UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 001-30176
DEVON ENERGY CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware 73-1567067
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
20 N. Broadway, Suite 1500
Oklahoma City, Oklahoma 73102
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (405) 235-3611
Not applicable
Former name, former address and former fiscal year, if changed from
last report.
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
The number of shares outstanding of Registrant's common
stock, par value $.10, as of November 1, 1999, was 80,893,000.
1 of 226 total pages
(Exhibit Index is found at page 39)
<PAGE>
DEVON ENERGY CORPORATION
Index to Form 10-Q Quarterly Report
to the Securities and Exchange Commission
Page No.
Part I. Financial Information
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets, September 30, 1999 4
(Unaudited) and December 31, 1998
Consolidated Statements of Operations (Unaudited) 5
for the Three Months and Nine Months Ended
September 30, 1999 and 1998
Consolidated Statements of Comprehensive 6
Operations (Unaudited) for the Three Months and
Nine Months Ended September 30, 1999 and 1998
Consolidated Statements of Cash Flows (Unaudited) 7
for the Nine Months Ended September 30, 1999 and
1998
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of 19
Financial Condition and Results of
Operations
Item 3. Quantitative and Qualitative Disclosures 33
About Market Risk
Part II. Other Information
Item 4. Submission of Matters to a Vote of 34
Security Holders
Item 6. Exhibits and Reports on Form 8-K 35
DEFINITIONS
As used in this document:
"Mcf" means thousand cubic feet
"MMcf" means million cubic feet
"Bcf" means billion cubic feet
"Bbl" means barrel
"MBbls" means thousand barrels
"MMBbls" means million barrels
"Boe" means equivalent barrels of oil
"MBoe" means thousand equivalent barrels of oil
"Oil" includes crude oil and condensate
"NGLs" means natural gas liquids
<PAGE>
DEVON ENERGY CORPORATION
Part I. Financial Information
Item 1. Consolidated Financial Statements
September 30, 1999 and 1998
(Forming a part of Form 10-Q Quarterly Report
to the Securities and Exchange Commission)
<PAGE>
<TABLE>
DEVON ENERGY CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(In Thousands, Except Share Data)
<CAPTION>
September 30, December 31,
1999 1998
(Unaudited)
Assets
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 380,258 19,154
Accounts receivable 187,726 83,858
Inventories 16,849 2,750
Prepaid expenses 11,377 2,351
Deferred income taxes - 605
Investments and other assets 383 1,930
Total current assets 596,593 110,648
Property and equipment, at cost, based
on the full cost method of accounting
for oil and gas properties 5,561,881 2,610,511
Less accumulated depreciation,
depletion and amortization 1,702,266 1,509,583
3,859,615 1,100,928
Investment in Chevron Corporation
common stock, at market value 629,453 -
Other assets 89,609 14,780
Total assets $5,175,270 1,226,356
Liabilities and stockholders' equity
Current liabilities:
Current maturities of long-term debt 200,000 -
Accounts payable:
Trade 117,387 40,177
Revenues and royalties due to others 38,974 12,508
Accrued liabilities 181,171 27,971
Deferred income taxes 3,823 -
Total current liabilities 541,355 80,656
Other liabilities 191,044 34,747
Debentures exchangeable into shares of
Chevron Corporation common stock 760,313 -
Other long-term debt 1,022,727 405,271
Deferred income taxes 691,743 33,219
Company-obligated mandatorily redeemable
convertible preferred securities of
subsidiary trust holding solely 6.5%
convertible junior subordinated
debentures of Devon Energy Corporation 149,500 149,500
Stockholders' equity:
Preferred stock of $1.00 par value.
Authorized 4,500,000 shares; issued
1,500,000 in 1999 and none in 1998 1,500 -
Common stock of $.10 par value.
Authorized 400,000,000 shares; issued
80,394,000 in 1999 and 48,425,000
in 1998 8,039 4,842
Additional paid-in capital 2,074,731 796,992
Accumulated deficit (205,873) (242,909)
Accumulated other comprehensive loss (59,809) (35,962)
Total stockholders' equity 1,818,588 522,963
Total liabilities and stockholders'
equity $5,175,270 1,226,356
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
DEVON ENERGY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(In Thousands, Except Per Share Amounts)
<CAPTION>
Three Months EndedNine Months Ended
September 30, September 30,
1999 1998 1999 1998
(Unaudited)
Revenues
<S> <C> <C> <C> <C>
Oil sales $ 81,778 35,828 146,562 111,401
Gas sales 116,619 50,739 229,557 157,294
Natural gas liquids sales 15,844 3,902 25,608 13,589
Other 5,610 2,401 9,702 15,798
Total revenues 219,851 92,870 411,429 298,082
Costs and expenses
Lease operating expenses 45,846 28,119 100,366 85,798
Production taxes 7,051 3,550 13,466 10,816
Depreciation, depletion and
amortization 85,477 31,755 154,798 92,913
General and administrative
expenses 19,338 5,896 32,513 17,680
Interest expense 21,459 5,507 35,238 16,344
Deferred effect of changes in
foreign currency exchange rate
on subsidiary's long-term debt (330) 8,512 (9,076) 15,433
Distributions on preferred
securities of subsidiary trust 2,429 2,429 7,288 7,288
Reduction of carrying value of oil
and gas properties - 126,900 - 126,900
Total costs and expenses 181,270 212,668 334,593 373,172
Earnings (loss) before income
tax expense (benefit) 38,581 (119,798) 76,836 (75,090)
Income tax expense (benefit)
Current 4,573 1,183 8,875 6,514
Deferred 9,556 (37,786) 21,320 (24,807)
Total income tax expense
(benefit) 14,129 (36,603) 30,195 (18,293)
Net earnings (loss) $ 24,452 (83,195) 46,641 (56,797)
Net earnings (loss) applicable
to common stockholders $ 23,235 (83,195) 45,424 (56,797)
Net earnings (loss) per average
common share outstanding
(Note 5):
Basic $0.39 (1.72) 0.87 (1.18)
Diluted $0.38 (1.72) 0.86 (1.18)
Weighted average common shares
outstanding - basic (Note 5) 59,842 48,406 52,372 48,361
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
DEVON ENERGY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Comprehensive Operations
(In Thousands)
<CAPTION>
Three Months EndedNine Months Ended
September 30, September 30,
1999 1998 1999 1998
(Unaudited)
<S> <C> <C> <C> <C>
Net earnings (loss) $ 24,452 (83,195) 46,641 (56,797)
Other comprehensive earnings (loss):
Foreign currency translation
adjustments 183 (4,805) 4,815 (7,909)
Unrealized losses on marketable
securities, net of tax benefit (28,662) - (28,662) -
Comprehensive earnings (loss) $ (4,027) (88,000) 22,794 (64,706)
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
DEVON ENERGY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In Thousands)
<CAPTION>
Nine Months Ended September 30,
1999 1998
(Unaudited)
Cash flows from operating activities
<S> <C> <C>
Net earnings (loss) $ 46,641 (56,797)
Adjustments to reconcile net earnings
(loss) to net cash provided by operating
activities:
Depreciation, depletion and amortization 154,798 92,913
Deferred effect of changes in foreign
currency exchange rate on subsidiary's
long-term debt (9,076) 15,433
(Gain) loss on sale of assets (87) (127)
Deferred income taxes (benefit) 21,320 (24,807)
Reduction of carrying value of oil and
gas properties - 126,900
Other (332) 901
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable (30,099) 16,456
Inventories (1,022) 1,412
Prepaid expenses (1,105) 503
Other assets (1,306) 516
Increase (decrease) in:
Accounts payable (13,798) (5,306)
Accrued liabilities 28,526 (14,445)
Long-term other liabilities (1,869) (1,158)
Net cash provided by operating activities 192,591 152,394
Cash flows from investing activities
Proceeds from sale of property and equipment 57,524 63,200
Payments made for acquisition of businesses,
net of cash acquired (16,588) -
Proceeds from sale of investments - 43,641
Capital expenditures (230,531) (248,377)
Decrease (increase) in other assets 637 (3,065)
Net cash used in investing activities (188,958) (144,601)
Cash flows from financing activities
Proceeds from borrowings on revolving lines of
credit 1,031,291 985,241
Principal payments on revolving lines of credit (1,058,096) (1,030,987)
Issuance of common stock, net of issuance costs 391,647 2,440
Dividends paid on common stock (8,388) (4,848)
Dividends paid on preferred stock (1,217) -
Increase in long-term other liabilities 2,072 5,977
Net cash provided (used) by financing
activities 357,309 (42,177)
Effect of exchange rate changes on cash 162 (531)
Net increase (decrease) in cash and cash
equivalents 361,104 (34,915)
Cash and cash equivalents at beginning of period 19,154 42,065
Cash and cash equivalents at end of period $ 380,258 7,150
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
DEVON ENERGY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Basis of Presentation
On December 10, 1998, Devon Energy Corporation ("Devon") and
Northstar Energy Corporation ("Northstar") closed a merger of the
two companies (the "Northstar Combination"). At that date,
Northstar became a wholly-owned subsidiary of Devon. Pursuant to
the Northstar Combination, Northstar's common shareholders
received approximately 16.1 million exchangeable shares (the
"Exchangeable Shares") based on an exchange ratio of 0.235
Exchangeable Shares for each Northstar common share outstanding.
The Exchangeable Shares were issued by Northstar, but are
exchangeable at any time into Devon's common shares on a one-for-
one basis. Prior to such exchange, the Exchangeable Shares have
rights identical to those of Devon's common shares, including
dividend, voting and liquidation rights. Between December 10,
1998 and September 30, 1999, approximately 11.3 million of the
originally issued 16.1 million Exchangeable Shares had been
exchanged for shares of Devon common stock.
The Northstar Combination was accounted for under the
pooling-of-interests method of accounting for business
combinations. All operational and financial information
contained herein includes the combined amounts of Devon and
Northstar for all periods presented. The separate results of
operations of Devon and Northstar for the three month and nine
month periods ended September 30, 1998 are as follows:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
September 30, 1998 September 30, 1998
(In Thousands)
Revenues:
<S> <C> <C>
Devon $ 57,072 184,506
Northstar 35,798 113,576
Combined $ 92,870 298,082
Net earnings (loss):
Devon (83,086) (65,329)
Northstar (109) 8,532
Combined $ (83,195) (56,797)
</TABLE>
The accompanying consolidated financial statements and notes
thereto have been prepared pursuant to the rules and regulations
of the Securities and Exchange Commission. Accordingly, certain
footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting
principles have been omitted. The accompanying consolidated
financial statements and notes thereto should be read in
conjunction with the consolidated financial statements and notes
thereto included in Devon's 1998 annual report on Form 10-K.
In the opinion of Devon's management, all adjustments (all
of which are normal and recurring) have been made which are
necessary to fairly state the consolidated financial position of
Devon and its subsidiaries as of September 30, 1999, and the
results of their operations and their cash flows for the three
month and nine month periods ended September 30, 1999 and 1998.
2. PennzEnergy Merger
Devon closed its merger with PennzEnergy Company
("PennzEnergy") on August 17, 1999. The merger was accounted for
using the purchase method of accounting for business
combinations. Accordingly, the accompanying statements of
operations for the third quarter and first nine months of 1999
include the effects of PennzEnergy operations for the last half
of August and the entire month of September.
Devon issued approximately 21.5 million shares of its common
stock to the former stockholders of PennzEnergy. In addition,
Devon assumed long-term debt and other obligations totaling
approximately $2.2 billion on August 17, 1999. The calculation
of the total purchase price and the preliminary allocation to
assets and liabilities as of August 17, 1999, are shown below.
Devon intends to sell in the near future certain of the assets
acquired. Generally, the proceeds from such sales will reduce
the gross purchase price allocated to oil and gas properties. The
following is preliminary and is subject to change as various
assumptions are finalized as information is evaluated or
determined.
<TABLE>
<CAPTION>
(In Thousands,
Except Share Price)
Calculation and preliminary allocation of
purchase price:
Shares of Devon common stock issued to
<S> <C>
PennzEnergy Stockholders 21,501
Average Devon stock price $33.40
Fair value of common stock issued $ 718,177
Plus preferred stock assumed by Devon 150,000
Plus estimated merger costs to be
incurred 71,545
Plus fair value of PennzEnergy employees
tock options assumed by Devon 18,295
Less stock registration and issuance
costs incurred (4,985)
Total purchase price 953,032
Plus fair value of liabilities assumed by Devon:
Current liabilities 213,619
Debentures exchangeable into Chevron Corporation
common stock 760,313
Other long-term debt 838,792
Other long-term liabilities 155,916
2,921,672
Less fair value of non oil and gas assets acquired
by Devon:
Current assets 108,164
Non oil and gas properties 17,370
Investment in common stock of Chevron
Corporation 676,441
Other assets 73,983
Fair value allocated to oil and gas properties,
including $111 million of undeveloped
leasehold $2,045,714
</TABLE>
In addition to the $2 billion allocated to oil and gas
properties as shown in the previous table, $660.7 million was
also added to oil and gas properties for deferred taxes created
as a result of the merger. Due to the tax-free nature of the
merger, Devon's tax basis in the assets acquired and liabilities
assumed are the same as PennzEnergy's tax basis. The $660.7
million of deferred taxes recorded represent the deferred tax
effect of the difference between the fair values assigned by
Devon for financial reporting purposes to the former PennzEnergy
assets and liabilities and their bases for income tax purposes.
Pro Forma Information
Set forth below is certain unaudited pro forma financial
information for the nine months ended September 30, 1999 and
1998. This information has been prepared assuming the merger was
consummated on January 1, 1998, and is based on estimates and
assumptions deemed appropriate by Devon. The pro forma
information is presented for illustrative purposes only. If the
merger had occurred in the past, Devon's operating results might
have been different from those presented in the following table.
The pro forma information should not be relied upon as an
indication of the operating results that Devon would have
achieved if the merger had occurred on January 1, 1998. The pro
forma information also should not be used as an indication of the
future results that Devon will achieve after the merger.
The pro forma information includes the effect of Devon's
recent issuance of 10,332,100 shares of common stock as if such
shares had been issued on January 1, 1998. (See Note 3 for
additional information on this recent issuance of shares of
common stock.) The pro forma information assumes that the
approximate $402 million of net proceeds from the issuance of
common stock was used to retire long-term debt and therefore
reduce interest expense.
The following should be considered in connection with the
pro forma financial information presented:
Expected annual cost savings of $50 to $60 million have
not been reflected as an adjustment to the historical
data in preparing the following pro forma information.
These cost savings are expected to result from the
consolidation of the corporate headquarters of Devon
and PennzEnergy and the elimination of duplicate staff
and expenses.
The first nine months of 1999's pro forma results
include a gain of $46.7 million ($29.8 million after-
tax) from PennzEnergy's second quarter sale of land,
timber and mineral rights in Pennsylvania and New York.
In the 1998 third quarter, PennzEnergy realized pretax
gains on the sale and exchange of Chevron Corporation
common stock of $203.1 million. This gain is included
in the 1998 pro forma financial information below. The
pro forma financial information does not include the
related $207.0 million after-tax extraordinary loss
resulting from the early extinguishment of debt.
The 1998 third quarter and year-to-date pro forma
results include $20.9 million and $22.9 million,
respectively, of nonrecurring general and
administrative expenses in connection with the spin-off
of Pennzoil-Quaker State Company on December 30, 1998.
