers under that Bail-In Legislation.
1.2
In this Agreement:
1.2.1
words denoting the plural number include the singular and vice versa;
1.2.2
words denoting persons include corporations, companies, partnerships, associations of persons (whether incorporated or not) or governmental or quasi-governmental bodies or authorities and vice versa;
1.2.3
references to Recitals, Clauses and Schedules are references to recitals, clauses and schedules to or of this Agreement;
1.2.4
references to this Agreement include the Recitals and the Schedules;
1.2.5
the headings and contents page(s) are for the purpose of reference only, have no legal or other significance, and shall be ignored in the interpretation of this Agreement;
1.2.6
references to any document (including, without limitation, to all or any of the Relevant Documents) are, unless the context otherwise requires, references to that document as amended, supplemented, novated or replaced from time to time;
1.2.7
references to statutes or provisions of statutes are references to those statutes, or those provisions, as from time to time amended, replaced or re-enacted;
1.2.8
references to any Finance Party include its successors, transferees and assignees;
1.2.9
a time of day (unless otherwise specified) is a reference to New York time;
1.2.10
words and expressions defined in the Master Agreements, unless the context otherwise requires, have the same meaning;
1.2.11
a " person " includes any individual firm, company, corporation, government, state or agency of a state or any association, trust, joint venture, consortium, partnership or other entity (whether or not having separate legal personality); and
1.2.12
a " regulation " includes any regulation, rule, official directive, request or guideline (whether or not having the force of law) of any governmental, intergovernmental or supranational body, agency, department or of any regulatory, self-regulatory or other authority or organisation.
1.3
Offer letter
This Agreement supersedes the terms and conditions contained in any correspondence relating to the subject matter of this Agreement exchanged between any Finance Party and the Borrower or their respective representatives prior to the date of this Agreement.
2
The Loan and its Purposes
2.1
Amount Subject to the terms of this Agreement, the Lenders agree to make available to the Borrower a revolving credit in an aggregate amount not exceeding the Maximum Amount. Subject to availability, a minimum of fifty per cent. (50%) of the Maximum Amount shall be drawn at all times following the First Drawdown Date, but this does not in any way affect or compromise any of the rights or remedies of the Finance Parties under the Finance Documents or general law.

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2.2
Finance Parties' rights and obligations
2.2.1
The obligations of each Finance Party under the Finance Documents are several. Failure by a Finance Party to perform its obligations under the Finance Documents does not affect the obligations of any other party to the Finance Documents. No Finance Party is responsible for the obligations of any other Finance Party under the Finance Documents.
2.2.2
The rights of each Finance Party under or in connection with the Finance Documents are separate and independent rights and any debt arising under the Finance Documents to a Finance Party from a Security Party shall be a separate and independent debt in accordance with which a Finance Party shall be entitled to enforce its rights in accordance with Clause 2.2.3. The rights of each Finance Party include any debt owning to that Finance Party under the Finance Documents and, for the avoidance of doubt, any part of the Loan or any other amount owed by a Security Party which relates to a Finance Party's participation in the Loan or its role under a Finance Document (including any such amount payable to the Agent on its behalf) as a debt owing to that Finance Party by that Security Party.
2.2.3
A Finance Party may, except as otherwise stated in the Finance Documents, separately enforce its rights under or in connection with the Finance Documents.
2.3
Purpose The Borrower shall apply the Loan for the purpose referred to in the Recital.
2.4
Monitoring No Finance Party is bound to monitor or verify the application of any amount borrowed under this Agreement.
3
Conditions of Utilisation
3.1
Conditions precedent to service of Drawdown Notice Before any Lender shall have any obligation to accept any Drawdown Notice under the Loan Agreement the Borrower shall deliver or cause to be delivered to or to the order of the Agent all of the documents and other evidence listed in Part I of Schedule 2.
3.2
Further conditions precedent to service of Drawdown Notice The Lenders will only be obliged to accept any Drawdown Notice if on the date of the Drawdown Notice:
3.2.1
no Default is continuing or would result from the advance of the relevant Drawing; and
3.2.2
the representations made by the Borrower under Clause 11 (other than that at Clause 11.7 for Drawdown Dates other than the First Drawdown Date and those at Clauses 11.2, 11.6 and 11.22) are true in all material respects.
3.3
Conditions precedent to First Drawdown Date The Lenders will only be obliged to comply with Clause 4.2 in relation to the advance of a Drawing if on or before the First Drawdown Date, the Agent has received all of the documents and other evidence listed in Part II of Schedule 2.
3.4
Further conditions precedent to Drawdown Date The Lenders will only be obliged to advance a Drawing if on the proposed Drawdown Date:
3.4.1
no Default is continuing or would result from the advance of the relevant Drawing; and
3.4.2
the representations made by the Borrower under Clause 11 (other than that at Clause 11.7 for Drawdown Dates other than the First Drawdown Date and those at Clauses 11.2, 11.6 and 11.22) are true in all material respects.
3.5  
Drawing limit The Lenders will only be obliged to advance a Drawing if:
3.5.1
that Drawing will not result in there being more than five (5) Drawings outstanding at any one time;

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3.5.2
that Drawing is not less than $5,000,000 or the balance then available; and
3.5.3  
that Drawing will not increase the outstanding amount of the Loan to a sum in excess of the Maximum Amount.
3.6
Reduction of Maximum Amount The Maximum Amount shall be reduced on (i) each Reduction Date by the relevant Initial Reduction Amount and (ii) the Maturity Date by the Balloon Amount.
3.7
Conditions subsequent to First Drawdown Date The Borrower undertakes to deliver or to cause to be delivered to the Agent on, or as soon as practicable after, (or within any time period specified in Part III of Schedule 2 and where no time period is specified, within thirty (30) days) the relevant Drawdown Date the additional documents and other evidence listed in Part III of Schedule 2.
3.8
No Waiver If the Lenders in their sole discretion agree to advance a Drawing to the Borrower before all of the documents and evidence required by Clause 3.3 have been delivered to or to the order of the Agent, the Borrower undertakes to deliver all outstanding documents and evidence to or to the order of the Agent no later than thirty (30) days after the First Drawdown Date or such other date specified by the Agent (acting on the instructions of the Lenders).
The advance of a Drawing under this Clause 3.8 shall not be taken as a waiver of the Lenders' right to require production of all the documents and evidence required by Clause 3.3.
3.9
Form and content All documents and evidence delivered to the Agent under this Clause 3 shall:
3.9.1
be in form and substance reasonably acceptable to the Agent (acting on the instructions of the Lenders); and
3.9.2
if reasonably required by the Agent, be certified, notarised, legalised or attested in a manner acceptable to the Agent.
4
Advance
4.1
Drawdown Request The Borrower may request a Drawing to be advanced on any Business Day prior to, in the case of the first Drawing, 30 September 2017 and, in the case of any subsequent Drawing, the Final Availability Date, by delivering to the Agent a duly completed Drawdown Notice not more than ten (10) Business Days and not later than 11:00am (New York time) three (3) Business Days before the proposed Drawdown Date.
4.2
Lenders' participation
4.2.1
Subject to Clause 2 and Clause 3, the Agent shall promptly notify each Lender of the receipt of a Drawdown Notice, following which each Lender shall advance its participation in the relevant Drawing to the Borrower through the Agent not later than 11:00am (New York time) on the relevant Drawdown Date.
4.2.2
The amount of each Lender's participation in each Drawing will be equal to the proportion borne by its Commitment to the Total Commitments.
4.3
Cancellation of Commitments The Total Commitments shall be cancelled on the Final Availability Date to the extent that they are unutilised at that time.
5
Repayment
5.1
Repayment of Loan
5.1.1
Repayment of each Drawing The Borrower agrees to repay each Drawing to the Agent for the account of the Lenders on the last day of the Interest Period in respect of that Drawing save where

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a further Interest Period is to apply in respect of such Drawing, in which case such Interest Period shall (unless otherwise notified by the Borrower to the Agent) be deemed to be based on an Interest Period of three months provided that no such Interest Period shall apply if an Event of Default has occurred and is continuing unremedied and unwaived in which case the Borrower shall be obliged to repay such Drawing on the last day of its then current Interest Period. The Borrower shall on the Maturity Date repay to the Agent as agent for the Lenders the amount of any Drawings made and outstanding at that time, to the extent not reduced by repayments, prepayments, cancellations or voluntary reductions.
5.1.2
Reborrowing Amounts of the Loan which are repaid or prepaid shall be available for reborrowing in accordance with Clause 3 prior to the Final Availability Date.
6
Prepayment
6.1
Illegality If it becomes unlawful in any jurisdiction for a Lender to fund or maintain its Commitment as contemplated by this Agreement or to fund or maintain its participation in the Loan or it becomes unlawful for any Affiliate of a Lender for that Lender to do so:
6.1.1
that Lender shall promptly notify the Agent of that event;
6.1.2
upon the Agent notifying the Borrower, the Commitment of that Lender (to the extent not already advanced) will be immediately cancelled; and
6.1.3
the Borrower shall repay that Lender's participation in any Drawing on the last day of its current Interest Period or, if earlier, the date specified by that Lender in the notice delivered to the Agent and notified by the Agent to the Borrower (being no earlier than the last day of any applicable grace period permitted by law) and the Maximum Amount shall be reduced by the amount of that Lender's Commitment in the Loan. Prior to the date on which repayment is required to be made under this Clause 6.1.3 the affected Lender shall negotiate in good faith with the Borrower to find an alternative method or lending base in order to maintain the Loan.
6.2
Voluntary Cancellation
6.2.1
The Borrower may voluntarily cancel the whole or any part of the undrawn amount of the Loan in an amount of not less than one million Dollars ($1,000,000) (or as otherwise may be agreed by the Agent), provided that it has first given to the Agent no fewer than five (5) Business Days' prior written notice expiring on a Business Day (the " Cancellation Date ") of its desire to cancel the whole or any part of the Loan; such notice once received by the Agent shall be irrevocable and shall oblige the Borrower to make payment of all interest and Commitment Commission accrued on the amount so cancelled up to and including the Cancellation Date. Any cancellation under this Clause 6.2.1 shall not be reversed. If, as a result of any such cancellation, the amount outstanding under the Loan would exceed the Maximum Amount, the Borrower shall, on the Cancellation Date, prepay such amount of the Loan as will ensure that the amount outstanding under the Loan is not greater than the Maximum Amount.
6.2.2
Simultaneously with each reduction of the Loan in accordance with this Clause 6.2, the Commitment of each Lender will reduce so that the Commitments of the Lenders in respect of the reduced Loan remains in accordance with their respective Proportionate Shares and the reduction shall be applied pro rata against each Initial Reduction Amount and the Balloon Amount.
6.3
Voluntary Prepayment of Drawings The Borrower may prepay the whole or any part of a Drawing (but, if in part, being an amount that reduces that Drawing by a minimum amount of one million Dollars ($1,000,000)) provided that it gives the Agent not less than five (5) Business Days' (or such shorter period as the Majority Lenders may agree acting reasonably) prior notice.

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6.4
Sale or release of Collateral Vessels In the event of a sale or disposal of a Collateral Vessel or the Agent having received not less than 5 Business Days' notice from the Borrower requesting that the security relating to a Collateral Vessel be released and discharged (a " Released Vessel "), the Maximum Amount shall be reduced in an amount equivalent to the higher of (i) the sale proceeds in respect of that Collateral Vessel (which in the case of a JV Vessel shall be multiplied by the Relevant Percentage applicable to such JV Vessel) and (ii) the Relevant Reduction Amount applicable to that Collateral Vessel, such reduction to be applied on a pro rata basis against the Initial Reduction Amounts and the Balloon Amount as reduced from time to time in accordance with this Clause 6.4. Such reduction shall be made in the case of a sale or disposal of such Collateral Vessel on the date of such sale or disposal and in the case of a Released Vessel on the date proposed by the Borrower for release and discharge of the security relating to that Collateral Vessel unless (a) the Collateral Vessel in question is aged nineteen years or older or (b) the Collateral Vessel in question is sold to another Collateral Owner or to any other Subsidiary of the Borrower who becomes a Guarantor and in such case any security held by the Agent (whether directly or indirectly) from such Collateral Owner or any other Security Party and over such Collateral Vessel is reconstituted immediately after the sale to the other Collateral Owner or the other Subsidiary of the Borrower in substantially identical form (which, for the avoidance of doubt, in the case of such a sale of m.v. "NAVION HISPANIA", shall include a Guarantee for the full amount of the Loan plus interest and costs, an Account Security Deed and a Share Pledge in respect of the new owner), and the Agent obtains favourable legal opinions in respect of such reconstituted security (and in the circumstances of both (a) and (b) above no reduction of the Maximum Amount shall be required). Any reduction in the Maximum Amount pursuant to this Clause 6.4 shall not be reversed.
6.5
Total Loss In the event that a Collateral Vessel becomes a Total Loss, on the earlier to occur of (i) the date of receipt of the proceeds of such Total Loss and (ii) on the earlier of the Maturity Date and the date falling one hundred and eighty days after the date of such Total Loss occurring, the Maximum Amount shall be reduced by an amount equal to the higher of (i) the proceeds of the Total Loss (which in the case of a JV Vessel shall be multiplied by the Relevant Percentage applicable to such JV Vessel) and (ii) the Relevant Reduction Amount in respect of such Collateral Vessel, such reduction to be applied on a pro rata basis against the Initial Reduction Amounts and the Balloon Amount as reduced from time to time in accordance with this Clause 6.5. Any reduction in the Maximum Amount pursuant to this Clause 6.5 shall not be reversed.
6.6
Change of Control In the event that a Change of Control occurs with respect to any Security Party, the Borrower shall immediately notify the Agent in writing of such event. Following such event, if required by the Agent (acting on the instructions of the Majority Lenders) the Maximum Amount shall be reduced (i) in the case of a Change of Control with respect to the Borrower, to zero and (ii) in the case of a Change of Control with respect to a Guarantor, by an amount equal to the higher of (a) the Relevant Reduction Amount applicable to the Collateral Vessel(s) related to that Guarantor and (b) the Relevant Proportion applicable to the Collateral Vessel(s) related to that Guarantor (which in the case of a JV Vessel shall be multiplied by the Relevant Percentage applicable to such JV Vessel(s)), such reduction to be applied on a pro rata basis against the Initial Reduction Amounts and the Balloon Amount as reduced from time to time in accordance with this Clause 6.6. Any reduction in the Maximum Amount pursuant to this Clause 6.6 shall not be reversed.
6.7
Mandatory prepayment on reduction of Maximum Amount If, at any time, the Maximum Amount is reduced in accordance with this Agreement to an amount which is less than the amount of the Loan then outstanding, the Borrower shall, simultaneously with that reduction, prepay one or more outstanding Drawings to the extent required to ensure that the amount of the Loan outstanding does not exceed the reduced Maximum Amount. Any such prepayment shall not be reborrowed.
6.8
Final Availability Date No Lender shall be under any obligation to advance all or any part of its Commitment after the Final Availability Date.
6.9
Restrictions Any notice of prepayment or cancellation given under this Clause 6 shall be irrevocable and, unless a contrary indication appears in this Agreement, shall specify the date or dates upon which the relevant prepayment or cancellation is to be made and the amount of that prepayment or cancellation.

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Any prepayment under this Agreement shall be made together with all interest and Commitment Commission accrued on the amount so reduced up to and including the date of reduction together with any Break Costs in respect of such reduced amount if the date of such reduction is not the final day of an Interest Period and subject to Clauses 6.3, 6.4, 6.5, 6.6 and 6.7, without premium or penalty.
6.10
If the Agent receives a notice under this Clause 6 it shall promptly forward a copy of that notice to the Borrower or the Lenders, as appropriate.
7
Interest
7.1
Interest Periods The period during which each Drawing shall be outstanding under this Agreement shall be divided into consecutive Interest Periods of three (3) or six (6) months' duration, as selected by the Borrower by written notice to the Agent not later than 11:00 a.m. on the third Business Day before the beginning of the Interest Period in question, or any other period which will coincide with the end of any other Interest Period then current, or such other duration as may be agreed by the Agent (acting on the instructions of all the Lenders) and provided that no Interest Period shall extend beyond the Maturity Date.
7.2
Beginning and end of Interest Periods The first Interest Period in respect of each Drawing shall begin on the Drawdown Date in respect of that Drawing and shall end on the last day of the Interest Period selected in accordance with Clause 7.1. Any subsequent Interest Period selected in respect of a Drawing shall commence on the last day of its previous Interest Period and shall end on the last day of its current Interest Period selected in accordance with Clause 7.1.
7.3
Interest Periods to meet Reduction Dates If an Interest Period in respect of a Drawing would otherwise expire after the next Reduction Date, there shall be a separate Interest Period for that Drawing and that separate Interest Period shall expire on the next Reduction Date.
7.4
Non-Business Days If an Interest Period would otherwise end on a day which is not a Business Day, that Interest Period will instead end on the next Business Day in that calendar month (if there is one) or the preceding Business Day (if there is not).
7.5
Interest rate During each Interest Period interest shall accrue on the Loan at the percentage rate per annum determined by the Agent to be the aggregate of (a) the Margin and (b) LIBOR.
7.6
Failure to select Interest Period If the Borrower at any time fails to select or agree an Interest Period in respect of a Drawing in accordance with Clause 7.1, the interest rate applicable shall be based on an Interest Period of three months.
7.7
Accrual and payment of interest Interest shall accrue from day to day, shall be calculated on the basis of a 360 day year and the actual number of days elapsed (or, in any circumstance where market practice differs, in accordance with the prevailing market practice) and shall be paid by the Borrower to the Agent for the account of the Lenders on the last day of each Interest Period and, if the Interest Period is longer than three months, on the dates falling at three monthly intervals after the first day of that Interest Period.
7.8
Default interest If the Borrower fails to pay any amount payable by it under a Finance Document on its due date, interest shall accrue on the overdue amount from the due date, subject to any applicable grace period, up to the date of actual payment (both before and after judgment) at a rate which is two hundred (200) basis points higher than the rate which would have been payable if the overdue amount had, during the period of non-payment, constituted a Drawing in the currency of the overdue amount for successive Interest Periods, each for a duration selected by the Agent (acting reasonably). Any interest accruing under this Clause 7.8 shall be immediately payable by the Borrower on demand by the Agent. If unpaid, any such interest will be compounded with the overdue amount at the end of each Interest Period applicable to that overdue amount but will remain immediately due and payable.

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7.9
Absence of quotations Subject to Clause 7.10, if LIBOR is to be determined by reference to the Reference Banks but a Reference Bank does not supply a quotation by 11.00 a.m. on the Quotation Day, the applicable LIBOR shall be determined on the basis of the quotations of the remaining Reference Banks.
7.10
Market disruption If a Market Disruption Event occurs for any Interest Period, then the rate of interest on each Lender's share of the relevant Drawing for that Interest Period shall be the percentage rate per annum which is the sum of:
7.10.1
the Margin; and
7.10.2
the rate notified to the Agent by that Lender as soon as practicable, and in any event by close of business on the date falling 10 Business Days after the Quotation Day (or, if earlier, on the date falling 10 Business Days prior to the date on which interest is due to be paid in respect of that Interest Period), to be that which expresses as a percentage rate per annum the cost to that Lender of funding its participation in the relevant Drawing from whatever source it may reasonably select.
In this Agreement " Market Disruption Event " means:
(a)
at or about noon on the Quotation Day for the relevant Interest Period LIBOR is to be determined by reference to the Reference Banks and none or only one of the Reference Banks supplies a rate to the Agent to determine LIBOR for dollars and the relevant Interest Period; or
(b)
before close of business in New York on the Quotation Day for the relevant Interest Period, the Agent receives notifications from a Lender or Lenders (whose participations in the relevant Drawing equals or exceeds 50 per cent of that Drawing) that the cost to it of funding its participation in that Drawing from the London Interbank Market or, if cheaper, from whatever other source it may reasonably select, would be in excess of LIBOR.
7.11
Alternative basis of interest or funding
7.11.1
If a Market Disruption Event occurs and the Agent or the Borrower so requires, the Agent and the Borrower shall enter into negotiations (for a period of not more than thirty days) with a view to agreeing a substitute basis for determining the rate of interest.
7.11.2
Any alternative basis agreed pursuant to Clause 7.11.1 shall, with the prior consent of all the Lenders and the Borrower, be binding on all Parties.
7.11.3  
If an alternative basis is not agreed pursuant to Clause 7.11.1, the Borrower will immediately prepay the relevant Commitment together with Break Costs and the Maximum Amount, the Balloon Amount and the remaining Initial Reduction Amounts shall be reduced pro rata to the amount prepaid.
7.12
Determinations conclusive The Agent shall promptly notify the Borrower of the determination of a rate of interest under this Clause 7 and each such determination shall (save in the case of manifest error) be final and conclusive.
8
Indemnities
8.1
Transaction expenses The Borrower will, within fourteen (14) days of the Agent's written demand, pay the Agent (for the account of the Finance Parties) the amount of all reasonable and documented out of pocket costs and expenses (including legal fees) reasonably incurred by the Finance Parties or any of them in connection with:

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8.1.1
the negotiation, preparation, printing, execution and registration of the Finance Documents (whether or not any Finance Document is actually executed or registered and whether or not the Loan is advanced);
8.1.2
any amendment, addendum or supplement to any Finance Document (whether or not completed); and
8.1.3
any other document which may at any time be required by a Finance Party to give effect to any Finance Document or which a Finance Party is entitled to call for or obtain under any Finance Document.
8.2
Funding costs The Borrower shall indemnify each Finance Party, by payment to the Agent (for the account of that Finance Party) on the Agent's written demand, against all losses and costs incurred or sustained by that Finance Party if, for any reason due to a default or other action by the Borrower, a Drawing is not advanced to the Borrower after the relevant Drawdown Notice has been given to the Agent, or is advanced on a date other than that requested in the Drawdown Notice.
8.3
Break Costs The Borrower shall indemnify each Finance Party, by payment to the Agent (for the account of that Finance Party) on the Agent's written demand, against all documented costs, losses, premiums or penalties incurred by that Finance Party as a result of its receiving any prepayment of all or any part of a Drawing (whether pursuant to Clause 5 or otherwise) on a day other than the last day of an Interest Period for that Drawing, or any other payment under or in relation to the Finance Documents on a day other than the due date for payment of the sum in question, including (without limitation) any losses or costs incurred in liquidating or re-employing deposits from third parties acquired to effect or maintain all or any part of a Drawing.
8.4
Currency indemnity In the event of a Finance Party receiving or recovering any amount payable under a Finance Document in a currency other than the Currency of Account, and if the amount received or recovered is insufficient when converted into the Currency of Account at the date of receipt to satisfy in full the amount due, the Borrower shall promptly, on the Agent's written demand, pay to the Agent for the account of the relevant Finance Party such further amount in the Currency of Account as is sufficient to satisfy in full the amount due and that further amount shall be due to the Agent on behalf of the relevant Finance Party as a separate debt under this Agreement.
8.5
Other Indemnities
8.5.1
The Borrower shall (or shall procure that a Security Party will), within three Business Days of demand, indemnify each Finance Party against any cost, loss or liability reasonably incurred by it as a result of:
(a)
a failure by a Security Party to pay any amount due under a Finance Document on its due date, including without limitation, any cost, loss or liability arising as a result of Clause 15.22;
(b)
a Drawing (or part of a Drawing) not being prepaid in accordance with a notice of prepayment given by the Borrower.
8.6
General indemnity
8.6.1
The Borrower hereby agrees at all times to pay promptly or, as the case may be, indemnify and hold the Finance Parties and their respective officers, directors, representatives, agents and employees (together the " Indemnified Parties ") harmless on a full indemnity basis from and against each and every loss suffered or incurred by or imposed on any Indemnified Party related to or arising out of:
(a)
the use of proceeds of the Loan;

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(b)
the execution and delivery of any commitment letter, engagement letter, fee letter, the Finance Documents or any other document connected therewith or the performance of the respective obligations thereunder, including without limitation environmental liabilities; or
(c)
any claim, action, suit, investigation or proceeding relating to the foregoing or the Security Parties, whether or not any Indemnified Party is a party thereto or target thereof, or the Indemnified Parties' roles in connection therewith, and will reimburse the Indemnified Parties, on demand, for all reasonable expenses (including reasonable counsel fees and expenses and costs related to operating a secure website for Lenders' communication) as they are incurred by the Indemnified Parties in connection with investigating, preparing for or defending any such claim, action, suit or proceeding (including any security holder actions or proceeding, inquiry or investigation), whether or not in connection with pending or threatened litigation in which the Security Parties are a party.
8.6.2
The Borrower will not, however, be responsible for any claims, liabilities, losses, damages or expenses of an Indemnified Party that are finally judicially determined by a court of competent jurisdiction to have resulted principally from the wilful misconduct or gross negligence of such Indemnified Party.
8.6.3
The foregoing shall be in addition to any rights that the Indemnified Parties may have at common law or otherwise and shall extend upon the same terms to and inure to the benefit of any Affiliate, director, officer, employee, agent or controlling person of an Indemnified Party.
8.7
Increased costs
8.7.1
Subject to Clause 8.9, the Borrower shall, within three Business Days of a demand by the Agent, pay to the Agent for the account of a Finance Party the amount of any Increased Costs incurred by that Finance Party or any of its Affiliates as a result of (i) the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation or (ii) compliance with any law or regulation made after the date of this Agreement or (iii) the implementation or application of or compliance with Basel III, CRR or CRD IV or any other law or regulation which implements Basel III, CRR or CRD IV (whether such implementation, application or compliance is by a government, regulator, that Finance Party or any of that Finance Party's Affiliates).
8.7.2
In this Agreement:
(a)
" Basel III " means:
(i)
the agreements on capital requirements, a leverage ratio and liquidity standards contained in "Basel III: A global regulatory framework for more resilient banks and banking systems", "Basel III: International framework for liquidity risk measurement, standards and monitoring" and "Guidance for national authorities operating the countercyclical capital buffer" published by the Basel Committee on Banking Supervision in December 2010, each as amended, supplemented or restated;
(ii)
the rules for global systemically important banks contained in "Global systemically important banks: assessment methodology and the additional loss absorbency requirement – Rules text" published by the Basel Committee on Banking Supervision in November 2011, as amended, supplemented or restated; and

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(iii)
any further guidance or standards published by the Basel Committee on Banking Supervision relating to "Basel III".
(b)
" CRD IV " means Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC, as amended, supplemented or restated.
(c)
" CRR " means Regulation EU No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation EU No 648/2012, as amended, supplemented or restated.
(d)
" Increased Costs " means:
(i)
a reduction in the rate of return from the Loan or on a Finance Party's (or its Affiliate's) overall capital;
(ii)
an additional or increased cost; or
(iii)
a reduction of any amount due and payable under any Finance Document,
which is incurred or suffered by a Finance Party or any of its Affiliates to the extent that it is attributable to that Finance Party having entered into any Finance Document or funding or performing its obligations under any Finance Document.
8.8
Increased cost claims
8.8.1
A Finance Party intending to make a claim pursuant to Clause 8.7 shall promptly notify the Agent of the event giving rise to the claim, following which the Agent shall promptly notify the Borrower.
8.8.2
Each Finance Party shall, as soon as practicable after a demand by the Agent, provide a certificate confirming the amount of its Increased Costs.
8.9
Exceptions to increased costs Clause 8.7 does not apply to the extent any Increased Cost is:
8.9.1
compensated for by a payment made under Clause 8.12 (or would have been compensated for by a payment made under Clause 8.12 but was not so compensated solely because any of the exclusions in Clause 8.12.2 applied); or
8.9.2
compensated for by a payment made under Clause 17.3; or
8.9.3
attributable to a FATCA Deduction required to be made by a Party; or
8.9.4
attributable to the wilful breach by the relevant Finance Party (or an Affiliate of that Finance Party) of any law or regulation; or
8.9.5
attributable to the implementation or application of, or compliance with, the "International Convergence of Capital Measurement and Capital Standards, a Revised Framework" published by the Basel Committee on Banking Supervision in June 2004 in the form existing on the date of this Agreement (but excluding any amendment arising out of Basel III) (" Basel II ") or any other law or regulation which implements Basel II (whether such implementation, application or compliance is by a government, regulator, Finance Party or of its Affiliates).

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8.10
Events of Default The Borrower shall indemnify each Finance Party from time to time, by payment to the Agent (for the account of that Finance Party) on the Agent's written demand, against all losses and costs incurred or sustained by that Finance Party as a consequence of any Event of Default.
8.11
Enforcement costs The Borrower shall pay to the Agent (for the account of each Finance Party) on the Agent's written demand the amount of all costs and expenses (including legal fees) incurred by a Finance Party in connection with the enforcement of, or the preservation of any rights under, any Finance Document including (without limitation) any losses, costs and expenses which that Finance Party may from time to time sustain, incur or become liable for by reason of that Finance Party or other Finance Party being a mortgagee of a Collateral Vessel and/or lender to the Borrower. No such indemnity will be given where any such loss or cost has occurred due to gross negligence or wilful misconduct on the part of that Finance Party; however, this shall not affect the right of any other Finance Party to receive such indemnity.
8.12
Taxes
8.12.1
The Borrower shall (within three (3) Business Days of demand by the Agent) pay to a Protected Party an amount equal to the loss, liability or cost which that Protected Party determines will be or has been (directly or indirectly) suffered for or on account of Tax by that Protected Party in respect of a Finance Document.
8.12.2
Clause 8.12.1 above shall not apply:
(a)
with respect to any Tax assessed on a Finance Party:
(i)
under the law of the jurisdiction in which that Finance Party is incorporated or, if different, the jurisdiction (or jurisdictions) in which that Finance Party is treated as resident for tax purposes; or
(ii)
under the law of the jurisdiction in which that Finance Party's Facility Office is located in respect of amounts received or receivable in that jurisdiction,
if that Tax is imposed on or calculated by reference to the net income received or receivable (but not any sum deemed to be received or receivable) by that Finance Party;
(b)
to the extent a loss, liability or cost is compensated for by an increased payment under Clause 17.3; or
(c)
to the extent a loss, liability or cost relates to a FATCA Deduction required to be made by a Party.
8.12.3
A Protected Party making, or intending to make, a claim under Clause 8.12.1 above shall promptly notify the Agent of the event which will give, or has given, rise to the claim, following which the Agent shall notify the Borrower.
8.12.4
A Protected Party shall, on receiving a payment from a Security Party under this Clause 8.12, notify the Agent.
8.13
Stamp taxes
8.13.1
The Borrower shall pay and, within three Business Days of demand, indemnify each Finance Party against any cost, loss or liability that Finance Party incurs in relation to all stamp duty, registration and other similar Taxes payable in respect of any Finance Document.
8.13.2
Provided that no Event of Default has occurred and is continuing, Clause 8.13.1 shall not apply in respect of any stamp duty, registration or other similar Taxes which are payable in respect of an assignment, transfer or other alienation of any kind by a Finance Party of any of its rights and/or obligations under a Finance Document.

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8.14
VAT
8.14.1
All amounts set out or expressed in a Finance Document to be payable by any Party or any Security Party to a Finance Party which (in whole or in part) constitute the consideration for a supply or supplies for VAT purposes shall be deemed to be exclusive of any VAT which is chargeable on such supply or supplies, and accordingly, subject to Clause 8.14.2, if VAT is or becomes chargeable on any supply made by any Finance Party to any Party or to any Security Party under a Finance Document and such Finance Party is required to account to the relevant tax authority for the VAT, that Party or Security Party shall pay to the Finance Party (in addition to and at the same time as paying any other consideration for such supply) an amount equal to the amount of such VAT (and such Finance Party shall promptly provide an appropriate VAT invoice to such Party).
8.14.2
If VAT is or becomes chargeable on any supply made by any Finance Party (the " Supplier ") to any other Finance Party (the " Recipient ") under a Finance Document, and any Party other than the Recipient (the " Relevant Party ") is required by the terms of any Finance Document to pay an amount equal to the consideration for that supply to the Supplier (rather than being required to reimburse or indemnify the Recipient in respect of that consideration):
(a)
(where the Supplier is the person required to account to the relevant tax authority for the VAT) the Relevant Party must also pay to the Supplier (at the same time as paying that amount) an additional amount equal to the amount of the VAT. The Recipient must (where this Clause 8.14.2(a) applies) promptly pay to the Relevant Party an amount equal to any credit or repayment the Recipient receives from the relevant tax authority which the Recipient reasonably determines relates to the VAT chargeable on that supply; and
(b)
(where the Recipient is the person required to account to the relevant tax authority for the VAT) the Relevant Party must promptly, following demand from the Recipient, pay to the Recipient an amount equal to the VAT chargeable on that supply but only to the extent that the Recipient reasonably determines that it is not entitled to credit or repayment from the relevant tax authority in respect of that VAT.
8.14.3
Where a Finance Document requires any Party to reimburse or indemnify a Finance Party for any cost or expense, that Party shall reimburse or indemnify (as the case may be) such Finance Party for the full amount of such cost or expense, including such part thereof as represents VAT, save to the extent that such Finance Party reasonably determines that it is entitled to credit or repayment in respect of such VAT from the relevant tax authority.
8.14.4
Any reference in this Clause 8.14 to any Party shall, at any time when such Party is treated as a member of a group for VAT purposes, include (where appropriate and unless the context otherwise requires) a reference to any member of such group at such time.
8.14.5
In relation to any supply made by a Finance Party to any Party under a Finance Document, if reasonably requested by such Finance Party, that Party must promptly provide such Finance Party with details of that Party's VAT registration and such other information as is reasonably requested in connection with such Finance Party's VAT reporting requirements in relation to such supply.
8.15
FATCA Information
8.15.1
Subject to Clause 8.15.3, each Party shall, within ten (10) Business Days of a reasonable request by another Party:
(a)
confirm to that other Party whether it is:
(i)
a FATCA Exempt Party; or

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(ii)
not a FATCA Exempt Party; and
(b)
supply to that other Party such forms, documentation and other information relating to its status under FATCA as that other Party reasonably requests for the purposes of that other Party's compliance with FATCA; and
(c)
supply to that other Party such forms, documentation and other information relating to its status as that other Party reasonably request for the purposes of that other Party's compliance with any other law, regulation or exchange of information regime.
8.15.2
If a Party confirms to another Party pursuant to Clause 8.15.1(a) that it is a FATCA Exempt Party and it subsequently becomes aware that it is not, or has ceased to be a FATCA Exempt Party, that Party shall notify that other Party reasonably promptly.
8.15.3
Clause 8.15.1 above shall not oblige any Finance Party to do anything, and Clause 8.15.1(c) shall not oblige any Party to do anything, which would or might in its reasonable opinion constitute a breach of:
(a)
any law or regulation;
(b)
any fiduciary duty; or
(c)
any duty of confidentiality.
8.15.4
If a Party fails to confirm whether or not it is a FATCA Exempt Party or to supply forms, documentation or other information requested in accordance with Clause 8.15.1 (including, for the avoidance of doubt, where Clause 8.15.3 applies) then such Party shall be treated for the purposes of the Finance Documents (and payments under them) as if it is not a FATCA Exempt Party until such time as the Party in question provides the requested confirmation, forms, documentation or other information.
8.15.5
If the Borrower is a US Tax Obligor or the Agent reasonably believes that its obligations under FATCA or any other applicable law or regulation require it, each Lender shall, within ten (10) Business Days of:
(a)
where the Borrower is a US Tax Obligor and the relevant Lender is a Lender on the date of this Agreement, the date of this Agreement;
(b)
where the Borrower is a US Tax Obligor on a date on which any other Lender becomes a Party as a Lender, that date; or
(c)
where the Borrower is not a US Tax Obligor, the date of a request from the Agent,
supply to the Agent:
(i)
a withholding certificate on Form W-8 or Form W-9 or any other relevant form; or
(ii)
any withholding statement or other document, authorisation or waiver as the Agent may require to certify or establish the status of such Lender under FATCA or that other law or regulation.
8.15.6
The Agent shall provide any withholding certificate, withholding statement, document, authorisation or waiver it receives from a Lender pursuant to Clause 8.15.5 to the Borrower.
8.15.7
If any withholding certificate, withholding statement, document, authorisation or waiver provided to the Agent by a Lender pursuant to Clause 8.15.5 is or becomes materially inaccurate or

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incomplete, that Lender shall promptly update it and provide such updated withholding certificate, withholding statement, document, authorisation or waiver to the Agent unless it is unlawful for the Lender to do so (in which case the Lender shall promptly notify the Agent). The Agent shall provide any such updated withholding certificate, withholding statement, document, authorisation or waiver to the Borrower.
8.15.8
The Agent may rely on any withholding certificate, withholding statement, document, authorisation or waiver it receives from a Lender pursuant to Clause 8.15.5 or 8.15.7 without further verification. The Agent shall not be liable for any action taken by it under or in connection with Clause 8.15.5, 8.15.6 or 8.15.7.
8.16
FATCA Deduction
8.16.1
Each Party may make any FATCA Deduction it is required by FATCA to make, and any payment required in connection with that FATCA Deduction, and no Party shall be required to increase any payment in respect of which it makes such a FATCA Deduction or otherwise compensate the recipient of the payment for that FATCA Deduction.
8.16.2
Each Party shall promptly, upon becoming aware that it must make a FATCA Deduction (or that there is any change in the rate or the basis of such FATCA Deduction) notify the Party to whom it is making the payment and, in addition, shall notify the Borrower, the Agent and the other Finance Parties.
9
Fees
9.1
Commitment fee The Borrower shall pay to the Agent (for the account of the Lenders in proportion to their Commitments) a fee computed at the rate of forty per cent (40%) of the Margin on the undrawn and uncancelled amount of the Maximum Amount from time to time for the period beginning on the Execution Date until the Final Availability Date.
The accrued commitment fees are payable on the last day of each successive period of three months which ends prior to the Final Availability Date, on the Final Availability Date and (on the cancelled amount of the relevant Lender's Commitment) at the time the cancellation is effective.
9.2
Other fees The Borrower shall pay to the Agent the fees in the amounts and at the times agreed in any Fee Letter.
10
Security and Application of Moneys
10.1
Security Documents As security for the payment of the Indebtedness, the Borrower shall execute and deliver to the Agent or cause to be executed and delivered to the Agent at the relevant time, the following documents in such forms and containing such terms and conditions as the Agent shall require:
10.1.1
a first priority statutory or preferred mortgage (as the case may be) over each Teekay Vessel together with a collateral deed of covenants (if applicable), and if such mortgage shows the amount secured, such amount shall be no less than 110% of the Indebtedness (if allowed by applicable law);
10.1.2
a first priority deed of assignment of the Insurances, Earnings, Charter Rights (if applicable) and Requisition Compensation of each Teekay Vessel from the relevant Collateral Owner and, where applicable, the relevant Head Charterer, including (in the case of the Head Charterer) an agreement whereby its interests under the relevant Head Charter are subordinated to the interests of the Finance Parties under the relevant Mortgage; additionally, in the case of each Teekay Vessel which is employed pursuant to a Charter which contains a prohibition of the assignment of the Charter Rights under that Charter, an assignment of the Charter Rights in respect of such Charter shall be executed and delivered to the Agent only upon obtaining of the relevant Charterer's consent to such

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an assignment, which the Borrower's Group (using reasonable efforts and acting promptly) shall seek to obtain;
10.1.3
an irrevocable and unconditional, joint and several on demand guarantee and indemnity from each Guarantor, equal to the Loan plus interest and costs (save for the guarantee and indemnity from Grand Banks which shall be limited in recourse to the value of the security given in respect of such guarantee and indemnity (namely, the mortgage and collateral deed of covenants in respect of the relevant Collateral Vessel and the ancillary assignment of insurances, earnings and requisition compensation));
10.1.4
a first priority pledge of all the membership interests or shares (as the case may be) in each Teekay Owner (except for TNOL and Grand Banks);
10.1.5
a negative pledge from Teekay Offshore Operating Pte. Ltd. in respect of all its shareholding in TNOL;
10.1.6
a first priority account security deed in respect of each Earnings Account and all amounts from time to time standing to the credit of such Earnings Account;
10.1.7
a first priority pledge of the Receivable Rights from each JV Partner;
10.1.8
at any time when the Approved Managers of a Teekay Vessel are not the Borrower or any other member of the TOO Group or the Teekay Group, a Managers' Confirmation;
10.1.9
a negative pledge from each JV Partner undertaking that it will not vote in favour of the creation or subsistence by a JV Owner of any Encumbrance over all or any parts of its assets (including, but not limited to, any insurances and earnings) or undertakings (other than Permitted Encumbrances) nor dispose of any of those assets or of all or part of that undertaking; and
10.1.10
a first priority deed of charge over the Master Agreement Proceeds in respect of each Master Agreement.
10.2
Earnings Accounts The Borrower shall procure that each Earnings Account shall be maintained with the Account Holder for the duration of the Facility Period free of Encumbrances and rights of set off other than those created by or under the Finance Documents.
10.3
Earnings The Borrower shall procure that all Earnings and any Requisition Compensation are credited to the relevant Earnings Account.
10.4
Withdrawals from Earnings Accounts It is agreed that the Vessel Owners may freely withdraw any sum standing to the credit of any Earnings Account other than where an Event of Default has occurred and is continuing (when no withdrawals may be made).
10.5
Relocation of Earnings Account On and at any time after the occurrence of an Event of Default which is continuing, the Agent may without the consent of the Borrower or the Vessel Owners instruct the Account Holder to relocate the Earnings Accounts to any other branch of the Account Holder, without prejudice to the continued application of this Clause 10 and the rights of the Finance Parties under the Finance Documents. The Agent shall promptly notify the Finance Parties following a relocation of any of the Earnings Accounts pursuant to this Clause.
10.6
Access to information The Borrower agrees that the Agent (and its nominees) may from time to time during the Facility Period upon reasonable prior request review the records held by the Account Holder (whether in written or electronic form) in relation to the Earnings Accounts, and irrevocably waives any right of confidentiality which may exist in relation to those records.