The 1998 third quarter and year-to-date pro forma
results include a reduction of the carrying value of
oil and gas properties incurred by Devon. This
reduction, which was due to the full cost ceiling
limitation, was $126.9 million ($88.0 million after-
tax).
<TABLE>
<CAPTION>
Pro Forma Information
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
(Dollars In Thousands, Except Per Share Amounts)
Revenues
<S> <C> <C> <C> <C>
Oil sales $ 113,407 75,031 263,305 238,080
Gas sales 161,747 127,046 425,569 421,095
Natural gas liquids sales 22,997 13,058 51,493 50,725
Other 10,205 244,431 75,859 289,251
Total revenues 308,356 459,566 816,226 999,151
Costs and expenses
Lease operating expenses 65,477 75,969 196,473 223,794
Production taxes 9,238 7,046 22,417 21,753
Depreciation, depletion and
amortization 136,664 136,403 405,569 432,063
General and administrative
expenses 30,101 56,624 87,996 111,160
Interest expense 26,021 35,496 81,164 105,551
Deferred effect of changes in
foreign currency exchange rate
on subsidiary's long-term debt (330) 8,512 (9,076) 15,433
Distributions on preferred
securities of subsidiary trust 2,429 2,429 7,288 7,288
Reduction of carrying value of oil
and gas properties - 126,900 - 126,900
Total costs and expenses 269,600 449,379 791,831 1,043,942
Earnings (loss) before income tax
expense (benefit) 38,756 10,187 24,395 (44,791)
Income tax expense (benefit)
Current 4,870 118,421 9,138 118,701
Deferred 9,212 (107,372) 224 (132,618)
Total income tax expense
(benefit) 14,082 11,049 9,362 (13,917)
Net earnings (loss) $ 24,674 (862) 15,033 (30,874)
Net earnings (loss) applicable
to common stockholders $ 22,240 (3,296) 7,731 (34,065)
Net earnings (loss) per average
common share outstanding -
basic and diluted $0.28 (0.04) 0.10 (0.43)
Weighted average common shares
outstanding - basic 80,728 80,112 80,696 80,031
Production data
Oil (MBbls) 6,109 6,648 18,071 19,878
Gas (MMcf) 76,282 73,796 229,734 229,258
NGLs (MBbls) 1,748 1,738 5,019 5,522
Mboe 20,571 20,685 61,379 63,610
</TABLE>
3. Equity Offering
In late September and early October, 1999, Devon received
$402.7 million from the sale of approximately 10.3 million shares
of its common stock in a public offering. On September 27, 1999,
Devon sold 9.9 million shares of its common stock in the initial
public offering. The price to the public for these shares was
$40.50 per share. Net of underwriters' discount and commissions,
Devon received $38.98 per share, or $385.9 million. On October
4, 1999, the underwriters exercised their overallotment option
for an additional 432,100 shares of Devon common stock. The net
proceeds to Devon from this additional offering, at the net price
of $38.98 per share, were approximately $16.8 million. Devon
expects to pay approximately $0.8 million of expenses related to
the equity offering, and these costs have been recorded as
reductions of additional paid-in capital as of September 30,
1999.
The $402 million of net proceeds from the offering will
primarily be used to retire $350 million of long-term debt
assumed in the PennzEnergy merger. This debt consists of $200
million that bears interest at 9.625% and matures on November 15,
1999, and $150 million that bears interest at 10.625% and matures
on June 1, 2001. The $200 million will be retired at its stated
maturity date. Devon called the $150 million for early
redemption and retired this debt on October 28, 1999. There were
no premiums required for this early redemption. The additional
credit available to Devon as a result of the debt reductions will
be used primarily for capital expenditures and acquisitions as
they occur.
The remainder of the equity offering proceeds will be used
to retire debt under Devon's U.S. credit facility which totaled
$30 million at September 30, 1999. Pending the use of the
proceeds to retire the various debt, the proceeds are being
invested in short-term investment-grade instruments, certificates
of deposit or direct or guaranteed obligations of the U.S.
government.
4. Credit Facilities
On October 15, 1999, Devon entered into new unsecured long-
term credit facilities aggregating $750 million (the "Credit
Facilities"). The Credit Facilities include a U.S. facility of
$475 million (the "U.S. Facility") and a Canadian facility of
$275 million (the "Canadian Facility"). The Credit Facilities
replaced Devon's previous facilities that totaled $400 million.
Amounts borrowed under the Credit Facilities bear interest
at various fixed rate options that Devon may elect for periods up
to six months. Such rates are generally less than the prime
rate. Devon may also elect to borrow at the prime rate. The
Credit Facilities provide for an annual facility fee of $0.9
million that is payable quarterly.
The $475 million U.S. Facility consists of a Tranche A
facility of $200 million and a Tranche B facility of $275
million. The Tranche A facility matures on October 15, 2004.
Devon may borrow funds under the Tranche B facility until October
13, 2000 (the "Tranche B Revolving Period"). Devon may request
that the Tranche B Revolving Period be extended an additional 364
days by notifying the agent bank of such request between 30 and
60 days prior to the end of the Tranche B Revolving Period. Debt
borrowed under the Tranche B facility matures two years and one
day following the end of the Tranche B Revolving Period. On
October 15, 1999, there were no borrowings from the $475 million
U.S. Facility.
Devon may borrow funds under the $275 million Canadian
Facility until October 13, 2000 (the "Canadian Facility Revolving
Period"). Devon may request that the Canadian Facility Revolving
Period be extended an additional 364 days by notifying the agent
bank of such request between 45 and 90 days prior to the end of
the Canadian Facility Revolving Period. Debt outstanding as of
the end of the Canadian Facility Revolving Period is payable in
semi-annual installments of 2.5% each for the following five
years, with the final installment due five years and one day
following the end of the Canadian Facility Revolving Period. On
October 15, 1999, there was $131.3 million borrowed under the
$275 million Canadian facility.
The agreements governing the Credit Facilities contain
certain covenants and restrictions, including a maximum allowed
debt-to-capitalization ratio as defined in the agreements.
5. Earnings Per Share
The following tables reconcile the net earnings and common
shares outstanding used in the calculations of basic and diluted
earnings per share for the three month and nine month periods
ended September 30, 1999. The diluted loss per share
calculations for the three and nine month periods ended September
30, 1998 produced results that were anti-dilutive. These
calculations decreased the net loss by $1.5 million and $4.5
million in the three month and nine month periods ended September
30, 1998, respectively, and increased the common shares
outstanding by 5.2 million shares in each of such respective
periods.
Options to purchase approximately 1.5 million shares of
Devon's common stock with exercise prices ranging from $40.13 per
share to $92.78 per share (with a weighted average price of
$62.74 per share) were outstanding at September 30, 1999, but
were not included in the computation of diluted earnings per
share for the third quarter of 1999 because the options' exercise
price exceeded the average market price of Devon's common stock
during the third quarter. Similarly, options to purchase
approximately 2.7 million shares of Devon's common stock with
exercise prices ranging from $35.58 per share to $92.78 per share
(with a weighted average price of $51.48 per share) were excluded
from the diluted earnings per share calculation for the first
nine months of 1999. The excluded options for both the quarter
and the nine months period expire between December 10, 1999 and
September 30, 2009.
<TABLE>
<CAPTION>
Net
Earnings Net
Applicable Common Earnings
To Common Shares Per
Stockholders Outstanding Share
(In Thousands)
Three Months Ended September 30, 1999:
<S> <C> <C> <C>
Basic earnings per share $23,235 59,842 $0.39
Dilutive effect of:
Potential common shares issuable
upon the conversion of Trust
Convertible Preferred Securities
(the increase in net earnings is
net of income tax expense of
$963,000) 1,506 4,902
Potential common shares issuable
upon the exercise of outstanding
stock options - 790
Diluted earnings per share $24,741 65,534 $0.38
Nine Months Ended September 30, 1999:
Basic earnings per share $45,424 52,372 $0.87
Dilutive effect of:
Potential common shares issuable
upon the conversion of Trust
Convertible Preferred securities
(the increase in net earnings
is net of income tax expense of
$2,889,000) 4,519 4,902
Potential common shares issuable
upon the exercise of outstanding
stock options - 553
Diluted earnings per share $49,943 57,827 $0.86
</TABLE>
To arrive at net earnings applicable to common stockholders
as shown in the previous tables, net earnings are reduced by the
amount of dividends on the 6.49% cumulative preferred stock
outstanding. Such dividends equal approximately $2.4 million per
quarter. This preferred stock was assumed by Devon in the
PennzEnergy merger. Therefore, the net earnings for the third
quarter and first nine months of 1999 have been reduced by $1.2
million for half of the third quarter's preferred dividend
because the merger was closed on August 17, 1999.
6. Segment Information
Devon manages its business by country. As such, Devon
identifies its segments based on geographic areas. Devon has two
reportable segments: its operations in the U.S. and its
operations in Canada. Substantially all of both segments'
operations involve oil and gas producing activities.
Following is certain financial information regarding Devon's
segments. The revenues reported are all from external customers.
<TABLE>
<CAPTION>
U.S. Canada Other Total
(In Thousands)
As of September 30, 1999:
<S> <C> <C> <C> <C>
Current assets $ 515,919 60,094 20,580 596,593
Property and equipment, net of accumulated
depreciation, depletion and amortization 3,076,670 476,100 306,845 3,859,615
Investment in Chevron Corporation common
stock 629,453 - - 629,453
Other assets 77,778 899 10,932 89,609
Total assets $4,299,820 537,093 338,357 5,175,270
Current liabilities 473,315 51,926 16,114 541,355
Debentures exchangeable into shares of
Chevron Corporation common stock 760,313 - - 760,313
Other long-term debt 668,463 354,264 - 1,022,727
Deferred tax liabilities (assets) 670,403 (8,668) 30,008 691,743
Other liabilities 183,687 3,603 3,754 191,044
TCP Securities 149,500 - - 149,500
Stockholders' equity 1,394,139 135,968 288,481 1,818,588
Total liabilities and stockholders'
equity $4,299,820 537,093 338,357 5,175,270
Three Months ended September 30, 1999:
Revenues
Oil sales $ 57,490 23,276 1,012 81,778
Gas sales 89,406 27,213 - 116,619
Natural gas liquids sales 12,972 2,872 - 15,844
Other 4,383 1,017 210 5,610
Total revenues 164,251 54,378 1,222 219,851
Costs and expenses
Lease operating expenses 33,332 12,214 300 45,846
Production taxes 6,684 367 - 7,051
Depreciation, depletion and amortization 68,441 16,982 54 85,477
General and administrative expenses 15,251 2,777 1,310 19,338
Interest expense 15,384 6,091 (16) 21,459
Deferred effect of changes in foreign
currency exchange rate on subsidiary's
long-term debt - (330) - (330)
Distributions on preferred securities of
subsidiary trust 2,429 - - 2,429
Total costs and expenses 141,521 38,101 1,648 181,270
Earnings (loss) before income tax expense
(benefit) 22,730 16,277 (426) 38,581
Income tax expense (benefit)
Current 4,080 493 - 4,573
Deferred 2,853 6,864 (161) 9,556
Total income tax expense (benefit) 6,933 7,357 (161) 14,129
Net earnings (loss) $ 15,797 8,920 (265) 24,452
Capital expenditures $ 56,640 33,996 - 90,636
</TABLE>
<PAGE>
6. Segment Information (Continued)
<TABLE>
<CAPTION>
U.S. Canada Other Total
(In Thousands)
Three months ended September 30, 1998:
Revenues
<S> <C> <C> <C> <C>
Oil sales $ 16,652 19,176 - 35,828
Gas sales 30,351 20,388 - 50,739
Natural gas liquids sales 2,808 1,094 - 3,902
Other 883 1,518 - 2,401
Total revenues 50,694 42,176 - 92,870
Costs and expenses
Lease operating expenses 16,360 11,759 - 28,119
Production taxes 3,184 366 - 3,550
Depreciation, depletion and
amortization 20,739 11,016 - 31,755
General and administrative expenses 2,758 3,138 - 5,896
Interest expense 133 5,374 - 5,507
Deferred effect of changes in foreign
currency exchange rate on subsidiary's
long-term debt - 8,512 - 8,512
Distributions on preferred securities
of subsidiary trust 2,429 - - 2,429
Reduction of carrying value of oil
and gas properties 126,900 - - 126,900
Total costs and expenses 172,503 40,165 - 212,668
Earnings (loss) before income tax
expense (benefit) (121,809) 2,011 - (119,798)
Income tax expense (benefit)
Current 412 771 - 1,183
Deferred (38,177) 391 - (37,786)
Total income tax expense (benefit) (37,765) 1,162 - (36,603)
Net earnings (loss) $ (84,044) 849 - (83,195)
Capital expenditures $ 47,143 29,736 - 76,879
Nine months ended September 30, 1999:
Revenues
Oil sales $ 91,887 53,663 1,012 146,562
Gas sales 150,015 79,542 - 229,557
Natural gas liquids sales 19,175 6,433 - 25,608
Other 5,761 3,731 210 9,702
Total revenues 266,838 143,369 1,222 411,429
Costs and expenses
Lease operating expenses 62,598 37,468 300 100,366
Production taxes 12,441 1,025 - 13,466
Depreciation, depletion and
amortization 105,212 49,532 54 154,798
General and administrative expenses 22,209 8,994 1,310 32,513
Interest expense 16,872 18,382 (16) 35,238
Deferred effect of changes in foreign
currency exchange rate on subsidiary's
long-term debt - (9,076) - (9,076)
Distributions on preferred securities
of subsidiary trust 7,288 - - 7,288
Total costs and expenses 226,620 106,325 1,648 334,593
Earnings (loss) before income tax
expense (benefit) 40,218 37,044 (426) 76,836
Income tax expense (benefit)
Current 6,790 2,085 - 8,875
Deferred 5,179 16,302 (161) 21,320
Total income tax expense (benefit) 11,969 18,387 (161) 30,195
Net earnings (loss) $ 28,249 18,657 (265) 46,641
Capital expenditures $ 138,244 92,287 - 230,531
</TABLE>
<PAGE>
6. Segment Information (Continued)
<TABLE>
<CAPTION>
U.S. Canada Other Total
(In Thousands)
Nine months ended September 30, 1998:
Revenues
<S> <C> <C> <C> <C>
Oil sales $ 55,719 55,682 - 111,401
Gas sales 95,429 61,865 - 157,294
Natural gas liquids sales 9,808 3,781 - 13,589
Other 3,185 12,613 - 15,798
Total revenues 164,141 133,941 - 298,082
Costs and expenses
Lease operating expenses 49,724 36,074 - 85,798
Production taxes 9,590 1,226 - 10,816
Depreciation, depletion and
amortization 61,195 31,718 - 92,913
General and administrative expenses 8,491 9,189 - 17,680
Interest expense 183 16,161 - 16,344
Deferred effect of changes in foreign
currency exchange rate on subsidiary's
long-term debt - 15,433 - 15,433
Distributions on preferred securities
of subsidiary trust 7,288 - - 7,288
Reduction of carrying value of oil
and gas properties 126,900 - - 126,900
Total costs and expenses 263,371 109,801 - 373,172
Earnings (loss) before income tax
expense (benefit) (99,230) 24,140 - (75,090)
Income tax expense (benefit)
Current 3,817 2,697 - 6,514
Deferred (34,156) 9,349 - (24,807)
Total income tax expense (benefit) (30,339) 12,046 - (18,293)
Net earnings (loss) $ (68,891) 12,094 - (56,797)
Capital expenditures $ 130,737 117,640 - 248,377
</TABLE>
7. Early Redemption of Trust Convertible Preferred Securities
Devon has outstanding $149.5 million of 6.5% Trust
Convertible Preferred Securities (the "TCP Securities"). The TCP
Securities are convertible into approximately 4.9 million shares
of Devon's common stock, which equates to a conversion price of
$30.50 per share of Devon common stock. The TCP Securities have
a maturity date of June 15, 2026. However, on October 27, 1999,
Devon issued notice to the holders of the TCP Securities that it
was exercising its right to redeem such securities on November
30, 1999. The redemption price, including a required 4.55%
premium, would total $156.3 million if all TCP Securities holders
elected to receive the cash redemption price. However, based
upon Devon's common stock price of $38.1875 per share as of
November 5, 1999, the TCP Securities holders have an economic
incentive to elect to convert their securities into shares of
Devon common stock instead of receiving the cash redemption
price.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
The following discussion addresses material changes in
results of operations for the three month and nine month periods
ended September 30, 1999, compared to the three month and nine
month periods ended September 30, 1998, and in financial
condition since December 31, 1998. It is presumed that readers
have read or have access to Devon's 1998 annual report on Form 10-K.