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10.7
Application after acceleration From and after the giving of notice to the Borrower by the Agent under Clause 13.2, the Borrower shall procure that all sums from time to time standing to the credit of the Earnings Accounts are immediately transferred to the Agent for application in accordance with Clause 10.8 and the Borrower irrevocably authorises the Agent to instruct the Account Holder to make those transfers.
10.8
General application of moneys Whilst an Event of Default is continuing unremedied and unwaived the Borrower irrevocably authorises the Agent to apply (and the Agent agrees to apply) all sums which it may receive under or in connection with any Security Document, in or towards satisfaction, or by way of retention on account, of the Indebtedness, as follows:
10.8.1
first in payment of all outstanding amounts (including, but not limited to, outstanding fees and expenses) payable to the Agent;
10.8.2
secondly in or towards payment of all outstanding interest hereunder;
10.8.3
thirdly in or towards payment of all outstanding principal hereunder;
10.8.4
fourthly in or towards payment of all other Indebtedness hereunder;
10.8.5
fifthly in or towards payment of all Master Agreement Liabilities;
10.8.6
sixthly the balance, if any, shall be remitted to the Borrower or whoever may be entitled thereto.
10.9
Additional security If at any time (a) the aggregate of (i) the full Fair Market Value of each Teekay Vessel, (ii) the Relevant Percentage of the Fair Market Value of each JV Vessel and (iii) the value of any additional security (such value to be the face amount of the deposit (in the case of cash), determined conclusively by appropriate advisers appointed by the Agent, acting on the instructions of the Majority Lenders (in the case of other charged assets), and determined by the Agent, acting reasonably (in all other cases)) for the time being provided to the Agent under this Clause 10.9 is less than one hundred and twenty five per cent (125%) of the amount of the Loan then outstanding or (b) the aggregate of (i) the full Fair Market Value of each Collateral Vessel (excluding the JV Vessels as long as they are indirectly partly owned by the Borrower) and (ii) the value of any additional security (such value to be the face amount of the deposit (in the case of cash), determined conclusively by appropriate advisers appointed by the Agent, acting on the instructions of the Majority Lenders (in the case of other charged assets), and determined by the Agent acting reasonably (in all other cases)) for the time being provided to the Agent under this Clause 10.9 is less than one hundred and ten per cent (110%) of the amount of the Loan then outstanding ((a) and (b) referred to as the " VTL Coverage "), the Borrower shall, within thirty (30) days of the Agent's request, at the Borrower's option:
10.9.1
pay to the Agent or to its nominee a cash deposit in the amount of the shortfall (as determined in accordance with Clause 10.9(a) or 10.9(b)) to be secured in favour of the Agent as additional security for the payment of the Indebtedness; or
10.9.2
give to the Agent other additional security in amount and form acceptable to the Agent (acting on the instructions of the Majority Lenders); or
10.9.3
prepay the Loan in the amount of the shortfall (as determined in accordance with Clause 10.9(a) or Clause 10.9(b)).
Clause 6.9 shall apply, mutatis mutandis , to any prepayment made under this Clause 10.9 and the value of any additional security provided shall be determined as stated above.
For the avoidance of doubt, the Agent shall carry out the calculations and determinations required under this Clause 10.9 reasonably promptly following receipt of the Valuations pursuant to Clause 12.1.36 and any Cure Amount standing to the credit of the Cash Cure Account shall not be included in the relevant calculations.

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If, at any time, after the Borrower has provided additional security in accordance with the Agent's request under this Clause 10.9, the Agent shall determine when testing compliance with the VTL Coverage that all or any part of that additional security may be released without resulting in a shortfall in the VTL Coverage, then, provided that no Default is continuing , the Agent shall (at the request and cost of the Borrowers) effect a release of all or any relevant part of that additional security, but this shall be without prejudice to the Agent's right to make a further request under this Clause 10.9 should the value of the remaining security subsequently merit it.
11
Representations and Warranties
The Borrower represents and warrants to each of the Finance Parties at the Execution Date and (by reference to the facts and circumstances then pertaining) at the date of each Drawdown Notice, at each Drawdown Date and at each Interest Payment Date as follows (except that the representation and warranty contained at Clause 11.7 shall only be made on the Execution Date and the First Drawdown Date and the representations and warranties at Clause 11.2, Clause 11.6 and Clause 11.22 shall only be made on the Execution Date):
11.1
Status and Due Authorisation Each of the Security Parties is a limited partnership, corporation or limited liability company duly incorporated or formed under the laws of its jurisdiction of incorporation or formation (as the case may be) with power to enter into the Finance Documents and to exercise its rights and perform its obligations under the Finance Documents and all corporate and other action required to authorise its execution of the Finance Documents and its performance of its obligations thereunder has been duly taken.
11.2
No Deductions or Withholding Under the laws of the Security Parties' respective jurisdictions of incorporation or formation in force at the date hereof, none of the Security Parties will be required to make any deduction or withholding from any payment it may make under any of the Finance Documents.
11.3
Claims Pari Passu Under the laws of the Security Parties' respective jurisdictions of incorporation or formation in force at the date hereof, the Indebtedness will, to the extent that it exceeds the realised value of any security granted in respect of the Indebtedness, rank at least pari passu with all the Security Parties' other unsecured indebtedness save that which is preferred solely by any bankruptcy, insolvency or other similar laws of general application.
11.4
No Immunity In any proceedings taken in any of the Security Parties' respective jurisdictions of incorporation or formation in relation to any of the Finance Documents, none of the Security Parties will be entitled to claim for itself or any of its assets immunity from suit, execution, attachment or other legal process.
11.5
Governing Law and Judgments In any proceedings taken in any of the Security Parties' jurisdiction of incorporation or formation in relation to any of the Finance Documents in which there is an express choice of the law of a particular country as the governing law thereof, that choice of law and any judgment or (if applicable) arbitral award obtained in that country will be recognised and enforced.
11.6
Validity and Admissibility in Evidence As at the date hereof, all acts, conditions and things required to be done, fulfilled and performed in order (a) to enable each of the Security Parties lawfully to enter into, exercise its rights under and perform and comply with the obligations expressed to be assumed by it in the Finance Documents, (b) to ensure that the obligations expressed to be assumed by each of the Security Parties in the Finance Documents are legal, valid and binding and (c) to make the Finance Documents admissible in evidence in the jurisdictions of incorporation or formation of each of the Security Parties, have been done, fulfilled and performed.
11.7
No Filing or Stamp Taxes Under the laws of the Security Parties' respective jurisdictions of incorporation or formation in force at the date hereof, it is not necessary that any of the Finance Documents be filed, recorded or enrolled with any court or other authority in its jurisdiction of incorporation or formation (other than the relevant maritime registry, to the extent applicable) or that any stamp, registration or similar tax be paid on or in relation to any of the Finance Documents.

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11.8
Binding Obligations The obligations expressed to be assumed by each of the Security Parties in the Finance Documents are legal and valid obligations, binding on each of them in accordance with the terms of the Finance Documents and no limit on any of their powers will be exceeded as a result of the borrowings, granting of security or giving of guarantees contemplated by the Finance Documents or the performance by any of them of any of their obligations thereunder.
11.9
No misleading information To the best of its knowledge, any factual information provided by any Security Party to any Finance Party in connection with the Loan was true and accurate in all material respects as at the date it was provided and is not misleading in any respect.
11.10
No Winding-up None of the Security Parties has taken any corporate, limited partnership or limited liability company action nor have any other steps been taken or legal proceedings been started or (to the best of the Borrower's knowledge and belief) threatened against any Security Party for its winding-up, dissolution, administration or reorganisation or for the appointment of a receiver, administrator, administrative receiver, trustee or similar officer of it or of any or all of its assets or revenues which might have a Material Adverse Effect.
11.11
Solvency
11.11.1
None of the Security Parties nor the Borrower Group taken as a whole is unable, or admits or has admitted its inability, to pay its debts or has suspended making payments in respect of any of its debts.
11.11.2
None of the Security Parties by reason of actual or anticipated financial difficulties, has commenced, or intends to commence, negotiations with one or more of its creditors with a view to rescheduling any of its indebtedness.
11.11.3
The value of the assets of each Security Party and the Borrower Group taken as a whole is not less than the liabilities of such entity or the Borrower Group taken as a whole (as the case may be) (taking into account contingent and prospective liabilities).
11.11.4
No moratorium has been, or may, in the reasonably foreseeable future be, declared in respect of any indebtedness of any Security Party (unless otherwise agreed by the Agent acting on the instructions of all Lenders).
11.12
No Material Defaults
11.12.1
Without prejudice to Clause 11.12.2, none of the Security Parties are in breach of or in default under any agreement to which it is a party or which is binding on it or any of its assets to an extent or in a manner which might have a Material Adverse Effect.
11.12.2
No Event of Default is continuing or might reasonably be expected to result from the advance of the Loan.
11.13
No Material Proceedings No action or administrative proceeding of or before any court, arbitral body or agency which is not covered by adequate insurance or which might have a Material Adverse Effect has been started or is reasonably likely to be started.
11.14
Accounts All financial statements relating to the Borrower required to be delivered under Clause 12.1 and Clause 12.1.3, were each prepared in accordance with GAAP, give (in conjunction with the notes thereto) a true and fair view of (in the case of annual financial statements) or fairly represent (in the case of quarterly accounts) the financial condition of the Borrower and its Subsidiaries at the date as of which they were prepared and the results of their operations during the financial period then ended.

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11.15
No Material Adverse Change Since the publication of the last financial statements relating to the Borrower and its Subsidiaries delivered pursuant to Clause 12.1 and Clause 12.1.3, there has been no change that has a Material Adverse Effect.
11.16
No Undisclosed Liabilities As at the date to which the Accounts were prepared none of the Security Parties had any material liabilities (contingent or otherwise) which were not disclosed thereby (or by the notes thereto) or reserved against therein nor any unrealised or anticipated losses arising from commitments entered into by it which were not so disclosed or reserved against therein.
11.17
No Obligation to Create Security The execution of the Finance Documents by the Security Parties and their exercise of their rights and performance of their obligations thereunder will not result in the existence of nor oblige any Security Party to create any Encumbrance over all or any of their present or future revenues or assets, other than pursuant to the Security Documents.
11.18
No Breach The execution of the Finance Documents by each of the Security Parties and their exercise of their rights and performance of their obligations under any of the Finance Documents do not constitute and will not result in any breach of any agreement or treaty to which any of them is a party.
11.19
Security Each of the Security Parties is the legal and beneficial owner of all assets and other property which it purports to charge, mortgage, pledge, assign or otherwise secure pursuant to each Security Document and those Security Documents to which it is a party create and give rise to valid and effective security having the ranking expressed in those Security Documents.
11.20
Necessary Authorisations The Necessary Authorisations required by each Security Party are in full force and effect, and each Security Party is in compliance with the material provisions of each such Necessary Authorisation relating to it and, to the best of its knowledge, none of the Necessary Authorisations relating to it are the subject of any pending or threatened proceedings or revocation.
11.21
Money Laundering Any amount borrowed hereunder, and the performance of the obligations of the Security Parties under the Finance Documents, will be for the account of members of the Borrower Group and will not involve any breach by any of them of any law or regulatory measure relating to "money laundering" as defined in Article 1 of the Directive ((EU) 2015/849) of the European Parliament and of the Council of the European Communities and comparable US federal and state laws implemented to combat "money laundering", including but not limited to, the Patriot Act and the Bank Secrecy Act.
11.22
Disclosure of material facts The Borrower is not aware of any material facts or circumstances which have not been disclosed to the Agent and which might, if disclosed, have reasonably been expected to adversely affect the decision of a person considering whether or not to make loan facilities of the nature contemplated by this Agreement available to the Borrower.
11.23
No breach of laws
11.23.1
None of the Security Parties has breached any law or regulation which breach has or is reasonably likely to have a Material Adverse Effect.
11.23.2
No labour disputes are current or (to the best of the Borrower's knowledge and belief) threatened against any member of the Borrower Group which have or are reasonably likely to have a Material Adverse Effect.
11.24
Anti-money laundering, anti-corruption and anti-bribery laws None of the Security Parties nor any of their Subsidiaries, directors or officers, or, to the best knowledge of any Security Party, any Affiliate of it, has engaged in any activity or conduct which would violate any applicable anti-bribery, anti-corruption or anti-money laundering laws, regulations or rules in any applicable jurisdiction.

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11.25
Environmental laws
11.25.1
Each member of the Borrower Group is in compliance with Clause 12.1.10 and (to the best of its knowledge and belief) no circumstances have occurred which would prevent such compliance in a manner or to an extent which has or is reasonably likely to have a Material Adverse Effect.
11.25.2
No Environmental Claim has been commenced or (to the best of the Borrower's knowledge and belief) is threatened against any member of the Borrower Group where that claim has or is reasonably likely, if determined against that member of the Borrower Group, to have a Material Adverse Effect.
11.26
Use of Facility The Loan will be used for the purposes specified in the Recital.
11.27
Taxation
11.27.1
The Borrower is not materially overdue in the filing of any Tax returns and it is not overdue in the payment of any amount in respect of Tax of $5,000,000 (or its equivalent in any other currency) or more, save in the case of Taxes which are being contested on bona fide grounds.
11.27.2
No claims or investigations are being made or conducted against the Borrower with respect to Taxes such that a liability of, or claim against, the Borrower of $5,000,000 (or its equivalent in any other currency) or more is reasonably likely to arise.
11.28
Shares
The shares or membership interests (as the case may be) of each Teekay Owner are fully paid and not subject to any option to purchase or similar rights. The constitutional documents of each Teekay Owner (other than TNOL) do not and could not restrict or inhibit any transfer of those shares on creation or enforcement of the Security Documents. There are no agreements in force which provide for the issue or allotment of, or grant any person the right to call for the issue or allotment of, any share or loan capital of any Teekay Owner (other than TNOL) (including any option or right of pre-emption or conversion).
11.29
Sanctions
11.29.1
No Security Party, nor any Affiliate of any Security Party nor any of their respective directors, officers or employees:
(a)
is a Restricted Party; or
(b)
has received notice of or is aware of any claim, action, suit, proceeding or investigation against it with respect to Sanctions by any Sanctions Authority.
11.29.2
No Collateral Vessel is a vessel with which any Finance Party is prohibited or restricted from dealing with under any Sanctions.
11.29.3
Each of the Security Parties is in compliance with all Sanctions.
11.30
Representations Limited The representation and warranties of the Borrower in this Clause 11 are subject to:
11.30.1
the principle that equitable remedies are remedies which may be granted or refused at the discretion of the court;
11.30.2
the limitation of enforcement by laws relating to bankruptcy, insolvency, liquidation, reorganisation, court schemes, moratoria, administration and other laws generally affecting or limiting the rights of creditors;

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11.30.3
the time barring of claims under any applicable limitation acts;
11.30.4
the possibility that a court may strike out provisions for a contract as being invalid for reasons of oppression, undue influence or similar; and
11.30.5
any other reservations or qualifications of law expressed in any legal opinions obtained by the Agent in connection with the Loan.
12
Undertakings and Covenants
The undertakings and covenants in this Clause 12 remain in force for the duration of the Facility Period.
12.1
General Undertakings
12.1.1
Financial statements The Borrower shall supply to the Agent as soon as the same become available, but in any event within one hundred and fifty (150) days after the end of each of its financial years, its audited consolidated financial statements for that financial year.
12.1.2
Requirements as to financial statements Each set of financial statements delivered by the Borrower under Clause 12.1.1:
(a)
shall be certified by an authorised signatory of the Borrower as fairly representing its financial condition as at the date as at which those financial statements were drawn up; and
(b)
shall be prepared in accordance with GAAP.
12.1.3
Interim financial statements The Borrower shall supply to the Agent as soon as the same become available, but in any event within ninety (90) days after the end of the first, second and third quarter during each of its financial years, its unaudited consolidated quarterly financial statements for that quarter.
12.1.4
Compliance Certificates The Borrower shall supply to the Agent a Compliance Certificate, signed by a duly authorised representative of the Borrower, with each set of its annual financial statements delivered pursuant to Clause 12.1.1 and with each set of its quarterly financial statements delivered pursuant to Clause 12.1.3 which, in each case, shall contain computations as to compliance with Clause 12.2 as at the date the relevant financial statements were drawn up.
12.1.5
Information: miscellaneous The Borrower shall, and shall procure that each of the other Security Parties shall, supply to the Agent:
(a)
promptly upon becoming aware of them, details of any material litigation, arbitration or administrative proceedings which are current, threatened or pending against any Security Party, and which, if adversely determined, are reasonably likely to have a Material Adverse Effect;
(b)
promptly, details of any capture, seizure, arrest, confiscation or detention of any Collateral Vessel which remains in existence five (5) Business Days after the initial capture, seizure, arrest, confiscation or detention (as the case may be); and
(c)
promptly, such further information regarding the financial condition, business and operations of any Security Party as the Agent may reasonably request.
12.1.6
Maintenance of Legal Validity The Borrower shall, and shall procure that each of the other Security Parties shall, comply with the terms of and do all that is necessary to maintain in full force and effect all Authorisations required in or by the laws and regulations of its jurisdiction of formation or incorporation and all other applicable jurisdictions, to enable it lawfully to enter into and perform

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its obligations under the Security Documents and to ensure the legality, validity, enforceability or admissibility in evidence of the Security Documents in its jurisdiction of incorporation, formation or organisation and all other applicable jurisdictions.
12.1.7
Notification of Default The Borrower shall promptly, upon becoming aware of the same, inform the Agent in writing of the occurrence of any Event of Default and, upon receipt of a written request to that effect from the Agent, confirm to the Agent that, save as previously notified to the Agent or as notified in such confirmation, no Event of Default has occurred.
12.1.8
Claims Pari Passu The Borrower shall, and shall procure that each of the other Security Parties shall, ensure that at all times the claims of the Finance Parties against it under the Security Documents rank at least pari passu with the claims of all its other unsecured creditors save those whose claims are preferred by any bankruptcy, insolvency, liquidation, winding-up or other similar laws of general application.
12.1.9
Necessary Authorisations Without prejudice to any specific provision of the Security Documents relating to an Authorisation, the Borrower shall, and shall procure that each of the other Security Parties shall, (i) obtain, comply with and do all that is necessary to maintain in full force and effect all Necessary Authorisations if a failure to do the same may cause a Material Adverse Effect; and (ii) promptly upon request, supply certified copies to the Agent of all Necessary Authorisations.
12.1.10
Compliance with Applicable Laws The Borrower shall, and shall procure that each of the other Security Parties shall, comply with all applicable laws, including Environmental Laws, to which it may be subject (except as regards Sanctions to which Clause 12.1.11 applies, and anti-corruption, anti-money laundering and anti-bribery laws to which Clause 12.1.12 applies) if a failure to do the same may have a Material Adverse Effect.
12.1.11
Sanctions
(a)
The Borrower shall, and shall procure that each of the other Security Parties shall, ensure that no part of the proceeds of the Loan or other transaction(s) contemplated by any Finance Document shall, directly or indirectly, be lent, contributed, used or otherwise made available:
(i)
to fund any trade, business or other activity of, with or involving any Restricted Party or any country or territory that at the time of such funding, is a Sanctioned Country;
(ii)
for the direct or indirect benefit of any Restricted Party;
(iii)
in a manner that would reasonably be expected to result in any Security Party being in breach of any Sanctions (if and to the extent applicable to either of them) or becoming a Restricted Party; or
(iv)
in any other manner that would result, or would reasonably be expected to result, in any party to the Finance Documents (other than the Security Parties) or any Affiliate of such party or any other person (including any person participating in the Loan hereunder, whether as lender, swap provider, facility or security agent or otherwise) being party to or which benefits from any Finance Document being in breach of any Sanctions (if and to the extent applicable to either of them) or becoming a Restricted Party.
(b)
The Borrower shall, and shall procure that each of the other Security Parties shall, ensure that its assets, the assets subject to Security Documents or the Collateral Vessels shall not be used directly or indirectly:

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(i)
by or for the direct or indirect benefit of any Restricted Party; or
(ii)
in any trade which is prohibited under applicable Sanctions or which could expose any Security Party, its assets, any asset subject to the Security Documents, the Collateral Vessels, any Finance Party, any other person being party to or which benefits from any Finance Document or any Approved Managers to enforcement proceedings or any other consequences whatsoever arising from Sanctions (including, in the case of the Insurances, the triggering of the operation of any sanctions limitation or exclusion clause (or similar provision)).
(c)
Neither the Loan nor any part thereof shall be repaid or prepaid (i) out of proceeds from funds or assets that constitute property of, or that are beneficially owned directly or indirectly by, any Restricted Party, is obtained or derived from transactions with or relating to any Restricted Party or transactions in violation of Sanctions or (ii) in any manner that would cause any Finance Party to be in violation of Sanctions.
(d)
The Borrower shall promptly, upon becoming aware of the same, inform the Agent in writing if it or any Security Party is in breach of any Sanctions and of any proceedings or investigations initiated by any relevant Sanctions Authority against any Security Party or any of its Subsidiaries.
12.1.12
Anti-money laundering, anti-corruption and anti-bribery laws
The Borrower shall, and shall procure that each of the Security Parties shall, conduct its business in compliance with applicable anti-money laundering, anti-corruption and anti-bribery laws.
12.1.13
Environmental compliance
The Borrower shall, and shall procure that each of the Security Parties will:
(a)
comply with all Environmental Laws;
(b)
obtain, maintain and ensure compliance with all requisite Environmental Approvals;
(c)
implement procedures to monitor compliance with and to prevent liability under any Environmental Laws;
(d)
ensure that any Collateral Vessel controlled by it that is intended to be scrapped by its Collateral Owner, is recycled at a recycling yard which conducts its recycling business in a socially and environmentally responsible manner,
where failure to do so has or is reasonably likely to have a Material Adverse Effect.
12.1.14
Environmental claims
The Borrower shall, and shall procure that each of the Security Parties will, promptly upon becoming aware of the same, inform the Agent in writing of:
(a)
any Environmental Claim against any member of the Borrower Group which is current, pending or threatened; and
(b)
any facts or circumstances which are reasonably likely to result in any Environmental Claim being commenced or threatened against any member of the Borrower Group,
where the claim, if determined against that member of the Borrower Group, has or is reasonably likely to have a Material Adverse Effect.