Overview
On December 10, 1998, Devon merged with Canadian-based
Northstar. As a result of accounting for this combination as a
"pooling-of-interests," the financial data for all periods
presented herein represent the combined results of the two
companies. The pooling-of-interests method of accounting
requires historical information to be restated as if the
combining companies had always been merged. The restated data
varies significantly from the historical data Devon previously
presented on a stand-alone basis.
Devon's net earnings for 1999's third quarter were $24.5
million, compared to a net loss in 1998's third quarter of $83.2
million. The 1999 quarter's net earnings per share were $0.39
per share ($0.38 per share diluted), compared to 1998's quarterly
net loss of $1.72 per share. Net earnings for the first nine
months of 1999 were $46.6 million, compared to a net loss of
$56.8 million for the same period of 1998. The 1999 year-to-date
net earnings per share were $0.87 per share ($0.86 per share
diluted), compared to a net loss of $1.18 per share for the first
nine months of 1998.
On August 17, 1999, Devon closed its merger with PennzEnergy
Company. Devon issued 21.5 million shares to the former
PennzEnergy stockholders and assumed debt and other obligations
that brought the total amount of assets acquired to approximately
$2.9 billion. The PennzEnergy merger was accounted for using the
purchase method of accounting for business combinations.
Accordingly, Devon began recognizing additional revenues and
expenses from the PennzEnergy operations on August 17, 1999.
Even though the PennzEnergy operations affected Devon's third
quarter results for only 1 1/2 months, the additional revenues and
expenses from such operations were significant in relation to
Devon's historical amounts. The effects of the PennzEnergy
merger, higher 1999 oil, gas and natural gas liquids ("NGLs")
prices and a $126.9 million ($88 million after-tax) full cost
writedown in 1998's third quarter were the primary factors behind
the third quarter and year-to-date variances between 1999's
results and those of the 1998 periods.
On September 27 and October 4, 1999, Devon issued an
aggregate 10.3 million shares of additional common stock in a
public offering. The net proceeds from this issuance were
approximately $402 million. These proceeds will be used
primarily to retire $350 million of 10% interest bearing long-
term debt assumed in the PennzEnergy merger.
On October 15, 1999, Devon entered into $750 million of new
unsecured long-term credit facilities which replaced its previous
$400 million of facilities. As of October 15, 1999, Devon had
approximately $619 million of unused borrowing capacity under the
new facilities.
Results of Operations
Total revenues increased $127.0 million, or 137%, in the
third quarter of 1999, and $113.3 million, or 38%, in the first
nine months of 1999. Oil, gas and NGLs revenues increased $123.8
million, or 137%, for the third quarter of 1999, and $119.4
million, or 42%, for the first nine months of the year. The
quarterly and year-to-date comparisons of production and price
changes are shown in the following tables. (Note: Unless
otherwise stated, all references in this report to dollar amounts
regarding Devon's foreign operations are expressed in U.S.
dollars.)
<TABLE>
<CAPTION>
Total
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 Change 1999 1998 Change
Production
<S> <C> <C> <C> <C> <C> <C>
Oil (MBbls) 4,324 2,945 +47% 9,395 9,050 +4%
Gas (MMcf) 56,010 33,850 +65% 127,412 100,512 +27%
NGL (MBbls) 1,142 504 +127% 2,133 1,547 +38%
Oil, Gas and NGLs (MBoe) 114,801 9,091 +63% 32,763 27,349 +20%
Average Prices
Oil (Per Bbl) $18.91 12.17 +55% 15.60 12.31 +27%
Gas (Per Mcf) 2.08 1.50 +39% 1.80 1.56 +15%
NGL (Per Bbl) 13.87 7.74 +79% 12.01 8.78 +37%
Oil, Gas and NGLs
<FN>
(Per Boe)1 14.47 9.95 +45% 12.26 10.32 +19%
<CAPTION>
(In Thousands)
Revenues
Oil $ 81,778 35,828 +128% 146,562 111,401 +32%
Gas 116,619 50,739 +130% 229,557 157,294 +46%
NGLs 15,844 3,902 +306% 25,608 13,589 +88%
Combined $214,241 90,469 +137% 401,727 282,284 +42%
<CAPTION>
Domestic
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 Change 1999 1998 Change
Production
Oil (MBbls) 2,812 1,387 +103% 5,342 4,293 +24%
Gas (MMcf) 37,233 16,752 +122% 70,527 49,353 +43%
NGL (MBbls) 965 342 +182% 1,630 1,074 +52%
Oil, Gas and NGLs (MBoe) 19,982 4,522 +121% 18,726 13,593 +38%
Average Prices
Oil (Per Bbl) $20.44 12.00 +70% 17.20 12.98 +33%
Gas (Per Mcf) 2.40 1.81 +33% 2.13 1.93 +10%
NGL (Per Bbl) 13.44 8.21 +64% 11.76 9.13 +29%
Oil, Gas and NGLs
<FN>
(Per Boe)1 16.02 11.02 +45% 13.94 11.84 +18%
<CAPTION>
(In Thousands)
Revenues
Oil $57,490 16,652 +245% 91,887 55,719 +65%
Gas 89,406 30,351 +195% 150,015 95,429 +57%
NGLs 12,972 2,808 +362% 19,175 9,808 +96%
Combined $159,868 49,811 +221% 261,077 160,956 +62%
<CAPTION>
Canada
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 Change 1999 1998 Change
Production
Oil (MBbls) 1,360 1,558 -13% 3,901 4,757 -18%
Gas (MMcf) 18,777 17,098 +10% 56,885 51,159 +11%
NGL (MBbls) 177 162 +9% 503 473 +6%
Oil, Gas and NGLs (MBoe) 14,667 4,569 +2% 13,885 13,756 +1%
Average Prices
Oil (Per Bbl) $17.11 12.31 +39% 13.76 11.71 +18%
Gas (Per Mcf) 1.45 1.19 +22% 1.40 1.21 +16%
NGL (Per Bbl) 16.23 6.75 +140% 12.79 7.99 +60%
Oil, Gas and NGLs
<FN>
(Per Boe)1 11.43 8.90 +28% 10.06 8.82 +14%
<CAPTION>
(In Thousands)
Revenues
Oil $23,276 19,176 +21% 53,663 55,682 -4%
Gas 27,213 20,388 +33% 79,542 61,865 +29%
NGLs 2,872 1,094 +163% 6,433 3,781 +70%
Combined $53,361 40,658 +31% 139,638 121,328 +15%
<FN>
1 Gas volumes are converted to Boe or MBoe at the rate of six Mcf of gas
per barrel of oil, based upon the approximate relative energy content of
natural gas and oil, which rate is not necessarily indicative of the
relationship of oil and gas prices. The respective prices of oil, gas
and NGLs are affected by market and other factors in addition to
relative energy content.
</TABLE>
In addition to the volumes included in the prior tables for
domestic and Canadian production, Devon also produced 152,000
barrels of oil in the third quarter and first nine months of 1999
in Venezuela. The oil revenues generated by this production were
$1.0 million. This production was for the 1 1/2 months following
the mid-August PennzEnergy merger closing.
Oil Revenues. Oil revenues increased $46.0 million, or
128%, in the third quarter of 1999. An increase in the average
price of $6.74 per barrel, or 55%, increased oil revenues by
$29.2 million. An increase in production of 1.4 million barrels,
or 47%, caused oil revenues to increase by $16.8 million in the
1999 quarter. Approximately 1.8 million barrels of 1999's third
quarter oil production were added by the PennzEnergy properties'
production for the last 1 1/2 months of the quarter following the
closing of the PennzEnergy merger. This additional production
was partially offset by a 0.4 million barrel decline from Devon's
other properties. Natural decline and the deferral of many oil-
related projects earlier in 1999 due to low prices were the
primary causes for the decline in these properties' 1999
quarterly production.
Oil revenues increased $35.2 million, or 32%, in the first
nine months of 1999. Oil revenues increased $30.9 million due to
an increase in the average price of $3.29 per barrel, or 27%. An
increase in production of 0.4 million barrels, or 4%, caused oil
revenues to increase by $4.3 million The 1.8 million barrels of
production added by the PennzEnergy merger were partially offset
by a 1.4 million barrel decline in production from Devon's other
properties. The disposition of certain Canadian producing
properties in 1998, the deferral of projects originally scheduled
earlier in the year, natural decline, and the effect of some
properties that were shut-in earlier in the year due to low
prices were the primary reasons for this decline in production.
Gas Revenues. Gas revenues increased $65.9 million, or
130%, in the third quarter of 1999. Production rose 22.2 Bcf, or
65%, in the 1999 period. This increase in production added $33.2
million to gas revenues in 1999's third quarter. The remaining
$32.7 million of increased gas revenues was caused by an increase
in the average gas price of $0.58 per Mcf, or 39%.
Devon's San Juan Basin coal seam gas properties produced 6.1
Bcf in 1999's third quarter compared to 4.9 Bcf in the 1998 third
quarter. Devon's other domestic properties produced 31.1 Bcf in
the 1999 quarter compared to 11.9 Bcf in the 1998 quarter.
Production for 1 1/2 months from the PennzEnergy properties
accounted for 19.6 Bcf of the 1999 quarter's production increase.
Canadian gas production increased 1.7 Bcf, or 10%, in 1999's
third quarter. Production added from an acquisition in December
1998 was the primary cause of the increased production in 1999's
third quarter.
Devon's San Juan Basin coal seam gas properties averaged
$1.82 per Mcf in the third quarter of 1999 compared to $1.64 per
Mcf in the same quarter of 1998. Other domestic properties
averaged $2.52 per Mcf in the 1999 quarter compared to $1.88 per
Mcf in the 1998 quarter.
Gas revenues increased $72.3 million, or 46%, in the first
nine months of 1999. Production rose 26.9 Bcf, or 27%, in the
1999 period. This increase in production added $42.1 million to
gas revenues in the 1999 period. Gas revenues were also
increased $30.2 million by an increased in the average gas price
of $0.24 per Mcf, or 15%, in the first nine months of 1999.
Devon's San Juan Basin coal seam gas properties produced
17.4 Bcf in the first nine months of 1999 compared to 15.0 Bcf in
the same period of 1998. Devon's other domestic properties
produced 53.1 Bcf in the first nine months of 1999 compared to
34.4 Bcf in the first nine months of 1998. Production for 1 1/2
months from the PennzEnergy properties accounted for 19.6 Bcf of
the 1999 year-to-date production increase.
Canadian gas production increased 5.7 Bcf, or 11%, in the
first nine months of 1999. Production from two 1998 acquisitions
was the primary cause of the increase in 1999 production.
Devon's San Juan Basin coal seam gas properties averaged
$1.75 per Mcf in the first nine months of 1999 compared to $1.74
per Mcf in the same period of 1998. Other domestic properties
averaged $2.25 per Mcf in the first nine months of 1999 compared
to $2.02 per Mcf in the first nine months of 1998.
NGLs Revenues. NGLs revenues increased $11.9 million, or
306%, in the third quarter of 1999. An increase in the average
price of $6.13 per barrel, or 79%, caused NGLs revenues to
increase $7.0 million in the 1999 quarter. An increase in
production of 638,000 barrels, or 127%, caused NGLs revenues to
increase by $4.9 million in the 1999 quarter. Production for 1 1/2
months from the PennzEnergy properties contributed 577,000
barrels of the 1999 quarterly production.
NGLs revenues increased $12.0 million, or 88%, in the first
nine months of 1999. An increase in the average price of $3.23
per barrel, or 37%, caused NGLs revenues to increase $6.9 million
in the first nine months of 1999. An increase in production of
586,000 barrels, or 38%, caused NGLs revenues to increase by $5.1
million in the year-to-date period.
Other Revenues. Other revenues increased $3.2 million, or
134%, in the third quarter of 1999 compared to the same period in
1998. Dividend income of $2.1 million from the investment in
Chevron Corporation common stock accounted for most of the
increase. This amount represents approximately half of the actual
$4.3 million dividend received which was attributable to the period
following the August 17, 1999, closing of the PennzEnergy merger. An
increase in third party gas processing income of $0.6 million in
the 1999 quarter was also a primary contributor to the quarterly
increase in other revenues.
Other revenues decreased $6.1 million, or 39% in the first
nine months of 1999 compared to the first nine months of 1998.
The reduction was primarily due to two nonrecurring revenue items
recognized in 1998's second quarter. In the second quarter of
1998, Northstar received a one-time payment of $5.0 million from
a gas purchaser related to the termination of a gas contract.
Also, Northstar received $2.8 million in 1998's second quarter in
return for the termination of a management arrangement with a
third party.
Production and Operating Expenses. The components of
production and operating expenses are set forth in the following
tables.
<TABLE>
<CAPTION>
Total
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 Change 1999 1998 Change
Absolute (Thousands)
<S> <C> <C> <C> <C> <C> <C>
Recurring operations and maintenance expenses $44,665 27,048 +65% 96,473 81,787 +18%
Well workover expenses 1,181 1,071 +10% 3,893 4,011 -3%
Production taxes 7,051 3,550 +99% 13,466 10,816 +25%
Total production and operating expenses $52,897 31,669 +67% 113,832 96,614 +18%
Per Boe
Recurring operations and maintenance expenses 3.02 2.97 +2% 2.94 2.99 -2%
Well workover expenses 0.08 0.12 -33% 0.12 0.15 -20%
Production taxes 0.47 0.39 +21% 0.41 0.39 +5%
Total production and operating expenses $3.57 3.48 +3% 3.47 3.53 -2%
<CAPTION>
Domestic
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 Change 1999 1998 Change
Absolute (Thousands)
Recurring operations and maintenance expenses $32,317 15,345 +111% 59,615 46,224 +29%
Well workover expenses 1,015 1,015 -% 2,983 3,500 -15%
Production taxes 6,684 3,184 +110% 12,441 9,590 +30%
Total production and operating expenses $40,016 19,544 +105% 75,039 59,314 +27%
Per Boe
Recurring operations and maintenance expenses 3.24 3.39 -4% 3.18 3.40 -6%
Well workover expenses 0.10 0.23 -57% 0.16 0.26 -38%
Production taxes 0.67 0.70 -4% 0.67 0.70 -4%
Total production and operating expenses $4.01 4.32 -7% 4.01 4.36 -8%
<CAPTION>
Canada
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 Change 1999 1998 Change
Absolute (Thousands)
Recurring operations and maintenance expenses $12,048 11,703 +3% 36,558 35,563 +3%
Well workover expenses 166 56 +196% 910 511 +78%
Production taxes 367 366 -% 1,025 1,226 -16%
Total production and operating expenses $12,581 12,125 +4% 38,493 37,300 +3%
Per Boe
Recurring operations and maintenance expenses 2.58 2.56 +1% 2.63 2.58 +2%
Well workover expenses 0.04 0.01 +300% 0.07 0.04 +75%
Production taxes 0.08 0.08 -% 0.07 0.09 -22%
Total production and operating expenses $2.70 2.65 +2% 2.77 2.71 +2%
</TABLE>
Recurring operations and maintenance expenses increased
$17.6 million, or 65%, in the third quarter of 1999. Domestic
expenses increased $17.0 million in the 1999 quarter due to $19.1
million of expenses for 1 1/2 months of the 1999 quarter from the
PennzEnergy properties. Other than the added costs from the
PennzEnergy properties, Devon's domestic properties' recurring
costs declined $2.1 million in the third quarter of 1999.
Various efficiencies achieved in certain of Devon's oil producing
properties contributed to this cost reduction.
Recurring operations and maintenance expenses increased
$14.7 million, or 18%, in the first nine months of 1999.
Domestic expenses increased $13.4 million in the 1999 period due
to $19.1 million of expenses for 1 1/2 months of operations from
the PennzEnergy properties. Excluding the costs added by the
PennzEnergy properties, Devon's domestic properties' recurring
costs declined $5.7 million in the 1999 year-to-date period. The
efficiencies referred to in the prior paragraph were the primary
contributors to these reductions.
Production taxes increased $3.5 million in the third quarter
of 1999 and $2.6 million in the first nine months of 1999. The
increases in oil, gas and NGLs revenues in these periods were the
primary reason for the increased production taxes.
In addition to the amounts shown in the prior tables for
domestic and Canadian expenses, Devon incurred $0.3 million of
recurring operations and maintenance expenses in Venezuela for
the third quarter and first nine months of 1999. These expenses,
which were at a rate of $1.97 per barrel, were for the 1 1/2 months
following the mid-August PennzEnergy merger closing.
Depreciation, Depletion and Amortization Expenses ("DD&A").
Oil and gas property related DD&A increased $52.4 million, or
171%, from $30.7 million in the third quarter of 1998 to $83.1
million in the third quarter of 1999. An increase in the
combined DD&A rate from $3.38 per Boe in the 1998 quarter to
$5.62 per Boe in the 1999 quarter caused oil and gas property
related DD&A to increase $33.1 million. The 1999 quarterly DD&A
rate of $5.62 per Boe was a blended rate for half of the quarter
before the PennzEnergy merger and half of the quarter after the
merger. The DD&A rate for the last half of the quarter after the
PennzEnergy merger was $6.50 per Boe. DD&A increased $19.3
million in the 1999 quarter due to the 63% increase in combined
oil, gas and NGLs production in the 1999 quarter.
Oil and gas property related DD&A increased $60.7 million,
or 68%, from $89.8 million in the first nine months of 1998 to
$150.5 million in the first nine months of 1999. An increase in
the combined DD&A rate from $3.28 per Boe in the year-to-date
1998 period to $4.59 per Boe in the year-to-date 1999 period
caused oil and gas property related DD&A to increase $42.9
million. DD&A increased $17.8 million in the year-to-date 1999
period due to the 20% increase in combined oil, gas and NGLs
production in the first nine months of 1999.
General and Administrative Expenses ("G&A"). Devon's G&A
consists of three primary components. The largest of these
components is the gross amount of expenses incurred for personnel
costs, office expenses, professional fees and other G&A items.
The gross amount of these expenses is partially reduced by two
offsetting components of G&A. One is the amount of G&A
capitalized pursuant to the full cost method of accounting. The
other is the amount of G&A reimbursed by working interest owners
of properties for which Devon serves as the operator. These
reimbursements are received during both the drilling and
operational stages of a property's life. The gross amount of G&A
incurred, less the amounts capitalized and reimbursed, is
recorded as G&A in the consolidated statements of operations.
G&A increased $13.4 million, or 228%, in the third quarter
of 1999 compared to the same quarter of 1998. Approximately
$13.7 million of the 1999 quarter's G&A was related to 1 1/2 months
of G&A related to the PennzEnergy operations. Included in this
amount was $4.4 million of nonrecurring retention bonuses paid to
certain PennzEnergy employees as an inducement for them to remain
with Devon for two months following the merger closing.
Gross G&A increased $18.7 million, or 151%, in the 1999
quarter. The PennzEnergy operations added $17.9 million to the
quarter's gross G&A. G&A was reduced $1.8 million in the third
quarter of 1999 due to an increase in the amount of
reimbursements on operated properties. G&A was also reduced $3.5
million in the third quarter of 1999 due to an increase in the
amount capitalized as part of oil and gas properties. The amount
capitalized increased from $2.4 million in the third quarter of
1998 to $5.9 million in the third quarter of 1999.
G&A increased $14.8 million, or 84%, in the first nine
months of 1999. Included in this increase was the $13.7 million
of expenses related to the PennzEnergy operations referred to
above. Gross G&A increased $19.6 million, or 51%, in the 1999
period. G&A was reduced due to a $0.5 million increase in the
amount of reimbursements on operated properties. G&A was also
lowered $4.3 million in the first nine months of 1999 due to an
increase in the amount capitalized as part of oil and gas
properties. The amount capitalized increased from $7.2 million
in the first nine months of 1998 to $11.5 million in the first
nine months of 1999.
Interest Expense. Interest expense increased $16.0 million,
or 290%, in 1999's third quarter. An increase in the average
debt balance outstanding from $311.4 million in the third quarter
of 1998 to $1.2 billion in the third quarter of 1999 caused
interest expense to increase by $15.9 million. The average
annualized interest rate on outstanding debt was 6.8% in the
third quarters of both years. The remaining $0.1 million
increase in interest expense was caused by an increase in other
components of interest expense such as facility and agency fees
and the amortization of capitalized loan costs.
Interest expense increased $18.9 million, or 116%, in the
first nine months of 1999. An increase in the average debt
balance outstanding from $332.1 million in the first nine months
of 1998 to $703.9 million in the first nine months of 1999 caused
interest expense to increase by $18.3 million. The average
annualized interest rate on outstanding debt was 6.5% in the
first nine months of both years. The remaining $0.6 million
increase in interest expense was caused by an increase in other
components of interest expense such as facility and agency fees
and the amortization of capitalized loan costs.
The increase in average debt outstanding and average
interest expense in the third quarter and first nine months of
1999 was attributable to the long-term debt assumed in the
PennzEnergy merger on August 17, 1999. At that date, Devon
assumed $1.6 billion of long-term debt with a weighted average
interest rate of 7.2%. On September 27 and October 4, 1999,
Devon received approximately $402 million of net proceeds from
the issuance of approximately 10.3 million shares of its common
stock. These proceeds will primarily be used to retire $350
million of the assumed PennzEnergy debt that bears interest at
approximately 10% per year. This debt consists of $200 million
that bears interest at 9.625% and matures on November 15, 1999,
and $150 million that bears interest at 10.625% and matures on
June 1, 2001. The $200 million will be retired at its stated
maturity date. Devon called the $150 million for early
redemption and retired this debt on October 28, 1999. There were
no premiums required for this early redemption. The additional
credit available to Devon as a result of the debt reductions will
be used primarily for capital expenditures and acquisitions as
they occur.
The following schedule includes the components of interest
expense for the third quarter and first nine months of 1999 and
1998.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
(In Thousands)
<S> <C> <C> <C> <C>
Interest based on debt outstanding $21,186 5,277 34,370 16,075
Facility and agency fees 292 201 591 460
Amortization of capitalized loan costs 81 24 246 69
Hedging gains - - - (188)
Other (100) 5 31 (72)
Total interest expense $21,459 5,507 35,238 16,344
</TABLE>
Deferred Effect of Changes in Foreign Currency Exchange Rate
on Subsidiary's Long-term Debt. Devon's Canadian subsidiary
Northstar has certain fixed rate senior notes which are
denominated in U.S. dollars. The outstanding principal amount of
these notes is $225 million. Changes in the exchange rate
between the U.S. dollar and the Canadian dollar from the dates
the notes were issued to the dates of repayment will increase or
decrease the expected amount of Canadian dollars eventually
required to repay the notes. Such changes in the Canadian dollar
equivalent balance of the debt are required to be included in
determining net earnings for the period in which the exchange
rate changes.
The rate of converting Canadian dollars to U.S. dollars
increased from $0.6793 at June 30, 1999, to $0.6803 at September
30, 1999, and from $0.6535 at the end of 1998 to $0.6803 at
September 30, 1999. These increases in the exchange rate reduced
the Canadian dollar equivalent of debt recorded by Northstar.
Therefore, $0.3 million and $9.1 million of reduced expenses were
recognized in 1999's third quarter and first nine months,
respectively.
The rate of converting Canadian dollars to U.S. dollars
decreased from $0.6813 at June 30, 1998, to $0.6554 at September
30, 1998, and from $0.6997 at the end of 1997 to $0.6554 at
September 30, 1998. These decreases in the exchange rate
increased the Canadian dollar equivalent of debt recorded by
Northstar during the respective periods. Therefore, $8.5 million
and $15.4 million of increased expenses were recognized in 1998's
third quarter and first nine months, respectively.
Distributions on Preferred Securities of Subsidiary Trust.
Devon has $149.5 million of 6.5% Trust Convertible Preferred
Securities outstanding. Distributions on these securities accrue
and are paid at the rate of 1.625% per quarter.
The TCP Securities are convertible into approximately 4.9
million shares of Devon's common stock, which equates to a
conversion price of $30.50 per share of Devon common stock. The
TCP Securities have a maturity date of June 15, 2026. However,
on October 27, 1999, Devon issued notice to the holders of the
TCP Securities that it was exercising its right to redeem such
securities on November 30, 1999. The redemption price, including
a required 4.55% premium, would total $156.3 million if all TCP
Securities holders elected to receive the cash redemption price.
However, based upon Devon's common stock price of $38.1875 per
share as of November 5, 1999, the TCP Securities holders have an
economic incentive to elect to convert their securities into
shares of Devon common stock instead of receiving the cash
redemption price.
Reduction of Carrying Value of Oil and Gas Properties.
Under the full cost method of accounting, the net book value of
oil and gas properties, less related deferred income taxes, may
not exceed a calculated "ceiling." The ceiling limitation is the
discounted estimated after-tax future revenues from proved oil
and gas properties. The ceiling is imposed separately by
country. In calculating future net revenues, current prices and
costs are generally held constant indefinitely. The net book
value, less deferred tax liabilities, is compared to the ceiling
on a quarterly and annual basis. Any excess of the net book
value, less deferred taxes, above the ceiling is written off as
an expense.
Due to a reduction in oil and gas prices from the beginning
of 1998 to September 30, 1998, Devon's net book value, less
deferred taxes, of its domestic oil and gas properties exceeded
the September 30, 1998, ceiling by approximately $88 million.
Accordingly, the carrying value of Devon's domestic oil and gas
properties was reduced by $126.9 million in the third quarter of
1998. This reduction was partially offset by a deferred income
tax benefit of $38.9 million, resulting in a net effect of $88
million.
Income Taxes. During interim periods, income tax expense is
based on the estimated effective income tax rate that is expected
for the entire fiscal year. The effective tax rates estimated
for the third quarter and first nine months of 1999 were 37% and
39%, respectively. The benefit rates for the losses incurred in
the third quarter and first nine months of 1998 were 31% and 24%,
respectively. The benefit rates in 1998 were significantly below
the federal statutory rate of 35% due to $27.2 million of
financial expenses incurred which were not deductible for income
tax purposes. The $27.2 million of financial deductions were
part of the $126.9 million reduction of carrying value of oil and
gas properties recorded in 1998's third quarter.
Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("Statement 109"), requires that
the tax benefit of available tax carryforwards be recorded as an
asset to the extent that management assesses the utilization of
such carryforwards to be "more likely than not." When the future
utilization of some portion of the carryforwards is determined
not to be "more likely than not," Statement 109 requires that a
valuation allowance be provided to reduce the recorded tax
benefits from such assets.
Included as deferred tax assets as of September 30, 1999,
were approximately $145 million of net operating loss
carryforwards. The carryforwards include U.S. federal net
operating loss carryforwards, the majority of which do not begin
to expire until 2018, U.S. state net operating loss carryforwards
which expire primarily between 2000 and 2012, and Canadian
carryforwards which expire primarily between 2000 and 2005.
Devon expects the tax benefits from the net operating loss
carryforwards to be utilized between 1999 and 2007. Such
expectation is based upon current estimates of taxable income
during this period, considering limitations on the annual
utilization of these benefits as set forth by federal tax
regulations. Significant changes in such estimates caused by
variables such as future oil and gas prices or capital
expenditures could alter the timing of the eventual utilization
of such carryforwards. There can be no assurance that Devon will
generate any specific level of continuing taxable earnings.
However, Devon's management believes that future taxable income
will more likely than not be sufficient to utilize substantially
all its tax carryforwards prior to their expirations.
Capital Expenditures, Capital Resources and Liquidity
The following discussion of capital expenditures, capital
resources and liquidity should be read in conjunction with the
consolidated statements of cash flows included in Part 1, Item 1
included elsewhere herein.
Capital Expenditures. Approximately $230.5 million was
spent in the first nine months of 1999 for capital expenditures.
This total included $170.2 million for the acquisition, drilling
and development of oil and gas properties, $58.7 million related
to the construction of an extensive gas gathering system, related
CO2 removal facilities and gas processing project all located in
the Powder River Basin of Wyoming, and $1.6 million for other
fixed assets.
Approximately $248.4 million was spent for capital
expenditures in the first nine months of 1998. This total
included $246.3 million for the acquisition, drilling and
development of oil and gas properties and $2.1 million for other
fixed assets.
Capital Resources and Liquidity. Net cash provided by
operating activities ("operating cash flow") continued to be the
primary source of capital and liquidity in the first nine months
of 1999. Operating cash flow in the first nine months was $192.6
million, compared to $152.4 million in the first nine months of
1998.
For the first nine months of 1999, Devon reduced its
borrowings under its credit facilities by approximately $21
million. As of September 30, 1999, Devon had $159.3 million
borrowed under its credit facilities.
On October 15, 1999, Devon entered into new unsecured long-
term credit facilities aggregating $750 million (the "Credit
Facilities"). The Credit Facilities include a U.S. facility of
$475 million (the "U.S. Facility") and a Canadian facility of
$275 million (the "Canadian Facility"). The Credit Facilities
replaced Devon's previous facilities that totaled $400 million.
Amounts borrowed under the Credit Facilities bear interest
at various fixed rate options that Devon may elect for periods up
to six months. Such rates are generally less than the prime
rate. Devon may also elect to borrow at the prime rate. The
Credit Facilities provide for an annual facility fee of $0.9
million that is payable quarterly.
The $475 million U.S. Facility consists of a Tranche A
facility of $200 million and a Tranche B facility of $275
million. The Tranche A facility matures on October 15, 2004.