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12.1.15
Taxation
The Borrower shall, and shall procure that each Security Party will, pay and discharge all Taxes imposed upon it or its assets within the time period allowed without incurring penalties unless and only to the extent that:
(a)
such payment is being contested in good faith;
(b)
adequate reserves are being maintained for those Taxes and the costs required to contest them which have been disclosed in its latest financial statements; and
(c)
such payment can be lawfully withheld and failure to pay those Taxes does not have or is not reasonably likely to have a Material Adverse Effect.
12.1.16
Loans or other financial commitments The Borrower shall procure that no Guarantor (other than TNOL, TNHI, Grand Banks and UNS) will make any loan or enter into any guarantee and indemnity or otherwise voluntarily assume any actual or contingent liability in respect of any obligation of any other person except for the Loan, loans made in the ordinary course of business in connection with the chartering, operation or repair of the Collateral Vessels or loans made to other members of the Borrower Group on an unsecured and subordinated basis.
12.1.17
Further Assurance The Borrower shall, and shall procure that each of the other Security Parties shall, at its own expense, promptly take all such action as the Agent may reasonably require for the purpose of perfecting or protecting any Finance Party's rights with respect to the security created or evidenced (or intended to be created or evidenced) by the Security Documents.
12.1.18
Other information The Borrower will, and will procure that each of the other Security Parties will, promptly supply to the Agent such financial information and explanations as the Majority Lenders may from time to time reasonably require and which can be delivered without breach of confidentiality, including the unaudited consolidated annual financial statements of such Security Parties as soon as such financial statements have been drawn up and all documents dispatched by the Borrower to its shareholders or creditors generally.
12.1.19
Inspection of records The Borrower will, and will procure that each other Security Party will, permit the inspection of its financial records and accounts on reasonable prior written notice from time to time during business hours by the Agent or its nominee.
12.1.20
Insurance The Borrower shall procure that all of the assets, operation and liability of the members of the Borrower Group are insured against such risks, liabilities and for amounts as normally adopted by the industry for similar assets and liabilities and, in the case of the Teekay Vessels, in accordance with the terms of the Security Documents.

12.1.21
Merger and Demerger The Borrower shall not, and shall ensure that no other Security Party will, enter into any amalgamation, merger, demerger or corporate restructuring without the prior written consent of all Lenders (such consent not to be unreasonably withheld) save (in the case of the Borrower's merger or de-merger only) where the Borrower is the surviving entity.
12.1.22
Transfer of Assets The Borrower shall not, and shall procure that no other Security Party will, sell or transfer any of its material assets other than:

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(a)
on arm's length terms to third parties where the net proceeds of sale are used as a prepayment hereunder; or
(b)
on arm's length terms to its Affiliates, which are and remain members of the Borrower Group.
For the avoidance of doubt, Clause 12.1.22(a) shall not apply to the sale by any Collateral Owner of a Collateral Vessel aged nineteen (19) years or older.
12.1.23
Change of Business The Borrower shall not, and shall procure that no other Security Party will, without the prior written consent of all Lenders, make any substantial change to the general nature of its shipping business from that carried on at the date of this Agreement.
12.1.24
Acquisitions The Borrower shall procure that no Guarantor (other than TNOL, TNHI, Grand Banks and UNS) will make any acquisition or investment or form any subsidiary without the prior written consent of all Lenders (such consent not to be unreasonably withheld or delayed).
12.1.25
"Know your customer" checks If:
(a)
the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation made after the date of this Agreement;
(b)
any change in the status of the Borrower after the date of this Agreement; or
(c)
a proposed assignment or transfer by a Lender of any of its rights and obligations under this Agreement to a party that is not a Lender prior to such assignment or transfer,
obliges the Agent or any Lender (or, in the case of (c) above, any prospective new Lender) to comply with "know your customer" or similar identification procedures in circumstances where the necessary information is not already available to it, the Borrower shall promptly upon the request of the Agent or any Lender supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Agent (for itself or on behalf of any Lender) or any Lender for itself (or, in the case of (c) above, on behalf of any prospective new Lender) in order for the Agent or that Lender (or, in the case of (c) above, any prospective new Lender) to carry out and be satisfied it has complied with all necessary "know your customer" or other similar checks under all applicable laws and regulations pursuant to the transactions contemplated in the Finance Documents including, without limitation, obtaining, verifying and recording certain information and documentation that will allow the Agent and any Lender to identify each Security Party in accordance with the requirements of the Patriot Act.
12.1.26
No borrowings The Borrower shall procure that no Guarantor (other than TNOL, TNHI, Grand Banks and UNS in respect of the acquisition and financing of any additional vessels as part of a fleet replacement plan or the refinancing of any vessel that is not a Collateral Vessel) shall, incur any liability or obligation except (i) liabilities and obligations under the Finance Documents to which it is a party, (ii) liabilities and obligations reasonably incurred in the ordinary course of business and (iii) Financial Indebtedness owing to Affiliates provided that such Financial Indebtedness is unsecured and subordinated and provided that so long as no Event of Default shall have occurred and be continuing, or would result from the making of any such payment, nothing in this Clause 12.1.26 shall prevent the Borrower or any Guarantor from repaying any such Financial Indebtedness or paying interest on any such Financial Indebtedness.
12.1.27
Negative Pledge The Borrower shall procure that no Guarantor (other than TNOL, TNHI, Grand Banks and UNS in respect of the acquisition and financing of any additional vessels as part of a fleet replacement plan or the refinancing of any vessel that is not a Collateral Vessel) or JV Owner shall create, or permit to subsist, any Encumbrance (other than pursuant to the Security Documents) over all or any part of its assets or undertakings (other than Permitted Encumbrances) nor dispose

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of any of those assets or of all or part of that undertaking other than, in the case of a sale of a Collateral Vessel, where such sale complies with the requirements of Clause 6.4.
12.1.28
Dividends The Borrower shall not, and shall procure that no Guarantor shall, pay any dividends or make other distributions to its shareholders:
(a)
whilst an Event of Default has occurred and is continuing unremedied and unwaived; or
(b)
if, at any relevant time, the following would not be satisfied but for any Cure Amount standing to the credit of the Cash Cure Account being included in the relevant calculation:
(i)
the Borrower does not maintain a DSCR of equal to or greater than 1.25:1; or
(ii)
the Borrower is not in compliance with any of the financial covenants set out at Clause 12.2(a), Clause 12.2(b) or Clause 12.2(d).
12.1.29
Management of Collateral Vessels The Borrower shall ensure that (a) each Teekay Vessel is at all times technically and commercially managed by Approved Managers and (b) at any time that the Approved Managers of the Teekay Vessels are not the Borrower or any other member of the Teekay Group or the TOO Group, such Approved Managers provide a written confirmation confirming that, among other things, following the occurrence of an Event of Default which is continuing unremedied and unwaived, all claims of the Approved Managers against a Teekay Owner shall be subordinated to the claims of the Finance Parties under the Finance Documents. The Borrower shall promptly inform the Agent in writing of any proposed change of an Approved Manager.
12.1.30
Classification The Borrower shall ensure that each Collateral Vessel maintains the highest classification required for the purpose of the relevant trade of such Collateral Vessel which shall be with a Pre-Approved Classification Society, in each case, free from any material overdue recommendations and adverse notations affecting that Collateral Vessel's class.
12.1.31
Certificate of Financial Responsibility The Borrower shall procure that each Collateral Owner shall, if required, obtain and maintain a certificate of financial responsibility in relation to any Collateral Vessel which is to call at the United States of America.
12.1.32
Registration The Borrower shall not change or permit a change to the flag of a Collateral Vessel during the Facility Period other than to a Pre-Approved Flag or such other flag as may be approved by the Agent acting on the instructions of the Majority Lenders, such instructions not to be unreasonably withheld or delayed. It is agreed that bareboat charter (dual) registration in Brazil is approved if required by the charterer of the relevant Collateral Vessel, provided that the primary registration of such Collateral Vessel shall be with either the Bahamas or the Panamanian flag.
12.1.33
ISM and ISPS Compliance The Borrower shall ensure that each ISM Company and ISPS Company complies in all material respects with the ISM Code and the ISPS Code, respectively, or any replacements thereof and in particular (without prejudice to the generality of the foregoing) shall ensure that such company holds (i) a valid and current Document of Compliance issued pursuant to the ISM Code, (ii) a valid and current SMC issued in respect of the relevant Collateral Vessel pursuant to the ISM Code, and (iii) an ISSC in respect of the relevant Collateral Vessel, and the Borrower shall promptly, upon request, supply the Agent with copies of the same.
12.1.34
Maintenance The Borrower shall ensure that each of the Collateral Vessels shall be maintained in good and safe condition and with all registered surveys carried out when due.

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12.1.35
Chartering The Borrower shall procure that no Teekay Owner (other than TNOL, TNHI, Grand Banks and UNS in respect of taking any vessel on charter or other contract of employment (or agreeing to do so) in replacement or substitution (on a temporary basis) of owned vessels which become unavailable by reason of drydocking, repairs or other temporary non-availability of such vessels arising in the ordinary course of business) shall, during the Facility Period, without the prior written consent of the Agent (acting on the instructions of all Lenders), take any vessel on charter or other contract of employment (or agree to do so) from any party outside the Teekay Group.
12.1.36
Valuations The Borrower will deliver to the Agent Valuations (in accordance with the definition of, and sufficient to establish, Fair Market Value) of each Collateral Vessel (a) in April and October in each calendar year starting in April 2018, (b) following the occurrence of an Event of Default which is continuing unremedied and unwaived, on such other occasions as the Agent may request (acting on the instructions of the Majority Lenders) and (c) on such other occasions as the Agent may reasonably request (acting on the instructions of the Majority Lenders). Unless otherwise stated specifically, such Valuations shall be dated no earlier than thirty (30) days prior to the date on which they are to be delivered to the Agent in accordance with this Clause and shall be at the cost of the Borrower (except in the case of (c) above).
12.1.37
Charters The Borrower shall from time to time during the Facility Period (i) promptly inform the Agent if a Teekay Owner and/or a Head Charterer lets, or agrees to let, its Teekay Vessel on a Charter and, subject always to the provisions of Clause 10.1.2, (ii) procure that within twenty (20) days of the Teekay Vessel in question being delivered under the relevant Charter the relevant Teekay Owner and/or Head Charterer provides the Agent with an assignment of the related Charter Rights together with any notice of assignment thereto required by the Agent and that the relevant Teekay Owner and/or Head Charterer uses its commercial best efforts (except in the case of a Petrobras Charter where it is agreed that the relevant Teekay Owner or Head Charterer shall have an obligation to use its reasonable efforts) to obtain any acknowledgement of such notice of assignment required by the Agent (each such assignment and acknowledgment being substantially in such form as previously agreed between the Borrower and the Agent).
12.1.38
Master Agreement Proceeds Charges Unless already signed and delivered pursuant to Clause 3.1 or Clause 3.3, upon execution and delivery of each Master Agreement, the Borrower shall execute and deliver to the Agent a Master Agreement Proceeds Charge in respect of that Master Agreement.
12.1.39
No dealings with Master Agreements Except as otherwise contemplated in the Finance Documents, the Borrower shall not assign, novate or encumber or in any other way transfer any of its rights or obligations under a Master Agreement, nor enter into any interest rate exchange or hedging agreement with anyone other than a Swap Provider.
12.2
Financial covenants
Throughout the Facility Period (but, in the case of Clause 12.2(c) only, with the first test date being at the first quarter end after the date falling twelve (12) months after the First Drawdown Date and thereafter tested quarterly) the Borrower shall:
(a)
maintain Free Liquidity and Available Credit Lines of (in aggregate) not less than thirty five million Dollars ($35,000,000);
(b)
ensure that the aggregate of Free Liquidity and Available Credit Lines will not be less than five per cent (5%) of the Total Debt;

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(c)
maintain a ratio of twelve (12) months historical EBITDA relative to the aggregate of total interest expense related to senior debt, junior debt and preferred equity and instalments for a similar period (" DSCR ") to be minimum 1.20x; and
(d)
maintain a Net Debt to Total Capitalisation Ratio of no more than seventy five per cent (75%);
provided that following any change in the applicable accounting policies for the Borrower from GAAP the Agent (acting on the instructions of the Majority Lenders and in consultation with the Borrower) may require an amendment to this Clause 12.2 as the Agent deems logical and necessary having regard to the nature of such changes in policy and the intended substance of this Clause 12.2.
If the Borrower believes that on the next date that it shall supply to the Agent a Compliance Certificate pursuant to Clause 12.1.4 (the " Test Date ") it will fail to comply with any of the financial covenants set out in this Clause 12.2, and the Borrower receives cash proceeds from any person (other than a member of the Borrower Group) in the form of a cash deposit to which it has immediate and unrestricted access in the amount of any shortfall (the " Cure Amount "), deposited in an account of the Borrower held with the Agent and charged in favour of the Agent (the " Cash Cure Account "), by no later than the Test Date, then the computations as to compliance with Clause 12.2 shall, at the Borrower's request, include the Cure Amount. This is subject to, and conditional upon, the Agent having received all such documentation or other evidence reasonably requested by the Agent in order for each Finance Party to comply with all necessary "know your customer" or similar identification procedures in relation to the party that has provided the Cure Amount.
If, on any following Test Date, the Borrower serves a Compliance Certificate evidencing that all or any part of the Cure Amount is no longer required in order to ensure compliance with any of the financial covenants set out at Clause 12.2, then, provided that no Default is continuing, the Borrower shall be free to withdraw all or any relevant part of the Cure Amount from the Cash Cure Account.
Following the occurrence of an Event of Default which is continuing the Borrower shall no longer be entitled to make any withdrawals from the Cash Cure Account in accordance with the provisions of this Clause 12.2 and any Cure Amount standing to the credit of the Cash Cure Account at that time may (or shall upon the instructions of the Majority Lenders) be applied by the Agent in accordance with Clause 10.8.
13
Events of Default
13.1
Events of Default Each of the events or circumstances set out in this Clause 13.1 is an Event of Default.
13.1.1
Borrower's Failure to pay under this Agreement The Borrower fails to pay any amount due from it under this Agreement at the time, in the currency and otherwise in the manner specified herein provided that, if the Borrower can demonstrate to the reasonable satisfaction of the Agent that all necessary instructions were given to effect such payment and the non-receipt thereof is attributable solely to an administrative or technical error by the Agent or an error in the banking system or a Disruption Event, such payment shall instead be deemed to be due, solely for the purposes of this paragraph, within three (3) Business Days of the date on which it actually fell due under this Agreement; or
13.1.2
Misrepresentation Any representation or statement made by any Security Party in any Finance Document to which it is a party or in any notice or other document, certificate or statement delivered by it pursuant thereto or in connection therewith is or proves to have been incorrect or misleading in any material respect, where the circumstances causing the same give rise to a Material Adverse Effect; or
13.1.3
Specific Covenants A Security Party fails duly to perform or comply with any of the obligations expressed to be assumed by or procured by the Borrower under Clauses 6.4, 6.5, 6.6, 6.7, 10.9, 12.1.6, 12.1.11, 12.1.20, 12.1.26, 12.1.27, 12.1.32 or 12.2; or

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13.1.4
Other Obligations A Security Party fails duly to perform or comply with any of the obligations expressed to be assumed by it in any Finance Document (other than those referred to in Clause 13.1.3) and such failure is not remedied within 30 days after the earlier of (i) the Agent having given notice thereof to the Borrower, and (ii) the Borrower becoming aware of such Default; or
13.1.5
Cross Default Any Financial Indebtedness of any Security Party is not paid when due (or within any applicable grace period) or any Financial Indebtedness of any Security Party is declared, or is capable of being declared, to be or otherwise becomes due and payable prior to its specified maturity where (in either case) the aggregate of all such unpaid or accelerated indebtedness (i) of the Borrower is equal to or greater than twenty five million Dollars ($25,000,000) or its equivalent in any other currency; or (ii) of TNOL and each JV Guarantor is equal to or greater than ten million Dollars ($10,000,000) or its equivalent in any other currency; or (iii) of any other Security Party is equal to or greater than five million Dollars ($5,000,000) or its equivalent in any other currency; or
13.1.6
Insolvency and Rescheduling A Security Party is unable to pay its debts as they fall due, commences negotiations with any one or more of its creditors with a view to the general readjustment or rescheduling of its indebtedness or makes a general assignment for the benefit of its creditors or a composition with its creditors; or
13.1.7
Winding-up A Security Party files for initiation of formal restructuring proceedings, is wound up or declared bankrupt or takes any corporate action or other steps are taken or legal proceedings are started for its winding‑up, dissolution, administration or re‑organisation or for the appointment of a liquidator, receiver, administrator, administrative receiver, conservator, custodian, trustee or similar officer of it or of any or all of its revenues or assets or any moratorium is declared or sought in respect of any of its indebtedness; or
13.1.8
Execution or Distress
(a)
Any Security Party fails to comply with or pay any sum due from it (within 30 days of such amount falling due) under any final judgment or any final order made or given by any court or other official body of a competent jurisdiction in an aggregate (i) in respect of the Borrower equal to or greater than twenty five million Dollars ($25,000,000) or its equivalent in any other currency; or (ii) of TNOL and each JV Guarantor is equal to or greater than ten million Dollars ($10,000,000) or its equivalent in any other currency; or (iii) in respect of any other Security Party equal to or greater than five million Dollars ($5,000,000) or its equivalent in any other currency, being a judgment or order against which there is no right of appeal or if a right of appeal exists, where the time limit for making such appeal has expired.
(b)
Any execution or distress is levied against, or an encumbrancer takes possession of, the whole or any part of, the property, undertaking or assets of a Security Party in an aggregate amount (i) in respect of the Borrower equal to or greater than twenty five million Dollars ($25,000,000) or its equivalent in any other currency; or (ii) of TNOL and each JV Guarantor is equal to or greater than ten million Dollars ($10,000,000) or its equivalent in any other currency; or (iii) in respect of any other Security Party equal to or greater than five million Dollars ($5,000,000) or its equivalent in any other currency, other than any execution or distress which is being contested in good faith and which is either discharged within 30 days or in respect of which adequate security has been provided within 30 days to the relevant court or other authority to enable the relevant execution or distress to be lifted or released; or
13.1.9
Similar Event Any event occurs which, under the laws of any jurisdiction, has a similar or analogous effect to any of those events mentioned in Clauses 13.1.6, 13.1.7 or 13.1.8; or

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13.1.10
Repudiation Any Security Party repudiates any Finance Document to which it is a party or does or causes to be done any act or thing evidencing an intention to repudiate any such Finance Document; or
13.1.11
Validity and Admissibility At any time any act, condition or thing required to be done, fulfilled or performed in order:
(a)
to enable any Security Party lawfully to enter into, exercise its rights under and perform the respective obligations expressed to be assumed by it in the Finance Documents;
(b)
to ensure that the obligations expressed to be assumed by each of the Security Parties in the Finance Documents are legal, valid and binding; or
(c)
to make the Finance Documents admissible in evidence in any applicable jurisdiction
is not done, fulfilled or performed within 30 days after notification from the Agent to the relevant Security Party requiring the same to be done, fulfilled or performed; or
13.1.12
Illegality At any time it is or becomes unlawful for any Security Party to perform or comply with any or all of its obligations under the Finance Documents to which it is a party or any of the obligations of the Borrower hereunder are not or cease to be legal, valid and binding and such illegality is not remedied or mitigated to the satisfaction of the Agent within thirty (30) days after it has given notice thereof to the relevant Security Party; or
13.1.13
Material Adverse Change At any time there shall occur any event or change which has a Material Adverse Effect in respect of any Security Party and such event or change, if capable of remedy, is not so remedied within 30 days of the delivery of a notice confirming such event or change by the Agent to the relevant Security Party; or
13.1.14
Conditions Subsequent If any of the conditions set out in Clause 3.7 is not satisfied within thirty (30) days or such other time period specified by the Agent in its discretion; or
13.1.15
Revocation or Modification of consents etc. If any Necessary Authorisation which is now or which at any time during the Facility Period becomes necessary to enable any of the Security Parties to comply with any of their obligations in or pursuant to any of the Finance Documents is revoked, withdrawn or withheld, or modified in a manner which the Agent reasonably considers is, or may be, prejudicial to the interests of a Finance Party in a material manner, or if such Necessary Authorisation ceases to remain in full force and effect; or
13.1.16
Cessation of Business The Borrower ceases, or threatens to cease, to carry on all or a substantial part of its business; or
13.1.17
Curtailment of Business If the business of the Borrower is wholly or materially curtailed by any intervention by or under authority of any government, or if all or a substantial part of the undertaking, property or assets of the Borrower is seized, nationalised, expropriated or compulsorily acquired by or under authority of any government or the Borrower disposes or threatens to dispose of a substantial part of its business or assets; or
13.1.18
Reduction of Capital If the Borrower reduces its committed or subscribed capital; or
13.1.19
Notice of Termination If any Guarantor gives notice to the Agent to determine its obligations under its Guarantee; or
13.1.20
Environmental Matters

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(a)
Any Environmental Claim is pending or made against a Collateral Owner or a Head Charterer or in connection with a Collateral Vessel, where such Environmental Claim has a Material Adverse Effect.
(b)
Any actual Environmental Incident occurs in connection with a Vessel, where such Environmental Incident has a Material Adverse Effect; or
13.1.21
Loss of Property All or a substantial part of the business or assets of any Security Party is destroyed, abandoned, seized, appropriated or forfeited for any reason, and such occurrence in the reasonable opinion of the Agent (acting on the instructions of the Majority Lenders) has or could reasonably be expected to have a Material Adverse Effect; or
13.1.22
Arrest of Collateral Vessel Any capture, seizure, arrest, confiscation, detention or similar proceeding is commenced against any Collateral Vessel in any jurisdiction and such Collateral Vessel is not released within thirty (30) Business Days from such capture, seizure, arrest, confiscation, detention or similar proceedings being commenced; or
13.1.23
Master Agreement termination A notice is given by a Swap Provider under section 6(a) of any Master Agreement, or by any person under section 6(b)(iv) of any Master Agreement, in either case designating an Early Termination Date for the purpose of that Master Agreement, or any Master Agreement is for any other reason terminated, cancelled, suspended, rescinded, revoked or otherwise ceases to remain in full force and effect.
13.2
Acceleration If an Event of Default is continuing unremedied and unwaived the Agent may (with the consent of the Majority Lenders) and shall (at the request of the Majority Lenders) by notice to the Borrower cancel any part of the Maximum Amount not then advanced and:
13.2.1
declare that the Loan, together with accrued interest, and all other amounts accrued or outstanding under the Finance Documents are immediately due and payable, whereupon they shall become immediately due and payable; and/or
13.2.2
declare that the Loan is payable on demand, whereupon they shall immediately become payable on demand by the Agent; and/or
13.2.3
declare the Commitments terminated and the Maximum Amount reduced to zero.
14
Assignment and Sub-Participation
14.1
Lenders' rights A Lender (the " Existing Lender ") may assign any of its rights under this Agreement or transfer by novation any of its rights and obligations under this Agreement to any other branch or Affiliate or company controlled by or part of the same group of, that Existing Lender, a trust corporation, fund or another person which is regularly engaged in or established for the purpose of making, purchasing or investing in loans, securities or other financial assets and which is advised by or the assets of which are managed by or serviced by that Existing Lender or to any other Lender (or an Affiliate of another Lender) or (subject to the prior written consent of the Borrower, such consent not to be unreasonably withheld but not to be required at any time after an Event of Default which is continuing unremedied and unwaived) to any other bank, financial institution or institutional lender, or any trust, fund or other entity which is regularly engaged in, or established for the purpose of, making, purchasing or investing in loans, securities or other financial assets (the " New Lender "), and may grant sub-participations in all or any part of its Commitment provided that where any such assignment, transfer or sub-participation relates to only part of a Lender's Commitment, (i) it shall be in an amount of no less than five million Dollars ($5,000,000) and (ii) such assignment, transfer or sub-participation of only part of a Lender's Commitment shall not result in such Lender holding a Commitment of less than five million Dollars ($5,000,000). Where the consent of the Borrower is required, the Borrower shall be deemed to have given its consent if no express refusal is given within five (5) Business Days.