Devon may borrow funds under the Tranche B facility until October
13, 2000 (the "Tranche B Revolving Period"). Devon may request
that the Tranche B Revolving Period be extended an additional 364
days by notifying the agent bank of such request between 30 and
60 days prior to the end of the Tranche B Revolving Period. Debt
borrowed under the Tranche B facility matures two years following
the end of the Tranche B Revolving Period. On October 15, 1999,
there were no borrowings from the $475 million U.S. Facility.
Devon may borrow funds under the $275 million Canadian
Facility until October 13, 2000 (the "Canadian Facility Revolving
Period"). Devon may request that the Canadian Facility Revolving
Period be extended an additional 364 days by notifying the agent
bank of such request between 45 and 90 days prior to the end of
the Canadian Facility Revolving Period. Debt outstanding as of
the end of the Canadian Facility Revolving Period is payable in
semi-annual installments of 2.5% each for the following five
years, with the final installment due five years and one day
following the end of the Canadian Facility Revolving Period. On
October 15, 1999, there was $131.3 million borrowed under the
$275 million Canadian Facility.
The agreements governing the Credit Facilities contain
certain covenants and restrictions, including a maximum allowed
debt-to-capitalization ratio as defined in the agreements.
Year 2000 Status. Devon's company-wide Year 2000 Project
("the Project") is proceeding on schedule. The Project is
addressing the Year 2000 issue caused by computer programs being
written utilizing two digits rather than four to define an
applicable year. As a result, Devon's computer equipment,
software (all of which is externally developed), and devices with
embedded technology that are time sensitive may misinterpret the
actual date beginning on January 1, 2000. This could result in a
system failure or miscalculations causing disruptions of
operations, including, but not limited to, a temporary inability
to process transactions.
Devon has undertaken various initiatives intended to ensure
that its computer equipment and software will function properly
with respect to dates in the Year 2000 and thereafter. In
planning and developing the Project, Devon has considered both
its information technology ("IT") and its non-IT systems. The
term "computer equipment and software" includes systems that are
commonly thought of as IT systems, including accounting, data
processing, telephone systems, scanning equipment, and other
miscellaneous systems. Those items not to be considered as IT
technology include alarm systems, fax machines, monitors for
field operations, or other miscellaneous systems. Both IT and
non-IT systems may contain embedded technology, which complicates
Devon's Year 2000 identification, assessment, remediation, and
testing efforts. Based upon its identification and assessment
efforts to date, Devon is in the process of
replacing the computer equipment and software it currently uses
to become Year 2000 compliant. In addition, in the ordinary
course of replacing computer equipment and software, Devon plans
to obtain replacements that are in compliance with year 2000.
Devon has also mailed letters to its significant vendors and
service providers and has verbally communicated with many
strategic customers to determine the extent to which interfaces
with such entities are vulnerable to Year 2000 issues and whether
the products and services purchased from or by such entities are
year 2000 compliant. Devon has received an overall favorable
response from such third parties and it is anticipated that their
significant Year 2000 issues will be addressed on a timely basis.
With regard to IT and non-IT systems and communications with
third parties, the Project was substantially completed as of
September 30, 1999.
As noted above, Devon is in the process of replacing certain
computer equipment and software because of the Year 2000 issue.
Devon estimates that the total cost of such replacements will
approximate $1.0 million. Substantially all of the personnel
being used on the Project are existing Devon employees. Devon
does not separately track the time that its own employees spend
on the Project. Therefore, the internal costs incurred on the
Project are not known. Such costs would consist almost entirely
of the payroll costs associated with the time spent on the
Project. Third party consulting costs of Devon's Year 2000
identification, assessment, remediation and testing efforts, as
well as currently anticipated costs to be incurred with respect
to Year 2000 issues of third parties, are expected to be
approximately $0.3 million.
Devon has performed a comprehensive analysis of the
operational problems and costs that would be reasonably likely to
result from the failure by Devon and significant third parties to
complete efforts necessary to achieve Year 2000 compliance on a
timely basis. Various contingency plans have been developed for
dealing with the most reasonably likely worst case scenario.
Devon plans to review such analysis and contingency planning, and
make any necessary revisions, during November, 1999.
Devon presently does not expect to incur significant
operational problems due to the Year 2000 issue. However, if all
Year 2000 issues are not properly and timely identified,
assessed, remediated and tested, there can be no assurances that
the Year 2000 issue will not materially impact Devon's results of
operations or adversely affect its relationships with customers,
vendors, or others. Additionally, there can be no assurance that
the Year 2000 issues of other entities will not have a material
impact on Devon's systems or results of operations.
Impact of Recently Issued Accounting Standards Not Yet
Adopted. In June 1998, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities"
("SFAS 133"). SFAS 133 establishes accounting and reporting
standards for derivative instruments, including certain
recognition of all derivatives as either assets or liabilities in
the balance sheet and measurement of those instruments at fair
value. If certain conditions are met, a derivative may be
specifically designated as a hedge. The accounting for changes
in the fair value of a derivative (that is, gains and losses)
depends on the intended use of the derivative and whether it
qualifies as a hedge. A subsequent pronouncement, SFAS 137, was
issued in July 1999 that delayed the effective date of SFAS 133
until the fiscal year beginning after June 15, 2000. Devon plans
to adopt the provisions of SFAS 133 in the first quarter of the
year ending December 31, 2001, and is currently evaluating the
effects of this pronouncement.
Revisions to 1999 Estimates
On October 1, 1999, Devon filed a Form 8-K that contained
forward-looking estimates for the year 1999 including the effect
of the August 17, 1999, PennzEnergy merger. Subsequently,
revisions were made in the allocation of the PennzEnergy purchase
price and various assumptions regarding the deferred tax effect
of the merger. As a result of these revisions in assumptions,
the forward-looking information contained in the October 1, 1999,
Form 8-K with regard to 1999 depreciation, depletion and
amortization expense is no longer applicable and is replaced by
the following revised information.
The following revised forward-looking statement regarding
depreciation, depletion and amortization expense is based on the
December 31, 1998 reserve reports of independent petroleum
engineers, other data in Devon's possession or available from
third parties and actual results for the first nine months of
1999. Devon cautions that its estimated 1999 depreciation,
depletion and amortization expense and rates per unit of
production are subject to certain risks and uncertainties
normally incident to the exploration for and development and
production and sale of oil and gas. These risks include, but are
not limited to, the uncertainty inherent in estimating future oil
and gas production and reserves.
Depreciation, Depletion and Amortization ("DD&A") The 1999
oil and gas property DD&A rate will depend on various factors.
Most notable among such factors are the amount of proved reserves
that could be added from drilling or acquisition efforts in 1999
compared to the costs incurred for such efforts, and the
revisions to Devon's 1998 year-end reserve estimates that will be
made during 1999.
The proved reserves added in the PennzEnergy merger will
have a significant effect on Devon's DD&A rate for the last 4 1/2
months of 1999. Devon's consolidated DD&A rate for the first 7 1/2
months of 1999 was $3.78 per Boe. After the PennzEnergy merger,
it is estimated that Devon's DD&A rate during the last 4 1/2 months
of the year will be between $6.50 and $6.80 per Boe on a
consolidated basis. On average for the total year, Devon expects
its consolidated DD&A rate will be between $5.20 and $5.50 per
Boe. This range of full-year DD&A rates should result in oil and
gas property related DD&A expense for 1999 of between $275
million and $295 million.
The domestic DD&A rate for the year is expected to be
between $6.25 and $6.55 per Boe. Domestic DD&A expense for oil
and gas properties for 1999 is expected to be between $210
million and $230 million. The Canadian DD&A rate for the year is
expected to be between $3.50 and $3.75 per Boe. Canadian DD&A
expense for oil and gas properties for 1999 is expected to be
between $64 million and $66 million.
Additionally, Devon expects its 1999 non-oil and gas
property related DD&A expense to total between $7.5 million and
$8.7 million in the U.S. and between $0.6 million and $0.7
million in Canada.
Item 3. Quantitative and Qualitative Disclosures About Market
Risk
The information included in "Quantitative and Qualitative
Disclosures About Market Risk" in item 7A of Devon's 1998 Annual
Report on Form 10-K is incorporated herein by reference. Such
information includes a description of Devon's potential exposure
to market risks, including commodity price risk, interest rate
risk and foreign currency risk. As of September 30, 1999, there
have been no material changes in Devon's market risk exposure
from that disclosed in the 1998 Form 10-K except for the
acquisition of 7.1 million shares of Chevron Corporation common
stock as a result of the PennzEnergy merger. These shares are
held for other than trading purposes and are included in Devon's
consolidated balance sheet as noncurrent assets at their
aggregate market value as of the balance sheet date. As of the
August 17, 1999, PennzEnergy merger closing date, the Chevron
Corporation common stock acquired by Devon had a market value of
approximately $676.4 million. As of September 30, 1999, the fair
value of such investment was $629.5 million.
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
(a) Devon held a Special Meeting of Stockholders in Oklahoma
City, Oklahoma at 10:00 a.m. local time, on August 17, 1999.
(b) Proxies for the meeting were solicited pursuant to
Regulation 14 under the Securities and Exchange Act of 1934,
as amended. There was no solicitation in opposition to the
proposals as listed in the proxy statement and both propo-
sals were approved.
(c) Out of a total of 48,830,782 shares outstanding and entitled
to vote 40,848,189 shares were present at the meeting in
person or by proxy, representing approximately 84 percent of
the total outstanding.
(d) The vote tabulation with respect to the proposal to approve
the amended and restated merger agreement dated as of May
19, 1999, between Devon and PennzEnergy Company, and the
transactions contemplated by it was 40,802,995 shares for,
19,848 shares against, with 25,346 shares abstaining.
(e) The vote tabulation with respect to the proposal to approve
a stock option plan amendment which was to increase the
number of shares available for grant under the plan from
3,000,000 to 6,000,000 was 37,474,258 shares for, 3,087,685
shares against, with 286,410 shares abstaining.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits required by Item 601 of Regulation S-K are as follows:
Exhibit
No.
2.2 Amended and Restated Agreement and Plan of Merger
among Registrant, Devon Energy Corporation
(Oklahoma) (formerly Devon Energy Corporation, an
Oklahoma corporation), Devon Oklahoma Corporation
and PennzEnergy Company dated as of May 19, 1999
(incorporated by reference to Exhibit 2 to
Registrant's Form S-4, File No. 33-82903 and by
reference to Exhibit 2.1 to Registrant's Form 8-K
filed on August 31, 1999).
3.1 Registrant's Restated Certificate of Incorporation
(incorporated by reference to Exhibit 3 to Registrant's
Form 8-K filed on August 18, 1999).
3.2 Registrant's Bylaw (incorporated by reference to
Exhibit 3.3 to Registrant's Registration Statement
on Form S-4, No. 333-82903 as filed on July 15,
1999).
4.1 Form of Common Stock Certificate (incorporated by
reference to Exhibit 4.1 to Registrant's Form 8-K
filed on August 18, 1999).
4.2 Rights Agreement dated as of August 17, 1999
between Registrant and BankBoston, N.A.
(incorporated by reference to Exhibit 4.2 to
Registrant's Form 8-K filed on august 18, 1999).
4.3 Certificate of Designations of Series A Junior
Participating Preferred Stock of Registrant
(incorporated by reference to Exhibit 4.3 to
Registrant's Form 8-K filed on August 18, 1999).
4.4 Certificate of Designations of the 6.49%
Cumulative Preferred Stock, Series A of Registrant
(incorporated by reference to Exhibit 4.4 to
Registrant's Form 8-K filed on August 18, 1999).
4.5 Description of Capital Stock (incorporated by
reference to Exhibit 4.9 to Registrant's Form 8-K
filed on August 18, 1999).
4.6 Second Supplemental Indenture dated as of August
17, 1999 between Registrant, Devon Energy
Corporation (Oklahoma) and The Bank of New York
(incorporated by reference to Exhibit 4.6 to
Registrant's Form 8-K filed on August 18, 1999).
4.7 Fifth Supplemental Indenture dated as of August
17, 1999 to Indenture dated as of December 15,
1992 among Registrant (as successor by Merger to
PennzEnergy) and Chase Bank of Texas, National
Association (incorporated by reference to Exhibit
4.6 to Registrant's Form 8-K filed on August 18,
1999).
4.8 First Supplemental Indenture dated as of August
17, 1999 to Indenture dated as of February 15,
1986 between Registrant (as successor by Merger to
PennzEnergy) and Chase Bank of Texas, National
Association (incorporated by reference to Exhibit
4.8 to Registrant's Form 8-K filed on August 18,
1999).
4.9 Amending Voting and Exchange Trust Agreement
dated as of August 17, 1999 between Registrant,
Devon Energy Corporation (Oklahoma) and Northstar
Energy Corporation (incorporated by reference to
Exhibit 9 to Registrant's Form 8-K filed on August
18, 1999).
4.10 Amending Support Agreement dated as of August 17,
1999 between Registrant, Devon Energy Corporation
(Oklahoma) and Northstar Energy Corporation
(incorporated by reference to Exhibit 4.5 to
Registrant's Form 8-K filed on August 18, 1999).
10.1 U.S. Credit Agreement, dated October 15, 1999
among the Registrant, as U.S. Borrower, Bank of
America, N.A., as Administrative Agent, Bank of
America Securities, LLC, as Lead Arranger, Bank
One, Texas, N.A., as Syndication Agent, The Chase
Manhattan Bank, as Documentation Agent, First
Union National Bank, as Co-Documentation Agent,
and Certain Financial Institutions, as Lenders.
10.2 Canadian Credit Agreement dated October 15,
1999, among Northstar Energy Corporation and Devon
Energy Corporation, as Canadian Borrowers, Bank of
America Canada, as Administrative Agent Bank of
America Securities, LLC, as Lead Arranger, BancOne
Capital Markets, Inc., as Syndication Agent, The
Chase Manhattan Bank, as Documentation Agent,
First Union National Bank, as Co-Documentation
Agent, and Certain Financial Institutions, as
Lenders.
10.3 Severance Agreement between Devon Energy
Corporation (Nevada), Devon Energy Corporation,
Devon Delaware Corporation and Mr. J. Larry
Nichols, dated May 19, 1999 *
10.4 Form of Severance Agreement between Devon
Energy Corporation (Nevada), Devon Energy
Corporation, Devon Delaware Corporation and
Messrs. Darryl G. Smette, Duke R. Ligon, H. Allen
Turner, William T. Vaughn and Ms. Marian J. Moon,
dated May 19, 1999 *
* Compensatory plans or arrangements.
(b) Reports on Form 8-K -A Current Report on Form
8-K was filed on July 22, 1999, regarding the
termination of certain agreements previously entered
into with Kerr-McGee Corporation. A Current Report on
Form 8-K was filed on August 13, 1999, regarding
certain supplemental information to the PennzEnergy
merger proxy statement. Current Reports on Form 8-K
were filed on August 18, 1999, and August 31, 1999,
regarding the closing of the PennzEnergy merger. On
September 24, 1999, a Current Report on Form 8-K was
filed regarding the underwriting agreement executed in
connection with Devon's equity offering. A Current
Report on Form 8-K was filed on October 1, 1999, and
amended by a Current Report on Form 8-K/A filed on
October 5, 1999, regarding revisions to Devon's forward-
looking information for the year 1999.
<PAGE>
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.