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14.2
Borrower's co-operation The Borrower will co-operate fully with an Existing Lender in connection with any assignment, transfer or sub-participation by that Existing Lender; will execute and procure the execution of such documents as that Existing Lender may require in that connection including, but not limited to, re-executing any Security Documents (if required); and irrevocably authorises any Finance Party to disclose to any proposed assignee, transferee or sub-participant (whether before or after any assignment, transfer or sub-participation and whether or not any assignment, transfer or sub-participation shall take place) all information relating to the Security Parties, the Loan and the Relevant Documents which any Finance Party may in its discretion consider necessary or desirable (subject to any duties of confidentiality applicable to the Lenders generally).
14.3
Rights of assignee Any assignee of an Existing Lender shall (unless limited by the express terms of the assignment) take the full benefit of every provision of the Finance Documents benefiting that Existing Lender provided that an assignment will only be effective on notification by the Agent to that Lender and the assignee that the Agent is satisfied it has complied with all necessary "Know your customer" or other similar checks under all applicable laws and regulations in relation to the assignment to the assignee.
14.4
Transfer Certificates If an Existing Lender wishes to transfer any of its rights and obligations under or pursuant to this Agreement, it may do so by delivering to the Agent a duly completed Transfer Certificate, in which event on the Transfer Date:
14.4.1
to the extent that that Existing Lender seeks to transfer its rights and obligations, the Borrower (on the one hand) and that Existing Lender (on the other) shall be released from all further obligations towards the other;
14.4.2
the Borrower (on the one hand) and the transferee (on the other) shall assume obligations towards the other identical to those released pursuant to Clause 14.4.1; and
14.4.3
the Agent, each of the Lenders and the transferee shall have the same rights and obligations between themselves as they would have had if the transferee had been an original party to this Agreement as a Lender
provided that the Agent shall only be obliged to execute a Transfer Certificate once:
(a)
it is satisfied it has complied with all necessary "know your customer" or other similar checks under all applicable laws and regulations in relation to the transfer to the transferee; and
(b)
the transferee has paid to the Agent for its own account a transfer fee of five thousand Dollars ($5,000).
The Agent shall, as soon as reasonably practicable after it has executed a Transfer Certificate, send to the Borrower and the Lenders a copy of that Transfer Certificate.
14.4.4
If:
(a)
a Lender assigns or transfers any of its rights or obligations under the Finance Documents or changes its Facility Office; and
(b)
as a result of circumstances existing at the date the assignment, transfer or change occurs, the Borrower would be obliged to make a payment to the New Lender or Lender acting through its new Facility Office under Clause 17.3 or Clauses 8.7 to 8.9,
then the New Lender or Lender acting through its new Facility Office is only entitled to receive payment under those Clauses to the same extent as the Existing Lender or Lender acting through its previous Facility Office would have been if the assignment, transfer or change had not occurred. This Clause

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14.4.4 shall not apply in respect of an assignment or transfer made in the ordinary course of the primary syndication of the Loan.
14.5
Finance Documents Unless otherwise expressly provided in any Finance Document or otherwise expressly agreed between an Existing Lender and any proposed transferee and notified by that Existing Lender to the Agent on or before the relevant Transfer Date, there shall automatically be assigned to the transferee with any transfer of an Existing Lender's rights and obligations under or pursuant to this Agreement the rights of that Existing Lender under or pursuant to the Finance Documents (other than this Agreement) which relate to the portion of that Lender's rights and obligations transferred by the relevant Transfer Certificate.
14.6
No assignment or transfer by the Security Parties No Security Party may assign any of its rights or transfer any of its rights or obligations under the Finance Documents.
14.7
Security over Lenders' rights In addition to the other rights provided to Lenders under this Clause 14, each Lender may without consulting with or obtaining consent from any Security Party, at any time charge, assign or otherwise create an Encumbrance in or over (whether by way of collateral or otherwise) all or any of its rights under any Finance Document to secure obligations of that Lender including, without limitation:
14.7.1
any charge, assignment or other Encumbrance to secure obligations to a federal reserve or central bank; and
14.7.2
in the case of any Lender which is a fund, any charge, assignment or other Encumbrance granted to any holders (or trustee or representatives of holders) of obligations owed, or securities issued, by that Lender as security for those obligations or securities,
except that no such charge, assignment or Encumbrance shall:
(a)
release a Lender from any of its obligations under the Finance Documents or substitute the beneficiary of the relevant charge, assignment or other Encumbrance for the Lender as a party to any of the Finance Documents; or
(b)
require any payments to be made by any Security Party or grant to any person any more extensive rights than those required to be made or granted to the relevant Lender under the Finance Documents.
15
The Agent and the Lenders
15.1
Appointment
15.1.1
Each Lender appoints the Agent to act as its agent and/or security trustee under and in connection with the Finance Documents and each Swap Provider appoints the Agent to act as its security trustee for the purposes of the Security Documents.
15.1.2
Each Lender and each Swap Provider authorises the Agent to exercise the rights, powers, authorities and discretions specifically given to the Agent under or in connection with the Finance Documents in the case of the Lenders and the Security Documents in the case of the Swap Providers, together with any other incidental rights, powers, authorities and discretions.
15.2
Authority Each Lender irrevocably authorises the Agent and the Agent hereby agrees (subject to Clauses 15.5.1, 15.24 and this Clause 15.2):
15.2.1
to execute any Finance Document (other than this Agreement) on its behalf;
15.2.2
to collect, receive, release or pay any money on its behalf;

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15.2.3
acting on the instructions from time to time of the Majority Lenders (save where the terms of any Finance Document expressly provide otherwise) to give or withhold any waivers, consents or approvals under or pursuant to any Finance Document; and
15.2.4
acting on the instructions from time to time of the Majority Lenders (save where the terms of any Finance Document expressly provide otherwise) to exercise, or refrain from exercising, any rights, powers, authorities or discretions under or pursuant to any Finance Document.
The Agent shall have no duties or responsibilities as agent or as security trustee other than those expressly conferred on it by the Finance Documents and shall not be obliged to act on any instructions from the Lenders or the Majority Lenders if to do so would, in the opinion of the Agent (in its sole discretion), be contrary to any provision of the Finance Documents or to any law, or would expose the Agent to any actual or potential liability to any third party.
15.3
Trust The Agent agrees and declares, and each of the other Finance Parties acknowledges, that, subject to the terms and conditions of this Clause 15.3, the Agent holds the Trust Property on trust for the Finance Parties absolutely. Each of the other Finance Parties agrees that the obligations, rights and benefits vested in the Agent shall be performed and exercised in accordance with this Clause 15.3. The Agent shall have the benefit of all of the provisions of this Agreement benefiting it in its capacity as Agent for the Finance Parties, and all the powers and discretions conferred on trustees by the Trustee Act 1925 (to the extent not inconsistent with this Agreement). In addition:
15.3.1
the Agent and any attorney, agent or delegate of the Agent may indemnify itself or himself out of the Trust Property against all liabilities, costs, fees, damages, charges, losses and expenses sustained or incurred by it or him in relation to the taking or holding of any of the Trust Property or in connection with the exercise or purported exercise of the rights, trusts, powers and discretions vested in the Agent or any other such person by or pursuant to the Security Documents or in respect of anything else done or omitted to be done in any way relating to the Security Documents other than as a result of its gross negligence or wilful misconduct;
15.3.2
the other Finance Parties acknowledge that the Agent shall be under no obligation to insure any property nor to require any other person to insure any property and shall not be responsible for any loss which may be suffered by any person as a result of the lack or insufficiency of any insurance; and
15.3.3
the Finance Parties agree that the perpetuity period applicable to the trusts declared by this Agreement shall be the period of 125 years from the date of this Agreement.
15.4
Required consents
15.4.1
Subject to Clause 15.5 any term of the Finance Documents (other than the Master Agreements) may be amended or waived only with the consent of the Majority Lenders and the Borrower and any such amendment or waiver will be binding on all Parties.
15.4.2
The Agent may effect, on behalf of any Finance Party, any amendment or waiver permitted by this Clause 15.
15.4.3
Without prejudice to the generality of Clause 15.14.4, the Agent may engage, pay for and rely on the services of lawyers in determining the consent level required for and effecting any amendment, waiver or consent under this Agreement.
15.5
Exceptions
15.5.1
An amendment, waiver or (in the case of a Security Document) a consent of, or in relation to, any term of any Finance Document (other than the Master Agreements) that has the effect of changing or which relates to:

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(a)
the definitions of " Majority Lenders ", " Maximum Amount ", " Fair Market Value " and " Proportionate Share " in Clause 1.1;
(b)
an extension to the date of payment of any amount under the Finance Documents (including, but not limited to, the Maturity Date);
(c)
a reduction in the Margin or a reduction in the amount of any payment of principal, interest, fees or commission payable;
(d)
a change in currency of payment of any amount under the Finance Documents;
(e)
an increase in any Commitment, an extension of the Final Availability Date or any requirement that a cancellation of Commitments reduces the Commitments of the Lenders rateably;
(f)
any provision which expressly requires the consent of all the Lenders;
(g)
Clause 2.2, Clause 14, this Clause 15 or Clause 23;
(h)
(other than as expressly permitted by the provisions of any Finance Document) the nature or scope of:
(i)
any Guarantee;
(ii)
the Charged Property; or
(iii)
the manner in which the proceeds of enforcement of the Security Documents are distributed;
(i)
the release of any Guarantee or of any Encumbrance created or expressed to be created or evidenced by the Security Documents unless permitted under this Agreement or any other Finance Document or relating to a sale or disposal of an asset which is the subject of any Encumbrance created or expressed to be created or evidenced by the Security Documents where such sale or disposal is expressly permitted under this Agreement or any other Finance Document; or
(j)
the pro rata application of payments made by the Borrower under the Finance Documents or sharing of payments or Commitment reductions;
shall not be made, or given, without the prior consent of all the Lenders.
15.5.2
An amendment or waiver which relates to the rights or obligations of the Agent or the MLAs or the Bookrunners (each in their capacity as such) may not be effected without the consent of the Agent or, as the case may be, the MLAs or the Bookrunners.
15.6
Excluded Commitments
If:
15.6.1
any Defaulting Lender fails to respond to a request for a consent, waiver, amendment of or in relation to any term of any Finance Document or any other vote of Lenders under the terms of this Agreement within twenty (20) Business Days of that request being made; or
15.6.2
any Lender which is not a Defaulting Lender fails to respond to such a request (other than an amendment, waiver or consent referred to in Clauses 15.5.1(b), 15.5.1(c) and 15.5.1(e)) or other or such a vote within twenty (20) Business Days of that request being made,

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(unless, in either case, the Borrower and the Agent agree to a longer time period in relation to any request):
(a)
its Commitment(s) shall not be included for the purpose of calculating the Total Commitments when ascertaining whether any relevant percentage (including, for the avoidance of doubt, unanimity) of the Total Commitments has been obtained to approve that request; and
(b)
its status as a Lender shall be disregarded for the purpose of ascertaining whether the agreement of any specified group of Lenders has been obtained to approve that request.
15.7
Replacement of Lender
15.7.1
If:
(a)
any Lender becomes a Non-Consenting Lender (as defined in Clause 15.7.4); or
(b)
the Borrower or any other Security Party becomes obliged to repay any amount in accordance with Clause 6.1 or to pay additional amounts pursuant to Clause 17.3, Clause 8.7 or Clause 8.12.1 to any Lender,
then the Borrower may, on ten (10) Business Days' prior written notice to the Agent and such Lender, replace such Lender by requiring such Lender to (and, to the extent permitted by law, such Lender shall) transfer pursuant to Clause 14 all (and not part only) of its rights and obligations under this Agreement to a Lender or other bank, financial institution, trust, fund or other entity (a " Replacement Lender ") selected by the Borrower, which confirms its willingness to assume and does assume all the obligations of the transferring Lender in accordance with Clause 14 for a purchase price in cash payable at the time of transfer in an amount equal to the outstanding principal amount of such Lender's participation in the outstanding Loan and all accrued interest, Break Costs and other amounts payable in relation thereto under the Finance Documents.
15.7.2
The replacement of a Lender pursuant to this Clause 15.7 shall be subject to the following conditions:
(a)
the Borrower shall have no right to replace the Agent;
(b)
neither the Agent nor the Lender shall have any obligation to the Borrower to find a Replacement Lender;
(c)
in the event of a replacement of a Non-Consenting Lender such replacement must take place no later than thirty (30) Business Days after the date on which that Lender is deemed a Non-Consenting Lender;
(d)
in no event shall the Lender replaced under this Clause 15.7 be required to pay or surrender to such Replacement Lender any of the fees received by such Lender pursuant to the Finance Documents; and
(e)
the Lender shall only be obliged to transfer its rights and obligations pursuant to Clause 15.7.1 once it is satisfied that it has complied with all necessary "know your customer" or other similar checks under all applicable laws and regulations in relation to that transfer.
15.7.3
A Lender shall perform the checks described in Clause 15.7.2(e) as soon as reasonably practicable following delivery of a notice referred to in Clause 15.7.1 and shall notify the Agent and the Borrower when it is satisfied that it has complied with those checks.
15.7.4
In the event that:

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(a)
the Borrower or the Agent (at the request of the Borrower) has requested the Lenders to give a consent in relation to, or to agree to a waiver or amendment of, any provisions of the Finance Documents;
(b)
the consent, waiver or amendment in question requires the approval of all the Lenders; and
(c)
Lenders whose Commitments aggregate equal to or more than sixty six and two thirds per cent (66 2 / 3 %) of the Total Commitments (or, if the Total Commitments have been reduced to zero, aggregated equal to or more than sixty six and two thirds per cent (66 2 / 3 %) of the Total Commitments prior to that reduction) have consented or agreed to such waiver or amendment,
then any Lender who does not and continues not to consent or agree to such waiver or amendment shall be deemed a " Non-Consenting Lender ".
15.8
FATCA Mitigation
Notwithstanding any other provision to this Agreement but subject to Clause 14.4, if a FATCA Deduction is or will be required to be made by any Party under Clause 8.16 in respect of a payment to any Lender which is a FATCA FFI (a " FATCA Non-Exempt Lender "), the FATCA Non-Exempt Lender may either:
(a)
transfer its entire interest in the Loan to a U.S. branch or affiliate; or
(b)
(subject to the prior written consent of the Borrower in the case of a transferee which is not already a Lender, such consent not to be unreasonably withheld or delayed) nominate one or more transferee lenders who upon becoming a Lender would be a FATCA Exempt Party, by notice in writing to the Agent and the Borrower specifying the terms of the proposed transfer, and cause such transferee lender(s) to purchase all of the FATCA Non-Exempt Lender's interest in the Loan.
15.9
Disenfranchisement of Defaulting Lenders
15.9.1
For so long as a Defaulting Lender has any Commitment in ascertaining:
(a)
the Majority Lenders; or
(b)
whether:
(i)
any given percentage (including, for the avoidance of doubt, unanimity) of the Total Commitments; or
(ii)
the agreement of any specified group of Lenders,
has been obtained to approve any request for a consent, waiver, amendment or other vote of Lenders under the Finance Documents, that Defaulting Lender's Commitment will be reduced by the amount of its participation in the Loan it has failed to make available and, to the extent that that reduction results in that Defaulting Lender's Commitment being zero, that Defaulting Lender shall be deemed not to be a Lender for the purposes of (i) and (ii).
15.9.2
For the purposes of this Clause 15.9, the Agent may assume that the following Lenders are Defaulting Lenders:
(a)
any Lender which has notified the Agent that it has become a Defaulting Lender;
(b)
any Lender in relation to which it is aware that any of the events or circumstances referred to in (a), (b) or (c) of the definition of "Defaulting Lender" has occurred,

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unless it has received notice to the contrary from the Lender concerned (together with any supporting evidence reasonably requested by the Agent) or the Agent is otherwise aware that the Lender has ceased to be a Defaulting Lender.
15.10
Replacement of a Defaulting Lender
15.10.1
The Borrower may, at any time a Lender has become and continues to be a Defaulting Lender, by giving ten (10) Business Days' prior written notice to the Agent and such Lender, replace such Lender by requiring such Lender to (and, to the extent permitted by law, such Lender shall) transfer pursuant to Clause 14 all (and not part only) of its rights and obligations under this Agreement to a Lender or other bank, financial institution, trust, fund or other entity (a " Replacement Lender ") selected by the Borrower which confirms its willingness to assume and does assume all the obligations, or all the relevant obligations, of the transferring Lender in accordance with Clause 14 for a purchase price in cash payable at the time of transfer which is either:
(a)
in an amount equal to the outstanding principal amount of such Lender's participation in the outstanding Loan and all accrued interest, Break Costs and other amounts payable in relation thereto under the Finance Documents; or
(b)
in an amount agreed between that Defaulting Lender, the Replacement Lender and the Borrower and which does not exceed the amount described in (a).
15.10.2
Any transfer of rights and obligations of a Defaulting Lender pursuant to this Clause 15.10 shall be subject to the following conditions:
(a)
the Borrower shall have no right to replace the Agent;
(b)
neither the Agent nor the Defaulting Lender shall have any obligation to the Borrower to find a Replacement Lender;
(c)
the transfer must take place no later than thirty (30) Business Days after the notice referred to in Clause 15.10.1;
(d)
in no event shall the Defaulting Lender be required to pay or surrender to the Replacement Lender any of the fees received by the Defaulting Lender pursuant to the Finance Documents; and
(e)
the Defaulting Lender shall only be obliged to transfer its rights and obligations pursuant to 15.10.1 once it is satisfied that it has complied with all necessary "know your customer" or other similar checks under all applicable laws and regulations in relation to that transfer to the Replacement Lender.
15.10.3
The Defaulting Lender shall perform the checks described in Clause 15.10.2(e) as soon as reasonably practicable following delivery of a notice referred to in Clause 15.10.1 and shall notify the Agent and the Borrower when it is satisfied that it has complied with those checks.
15.11
Liability Neither the Agent nor any of its directors, officers, employees or agents shall be liable to the Lenders or the Swap Providers for anything done or omitted to be done by the Agent under or in connection with any of the Relevant Documents unless as a result of the Agent's gross negligence or wilful misconduct.
15.12
Acknowledgement Each Lender and Swap Provider acknowledges that:
15.12.1
it has not relied on any representation made by the Agent or any of the Agent's directors, officers, employees or agents or by any other person acting or purporting to act on behalf of the Agent to induce it to enter into any Finance Document;

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15.12.2
it has made and will continue to make without reliance on the Agent, and based on such documents and other evidence as it considers appropriate, its own independent investigation of the financial condition and affairs of the Security Parties in connection with the making and continuation of the Loan;
15.12.3
it has made its own appraisal of the creditworthiness of the Security Parties; and
15.12.4
the Agent shall not have any duty or responsibility at any time to provide it with any credit or other information relating to any Security Party unless that information is received by the Agent pursuant to the express terms of a Finance Document.
Each Lender agrees that it will not assert nor seek to assert against any director, officer, employee or agent of the Agent or against any other person acting or purporting to act on behalf of the Agent any claim which it might have against them in respect of any of the matters referred to in this Clause 15.12.
15.13
Limitations on responsibility The Agent shall have no responsibility to any Security Party or to any Finance Party on account of:
15.13.1
the failure of a Finance Party or of any Security Party to perform any of its obligations under a Finance Document; nor
15.13.2
the financial condition of any Security Party; nor
15.13.3
the completeness or accuracy of any statements, representations or warranties made in or pursuant to any Finance Document, or in or pursuant to any document delivered pursuant to or in connection with any Finance Document; nor
15.13.4
the negotiation, execution, effectiveness, genuineness, validity, enforceability, admissibility in evidence or sufficiency of any Finance Document or of any document executed or delivered pursuant to or in connection with any Finance Document.
15.14
The Agent's rights The Agent may:
15.14.1
assume that all representations or warranties made or deemed repeated by any Security Party in or pursuant to any Finance Document are true and complete, unless, in its capacity as the Agent, it has acquired actual knowledge to the contrary;
15.14.2
assume (unless it has received notice to the contrary in its capacity as Agent) that no Default has occurred unless, in the case of Clause 13.1.1 only, it, in its capacity as the Agent, has acquired actual knowledge to the contrary;
15.14.3
rely on any document or notice believed by it to be genuine;
15.14.4
rely as to legal or other professional matters on opinions and statements of any legal or other professional advisers selected or approved by it;
15.14.5
rely as to any factual matters which might reasonably be expected to be within the knowledge of any Security Party on a certificate signed by or on behalf of that Security Party; and
15.14.6
refrain from exercising any right, power, discretion or remedy unless and until instructed to exercise that right, power, discretion or remedy and as to the manner of its exercise by the Lenders (or, where applicable, by the Majority Lenders) and unless and until the Agent has received from the Lenders any payment which the Agent may require on account of, or any security which the Agent may require for, any costs, claims, expenses (including legal and other professional fees) and liabilities which it considers it may incur or sustain in complying with those instructions.