DEVON ENERGY CORPORATION
Date: November 10, 1999 /s/Danny J. Heatly
Danny J. Heatly
Vice President - Accounting
Chief Accounting Officer
<PAGE>
INDEX TO EXHIBITS
Page
2.2 Amended and Restated Agreement and Plan of #
Merger among Registrant, Devon Energy
Corporation (Oklahoma) (formerly Devon Energy
Corporation, an Oklahoma corporation), Devon
Oklahoma Corporation and PennzEnergy Company
dated as of May 19, 1999 (incorporated by
reference to Exhibit 2 to Registrant's Form
S-4, File No. 33-82903 and by reference to
Exhibit 2.1 to Registrant's Form 8-K filed on
August 31, 1999).
3.1 Registrant's Restated Certificate of #
Incorporation (incorporated by reference to
Exhibit 3 to Registrant's Form 8-K filed
on August 18, 1999).
3.2 Registrant's Bylaws (incorporated by reference #
to Exhibit 3.3 to Registrant's Registration
Statement on Form S-4, No. 333-82903 as filed
on July 15, 1999).
4.1 Form of Common Stock Certificate (incorporated #
by reference to Exhibit 4.1 to Registrant's
Form 8-K filed on August 18, 1999).
4.2 Rights Agreement dated as of August 17, 1999 #
between Registrant and BankBoston, N.A.
(incorporated by reference to Exhibit 4.2 to
Registrant's Form 8-K filed on august 18, 1999).
4.3 Certificate of Designations of Series A Junior #
Participating Preferred Stock of Registrant
(incorporated by reference to Exhibit 4.3 to
Registrant's Form 8-K filed on August 18, 1999).
4.4 Certificate of Designations of the 6.49% #
Cumulative Preferred Stock, Series A of
Registrant (incorporated by reference to
Exhibit 4.4 to Registrant's Form 8-K filed on
August 18, 1999).
4.5 Description of Capital Stock (incorporated by #
reference to Exhibit 4.9 to Registrant's Form
8-K filed on August 18, 1999).
4.6 Second Supplemental Indenture dated as of #
August 17, 1999 between Registrant, Devon
Energy Corporation (Oklahoma) and The Bank of
New York (incorporated by reference to Exhibit
4.6 to Registrant's Form 8-K filed on August
18, 1999).
4.7 Fifth Supplemental Indenture dated as of #
August 17, 1999 to Indenture dated as of
December 15, 1992 among Registrant (as
successor by Merger to PennzEnergy) and
Chase Bank of Texas, National Association
(incorporated by reference to Exhibit 4.6
to Registrant's Form 8-K filed on August 18,
1999).
4.8 First Supplemental Indenture dated as of #
August 17, 1999 to Indenture dated as of
February 15, 1986 between Registrant (as
successor by Merger to PennzEnergy) and
Chase Bank of Texas, National Association
(incorporated by reference to Exhibit 4.8 to
Registrant's Form 8-K filed on August 18,
1999).
4.9 Amending Voting and Exchange Trust Agreement #
dated as of August 17, 1999 between Registrant,
Devon Energy Corporation (Oklahoma) and
Northstar Energy Corporation (incorporated by
reference to Exhibit 9 to Registrant's Form
8-K filed on August 18, 1999).
4.10 Amending Support Agreement dated as of August #
17, 1999 between Registrant, Devon Energy
Corporation (Oklahoma) and Northstar Energy
Corporation (incorporated by reference to
Exhibit 4.5 to Registrant's Form 8-K filed
on August 18, 1999).
10.1 U.S. Credit Agreement, dated October 15, 42
1999 among the Registrant,as U.S. Borrower,
Bank of America, N.A., as Administrative
Agent, Bank of America Securities, LLC,
as Lead Arranger, Bank One, Texas, N.A.,
as Syndication Agent, The Chase Manhattan
Bank, as Documentation Agent, First Union
National Bank, as Co-Documentation Agent,
and Certain Financial Institutions, as Lenders.
10.2 Canadian Credit Agreement dated October 15, 116
1999, among Northstar Energy Corporation
and Devon Energy Corporation, as Canadian
Borrowers, Bank of America Canada, as
Administrative Agent Bank of America
Securities, LLC, as Lead Arranger, BancOne
Capital Markets, Inc., as Syndication Agent,
The Chase Manhattan Bank, as Documentation
Agent, First Union National Bank, as Co-
Documentation Agent, and Certain Financial
Institutions, as Lenders.
10.3 Severance Agreement between Devon Energy 199
Corporation (Nevada), Devon Energy
Corporation, Devon Delaware Corporation
and Mr. J. Larry Nichols, dated May 19,
1999 *
10.4 Form of Severance Agreement between Devon 213
Energy Corporation (Nevada), Devon Energy
Corporation, Devon Delaware Corporation
and Messrs. Darryl G. Smette, Duke R. Ligon,
H. Allen Turner, William T. Vaughn and
Ms. Marian J. Moon, dated May 19, 1999 *
# Incorporated by reference.
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<PERIOD-END> SEP-30-1999 SEP-30-1998
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<SECURITIES> 0 0
<RECEIVABLES> 187726 76183
<ALLOWANCES> 0 0
<INVENTORY> 16849 2544
<CURRENT-ASSETS> 596593 114764
<PP&E> 5561881 2463931
<DEPRECIATION> 1702266 1481672
<TOTAL-ASSETS> 5175270 1170179
<CURRENT-LIABILITIES> 541355 86438
<BONDS> 1783040 303745
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<COMMON> 8039 4841
<OTHER-SE> 1809049 524536
<TOTAL-LIABILITY-AND-EQUITY> 5175270 1170179
<SALES> 401727 282284
<TOTAL-REVENUES> 411429 298082
<CGS> 0 0
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<OTHER-EXPENSES> 113832 96614
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<INTEREST-EXPENSE> 35238 16344
<INCOME-PRETAX> 76836 (75090)
<INCOME-TAX> 30195 (18293)
<INCOME-CONTINUING> 46641 (56797)
<DISCONTINUED> 0 0
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</TABLE>
US CREDIT AGREEMENT
_______________________________________________________
DEVON ENERGY CORPORATION
as US Borrower
BANK OF AMERICA, N.A.
as Administrative Agent
BANC OF AMERICA SECURITIES LLC
as Lead Arranger
BANC ONE CAPITAL MARKETS, INC.
as Syndication Agent
THE CHASE MANHATTAN BANK
as Documentation Agent
FIRST UNION NATIONAL BANK
as Co-Documentation Agent
and CERTAIN FINANCIAL INSTITUTIONS
as Lenders
_______________________________________________________
US $475,000,000
October 15, 1999
<PAGE>
TABLE OF CONTENTS
Page
CREDIT AGREEMENT 1
ARTICLE I - The US Loans 1
Section 1.1. Commitments to Lend; US Notes 1
Section 1.2. Requests for New US Loans 4
Section 1.3. Continuations and Conversions of Existing
US Loans 5
Section 1.4. Use of Proceeds 7
Section 1.5. Interest Rates and Fees 7
Section 1.6. Prepayments 8
Section 1.7. Competitive Bid Loans 9
Section 1.8. Refinancings of US Swing Loans 12
ARTICLE II - Letters of Credit 13
Section 2.1. Letters of Credit 13
Section 2.2. Requesting Letters of Credit 14
Section 2.3. Reimbursement and Participations 14
Section 2.4. Letter of Credit Fees 15
Section 2.5. No Duty to Inquire 15
Section 2.6. LC Collateral 16
ARTICLE III - Payments to Lenders 17
Section 3.1. General Procedures 17
Section 3.2. Increased Cost and Reduced Return 18
Section 3.3. Limitation on Types of US Loans 20
Section 3.4. Illegality 20
Section 3.5. Treatment of Affected US Loans 20
Section 3.6. Compensation 21
Section 3.7. Change of Applicable Lending Office 21
Section 3.8. Replacement of Lenders 22
Section 3.9. Taxes 22
Section 3.10. Currency Conversion and Currency Indemnity 24
ARTICLE IV - Conditions Precedent to Lending 25
Section 4.1. Documents to be Delivered 25
Section 4.2. Additional Conditions Precedent to First
US Loan or First Letter of Credit 26
Section 4.3. Additional Conditions Precedent to all
US Loan and Letters of Credit 26
ARTICLE V - Representations and Warranties 27
Section 5.1. No Default 27
Section 5.2. Organization and Good Standing 27
Section 5.3. Authorization 27
Section 5.4. No Conflicts or Consents 27
Section 5.5. Enforceable Obligations 28
Section 5.6. Full Disclosure 28
Section 5.7. Litigation 28
Section 5.8. ERISA Plans and Liabilities 28
Section 5.9. Environmental and Other Laws 29
Section 5.10. Names and Places of Business 29
Section 5.11. US Borrower's Subsidiaries 29
Section 5.12. Title to Properties; Licenses 29
Section 5.13. Government Regulation 30
Section 5.14. Insider 30
Section 5.15. Solvency 30
Section 5.16. Year 2000 Compliance 30
ARTICLE VI - Affirmative Covenants of US Borrower 31
Section 6.1. Payment and Performance 31
Section 6.2. Books, Financial Statements and Reports 31
Section 6.3. Other Information and Inspections 32
Section 6.4. Notice of Material Events and Change of
Address 32
Section 6.5. Maintenance of Properties 33
Section 6.6. Maintenance of Existence and
Qualifications 33
Section 6.7. Payment of Trade Liabilities, Taxes, etc. 33
Section 6.8. Insurance 33
Section 6.9. Performance on US Borrower's Behalf 33
Section 6.10. Interest 34
Section 6.11. Compliance with Law 34
Section 6.12. Environmental Matters 34
Section 6.13. Bank Accounts; Offset. 34
Section 6.14. Year 2000 Compliance 35
ARTICLE VII - Negative Covenants of US Borrower 35
Section 7.1. Indebtedness 35
Section 7.2. Limitation on Liens 37
Section 7.3. Limitation on Mergers 37
Section 7.4. Limtation on Issuance of Securities by
Subsidiaries of US Borrower 37
Section 7.5. Limitation on Restricted Payments 37
Section 7.6. Transactions with Affiliates 37
Section 7.7. Prohibited Contracts; ERISA 38
Section 7.8. Funded Debt to Total Capitalization 38
Section 7.9. Devon Trust; Devon Trust Securities 38
ARTICLE VIII - Events of Default and Remedies 38
Section 8.1. Events of Default 38
Section 8.2. Remedies 41
ARTICLE IX - US Agent 41
Section 9.1. Appointment, Powers, and Immunities 41
Section 9.2. Reliance by US Agent 41
Section 9.3. Defaults 42
Section 9.4. Rights as Lender 42
Section 9.5. Indemnification 42
Section 9.6. Non-Reliance on US Agent and Other Lenders 43
Section 9.7. Rights as Lender 43
Section 9.8. Sharing of Set-Offs and Other Payments 43
Section 9.9. Investments 44
Section 9.10. Benefit of Article IX 44
Section 9.11. Resignation 44
Section 9.12. Lenders to Remain Pro Rata 45
ARTICLE X - Miscellaneous 45
Section 10.1. Waivers and Amendments; Acknowledgments 45
Section 10.2. Survival of Agreements; Cumulative Nature 46
Section 10.3. Notices 47
Section 10.4. Payment of Expenses; Indemnity 47
Section 10.5. Parties in Interest 48
Section 10.6. Assignments and Participations 49
Section 10.7. Confidentiality 50
Section 10.8. Governing Law; Submission to Process 51
Section 10.9. Limitation on Interest 51
Section 10.10. Termination; Limited Survival 52
Section 10.11. Severability 52
Section 10.12. Counterparts; Fax 52
Section 10.13. Waiver of Jury Trial, Punitive Damages,
etc. 52
Section 10.14. Defined Terms 53
Section 10.15. Annex I, Exhibits and Schedules;
Additional Definitions 53
Section 10.16. Amendment of Defined Instruments 53
Section 10.17. References and Titles 53
Section 10.18. Calculations and Determinations 53
Section 10.19. Construction of Indemnities and Releases 54
Section 10.20. Termination of Existing US Agreement 54
Schedules and Exhibits:
Annex I - Defined Terms
Annex II - Lenders Schedule
Schedule 1 - Disclosure Schedule
Schedule 2 - Surety Bonds & Letters of Credit
Exhibit A-1 - Tranche A Promissory Note
Exhibit A-2 - Tranche B Promissory Note
Exhibit A-3 - US Swing Promissory Note
Exhibit B - Borrowing Notice
Exhibit C - Continuation/Conversion Notice
Exhibit D - Certificate Accompanying Financial Statements
Exhibit E - Opinion of Counsel for Restricted Persons
Exhibit F - Assignment and Acceptance Agreement
Exhibit G - Letter of Credit Application and Agreement
Exhibit H - Competitive Bid Request
Exhibit I - Invitation to Bid
Exhibit J - Competitive Bid
Exhibit K - Competitive Bid Accept/Reject Letter
Exhibit L - Competitive Bid Note
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is made as of October 15, 1999, by and
among Devon Energy Corporation, a Delaware corporation (herein
called "US Borrower"), Bank of America, N.A., individually and as
administrative agent (herein called "US Agent"), and the
undersigned Lenders. In consideration of the mutual covenants
and agreements contained herein the parties hereto agree as
follows:
ARTICLE I - The US Loans
Section 1.1. Commitments to Lend; US Notes.
(a) Tranche A. Subject to the terms and conditions hereof,
each Lender agrees to make loans to US Borrower (herein called
such Lender's "Tranche A Loans") upon US Borrower's request from
time to time during the US Facility Commitment Period, provided
that (i) subject to Sections 3.3, 3.4 and 3.5, all Lenders are
requested to make Tranche A Loans of the same Type in accordance
with their respective Percentage Shares and as part of the same
Borrowing, (ii) such Lender's Percentage Share of the US Facility
Usage shall never exceed such Lender's Percentage Share of the US
Maximum Credit Amount, and (iii) such Lender's Percentage Share
of the Tranche A Facility Usage shall never exceed such Lender's
Percentage Share of the Tranche A Maximum Credit Amount. The
aggregate amount of all Tranche A Loans in any Borrowing must be
an integral multiple of US $100,000 which equals or exceeds US
$200,000 or must equal the unadvanced portion of the US Maximum
Credit Amount. The obligation of US Borrower to repay to each
Lender the aggregate amount of all Tranche A Loans made by such
Lender, together with interest accruing in connection therewith,
shall be evidenced by a single promissory note (herein called
such Lender's "Tranche A Note") made by US Borrower payable to
the order of such Lender in the form of Exhibit A-1 with
appropriate insertions. The amount of principal owing on any
Lender's Tranche A Note at any given time shall be the aggregate
amount of all Tranche A Loans theretofore made by such Lender
minus all payments of principal theretofore received by such
Lender on such Tranche A Note. Interest on each Tranche A Note
shall accrue and be due and payable as provided herein and
therein. Each Tranche A Note shall be due and payable as
provided herein and therein, and shall be due and payable in full
on the Tranche A Maturity Date. Subject to the terms and
conditions hereof, US Borrower may borrow, repay, and reborrow
Tranche A Loans under the US Agreement during the US Facility
Commitment Period. US Borrower may have no more than ten
Borrowings of US Dollar Eurodollar Loans (including Tranche A
Loans and Tranche B Loans) outstanding at any time.