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15.15
The Agent's duties The Agent shall inform the Lenders and the Swap Providers promptly of any Event of Default under Clause 13.1.1 of which the Agent has actual knowledge.
15.16
No deemed knowledge The Agent shall not be deemed to have actual knowledge of the falsehood or incompleteness of any representation or warranty made or deemed repeated by any Security Party or actual knowledge of the occurrence of any Default (other than a Default under Clause 13.1.1) unless a Lender, a Swap Provider or a Security Party shall have given written notice thereof to the Agent in its capacity as the Agent. Any information acquired by the Agent other than specifically in its capacity as the Agent shall not be deemed to be information acquired by the Agent in its capacity as the Agent.
15.17
Other business The Agent may, without any liability to account to the Lenders or the Swap Providers, generally engage in any kind of banking or trust business with a Security Party or with a Security Party's subsidiaries or associated companies or with a Lender as if it were not the Agent.
15.18
Indemnity The Lenders shall, promptly on the Agent's request, reimburse the Agent in their respective Proportionate Share, for, and keep the Agent fully indemnified in respect of all liabilities, damages, costs and claims sustained or incurred by the Agent in connection with the Finance Documents, or the performance of its duties and obligations, or the exercise of its rights, powers, discretions or remedies under or pursuant to any Finance Document, to the extent not paid by the Security Parties and not arising from the Agent's gross negligence or wilful misconduct.
15.19
Employment of agents In performing its duties and exercising its rights, powers, discretions and remedies under or pursuant to the Finance Documents, the Agent shall be entitled to employ and pay agents to do anything which the Agent is empowered to do under or pursuant to the Finance Documents (including the receipt of money and documents and the payment of money) and to act or refrain from taking action in reliance on the opinion of, or advice or information obtained from, any lawyer, banker, broker, accountant, valuer or any other person believed by the Agent in good faith to be competent to give such opinion, advice or information.
15.20
Distribution of payments The Agent shall pay promptly to the order of each Lender that Lender's Proportionate Share of every sum of money received by the Agent pursuant to the Finance Documents (with the exception of the Master Agreements, any amounts payable pursuant to Clause 9 and/or any Fee Letter and any amounts which, by the terms of the Finance Documents, are paid to the Agent for the account of the Agent alone or specifically for the account of one or more Lenders) and until so paid such amount shall be held by the Agent on trust absolutely for that Lender.
15.21
Reimbursement The Agent shall have no liability to pay any sum to a Lender until it has itself received payment of that sum. If, however, the Agent does pay any sum to a Lender on account of any amount prospectively due to that Lender pursuant to Clause 15.20 before it has itself received payment of that amount, and the Agent does not in fact receive payment within five (5) Business Days after the date on which that payment was required to be made by the terms of the Finance Documents, that Lender will, on demand by the Agent, refund to the Agent an amount equal to the amount received by it, together with an amount sufficient to reimburse the Agent for any amount which the Agent may certify that it has been required to pay by way of interest on money borrowed to fund the amount in question during the period beginning on the date on which that amount was required to be paid by the terms of the Finance Documents and ending on the date on which the Agent receives reimbursement.
15.22
Redistribution of payments Unless otherwise agreed between the Lenders and the Agent, if at any time a Lender receives or recovers by way of set‑off, the exercise of any lien or otherwise from any Security Party, an amount greater than that Lender's Proportionate Share of any sum due from that Security Party to the Lenders under the Finance Documents excluding the Master Agreements (the amount of the excess being referred to in this Clause 15.22 and in Clause 15.23 as the " Excess Amount ") then:
15.22.1
that Lender shall promptly notify the Agent (which shall promptly notify each other Lender);

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15.22.2
that Lender shall pay to the Agent an amount equal to the Excess Amount within ten (10) days of its receipt or recovery of the Excess Amount; and
15.22.3
the Agent shall treat that payment as if it were a payment by the Security Party in question on account of the sum due from that Security Party to the Lenders and shall account to the Lenders in respect of the Excess Amount in accordance with the provisions of this Clause 15.22.
However, if a Lender has commenced any legal proceedings to recover sums owing to it under the Finance Documents and, as a result of, or in connection with, those proceedings has received an Excess Amount, the Agent shall not distribute any of that Excess Amount to any other Lender which had been notified of the proceedings and had the legal right to, but did not, join those proceedings or commence and diligently prosecute separate proceedings to enforce its rights in the same or another court.
15.23
Rescission of Excess Amount If all or any part of any Excess Amount is rescinded or must otherwise be restored to any Security Party or to any other third party, the Lenders which have received any part of that Excess Amount by way of distribution from the Agent pursuant to Clause 15.22 shall repay to the Agent for the account of the Lender which originally received or recovered the Excess Amount, the amount which shall be necessary to ensure that the Lenders share rateably in accordance with their Proportionate Shares in the amount of the receipt or payment retained, together with interest on that amount at a rate equivalent to that (if any) paid by the Lender receiving or recovering the Excess Amount to the person to whom that Lender is liable to make payment in respect of such amount, and Clause 15.22.3 shall apply only to the retained amount.
15.24
Instructions Where the Agent is authorised or directed to act or refrain from acting in accordance with the instructions of the Lenders or of the Majority Lenders each of the Lenders shall provide the Agent with instructions within five (5) Business Days of the Agent's request (which request must be in writing). If a Lender does not provide the Agent with instructions within that period, that Lender shall be bound by the decision of the Agent. Nothing in this Clause 15.24 shall limit the right of the Agent to take, or refrain from taking, any action without obtaining the instructions of the Lenders or the Majority Lenders if the Agent in its discretion considers it necessary or appropriate to take, or refrain from taking, such action in order to preserve the rights of the Lenders under or in connection with the Finance Documents. In that event, the Agent will notify the Lenders of the action taken by it as soon as reasonably practicable, and the Lenders agree to ratify any action taken by the Agent pursuant to this Clause 15.24.
15.25
Payments All amounts payable to a Lender under this Clause 15 shall be paid to such account at such bank as that Lender may from time to time direct in writing to the Agent.
15.26
"Know your customer" checks Each Lender shall promptly upon the request of the Agent supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Agent (for itself) in order for the Agent to carry out and be satisfied it has complied with all necessary "know your customer" or other similar checks under all applicable laws and regulations pursuant to the transactions contemplated in the Finance Documents.
15.27
Resignation
15.27.1
Subject to a successor being appointed in accordance with this Clause 15.27, the Agent may resign as agent and/or security trustee at any time without assigning any reason by giving to the Borrower, the Lenders and, in the case of its resignation as security trustee, the Swap Providers notice of its intention to do so, in which event the following shall apply:
(a)
with the consent of the Borrower not to be unreasonably withheld (but such consent not to be required at any time after an Event of Default which is continuing unremedied and unwaived) the Lenders may within thirty (30) days after the date of the notice from the Agent appoint a successor to act as agent and/or security trustee or, if they fail to do so with the consent of the Borrower, not to be unreasonably withheld (but such

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consent not to be required at any time after an Event of Default which is continuing unremedied and unwaived), the Agent may appoint any other bank or financial institution as its successor;
(b)
the resignation of the Agent shall take effect simultaneously with the appointment of its successor on written notice of that appointment being given to the Borrower and the Lenders;
(c)
the Agent shall thereupon be discharged from all further obligations as agent but shall remain entitled to the benefit of the provisions of this Clause 15; and
(d)
the successor of the Agent and each of the other parties to this Agreement shall have the same rights and obligations amongst themselves as they would have had if that successor had been a party to this Agreement.
15.27.2
The Agent shall resign and the Majority Lenders (after consultation with the Borrower) shall appoint a successor Agent in accordance with Clause 15.27 if on or after the date which is three months before the earliest FATCA Application Date relating to any payment to the Agent under the Finance Documents, either:
(a)
the Agent fails to respond to a request under Clause 8.15 and a Lender reasonably believes that the Agent will not be (or will have ceased to be) a FATCA Exempt Party on or after that FATCA Application Date;
(b)
the information supplied by the Agent pursuant to Clause 8.15 indicates that the Agent will not be (or will have ceased to be) a FATCA Exempt Party on or after that FATCA Application Date; or
(c)
the Agent notifies the Borrower and the Lenders that the Agent will not be (or will have ceased to be) a FATCA Exempt Party on or after that FATCA Application Date,
and (in each case) a Lender reasonably believes that a Party will be required to make a FATCA Deduction that would not be required if the Agent were a FATCA Exempt Party, and that Lender, by notice to the Agent, requires it to resign.
15.28
Replacement of the Agent
15.28.1
After consultation with the Borrower, the Majority Lenders may, by giving thirty (30) days' notice to the Agent (or, at any time the Agent is an Impaired Agent, by giving any shorter notice determined by the Majority Lenders) replace the Agent by appointing a successor Agent.
15.28.2
The retiring Agent shall (at its own cost if it is an Impaired Agent and otherwise at the expense of the Lenders) make available to the successor Agent such documents and records and provide such assistance as the successor Agent may reasonably request for the purposes of performing its function as Agent under the Finance Documents.
15.28.3
The appointment of the successor Agent shall take effect on the date specified in the notice from the Majority Lenders to the retiring Agent. As from this date, the retiring Agent shall be discharged from any further obligation in respect of the Finance Documents (other than its obligations under Clause 15.28.2 but shall remain entitled to the benefit of this Clause 15 (and any agency fees for the account of the retiring Agent shall cease to accrue from (and shall be payable on) that date).
15.28.4
Any successor Agent and each of the other Parties shall have the same rights and obligations amongst themselves as they would have had if such successor had been an original Party.

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15.29
No fiduciary relationship Except as provided in Clauses 15.3 and 15.20, the Agent shall not have any fiduciary relationship with or be deemed to be a trustee of or for any other person and nothing contained in any Finance Document shall constitute a partnership between any two or more Lenders or between the Agent and any other person.
15.30
No other Duties Notwithstanding anything to the contrary hereunder, neither the MLAs nor the Bookrunners shall have any powers, duties or responsibilities under any of the Finance Documents, except in their respective capacities, as applicable, as MLAs or Bookrunners.
16
Set-Off
16.1
A Finance Party may set off any matured obligation due from the Borrower under any Finance Document (to the extent beneficially owned by that Finance Party) against any matured obligation owed by that Finance Party to the Borrower, regardless of the place of payment, booking branch or currency of either obligation. If the obligations are in different currencies, that Finance Party may convert either obligation at a market rate of exchange in its usual course of business for the purpose of the set-off.
16.2
The rights conferred on each Swap Provider by this Clause 16 shall be in addition to, and without prejudice to or limitation of, the rights of netting and set off conferred on that Swap Provider by the relevant Master Agreement.
17
Payments
17.1
Payments Each amount payable by the Borrower under a Finance Document shall be paid to such account at such bank as the Agent may from time to time direct to the Borrower in the Currency of Account and in such funds as are customary at the time for settlement of transactions in the relevant currency in the place of payment. Payment shall be deemed to have been received by the Agent on the date on which the Agent receives authenticated advice of receipt, unless that advice is received by the Agent on a day other than a Business Day or at a time of day (whether on a Business Day or not) when the Agent in its reasonable discretion considers that it is impossible or impracticable for the Agent to utilise the amount received for value that same day, in which event the payment in question shall be deemed to have been received by the Agent on the Business Day next following the date of receipt of advice by the Agent.
17.2
No deductions or withholdings Each payment (whether of principal or interest or otherwise) to be made by the Borrower under a Finance Document shall, subject only to Clause 17.3, be made free and clear of and without deduction for or on account of any Taxes or other deductions, withholdings, rights of set-off, restrictions, conditions or counterclaims of any nature, other than FATCA Deductions.
17.3
Grossing-up If at any time any law requires the Borrower or any other Security Party to make any deduction or withholding from any payment, other than a FATCA Deduction, or to change the rate or manner in which any required deduction or withholding is made under a Finance Documents, the Borrower shall (and shall procure that such Security Party shall) promptly notify the Agent and, simultaneously with making that payment, will pay to the Agent for and on behalf of the relevant Finance Party whatever additional amount (after taking into account any additional Taxes on, or deductions or withholdings from, or restrictions or conditions on, that additional amount) is necessary to ensure that, after making the deduction or withholding, the relevant Finance Parties receive a net sum equal to the sum which they would have received had no deduction or withholding been made.
17.4
Evidence of deductions If at any time the Borrower or any other Security Party is required by law to make any deduction or withholding from any payment to be made by it under a Finance Document, the Borrower shall (and shall procure that such Security Party shall) pay the amount required to be deducted or withheld to the relevant authority within the time allowed under the applicable law and will as soon as reasonably practicable, and in any case no later than thirty (30) days after making that payment, deliver to the Agent an original receipt issued by the relevant authority, or other evidence reasonably acceptable to the Agent, evidencing the payment to that authority of all amounts required to be deducted or withheld.

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17.5
Rebate If the Borrower or any other Security Party pays any additional amount under Clause 8.12 or Clause 17.3, and a Finance Party subsequently receives a refund of or allowance in respect of any Tax which that Finance Party identifies as being referable to that increased amount so paid by the Borrower or that other Security Party, that Finance Party shall, as soon as reasonably practicable, pay to the Borrower or that other Security Party an amount equal to the amount of the refund or allowance received, if and to the extent that it may do so without prejudicing its right to retain that refund or allowance and without putting itself in any worse financial position than that in which it would have been had the relevant deduction or withholding not been required to have been made. Nothing in this Clause 17.5 shall be interpreted as imposing any obligation on any Finance Party to apply for any refund or allowance nor as restricting in any way the manner in which any Finance Party organises its tax affairs, nor as imposing on any Finance Party any obligation to disclose to the Borrower or any other Security Party any information regarding its tax affairs or tax computations.
17.6
Adjustment of due dates If any payment or transfer of funds to be made under a Finance Document, other than a payment of interest on the Loan, shall be due on a day which is not a Business Day, that payment shall be made on the next succeeding Business Day (unless the next succeeding Business Day falls in the next calendar month in which event the payment shall be made on the next preceding Business Day). Any such variation of time shall be taken into account in computing any interest in respect of that payment.
17.7
Control Account The Agent shall open and maintain on its books a control account in the name of the Borrower showing the advance of the Loan and the computation and payment of interest and all other sums due under this Agreement. The Borrower's obligations to repay the Loan and to pay interest and all other sums due under this Agreement shall be evidenced by the entries from time to time made in the control account opened and maintained under this Clause 17.7 and those entries will, in the absence of manifest error, be conclusive and binding.
17.8
Impaired Agent
17.8.1
If, at any time, the Agent becomes an Impaired Agent, a Security Party or a Lender which is required to make a payment under the Finance Documents to the Agent in accordance with Clause 17.1 may instead either:
(a)
pay that amount direct to the required recipient(s); or
(b)
if in its absolute discretion it considers that it is not reasonably practicable to pay that amount direct to the required recipient(s), pay that amount or the relevant part of that amount to an interest-bearing account held with an Acceptable Bank in relation to which no Insolvency Event has occurred and is continuing, in the name of the Security Party or the Lender making the payment (the " Paying Party ") and designated as a trust account for the benefit of the Party or Parties beneficially entitled to that payment under the Finance Documents (the " Recipient Party " or " Recipient Parties ").
In each case such payments must be made on the due date for payment under the Finance Documents.
17.8.2
All interest accrued on the amount standing to the credit of the trust account shall be for the benefit of the Recipient Party or the Recipient Parties pro rata to their respective entitlements.
17.8.3
A Party which has made a payment in accordance with this Clause 17.8 shall be discharged of the relevant payment obligation under the Finance Documents and shall not take any credit risk with respect to the amounts standing to the credit of the trust account.
17.8.4
Promptly upon the appointment of a successor Agent in accordance with Clause 15.28, each Paying Party shall (other than to the extent that that Party has given an instruction pursuant to Clause 17.8.5) give all requisite instructions to the bank with whom the trust account is held to transfer the amount (together with any accrued interest) to the successor Agent for distribution to the relevant Recipient Party or Recipient Parties in accordance with Clause 15.20.

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17.8.5
A Paying Party shall, promptly upon request by a Recipient Party and to the extent:
(a)
it has not given an instruction pursuant to Clause 17.8.4; and
(b)
that it has been provided with the necessary information by that Recipient Party,
give all requisite instructions to the bank with whom the trust account is held to transfer the relevant amount (together with any accrued interest) to that Recipient Party.
17.9
In this Clause 17, any reference to Finance Document(s) shall exclude reference to the Master Agreement(s), unless otherwise specified.
18
Notices
18.1
Communications in writing Any communication to be made under or in connection with this Agreement shall be made in writing and, unless otherwise stated, may be made by fax or letter or (subject to Clause 18.6) electronic mail.
18.2
Addresses The address and fax number (and the department or officer, if any, for whose attention the communication is to be made) of each party to this Agreement for any communication or document to be made or delivered under or in connection with this Agreement are:
18.2.1
in the case of the Borrower, c/o Teekay Shipping (Canada) Ltd Suite 2000, Bentall 5, 550 Burrard Street, Vancouver, B.C., Canada V6C 2K2 (fax no: +1 604 681 3011) marked for the attention of Renee Eng, Treasury Manager;
18.2.2
in the case of each Lender, those appearing opposite its name in Schedule 1; and
18.2.3
in the case of the Agent, 1211 Avenue of the Americas, 23 rd Floor, New York, New York 10036, United States of America (fax no: +1 (212) 421 4420) marked for the attention of Shipping, Offshore & Oil Services; and
18.2.4
in the case of each Swap Provider, those appearing opposite its name in Schedule 1;
or any substitute address, fax number, department or officer as any party may notify to the Agent (or the Agent may notify to the other parties, if a change is made by the Agent) by not less than five (5) Business Days' notice.
18.3
Delivery Any communication or document made or delivered by one party to this Agreement to another under or in connection this Agreement will only be effective:
18.3.1
if by way of fax, when received in legible form; or
18.3.2
if by way of letter, when it has been left at the relevant address or five (5) Business Days after being deposited in the post postage prepaid in an envelope addressed to it at that address; or
18.3.3
if by way of electronic mail, in accordance with Clause 18.6;
and, if a particular department or officer is specified as part of its address details provided under Clause 18.2, if addressed to that department or officer.
Any communication or document to be made or delivered to the Agent will be effective only when actually received by the Agent.
All notices from or to the Borrower (save in respect of each Master Agreement) shall be sent through the Agent.

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18.4
Notification of address and fax number Promptly upon receipt of notification of an address, fax number or change of address, pursuant to Clause 18.2 or changing its own address or fax number, the Agent shall notify the other parties to this Agreement.
18.5
English language Any notice given under or in connection with this Agreement must be in English. All other documents provided under or in connection with this Agreement must be:
18.5.1
in English; or
18.5.2
if not in English, and if so required by the Agent, accompanied by a certified English translation and, in this case, the English translation will prevail unless the document is a constitutional, statutory or other official document.
18.6
Electronic communication
(a)
Any communication to be made in connection with this Agreement may be made by electronic mail or other electronic means (including Debtdomain and any other similar electronic communication platform), if the Borrower and the relevant Finance Party:
(i)
agree that, unless and until notified to the contrary, this is to be an accepted form of communication;
(ii)
notify each other in writing of their electronic mail address and/or any other information required to enable the sending and receipt of information by that means; and
(iii)
notify each other of any change to their address or any other such information supplied by them.
(b)
Any electronic communication made between the Borrower and the relevant Finance Party will be effective only when actually received in readable form and acknowledged by the recipient (it being understood that any system generated responses do not constitute an acknowledgement) and in the case of any electronic communication made by the Borrower to a Finance Party only if it is addressed in such a manner as the Finance Party shall specify for this purpose.
19
Partial Invalidity
If, at any time, any provision of a Finance Document is or becomes illegal, invalid or unenforceable in any respect under any law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions nor the legality, validity or enforceability of such provision under the law of any other jurisdiction will in any way be affected or impaired.
20
Remedies and Waivers
No failure to exercise, nor any delay in exercising, on the part of any Finance Party, any right or remedy under a Finance Document shall operate as a waiver, nor shall any single or partial exercise of any right or remedy prevent any further or other exercise or the exercise of any other right or remedy. The rights and remedies provided in this Agreement are cumulative and not exclusive of any rights or remedies provided by law.
21
Miscellaneous
21.1
No oral variations No variation or amendment of a Finance Document shall be valid unless in writing and signed on behalf of all the Finance Parties.
21.2
Further Assurance If any provision of a Finance Document shall be invalid or unenforceable in whole or in part by reason of any present or future law or any decision of any court, or if the documents at any time held by or on behalf of the Finance Parties or any of them are considered by the Lenders for any reason insufficient to carry out the terms of this Agreement, then from time to time the Borrower will promptly, on

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demand by the Agent, execute or procure the execution of such further documents as in the opinion of the Lenders are necessary to provide adequate security for the repayment of the Indebtedness.
21.3
Rescission of payments etc. Any discharge, release or reassignment by a Finance Party of any of the security constituted by, or any of the obligations of a Security Party contained in, a Finance Document shall be (and be deemed always to have been) void if any act (including, without limitation, any payment) as a result of which such discharge, release or reassignment was given or made is subsequently wholly or partially rescinded or avoided by operation of any law.
21.4
Certificates Any certificate or statement signed by an authorised signatory of the Agent purporting to show the amount of the Indebtedness (or any part of the Indebtedness) or any other amount referred to in any Finance Document shall, save for manifest error or on any question of law, be conclusive evidence as against the Borrower of that amount.
21.5
Counterparts This Agreement may be executed in any number of counterparts each of which shall be original but which shall together constitute the same instrument.
21.6
Contracts (Rights of Third Parties) Act 1999 A person who is not a party to this Agreement (other than the Indemnified Parties) has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce or to enjoy the benefit of any term of this Agreement.
21.7
Contractual recognition of bail-in Notwithstanding any other term of any Finance Document or any other agreement, arrangement or understanding between the Parties, each Party acknowledges and accepts that any liability of any Party to any other Party under or in connection with the Finance Documents may be subject to Bail-In Action by the relevant Resolution Authority and acknowledges and accepts to be bound by the effect of:
(a)
any Bail-In Action in relation to any such liability; including (without limitation):
(i)
a reduction, in full and part, in the principal amount, or outstanding amount due (including any accrued but unpaid interest) in respect of any such liability;
(ii)
a conversion of all, or part of, any such liability into shares or other instruments of ownership that may be issued to, or conferred on, it; and
(iii)
a cancellation of any such liability; and
(b)
a variation of any term of any Finance Document to the extent necessary to give effect to any Bail-In Action in relation to any such liability.
22
Confidentiality
22.1
Confidential Information Each Finance Party agrees to keep all Confidential Information confidential and not to disclose it to anyone, save to the extent permitted by Clause 22.2 and Clause 22.3, and to ensure that all Confidential Information is protected with security measures and a degree of care that would apply to its own confidential information.
22.2
Disclosure of Confidential Information Any Finance Party may disclose:
22.2.1
to any of its Affiliates and Related Funds and any of its or their officers, directors, employees, professional advisers, auditors, partners and Representatives such Confidential Information as that Finance Party shall consider appropriate if any person to whom the Confidential Information is to be given pursuant to this Clause 22.2.1 is informed in writing of its confidential nature and that some or all of such Confidential Information may be price-sensitive information except that there shall be no such requirement to so inform if the recipient is subject to professional obligations to maintain the confidentiality of the information or is otherwise bound by requirements of confidentiality in relation to the Confidential Information;

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22.2.2
to any person:
(a)
to (or through) whom it assigns or transfers (or may potentially assign or transfer) all or any of its rights and/or obligations under one or more Finance Documents or which succeeds (or which may potentially succeed) it as agent or security trustee and, in each case, to any of that person's Affiliates, Related Funds, Representatives, auditors and professional advisers;
(b)
with (or through) whom it enters into (or may potentially enter into), whether directly or indirectly, any sub-participation in relation to, or any other transaction under which payments are to be made or may be made by reference to, one or more Finance Documents and/or one or more Security Parties and to any of that person's Affiliates, Related Funds, Representatives, auditors and professional advisers;
(c)
appointed by any Finance Party or by a person to whom Clause 22.2.2(a) or 22.2.2(b) applies to receive communications, notices, information or documents delivered pursuant to the Finance Documents on its behalf;
(d)
who invests in or otherwise finances (or may potentially invest in or otherwise finance), directly or indirectly, any transaction referred to in Clause 22.2.2(a) or 22.2.2(b);
(e)
to whom information is required or requested to be disclosed by any court of competent jurisdiction or any governmental, banking, taxation or other regulatory authority or similar body, the rules of any relevant stock exchange or pursuant to any applicable law or regulation;
(f)
to whom information is required to be disclosed in connection with, and for the purposes of, any litigation, arbitration, administrative or other investigations, proceedings or disputes;
(g)
to whom or for whose benefit that Finance Party charges, assigns or otherwise creates security (or may do so) pursuant to Clause 14.7;
(h)
who is a Party; or
(i)
with the consent of the Borrower;
in each case, such Confidential Information as that Finance Party shall consider appropriate if:
(i)
in relation to Clauses 22.2.2(a), 22.2.2(b) and 22.2.2(c), the person to whom the Confidential Information is to be given has entered into a Confidentiality Undertaking except that there shall be no requirement for a Confidentiality Undertaking if the recipient is a professional adviser and is subject to professional obligations to maintain the confidentiality of the Confidential Information;
(ii)
in relation to Clause 22.2.2(d), the person to whom the Confidential Information is to be given has entered into a Confidentiality Undertaking or is otherwise bound by requirements of confidentiality in relation to the Confidential Information they receive and is informed that some or all of such Confidential Information may be price-sensitive information;
(iii)
in relation to Clauses 22.2.2(e), 22.2.2(f) and 22.2.2(g), the person to whom the Confidential Information is to be given is informed of its confidential nature and that some or all of such Confidential Information may be price-sensitive information except that there shall be no requirement to so inform if, in the opinion of that Finance Party, it is not practicable so to do in the circumstances; and

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22.2.3
to any person appointed by that Finance Party or by a person to whom Clause 22.2.2(a) or 22.2.2(b) applies to provide administration or settlement services in respect of one or more of the Finance Documents including without limitation, in relation to the trading of participations in respect of the Finance Documents, such Confidential Information as may be required to be disclosed to enable such service provider to provide any of the services referred to in this Clause 22.2.3 if the service provider to whom the Confidential Information is to be given has entered into a Confidentiality Undertaking.
22.3
Disclosure to numbering service providers
22.3.1
Any Finance Party may disclose to any national or international numbering service provider appointed by that Finance Party to provide identification numbering services in respect of this Agreement, the Loan and/or one or more Security Parties the following information:
(a)
names of Security Parties;
(b)
country of domicile of Security Parties;
(c)
place of incorporation of Security Parties;
(d)
date of this Agreement;
(e)
Clause 23;
(f)
the names of the Agent and the MLAs;
(g)
date of each amendment and restatement of this Agreement;
(h)
amount of Total Commitments;
(i)
currencies of the Loan;
(j)
type of Loan;
(k)
ranking of the Loan;
(l)
Final Availability Date for the Loan;
(m)
changes to any of the information previously supplied pursuant to (a) to (l); and
(n)
such other information agreed between such Finance Party and that Security Party,
to enable such numbering service provider to provide its usual syndicated loan numbering identification services.
22.3.2
The Parties acknowledge and agree that each identification number assigned to this Agreement, the Loan and/or one or more Security Parties by a numbering service provider and the information associated with each such number may be disclosed to users of its services in accordance with the standard terms and conditions of that numbering service provider.
22.3.3
The Borrower represents that none of the information set out in Clauses 22.3.1(a) to 22.3.1(n) is, nor will at any time be, unpublished price-sensitive information.
22.3.4
The Agent shall notify the Borrower and the other Finance Parties of:
(a)
the name of any numbering service provider appointed by the Agent in respect of this Agreement, the Loan and/or one or more Security Parties; and

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(b)
the number or, as the case may be, numbers assigned to this Agreement, the Loan and/or one or more Security Parties by such numbering service provider.
23
Law and Jurisdiction
23.1
Governing law This Agreement and any non-contractual obligations arising from or in connection with it shall in all respects be governed by and interpreted in accordance with English law.
23.2
Jurisdiction For the exclusive benefit of the Finance Parties, the parties to this Agreement irrevocably agree that the courts of England are to have jurisdiction to settle any dispute (a) arising from or in connection with this Agreement or (b) relating to any non-contractual obligations arising from or in connection with this Agreement and that any proceedings may be brought in those courts.
23.3
Alternative jurisdictions Nothing contained in this Clause 23 shall limit the right of the Finance Parties to commence any proceedings against the Borrower in any other court of competent jurisdiction nor shall the commencement of any proceedings against the Borrower in one or more jurisdictions preclude the commencement of any proceedings in any other jurisdiction, whether concurrently or not.
23.4
Waiver of objections The Borrower irrevocably waives any objection which it may now or in the future have to the laying of the venue of any proceedings in any court referred to in this Clause 23, and any claim that those proceedings have been brought in an inconvenient or inappropriate forum, and irrevocably agrees that a judgment in any proceedings commenced in any such court shall be conclusive and binding on it and may be enforced in the courts of any other jurisdiction.
23.5
Service of process Without prejudice to any other mode of service allowed under any relevant law, the Borrower:
23.5.1
irrevocably appoints Teekay Shipping (UK) Ltd of 2 nd Floor, 86 Jermyn Street, London SW1Y 6JD, England as its agent for service of process in relation to any proceedings before the English courts in connection with this Agreement; and
23.5.2
agrees that failure by a process agent to notify the Borrower of the process will not invalidate the proceedings concerned.
24
Patriot Act Notice
Each of the Finance Parties hereby notifies the Borrower that pursuant to the requirements of the Patriot Act and the policies and practices of the Finance Parties, the Finance Parties are required to obtain, verify and record certain information and documentation that identifies each Security Party, which information includes the name and address of each Security Party and such other information that will allow the Finance Parties to identify each Security Party in accordance with the Patriot Act.


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Schedule 1
Part I
The Lenders and the Commitments
The Lenders
Commitments (US$)
The Proportionate Share (%)
Nordea Bank AB (publ),
New York Branch
1211 Avenue of the Americas
23rd Floor
New York
NY 10036
United States of America
Attn: Henning Lyche Christiansen
Email: henning.christiansen@nordea.com


61,500,000
10.25
DNB Capital LLC
200 Park Avenue
31st Floor
New York
NY 10166 – 0396
United States of America

Attn: Passchier Veefkind /
Magdalena Brzostowska
Email: agencyNY@dnb.no
Fax no: +1 212 681 3900


61,500,000
10.25
ING Bank N.V., London Branch
8-10 Moorgate
London EC2R 6DA
United Kingdom

Attn: Deal Execution Team
Email: GB.LDN.DEAL.EXECUTION@uk.ing.com


61,500,000
10.25
ABN AMRO Capital USA LLC
17th Floor
100 Park Avenue
NY 10017
New York
United States of America
Attn: Lilia Engelsbel-Sporysheva
Email: tradefinance@abnamro.com
Fax no: +1 917 284 6697



46,500,000
7.75

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Credit Agricole Corporate and Investment Bank
12 Place des Etats Unis
CS 70052, 92547 Montrouge Cedex
France

Attn: Jerome Duval / Clementine Costil
Email: Jerome.duval@ca-cib.com clementine.costil@ca-cib.com
NyShipFinance@ca-cib.com

Fax no: +33 1489 19 34


46,500,000
7.75
Scotiabank Europe Plc
6th Floor, 201 Bishopsgate
London, EC2M 3NS
United Kingdom

Attn: David Sparkes / Michael Weinberg
Email: david.sparkes@scotiabank.com /
             michael.weinberg@scotiabank.com

Tel. no: +44 207 826 5635 /
            +44 207 826 5893

For operational matters:
Attn.: Tony Sposato / Peter Early
Email: Gwsloanops.uk.gtb@scotiabank.com
Tel. no: + 44 207 826 5660
Fax no: + 1 416 350 5150



46,500,000
7.75
Credit Suisse AG
St. Alban-Graben 1-3
P.O. Box
4002 Basel
Switzerland
Attn: Nadja Gautschi
Email: nadja.gautschi@credit-suisse.com






61,500,000
10.25

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BNP Paribas
16, Rue de Hanovre
75002 Paris
France

Attn: Audrey Hérin
Email: audrey.herin@bnpparibas.com
tgmo.shipping@bnpparibas.com
Fax no: +33 1 42 98 43 55


61,500,000
10.25
Swedbank AB (publ)
Landsvägen 40
SE-105 34 Stockholm
Sweden

For credit matters:
Attn: Mikael Sandersson / Andreas Webster
Email: mikael.sandersson@swedbank.no
andreas.webster@swedbank.no

For administration matters:
Attn: Loan Agency / Credit Administration
Email: agency@swedbank.se
creditadmin@swedbank.se


46,500,000
7.75
Danske Bank, Norwegian Branch
Søndre gate 15
7011 Trondhelm
Norway

Attn: Loan Management 4754
Email: loanmanshi@danskebank.com


61,500,000
10.25
Skandinaviska Enskilda Banken AB (publ)
106 40 Stockholm
Sweden

Attn: Fredrik-Bock-Hagen
Email: fredrik.bock-hagen@seb.no
45,000,000
7.50

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Part II    
MLAs
Nordea Bank AB (publ),
New York Branch
1211 Avenue of the Americas
23rd Floor
New York
NY 10036
United States of America
Attn: Henning Lyche Christiansen
Email: henning.christiansen@nordea.com

DNB Markets, Inc.
200 Park Avenue
31st Floor
New York
NY 10166 – 0396
United States of America

Attn: Christian Astrup
Email: christian.astrup@dnb.no



ING Bank N.V., London Branch
8-10 Moorgate
London EC2R 6DA
United Kingdom

Attn: Deal Execution Team
Email: GB.LDN.DEAL.EXECUTION@uk.ing.com


ABN AMRO Capital USA LLC
17th Floor
100 Park Avenue
NY 10017
New York
United States of America

Attn: Lilia Engelsbel-Sporysheva
Email: tradefinance@abnamro.com
Fax no: 1 917 284 6697
 



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Credit Agricole Corporate and Investment Bank
12 Place des Etats Unis
CS 70052, 92547 Montrouge Cedex
France

Attn: Jerome Duval / Clementine Costil
Email: Jerome.duval@ca-cib.com
clementine.costil@ca-cib.com
NyShipFinance@ca-cib.com
Fax no: +33 1489 19 34


Scotiabank Europe Plc
6th Floor, 201 Bishopsgate
London, EC2M 3NS
United Kingdom

Attn: David Sparkes / Michael Weinberg
Email: david.sparkes@scotiabank.com /
             michael.weinberg@scotiabank.com

Tel. no: +44 207 826 5635 /
            +44 207 826 5893

For operational matters:
Attn.: Tony Sposato / Peter Early
Email: Gwsloanops.uk.gtb@scotiabank.com
Tel. no: + 44 207 826 5660
Fax no: + 1 416 350 5150



Credit Suisse AG
St. Alban-Graben 1-3
P.O. Box
4002 Basel
Switzerland
Attn: Nadja Gautschi
Email: nadja.gautschi@credit-suisse.com


BNP Paribas
16, Rue de Hanovre
75002 Paris
France

Attn: Marion Fievez
Email: marion.fievez@bnpparibas.com



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Swedbank AB (publ)
Landsvägen 40
SE-105 34 Stockholm
Sweden

For credit matters:
Attn: Mikael Sandersson / Andreas Webster
Email: mikael.sandersson@swedbank.no
andreas.webster@swedbank.no

For administration matters:
Attn: Loan Agency / Credit Administration
Email: agency@swedbank.se
creditadmin@swedbank.se


Danske Bank A/S
Holmens Kanal 2-12
1092 Copenhagen K
Denmark

Attn: Anette Orsten
Email: anette.orsten@danskebank.com




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Part III    
Bookrunners
Nordea Bank AB (publ),
New York Branch
1211 Avenue of the Americas
23rd Floor
New York
NY 10036
United States of America
Attn: Henning Lyche Christiansen
Email: henning.christiansen@nordea.com


DNB Markets, Inc.
200 Park Avenue
31st Floor
New York
NY 10166 – 0396
United States of America

Attn: Christian Astrup
Email: christian.astrup@dnb.no


ING Bank N.V., London Branch
8-10 Moorgate
London EC2R 6DA
United Kingdom

Attn: Deal Execution Team
Email: GB.LDN.DEAL.EXECUTION@uk.ing.com


 
Credit Suisse AG
St. Alban-Graben 1-3
P.O. Box
4002 Basel
Switzerland
Attn: Nadja Gautschi
Email: nadja.gautschi@credit-suisse.com




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BNP Paribas
16, Rue de Hanovre
75002 Paris
France

Attn: Marion Fievez
Email : marion.fievez@bnpparibas.com



Danske Bank A/S
Holmens Kanal 2-12
1092 Copenhagen K
Denmark

Attn: Anette Orsten
Email: anette.orsten@danskebank.com



Swedbank AB (publ)
Landsvägen 40
SE-105 34 Stockholm
Sweden

Attn: Mikael Sandersson/Andreas Webster
Email: mikael.sandersson@swedbank.no
          andreas.webster@swedbank.no





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Part IV
Swap Providers
Nordea Bank AB (publ),
New York Branch
1211 Avenue of the Americas
23rd Floor
New York
NY 10036
United States of America
Attn: Henning Lyche Christiansen
Email: henning.christiansen@nordea.com


DNB Bank ASA, New York Branch
200 Park Avenue
31st Floor
New York
NY 10166 – 0396
United States of America

Attn: Passchier Veefkind/Emmanuel Sanz
Email: passchier.veefkind@dnb.no /
          emmanuel.sanz@dnb.no


ABN AMRO Bank N.V.
Gustav Mahlerlaan 10
1082 PP Amsterdam
The Netherlands

c/o ABM AMRO Securities USA
100 Park Avenue, 17th Floor
New York
NY 10017

Attn: MacGregor Stockdale
Email: MacGregor.Stockdale@abnamro.com


Scotiabank Europe Plc
6th Floor, 201 Bishopsgate
London, EC2M 3NS
United Kingdom
Attn: David Sparkes / Michael Weinberg
Email: david.sparkes@scotiabank.com /
michael.weinberg@scotiabank.com

Tel. no: +44 207 826 5635 / +44 207 826 5893


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Swedbank AB (publ)
Landsvägen 40
SE-105 34 Stockholm
Sweden

Attn: Mikael Sandersson/Andreas Webster
Email: mikael.sandersson@swedbank.no
andreas.webster@swedbank.no



Skandinaviska Enskilda Banken AB (publ)
106 40 Stockholm
Sweden

Attn: Fredrik Bock-Hagen
Email: fredrik.bock-hagen@seb.no







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Schedule 2     
Conditions Precedent and Subsequent
Part I:
Conditions precedent to service of Drawdown Notice
1
Security Parties
(a)
Constitutional Documents Copies of the constitutional documents of the Borrower together with such other evidence as the Agent may reasonably require that the Borrower is duly incorporated in its country of incorporation and remains in existence with power to enter into, and perform its obligations under, the Relevant Documents to which it is or is to become a party.
(b)
Certificate of goodstanding A certificate of good standing in respect of the Borrower (if available).
(c)
Board resolutions A copy of a resolution of the board of directors of the Borrower:
(i)
approving the terms of, and the transactions contemplated by, the Relevant Documents to which it is a party and ratifying or resolving that it execute those Relevant Documents; and
(ii)
if required authorising a specified person or persons to execute those Relevant Documents (and all documents and notices to be signed and/or despatched under those documents) on its behalf.
(d)
Shareholder resolutions If required by any legal advisor to the Agent, a copy of a resolution signed by all the holders of the issued shares in the Borrower, approving the terms of, and the transactions contemplated by, the Relevant Documents to which it is a party.
(e)
Officer's certificates An original certificate of a duly authorised officer or representative of the Borrower certifying that each copy document relating to it specified in this Part I of Schedule 2 is correct, complete and in full force and effect as at a date no earlier than the date of this Agreement, setting out the names of its directors and officers (or its sole member), setting out the proportion of shares held by each shareholder, and confirming that any applicable borrowing and guaranteeing limits will not be exceeded.
(f)
Power of attorney The original power of attorney of the Borrower under which any documents are to be executed or transactions undertaken by the Borrower.
2
Finance Documents
This Agreement and any Fee Letter, together with all other documents required by any of them.
3
Legal opinions
The following legal opinions, each addressed to the Agent, or confirmation satisfactory to the Agent that such opinion will be given:
(a)
an opinion on matters of English law from Stephenson Harwood LLP; and
(b)
an opinion on matters of Marshall Island law from Watson Farley & Williams LLP, New York.
4
Other documents and evidence
(a)
Process agent Evidence that any process agent referred to in Clause 23.5 and any process agent appointed under any Finance Document executed pursuant to paragraph 2 above has accepted its appointment.

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(b)
Other authorisations A copy of any Necessary Authorisation or other document, opinion or assurance which the Agent considers to be necessary (if it has notified the Borrower accordingly) in connection with the entry into and performance of the transactions contemplated by any of the Relevant Documents or for the validity and enforceability of any of the Relevant Documents.
(c)
Fees Evidence that the fees, costs and expenses then due from the Borrower under Clause 8 and Clause 9 have been paid.
(d)
"Know your customer" documents Such documentation and other evidence as is reasonably requested by the Agent in order for the Lenders to comply with all necessary "know your customer" or similar identification procedures in relation to the transactions contemplated in the Finance Documents (including "know your customer" documentation on each shareholder of the Borrower with a shareholding of 20% or more).
(e)
Other Such other documents, authorisations, opinions and assurances as the Agent may specify.
(f)
Initial balance sheet A copy of the initial balance sheet of the Borrower.
(g)
Borrower structure and ownership (i) The approval of all the Lenders in respect of the ownership of the Borrower, (ii) evidence (reasonably satisfactory to the Agent) concerning the legal and capital structure of the Borrower and (iii) a structure chart relating to the Borrower Group, including the current name, company registration number, jurisdiction of incorporation and/or establishment and a list of the shareholders for each member of the Borrower Group.
(h)
Financial covenant compliance evidence Evidence satisfactory to the Agent of (i) projected covenant compliance for the Loan as outlined in the base case financial model as at the Execution Date and (ii) Net Debt to Total Capitalisation Ratio of no more than seventy five per cent. (75%) on the Execution Date (as set out in a pro forma balance sheet capitalisation for the Borrower Group as at the First Drawdown Date).