(b) Tranche B. Subject to the terms and conditions hereof,
each Lender agrees to make loans to US Borrower (herein called
such Lender's "Tranche B Loans") upon US Borrower's request from
time to time during the Tranche B Revolving Period, provided that
(i) subject to Sections 3.3, 3.4 and 3.5, all Lenders are
requested to make Tranche B Loans of the same Type in accordance
with their respective Percentage Shares and as part of the same
Borrowing, (ii) such Lender's Percentage Share of the US Facility
Usage shall never exceed such Lender's Percentage Share of the US
Maximum Credit Amount, and (iii) such Lender's Percentage Share
of the Tranche B Facility Usage shall never exceed such Lender's
Percentage Share of the Tranche B Maximum Credit Amount. The
aggregate amount of all Tranche B Loans in any Borrowing must be
an integral multiple of US $100,000 which equals or exceeds US
$200,000 or must equal the unadvanced portion of the US Maximum
Credit Amount. The obligation of US Borrower to repay to each
Lender the aggregate amount of all Tranche B Loans made by such
Lender, together with interest accruing in connection therewith,
shall be evidenced by a single promissory note (herein called
such Lender's "Tranche B Note") made by US Borrower payable to
the order of such Lender in the form of Exhibit A-2 with
appropriate insertions. The amount of principal owing on any
Lender's Tranche B Note at any given time shall be the aggregate
amount of all Tranche B Loans theretofore made by such Lender
minus all payments of principal theretofore received by such
Lender on such Tranche B Note. Interest on each Tranche B Note
shall accrue and be due and payable as provided herein and
therein. Each Tranche B Note shall be due and payable as
provided herein and therein, and shall be due and payable in full
on the Tranche B Maturity Date. Subject to the terms and
conditions hereof, US Borrower may borrow, repay, and reborrow
Tranche B Loans under the US Agreement during the Tranche B
Revolving Period. US Borrower may have no more than ten
Borrowings of US Dollar Eurodollar Loans (including Tranche A
Loans and Tranche B Loans) outstanding at any time.
(c) Extension of Conversion Date.
(i) US Borrower may, at its option and from time to
time during the Tranche B Revolving Period, request an offer
to extend the Tranche B Revolving Period by delivering to US
Agent a Request for an Offer of Extension not more than
sixty days and not less than thirty days prior to the then
current Tranche B Conversion Date. US Agent shall forthwith
provide a copy of the Request for an Offer of Extension to
each of the Lenders. Upon receipt from US Agent of an
executed Request for an Offer of Extension, each Lender
shall, within twenty days after the date of such Lender's
receipt of such request from US Agent, either:
(1) notify US Agent of its acceptance of the
Request for an Offer of Extension, and the terms and
conditions, if any, upon which such Lender is prepared
to extend the Tranche B Conversion Date; or
(2) notify US Agent that the Request for an Offer
of Extension has been denied, such notice to forthwith
be forwarded by US Agent to US Borrower to allow US
Borrower to seek a replacement lender pursuant to
Section 1.1(e) (any Lender giving notice of such denial
is herein called a "Non-Accepting Lender"). The
failure of a Lender to so notify US Agent within such
twenty day period shall be deemed to be notification by
such Lender to US Agent that such Lender has denied US
Borrower's Request for an Offer of Extension.
(ii) Provided that all Lenders provide notice to US
Agent under Section 1.1(c)(i) that they accept the Request
for an Offer of Extension, or if there are Non-Accepting
Lenders, such Lenders shall have been repaid pursuant to
Section 1.1(e) or replacement lenders shall have become
parties hereto pursuant to Section 1.1(e) and shall have
accepted the Request for an Offer of Extension, such
acceptance having common terms and conditions, US Agent
shall deliver to US Borrower an Offer of Extension
incorporating the said terms and conditions. Such offer
shall be open for acceptance by US Borrower until the fifth
Business Day immediately preceding the then current Tranche
B Conversion Date. Upon written notice by US Borrower to US
Agent accepting an outstanding Offer of Extension and
agreeing to the terms and conditions, if any, specified
therein (the date of such notice of acceptance in this
Section 1.1 being called the "Extension Date"), the Tranche
B Conversion Date shall be extended to the date 364 days
from the Extension Date and the terms and conditions
specified in such Offer of Extension shall be immediately
effective.
(iii) US Borrower understands that the
consideration of any Request for an Offer of Extension
constitutes an independent credit decision which each Lender
retains the absolute and unfettered discretion to make and
that no commitment in this regard is hereby given by a
Lender and that any offer to extend the Tranche B Conversion
Date may be on such terms and conditions in addition to
those set out herein as the extending Lenders stipulate.
(d) Conversion to Tranche B Term Loan. Effective at 11:59
p.m. Dallas, Texas time on the day immediately preceding the
Tranche B Conversion Date, (i) each Lender's obligation to make
new Tranche B Loans shall be canceled automatically, and
(ii) each Lender's Tranche B Loans shall become term loans
maturing on the Tranche B Maturity Date.
(e) Non-Accepting Lender. Provided that Lenders whose
Percentage Shares represent more than 50% but less than 100% of
the US Maximum Credit Amount provide notice to US Agent under
Section 1.1(c)(i) that they accept the Request for an Offer of
Extension, on notice of US Borrower to US Agent, US Borrower
shall be entitled to choose any of the following in respect of
each Non-Accepting Lender prior to the expiration of the Tranche
B Revolving Period, provided that if US Borrower does not make an
election prior to the expiration of the Tranche B Revolving
Period, US Borrower shall be deemed to have irrevocably elected
to exercise the provisions of Section 1.1(e)(i):
(i) the Non-Accepting Lender's obligations to make US
Loans shall be canceled as of the Extension Date, the US
Maximum Credit Amount shall be reduced by the amount so
canceled, and on or prior to the Extension Date the US
Borrower shall repay in full all Obligations then
outstanding to the Non-Accepting Lender (as defined in
Section 1.1(c)(i)(2)), or
(ii) replace the Non-Accepting Lender by reaching
satisfactory arrangements with one or more existing
Lenders or new Lenders, for the purchase, assignment and
assumption of all Canadian Obligations and US Obligations of
the Non-Accepting Lender, provided that any new Lender,
with, if necessary, any Affiliate, shall take a pro rata
assignment of both Canadian Obligations and US Obligations,
and such Non-Accepting Lender shall be obligated to sell
such Obligations in accordance with such satisfactory
arrangements.
In connection with any such replacement of a Lender Party
pursuant to this Section 1.1(e), US Borrower shall pay all costs
that would have been due to such Lender Party pursuant to Section
3.6 if such Lender Party's US Loans had been prepaid at the time
of such replacement.
(f) Swing Line Loans. Subject to the terms and conditions
hereof, US Agent agrees to make loans to US Borrower (herein
called "US Swing Loans") upon US Borrower's request from time to
time during the US Facility Commitment Period, provided that (i)
the US Facility Usage shall never exceed the US Maximum Credit
Amount, and (ii) the aggregate amount of US Swing Loans
outstanding shall never exceed the US Swing Sublimit. The
aggregate amount of all US Swing Loans in any Borrowing must be
an integral multiple of US $100,000 which equals or exceeds US
$1,000,000 or must equal the unadvanced portion of the US Maximum
Credit Amount. The obligation of US Borrower to repay to US
Agent the aggregate amount of all US Swing Loans made by US
Agent, together with interest accruing in connection therewith,
shall be evidenced by a single promissory note (herein called the
"US Swing Note") made by US Borrower payable to the order of US
Agent in the form of Exhibit A-3 with appropriate insertions.
The amount of principal owing on the US Swing Note at any given
time shall be the aggregate amount of all US Swing Loans
theretofore made by US Agent minus all payments of principal
theretofore received by US Agent on the US Swing Note (including
as a result of any refinancing pursuant to Section 1.8).
Interest on the US Swing Note shall accrue and be due and payable
as provided herein and therein. The US Swing Note shall be due
and payable as provided herein and therein, and shall be due and
payable in full on the Tranche A Maturity Date. Subject to the
terms and conditions hereof, US Borrower may borrow, repay, and
reborrow US Swing Loans under the US Agreement during the US
Facility Commitment Period.
Section 1.2. Requests for New US Loans. US Borrower must
give to US Agent written notice (or telephonic notice promptly
confirmed in writing) of any requested Borrowing of new US Loans
to be advanced by Lenders. Each such notice constitutes a
"Borrowing Notice" hereunder and must:
(a) specify the aggregate amount of any such Borrowing of
new US Base Rate Loans and the date on which such US Base Rate
Loans are to be advanced, the aggregate amount of any such
Borrowing of new US Dollar Eurodollar Loans, the date on which
such US Dollar Eurodollar Loans are to be advanced (which shall
be the first day of the Eurodollar Interest Period which is to
apply thereto), and the length of the applicable Eurodollar
Interest Period, or the aggregate amount of any such Borrowing of
new US Swing Loans and the date on which such US Swing Loans are
to be advanced; and
(b) be received by US Agent (i) in the case of US Loans
that are not US Swing Loans, not later than 11:00 a.m., Dallas,
Texas time, on the day on which any such US Base Rate Loans are
to be made, or the second Business Day preceding the day on which
any such US Dollar Eurodollar Loans are to be made, and (ii) in
the case of US Loans that are US Swing Loans, not later than 4:00
p.m., Dallas, Texas time on the Business Day on which any such US
Swing Loans are to be made.
Each such written request or confirmation must be made in the
form and substance of the "Borrowing Notice" attached hereto as
Exhibit B, duly completed. Each such telephonic request shall be
deemed a representation, warranty, acknowledgment and agreement
by US Borrower as to the matters which are required to be set out
in such written confirmation. Upon receipt of any such Borrowing
Notice, US Agent shall give each Lender notice of the terms
thereof (excluding US Swing Loans) not later than 2:00 p.m.,
Dallas, Texas time on the day it receives such Borrowing Notice
from US Borrower if it receives such Borrowing Notice by 11:00
a.m., Dallas, Texas time, otherwise on the next Business Day. If
all conditions precedent to such new US Loans have been met, each
Lender will on the date requested promptly remit to US Agent at
US Agent's office in Dallas, Texas the amount of such Lender's
new US Loan in immediately available funds, and upon receipt of
such funds, unless to its actual knowledge any conditions
precedent to such US Loans have been neither met nor waived as
provided herein, US Agent shall promptly make such US Loans
available to US Borrower. Unless US Agent shall have received
prompt notice from a Lender that such Lender will not make
available to US Agent such Lender's new US Loan, US Agent may in
its discretion assume that such Lender has made such US Loan
available to US Agent in accordance with this section and US
Agent may if it chooses, in reliance upon such assumption, make
such US Loan available to US Borrower. If and to the extent such
Lender shall not so make its new US Loan available to US Agent,
such Lender and US Borrower severally agree to pay or repay to US
Agent within three days after demand the amount of such US Loan
together with interest thereon, for each day from the date such
amount was made available to US Borrower until the date such
amount is paid or repaid to US Agent, with interest at (1) the
Federal Funds Rate, if such Lender is making such payment;
provided that US Agent gave notice of the terms of the Borrowing
Notice to such Lender in accordance with the terms of this
Section 1.2, and (2) the interest rate applicable at the time to
the other new US Loans made on such date, if US Borrower is
making such repayment. If neither such Lender nor US Borrower
pays or repays to US Agent such amount within such three-day
period, US Agent shall in addition to such amount be entitled to
recover from such Lender and from US Borrower, on demand,
interest thereon at the Default Rate for US Base Rate Loans,
calculated from the date such amount was made available to US
Borrower. The failure of any Lender to make any new US Loan to
be made by it hereunder shall not relieve any other Lender of its
obligation hereunder, if any, to make its new US Loan, but no
Lender shall be responsible for the failure of any other Lender
to make any new US Loan to be made by such other Lender.
Section 1.3. Continuations and Conversions of Existing US
Loans. US Borrower may make the following elections with respect
to US Loans already outstanding under this Agreement: to convert
US Base Rate Loans to US Dollar Eurodollar Loans, to convert US
Dollar Eurodollar Loans to US Base Rate Loans on the last day of
the Eurodollar Interest Period applicable thereto, to continue US
Dollar Eurodollar Loans beyond the expiration of such Eurodollar
Interest Period by designating a new Eurodollar Interest Period
to take effect at the time of such expiration, and to convert US
Swing Loans to US Dollar Eurodollar Loans simultaneously with the
refinancing of such US Swing Loans pursuant to Section 1.8. In
making such elections, US Borrower may combine existing Tranche A
Loans made pursuant to separate Borrowings into one new Borrowing
or divide existing Tranche A Loans made pursuant to one Borrowing
into separate new Borrowings, or combine existing Tranche B Loans
made pursuant to separate Borrowings into one new Borrowing or
divide existing Tranche B Loans made pursuant to one Borrowing
into separate new Borrowings, provided that US Borrower may have
no more than ten Borrowings of US Dollar Eurodollar Loans
outstanding at any time. To make any such election, US Borrower
must give to US Agent written notice (or telephonic notice
promptly confirmed in writing) of any such Conversion or
Continuation of existing US Loans, with a separate notice given
for each new Borrowing. Each such notice constitutes a
"Continuation/Conversion Notice" hereunder and must:
(a) specify the existing US Loans made under this Agreement
which are to be continued or converted and whether such US Loans
are Tranche A Loans or Tranche B Loans;
(b) specify the aggregate amount of any Borrowing of US
Base Rate Loans into which such existing US Loans are to be
continued or converted and the date on which such Continuation or
Conversion is to occur, or the aggregate amount of any Borrowing
of US Dollar Eurodollar Loans into which such existing US Dollar
Eurodollar Loans are to be continued or converted, the date on
which such Continuation or Conversion is to occur (which shall be
the first day of the Eurodollar Interest Period which is to apply
to such US Dollar Eurodollar Loans), and the length of the
applicable Eurodollar Interest Period; and
(c) be received by US Agent not later than 10:00 a.m.,
Dallas, Texas time, on the day on which any such Continuation or
Conversion to US Base Rate Loans is to occur, or the second
Business Day preceding the day on which any such Continuation or
Conversion to US Dollar Eurodollar Loans is to occur.
Each such written request or confirmation must be made in the
form and substance of the "Continuation/Conversion Notice"
attached hereto as Exhibit C, duly completed. Each such
telephonic request shall be deemed a representation, warranty,
acknowledgment and agreement by US Borrower as to the matters
which are required to be set out in such written confirmation.
Upon receipt of any such Continuation/Conversion Notice, US Agent
shall give each Lender prompt notice of the terms thereof. Each
Continuation/Conversion Notice shall be irrevocable and binding
on US Borrower. During the continuance of any Default, US
Borrower may not make any election to convert existing US Loans
made under this Agreement into US Dollar Eurodollar Loans or
continue existing US Loans made under this Agreement as US Dollar
Eurodollar Loans. If (due to the existence of a Default or for
any other reason) US Borrower fails to timely and properly give
any Continuation/Conversion Notice with respect to a Borrowing of
existing US Dollar Eurodollar Loans at least two Business Days
prior to the end of the Eurodollar Interest Period applicable
thereto, such US Dollar Eurodollar Loans shall automatically be
converted into US Base Rate Loans at the end of such Eurodollar
Interest Period. No new funds shall be repaid by US Borrower or
advanced by any Lender in connection with any Continuation or
Conversion of existing US Loans pursuant to this section, and no
such Continuation or Conversion shall be deemed to be a new
advance of funds for any purpose; such Continuations and
Conversions merely constitute a change in the interest rate
applicable to already outstanding US Loans.