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Part II:
Conditions precedent to First Drawdown Date
1
Security Parties
(a)
Bringdown Certificate An original certificate from a duly authorised officer or representative of the Borrower confirming that none of the documents delivered to the Agent pursuant to Schedule 2, Part I, paragraphs 1(a), (c), (d), (e) and (f) and 4(g)(ii) and (iii) have been amended or modified in any way since the date of their delivery to the Agent.
(b)
Constitutional Documents Copies of the constitutional documents (including joint venture and shareholder agreements (if applicable)) of each Security Party (save for the Borrower) together with such other evidence as the Agent may reasonably require that each Security Party (save for the Borrower) is duly formed or incorporated in its country of formation or incorporation and remains in existence with power to enter into, and perform its obligations under, the Relevant Documents to which it is or is to become a party.
(c)
Certificates of good standing A certificate of good standing in respect of each Security Party (if such a certificate can be obtained).
(d)
Board resolutions A copy (or extract) of a resolution of the board of directors (or sole member) of each Security Party (save for the Borrower):
(i)
approving the terms of, and the transactions contemplated by, the Relevant Documents to which it is a party and ratifying or resolving that it execute those Relevant Documents; and
(ii)
if required authorising a specified person or persons to execute those Relevant Documents (and all documents and notices to be signed and/or despatched under those documents) on its behalf.
(e)
Shareholder resolutions If required by any legal advisor to the Agent, a copy of a resolution signed by all the holders of the issued shares or membership interests (as the case may be) in each Security Party (save for the Borrower), approving the terms of, and the transactions contemplated by, the Relevant Documents to which it is a party.
(f)
Officer's certificates An original certificate of a duly authorised officer or representative of each Security Party (save for the Borrower) certifying that each copy document relating to it specified in this Part II of Schedule 2 is correct, complete and in full force and effect as at a date no earlier than the date of the Drawdown Date, setting out the names of its directors and officers, setting out the proportion of shares held by each shareholder, and confirming that its borrowing and guaranteeing limits will not be exceeded.
(g)
Powers of attorney The notarially attested and legalised (where necessary for registration purposes) power of attorney of each Security Party (save for the Borrower) under which any documents are to be executed or transactions undertaken by that Security Party.
2
Security and related documents
(a)
Vessel documents In respect of each Collateral Vessel, photocopies, certified as true, accurate and complete by a duly authorised representative of the Borrower, of:
(i)
the Management Agreements (if any);
(ii)
any Charter;

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(iii)
evidence of each Collateral Vessel's current Certificate of Financial Responsibility issued pursuant to the United States Oil Pollution Act 1990 (if applicable);
(iv)
each ISM Company's current Document of Compliance;
(v)
each Collateral Vessel's current ISSC;
(vi)
each Collateral Vessel's current IAPPC;
(vii)
each Collateral Vessel's current SMC;
in each case together with all addenda, amendments or supplements.
(b)
Evidence of Collateral Owners' title Evidence that on the First Drawdown Date (i) each Collateral Vessel will be permanently registered under the relevant flag in the ownership of the relevant Collateral Owner and (ii) in the case of the Teekay Vessels only, each Mortgage will be capable of being registered against the relevant Teekay Vessel with first priority.
(c)
Evidence of insurance Evidence that each Teekay Vessel is insured in the manner required by the Security Documents and that letters of undertaking will be issued in the manner required by the Security Documents, together with the written approval of the Insurances by an insurance adviser appointed by the Agent, it being understood that such written approval shall be at the cost of the Borrower.
(d)
Confirmations of class A Certificate of Confirmation of Class for hull and machinery in respect of each Collateral Vessel confirming that that Collateral Vessel is classed with the highest in respect of each Collateral Vessel class applicable to vessels of her type with a Pre-Approved Classification Society free of material overdue recommendations and adverse notations affecting class.
(e)
Security Documents The Guarantees, the Mortgages, the Deeds of Covenants, the Assignments (subject always to the provisions of Clause 10.1.2), the Share Pledges, the Negative Pledges, the Pledges of Receivable Rights and the Account Security Deeds together with all other documents required by any of them, including, without limitation, all notices of assignment and/or charge and evidence that those notices will be duly acknowledged by the recipients, all share certificates, certified copy share registers or registers of members, transfer forms, proxy forms, letters of resignation and letters of undertakings specified in the Share Pledges.
(f)
Managers' Confirmations The Managers' Confirmations (if any) together with notices of any assignments contained in the same and evidence that those notices will be duly acknowledged by the recipients.
(g)
Other Relevant Documents Copies of each of the Relevant Documents not otherwise comprised in the documents listed in this Part II of Schedule 2.
3
Legal opinions
Confirmation satisfactory to the Agent that legal opinions substantially in the form provided to the Agent prior to the First Drawdown Date will be given promptly following disbursement of the Loan, namely:
(a)
an opinion on matters of English law from Stephenson Harwood LLP;
(b)
an opinion on matters of Marshall Islands law from Watson Farley & Williams LLP;
(c)
an opinion on matters of Bahamas law from Lennox Patton (or such other legal advisors in respect of the jurisdiction of the underlying flag of the Collateral Vessels);
(d)
an opinion on matters of Singapore law from Virtus Law LLP;

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(e)
an opinion on matters of Norwegian law from Wikborg Rein;
(f)
an opinion on matters of Canadian law from Dentons Canada LLP; and
(g)
an opinion on matters of New York law from Watson Farley & Williams LLP.
4
Other documents and evidence
(a)
Drawdown Notice A duly completed Drawdown Notice.
(b)
Process agent Evidence that any process agent appointed under any of the Security Documents executed pursuant to paragraph 2(e) above has accepted its appointment.
(c)
Other Authorisations A copy of any other Necessary Authorisation or other document, opinion or assurance which the Agent considers to be necessary (if it has notified the Borrower accordingly) in connection with the entry into and performance of the transactions contemplated by any Relevant Document or for the validity and enforceability of any Relevant Document.
(d)
" Know your customer " Such documentation and other evidence as is reasonably requested by the Agent in order for the Lenders to comply with all necessary "know your customer" or similar identification procedures in relation to the transactions contemplated in the Finance Documents.
(e)
Fees Evidence that the fees, costs and expenses then due from the Borrower under Clause 8 and Clause 9 have been paid by, or will have been paid on, the Drawdown Date.
(f)
Existing Loan Agreements Evidence satisfactory to the Agent that on or by the First Drawdown Date, each Existing Loan has, or will be, repaid in full together with accrued interest and all other fees accrued or outstanding under each Existing Loan Agreement and that all relevant Security Documents (as defined in the Existing Loan Agreements) and any relevant Encumbrance securing the Existing Loans or the obligations under the Existing Loans will be released and discharged.
(g)
Borrower's Certificate A certificate signed by a director or officer of the Borrower confirming that there is a minimum starting cash balance of ninety million Dollars ($90,000,000) within the Borrower Group (as set out in a pro forma balance sheet capitalisation for the Borrower Group as at the first Drawdown Date).
(h)
Recapitalisation Evidence satisfactory to the Agent (in form and substance) that on or by the First Drawdown Date, the investment into TOO (i) by Brookfield Business Partners L.P. or any of its Affiliates in a minimum of six hundred and ten million Dollars ($610,000,000) and (ii) by Teekay in a minimum amount of thirty million Dollars ($30,000,000) has taken place.


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Part III:
Conditions subsequent to First Drawdown Date
1
Evidence of Collateral Owners' title Certificate of ownership and encumbrance (or equivalent) issued by the Registrar of Ships (or equivalent official) of the flag of each Teekay Vessel confirming that (a) each Teekay Vessel is permanently registered under that flag in the ownership of the relevant Collateral Owner, (b) each Mortgage has been registered with first priority against the relevant Collateral Vessel and (c) there are no further Encumbrances registered against any of the Teekay Vessels.
2
Letters of undertaking Letters of undertaking in respect of the Insurances as required by the Security Documents together with copies of the relevant policies or cover notes or entry certificates duly endorsed with the interest of the Finance Parties.
3
Acknowledgements of notices Acknowledgements of all notices of assignment and/or charge given pursuant to any Security Documents received by the Agent pursuant to Part II of this Schedule 2, it being agreed that in the case of each notice of assignment of Charter Rights to be served in respect of the assignment of the Charter Rights under a Petrobras Charter, the Borrower Group shall only have an obligation to use its reasonable efforts to procure the provision of the relevant acknowledgement of such notice.
4
Legal opinions Such of the legal opinions specified in Part II of this Schedule 2 as have not already been provided to the Agent.
5
Quiet Enjoyment Letters Originals of any relevant Quiet Enjoyment Letters, duly executed, together with such evidence of the authority of the signatory of the relevant Charterers to sign such Quiet Enjoyment Letters as the Agent may reasonably require (unless, despite the reasonable efforts of the Borrower, such evidence cannot be obtained from the relevant Charterers), within ninety (90) days of the First Drawdown Date.

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Schedule 3     
The JV Vessels
Vessel name
JV Owner
Flag
Relevant Percentage
Relevant Share
Stena Alexita
Partrederiet Stena Ugland Shuttle Tankers I D.A.
Bahamas
50%
1.463354648%
Stena Natalita
Partrederiet Stena Ugland Shuttle Tankers III D.A.
Bahamas
50%
1.807673389%

The Teekay Vessels
Vessel name
Teekay Owner
Flag
Relevant Share
Samba Spirit
Samba Spirit L.L.C.
Bahamas
9.468765371%
Lambada Spirit
Lambada Spirit L.L.C.
Bahamas
9.468765371%
Navion Oslo
TNOL
Bahamas
3.566158387%
Nordic Brasilia
TNOL
Bahamas
5.681259223%
Navion Stavanger
TNOL
Bahamas
5.238563699%
Navion Scandia
TNOL
Bahamas
3.098868667%
Navion Anglia
TNOL
Bahamas
3.369404820%
Navion Oceania
TNOL
Bahamas
3.369404820%
Navion Hispania
Grand Banks
Bahamas
3.369404820%
Navion Britannia
TNOL
Bahamas
3.098868667%
Nordic Spirit
TNOL
Bahamas
4.549926217%
Petronordic
TNOL
Bahamas
3.664535170%
Petroatlantic
TNOL
Bahamas
4.156419085%
Amundsen Spirit
Amundsen Spirit L.L.C.
Bahamas
7.624200689%
Nansen Spirit
Nansen Spirit L.L.C.
Bahamas
7.624200689%
Peary Spirit
Peary Spirit L.L.C.
Bahamas
8.116084604%
Scott Spirit
Scott Spirit L.L.C.
Bahamas
8.116084604%
Navion Bergen
Navion Bergen L.L.C.
Bahamas
3.148057059%

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Schedule 4     
Form of Drawdown Notice
To:
Nordea Bank AB (publ), New York Branch
From:     Teekay Shuttle Tankers L.L.C.
[Date] 2017
Dear Sirs,
Drawdown Notice
We refer to the Loan Agreement dated 2017 made between, amongst others, ourselves and yourselves (the " Agreement ").
Words and phrases defined in the Agreement have the same meaning when used in this Drawdown Notice.
Pursuant to Clause 4.1 of the Agreement, we irrevocably request that you advance a Drawing in the sum of [ ] to us on                        2017, which is a Business Day, by paying the amount of the advance to [ ].
We warrant that the representations and warranties contained in Clause 11 of the Agreement save those contained in Clauses 11.2, 11.6 and 11.22 are true and correct at the date of this Drawdown Notice and will be true and correct (although this warranty is not given with regard to Clause 11.7) on                         2017 that no Default has occurred and is continuing, and that no Default will result from the advance of the sum requested in this Drawdown Notice.
We select the period of [ ] months as the Interest Period in respect of the said Drawing.
Yours faithfully

.......................

For and on behalf of

Teekay Shuttle Tankers L.L.C.

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Schedule 5     
Form of Transfer Certificate
To:     Nordea Bank AB (publ), New York Branch
Transfer Certificate
This transfer certificate relates to a secured loan facility agreement (as from time to time amended, varied, supplemented or novated the " Loan Agreement ") dated [ ] 2017, on the terms and subject to the conditions of which a secured revolving credit and term loan facility was made available to Teekay Shuttle Tankers L.L.C., by a syndicate of banks on whose behalf you act as agent and security trustee.
1
Terms defined in the Loan Agreement shall, unless otherwise expressly indicated, have the same meaning when used in this certificate. The terms " Transferor " and " Transferee " are defined in the schedule to this certificate (the " Schedule ").
2
The Transferor:
2.1
confirms that the details in the Schedule under the heading " Transferor's Commitment " accurately summarise its Commitment; and
2.2
requests the Transferee to accept by way of novation the transfer to the Transferee of the amount of the Transferor's Commitment specified in the Schedule by counter-signing and delivering this certificate to the Agent at its address for communications specified in the Loan Agreement.
3
The Transferee requests the Agent to accept this certificate as being delivered to the Agent pursuant to and for the purposes of clause 14 of the Loan Agreement so as to take effect in accordance with the terms of that clause on the Transfer Date specified in the Schedule.
4
The Agent confirms its acceptance of this certificate for the purposes of clause 14 of the Loan Agreement.
5
The Transferee confirms that:
5.1
it has received a copy of the Loan Agreement together with all other information which it has required in connection with this transaction;
5.2
it has not relied and will not in the future rely on the Transferor or any other party to the Loan Agreement to check or enquire on its behalf into the legality, validity, effectiveness, adequacy, accuracy or completeness of any such information; and
5.3
it has not relied and will not in the future rely on the Transferor or any other party to the Loan Agreement to keep under review on its behalf the financial condition, creditworthiness, condition, affairs, status or nature of any Security Party.
6
Execution of this certificate by the Transferee constitutes its representation and warranty to the Transferor and to all other parties to the Loan Agreement that it has the power to become a party to the Loan Agreement as a Lender on the terms of the Loan Agreement and has taken all steps to authorise execution and delivery of this certificate.
7
The Transferee undertakes with the Transferor and each of the other parties to the Loan Agreement that it will perform in accordance with their terms all those obligations which by the terms of the Loan Agreement will be assumed by it after delivery of this certificate to the Agent and the satisfaction of any conditions subject to which this certificate is expressed to take effect.
8
The Transferor makes no representation or warranty and assumes no responsibility with respect to the legality, validity, effectiveness, adequacy or enforceability of any Finance Document or any document relating to any

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Finance Document, and assumes no responsibility for the financial condition of any Finance Party or for the performance and observance by any Security Party of any of its obligations under any Finance Document or any document relating to any Finance Document and any conditions and warranties implied by law are expressly excluded.
9
The Transferee acknowledges that nothing in this certificate or in the Loan Agreement shall oblige the Transferor to:
9.1
accept a re-transfer from the Transferee of the whole or any part of the rights, benefits and/or obligations transferred pursuant to this certificate; or
9.2
support any losses directly or indirectly sustained or incurred by the Transferee for any reason including, without limitation, the non-performance by any party to any Finance Document of any obligations under any Finance Document.
10
The address and fax number of the Transferee for the purposes of clause 18 of the Loan Agreement are set out in the Schedule.
11
This certificate may be executed in any number of counterparts each of which shall be original but which shall together constitute the same instrument.
12
This certificate shall be governed by and interpreted in accordance with English law.

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The Schedule
1
Transferor :
2
Transferee :
3
Transfer Date (not earlier that the fifth Business Day after the date of delivery of the Transfer Certificate to the Agent):
4
Transferor's Commitment :
5
Amount transferred :
6
Transferee's address and fax number for the purposes of clause 18 of the Loan Agreement :
[ name of Transferor ]                [ name of Transferee ]
By:                        By:

Date:                        Date:



Nordea Bank AB (publ), New York Branch as Agent
By:
Date:


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Schedule 6     
Form of Compliance Certificate
To:     Nordea Bank AB (publ), New York Branch
From:     Teekay Shuttle Tankers L.L.C.
Date:    [ ]
Dear Sirs
We refer to an agreement (the " Loan Agreement ") dated [     ] 2017 and made between (inter alia) (1) us as borrower, (2) the banks listed at Schedule 1, Part I thereto as lenders and (3) yourselves as agent and security trustee (as from time to time amended, varied, novated or supplemented).
Terms defined or construed in the Loan Agreement have the same meanings and constructions in this Certificate.
We attach the relevant calculation applicable on the last day of our financial [year][quarter] ending [     ] (the " Relevant Period ") which confirm that:
1
Free Liquidity and Available Credit Lines [were in aggregate at all times equal to or greater than/fell below] $35,000,000. Therefore the condition contained in clause 12.2(a) of the Loan Agreement [has/has not] been complied with in respect of the Relevant Period.
2
The aggregate of Free Liquidity and Available Credit Lines [was at all times equal to or greater than/fell below] 5.0% of Total Debt. Therefore the condition contained in clause 12.2(b) of the Loan Agreement [has/has not] been complied with.
3
The ratio of twelve (12) months historical EBITDA relative to the aggregate of total interest expense related to senior debt, junior debt and preferred equity and instalments for a similar period [has been at all times during the Relevant Period a][has during the Relevant Period fallen below the] minimum of 1.20x. Therefore the condition contained in clause 12.2(c) of the Loan Agreement [has/has not] been complied with in respect of the Relevant Period.
4
The Net Debt to Total Capitalisation Ratio [was at all time equal to or less than/exceeded] seventy five per cent (75%). Therefore the condition at clause 12.2(d) of the Loan Agreement [has/has not] been complied with in respect of the Relevant Period.
5
The aggregate of (i) the full Fair Market Value of the Teekay Vessels and the Relevant Percentage of the Fair Market Value of each JV Vessel is [ ] and (ii) the value of any additional security previously provided under clause 10.9 of the Loan Agreement is [ ] which in aggregate is not less than 125% of the amount of the Loans outstanding in the Relevant Period. The aggregate of (iii) the full Fair Market Value of the Collateral Vessels (excluding the JV Vessels as long as they are indirectly partly owned by the Borrower) and (iv) the value stipulated under (ii) above is [ ] which in aggregate is not less than 110% of the amount of the Loans outstanding in the Relevant Period. Therefore, the requirements of clause 10.9 of the Loan Agreement have been complied with in respect of the Relevant Period.
The Fair Market Value of each Collateral Vessel is as follows at [date]:
Name of Collateral Vessel
Name of first shipbroker providing valuation
Name of second shipbroker providing valuation
Average market value
[ ]
[ ]
[ ]
[ ]


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6
The amount of any Cure Amount standing to the credit of the Cash Cure Account at the date of this Certificate is $[         ].

Signed:        

Duly authorised representative of

Teekay Shuttle Tankers L.L.C.

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Schedule 7     
Existing Charters
Vessel name
Teekay Owner
Charterers
Samba Spirit
Samba Spirit L.L.C.
Time Charter between Samba Spirit L.L.C. and Brazil Shipping I Limited dated 21 June 2011
Lambada Spirit
Lambada Spirit L.L.C.
Time Charter between Lambada Spirit L.L.C. and Brazil Shipping I Limited dated 21 June 2011
Navion Stavanger
TNOL
(1) Bareboat Charter between TNOL and Teekay Norway AS dated 16 January 2006; and
(2) Bareboat Charter between Teekay Norway AS and Fronape International Company and Petrobras Transporte S.A. – Transpetro dated 16 January 2006.
Nansen Spirit
Nansen Spirit L.L.C.
(1) Bareboat Charter between Nansen Spirit L.L.C. and TNOL dated 10 December 2010; and
(2) Time Charter between TNOL and Statoil ASA dated 13 December 2010.
Peary Spirit
Peary Spirit L.L.C.
(1) Bareboat Charter between Peary Spirit L.L.C. and TNOL dated 3 May 2011; and
(2) Time Charter between TNOL and Statoil ASA dated 29 March 2012.
Navion Bergen
Navion Bergen L.L.C.
(1) Bareboat Charter between Navion Bergen L.L.C. and Navion Bergen AS dated 1 December 2006; and
(2) Bareboat Charter between Navion Bergen AS, Fronape International Company B.V. and Petrobras Transporte S.A. – Transpetro dated 16 January 2006.
Petronordic
TNOL
Time Charter dated 1 April 2017 between TNOL and Golar-NOR (UK) Limited
Petroatlantic
TNOL
Time Charter dated 1 April 2017 between TNOL and Golar-NOR (UK) Limited

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Schedule 8     
Earnings Accounts
Vessel name
Beneficiary
Account Bank
Account Number
Samba Spirit
Samba Spirit L.L.C.
DNB Bank ASA, New York Branch
13469001
Lambada Spirit
Lambada Spirit LLC.
DNB Bank ASA, New York Branch
14036001
Navion Oslo
TNOL
DNB Bank ASA, New York Branch
15760001
Nordic Brasilia
TNOL
DNB Bank ASA, New York Branch
15760001
Navion Stavanger
TNOL
DNB Bank ASA, New York Branch
15760001
Navion Stavanger
Teekay Norway AS
DNB Bank ASA, Oslo Branch
54130441141
Navion Scandia
TNOL
DNB Bank ASA, New York Branch
15760001
Navion Anglia
TNOL
DNB Bank ASA, New York Branch
15760001
Navion Oceania
TNOL
DNB Bank ASA, New York Branch
15760001
Navion Britannia
TNOL
DNB Bank ASA, New York Branch
15760001
Nordic Spirit
TNOL
DNB Bank ASA, New York Branch
15760001
Petronordic
TNOL
DNB Bank ASA, New York Branch
15760001
Petroatlantic
TNOL
DNB Bank ASA, New York Branch
15760001
Amundsen Spirit
TNOL
DNB Bank ASA, New York Branch
15760001
Nansen Spirit
TNOL
DNB Bank ASA, New York Branch
15760001
Peary Spirit
TNOL
DNB Bank ASA, New York Branch
15760001
Scott Spirit
TNOL
DNB Bank ASA, New York Branch
15760001
Navion Bergen
Navion Bergen L.L.C.
DNB Bank ASA, London Branch
63241001
Navion Bergen
Navion Bergen AS
DNB Bank ASA, Oslo Branch
70370442965


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