Section 1.4. Use of Proceeds. US Borrower shall use all
US Loans made under this Agreement to pay in full on the Closing
Date all indebtedness outstanding under the Existing US Agreement
and the PennzEnergy Agreement and thereafter to refinance
existing indebtedness (including any commercial paper issued by
or for the account of US Borrower), to finance capital
expenditures, to refinance Matured US LC Obligations outstanding
under this Agreement, and provide working capital for its
operations and for other general business purposes. US Borrower
shall use all Letters of Credit for its general corporate
purposes. In no event shall the funds from any US Loan or any
Letter of Credit be used directly or indirectly by any Person for
personal, family, household or agricultural purposes or for the
purpose, whether immediate, incidental or ultimate, of
purchasing, acquiring or carrying any "margin stock" (as such
term is defined in Regulation U promulgated by the Board of
Governors of the Federal Reserve System) or to extend credit to
others directly or indirectly for the purpose of purchasing or
carrying any such margin stock. US Borrower represents and
warrants that US Borrower is not engaged principally, or as one
of US Borrower's important activities, in the business of
extending credit to others for the purpose of purchasing or
carrying such margin stock.
Section 1.5. Interest Rates and Fees.
(a) Tranche A Loans. The following interest and fees shall
be payable with respect to Tranche A Loans:
(i) Interest. Each Tranche A Loan that is a US Base
Rate Loan shall bear interest on each day outstanding at the
US Base Rate in effect on such day. Each Tranche A Loan
that is a US Dollar Eurodollar Loan shall bear interest on
each day during the related Eurodollar Interest Period at
the related Adjusted US Dollar Eurodollar Rate in effect on
such day.
(ii) Facility Fees. In consideration of each Lender's
commitment to make Tranche A Loans under this Agreement, US
Borrower will pay to US Agent for the account of each Lender
a facility fee determined on a daily basis by applying the
Facility Fee Rate to such Lender's Percentage Share of the
Tranche A Maximum Credit Amount on each day during the US
Facility Commitment Period. This facility fee shall be due
and payable in arrears on the last day of each Fiscal
Quarter and at the end of the US Facility Commitment Period.
(b) Tranche B Loans. The following interest and fees shall
be payable with respect to Tranche B Loans:
(i) Interest. Each Tranche B Loan that is a US Base
Rate Loan shall bear interest on each day outstanding at the
US Base Rate in effect on such day. Each Tranche B Loan
that is a US Dollar Eurodollar Loan shall bear interest on
each day during the related Eurodollar Interest Period at
the related Adjusted US Dollar Eurodollar Rate in effect on
such day.
(ii) Facility Fees. In consideration of each Lender's
commitment to make Tranche B Loans under this Agreement, US
Borrower will pay to US Agent for the account of each Lender
a facility fee determined on a daily basis by applying (i)
the Tranche B Facility Fee Rate to such Lender's Percentage
Share of the Tranche B Maximum Credit Amount on each day
during the period from the date hereof until the Tranche B
Conversion Date and (ii) the Tranche B Facility Fee Rate to
such Lender's Percentage Share of the Tranche B Facility
Usage on each day from the Tranche B Conversion Date until
the Tranche B Maturity Date. This facility fee shall be due
and payable in arrears on the last day of each Fiscal
Quarter and on the Tranche B Maturity Date.
(c) US Swing Loans. Each US Swing Loan shall bear interest
on each day outstanding at the US Swing Rate for such US Swing
Loan in effect on such day.
(d) Utilization Fees. In consideration of each Lender's
commitment to make US Loans under this Agreement, US Borrower
will pay to US Agent for the account of each Lender a utilization
fee determined on a daily basis by applying (i) a rate of 7.5
Basis Points per annum to such Lender's Percentage Share of the
US Facility Usage on each day during the term of this Agreement
that the US Facility Usage exceeds thirty-three percent (33%) of
the US Maximum Credit Amount, and (ii) a rate of 15 Basis Points
per annum to such Lender's Percentage Share of the US Facility
Usage on each day during the term of this Agreement that the US
Facility Usage exceeds sixty-six percent (66%) of the US Maximum
Credit Amount. This utilization fee shall be due and payable in
arrears on each Interest Payment Date for US Base Rate Loans and
on the date all US Obligations are repaid in full.
(e) Competitive Bid Loans. Each Competitive Bid Loan shall
bear interest on each
day outstanding at the Competitive Bid Rate for such Competitive
Bid Loan.
(f) All US Loans. Notwithstanding the foregoing, if an
Event of Default has occurred
and is continuing, all US Loans shall bear interest on each day
outstanding at the applicable Default Rate. Past due payments of
principal and interest shall bear interest at the rates and in
the manner set forth in the US Notes.
(g) US Agent's Fees. In addition to all other amounts due
to US Agent under the US Loan Documents, US Borrower will pay
fees to US Agent as described in a letter agreement dated
September 16, 1999 between US Agent and US Borrower.
Section 1.6. Prepayments.
(a) Optional Prepayments. US Borrower may, upon giving
notice to US Agent by 11:00 a.m., Dallas, Texas time on the
Business Day of prepayment, from time to time and without premium
or penalty prepay the US Notes, including Competitive Bid Notes,
in whole or in part, so long as all partial prepayments of
principal concurrently paid on the US Notes are in increments of
US $100,000 and in an aggregate amount greater than or equal to
US $200,000, and so long as US Borrower pays all amounts owing in
connection with the prepayment of any US Dollar Eurodollar Loan
owing under Section 3.6. US Agent shall give each Lender notice
thereof by 2:00 p.m. Dallas, Texas time on the date such notice
is received from US Borrower. Each prepayment of principal under
this section shall be accompanied by all interest then accrued
and unpaid on the principal so prepaid. Any principal or
interest prepaid pursuant to this section shall be in addition
to, and not in lieu of, all payments otherwise required to be
paid under the US Loan Documents at the time of such prepayment.
Unless otherwise designated by US Borrower, any prepayment of
Competitive Bid Loans shall be applied to the outstanding
Competitive Bid Loans in order of shortest maturity.
(b) Mandatory Prepayments of Tranche A Loans. If the
Tranche A Facility Usage exceeds the Tranche A Maximum Credit
Amount, US Borrower shall immediately prepay the principal of the
Tranche A Loans in an amount at least equal to such excess.
(c) Mandatory Prepayments of Tranche B Loans. If the
aggregate amount of the outstanding Tranche B Loans ever exceeds
the Tranche B Maximum Credit Amount, US Borrower shall
immediately prepay the principal of the Tranche B Loans in an
amount at least equal to such excess.
(d) Procedures. Each prepayment of principal under this
section shall
be accompanied by all interest then accrued and unpaid on the
principal so prepaid. Any principal or interest prepaid pursuant
to this section shall be in addition to, and not in lieu of, all
payments otherwise required to be paid under the US Loan
Documents at the time of such prepayment.
Section 1.7. Competitive Bid Loans.
(a) US Borrower may request that each Lender submit
Competitive Bids (on a several basis) for requested maturities of
thirty days or more to US Borrower on any Business Day during the
US Facility Commitment Period, provided that all Lenders are
requested to make a Competitive Bid on the same basis at the same
time. In order to request Competitive Bids, US Borrower shall
deliver by hand or facsimile to US Agent a Competitive Bid
Request, to be received by US Agent not later than 9:00 a.m.,
Dallas, Texas time one Business Day before the date specified for
a proposed Competitive Bid Loan. A Competitive Bid Request that
does not conform substantially to the format of Exhibit H may be
rejected in US Agent's sole discretion, and US Agent shall
promptly notify US Borrower of such rejection by facsimile.
After receiving an acceptable Competitive Bid Request, US Agent
shall no later than 12:00 noon, Dallas, Texas time on the date
such Competitive Bid Request is received by US Agent, by
facsimile deliver to Lenders an Invitation to Bid substantially
in the form of Exhibit I with respect thereto.
(b) Each Lender may, in its sole discretion, make one or
more Competitive Bids to US Agent responsive to each Competitive
Bid Request given by US Borrower. Each Competitive Bid by a
Lender must be received by US Agent by facsimile not later than
9:00 a.m., Dallas, Texas time on the date specified for a
proposed Competitive Bid Loan. Multiple bids may be accepted by
US Agent. Competitive Bids that do not conform substantially to
the format of Exhibit J may be rejected by US Agent after
conferring with, and upon the instruction of, US Borrower, and US
Agent shall notify the bidding Lender of such rejection as soon
as practicable. If any Lender shall elect not to make a
Competitive Bid, such Lender shall so notify US Agent by
facsimile not later than 9:00 a.m., Dallas, Texas time, on the
date specified for a Competitive Bid Loan; provided, however,
that failure by any Lender to give such notice shall not cause
such Lender to be obligated to make any Competitive Bid Loan and
by such failure such Lender shall be deemed to have rejected such
Competitive Bid. A Competitive Bid submitted by a Lender shall
be irrevocable.
(c) Promptly, and in no event later than 9:30 a.m., Dallas,
Texas time, on the date specified for a proposed Competitive Bid
Loan, US Agent shall notify US Borrower by facsimile of all the
Competitive Bids made, the Competitive Bid Rate and the principal
amount of each Competitive Bid Loan in respect of which a
Competitive Bid was made, and the identity of each Lender that
made each Competitive Bid. US Agent shall send a copy of all
Competitive Bids to US Borrower for its records as soon as
practicable after completion of the bidding process.
(d) US Borrower may, subject only to the provisions hereof,
accept or reject any Competitive Bid. US Borrower shall notify
US Agent by facsimile pursuant to a Competitive Bid Accept/Reject
Letter whether and to what extent US Borrower has decided to
accept or reject any or all of the Competitive Bids, not later
than 10:00 a.m., Dallas, Texas time, on the date specified for a
proposed Competitive Bid Loan; provided, however, that:
(i) the failure by US Borrower to accept or reject any
Competitive Bid within the time period specified herein
shall be deemed to be a rejection of such Competitive Bid,
(ii) the aggregate amount of the Competitive Bids
accepted by US Borrower shall not exceed the principal
amount specified in the Competitive Bid Request,
(iii) the aggregate amount of all outstanding US
Loans and US LC Obligations shall never exceed the US
Maximum Credit Amount,
(iv) if US Borrower shall accept a Competitive Bid or
Competitive Bids made at a particular Competitive Bid Rate,
but the amount of such Competitive Bid or Competitive Bids
shall cause the total amount of Competitive Bids to be
accepted by US Borrower to exceed the amount specified in
the Competitive Bid Request, then US Borrower shall accept a
portion of such Competitive Bid or Competitive Bids in an
amount equal to the amount specified in the Competitive Bid
Request less the amount of all other Competitive Bids
accepted with respect to such Competitive Bid Request, which
acceptance, in the case of multiple Competitive Bids at such
Competitive Bid Rate, shall be made pro rata in accordance
with the amount of each such Competitive Bid at such
Competitive Bid Rate, and
(v) no Competitive Bid shall be accepted for a
Competitive Bid Loan unless such Competitive Bid Loan is in
a minimum principal amount of US $5,000,000 or a higher
integral multiple of US $1,000,000; provided, however, that
if a Competitive Bid Loan must be in an amount less than US
$5,000,000 because of the provisions of clause (iv) above,
such Competitive Bid Loan may be for a minimum of US
$1,000,000 or any higher integral multiple thereof, and in
calculating the pro rata allocation of acceptances or
portions of multiple bids at a particular Competitive Bid
Rate pursuant to clause (iv), the amounts shall be rounded
to integral multiples of US $1,000,000 in a manner which
shall be in the sole and absolute discretion of US Borrower.
(e) Promptly on each date US Borrower accepts a Competitive
Bid, US Agent shall notify each Lender whether or not its
Competitive Bid has been accepted (and if so, in what amount and
at what Competitive Bid Rate) by facsimile transmission sent by
US Agent, and each successful bidder will thereupon become bound,
subject to the other applicable conditions hereof, to make the
Competitive Bid Loan in respect of which its Competitive Bid has
been accepted. After completing the notifications referred to in
the immediately preceding sentence, US Agent shall notify each
Lender of the aggregate principal amount of all Competitive Bids
accepted. Each Lender which is to make a Competitive Bid Loan
shall, before 11:00 a.m., Dallas, Texas time, on the borrowing
date specified in the Competitive Bid Request applicable thereto,
make available to US Agent in immediately available funds the
amount of each Competitive Bid Loan to be made by such Lender,
and US Agent shall promptly deposit such funds to an account
designated by US Borrower. As soon as practicable thereafter, US
Agent shall notify each Lender of the aggregate amount of
Competitive Bid Loans advanced, the respective Competitive Bid
Interest Periods thereof and Competitive Bid Rate applicable
thereto.
(f) The obligation of US Borrower to repay to each Lender
the aggregate amount of all Competitive Bid Loans made by such
Lender, together with interest accruing in connection therewith,
shall be evidenced by promissory notes (respectively, such
Lender's "Competitive Bid Note") made by US Borrower payable to
the order of such Lender in the form of Exhibit L, with
appropriate insertions. The amount of principal owing on any
Lender's Competitive Bid Note at any given time shall be the
aggregate amount of all Competitive Bid Loans theretofore made by
such Lender thereunder minus all payments of principal
theretofore received by such Lender thereon. Interest on each
Competitive Bid Note shall accrue and be due and payable as
provided herein and therein. US Borrower shall repay on the
final day of the Competitive Bid Interest Period of each
Competitive Bid Loan (such date being that specified by US
Borrower for repayment of such Competitive Bid Loan in the
related Competitive Bid Request and such date being no later than
six months after the date of the Competitive Bid Loan) the then
unpaid principal amount of such Competitive Bid Loan. Subject to
Section 1.6 and the payment of amounts described in Section 3.6,
US Borrower shall have the right to prepay any principal amount
of any Competitive Bid Loan.
(g) No Competitive Bid Loan shall be made within five
Business Days after the date of any other Competitive Bid Loan,
unless US Borrower and US Agent shall mutually agree otherwise.
If US Agent shall at any time elect to submit a Competitive Bid
in its capacity as a Lender, it shall submit such bid directly to
US Borrower requesting such Competitive Bid one quarter of an
hour earlier than the latest time at which the other Lenders are
required to submit their bids to US Agent.
Section 1.8. Refinancings of US Swing Loans. US Agent, at
any time in its sole and absolute discretion, may, upon notice
given to each Lender by not later than 11:30 a.m., Dallas, Texas
time, on any Business Day, request that each Lender make a
Tranche A Loan or a Tranche B Loan that is a US Base Rate Loan
(or a Tranche A Loan or a Tranche B Loan that is a US Dollar
Eurodollar Loan if requested by US Borrower in accordance with
Section 1.2) in an aggregate amount equal to its Percentage Share
of the aggregate unpaid principal amount of any outstanding US
Swing Loans for the purpose of refinancing such US Swing Loans
(in this section called a "Refinancing Loan"). In any event, not
later than 11:30 a.m., Dallas, Texas time, on the first day and
the fifteenth day of each calendar month (or if such day is not a
Business Day, on the next Business Day), US Agent will notify
each Lender of the aggregate amount of US Swing Loans which are
then outstanding and the amount of the Refinancing Loan required
to be made by each Lender to refinance such outstanding US Swing
Loans (the aggregate amount of such Refinancing Loan to be made
by each Lender shall equal such Lender's Percentage Share of such
outstanding US Swing Loans). Upon the giving of notices by US
Agent described above, each Lender shall promptly remit to US
Agent such Refinancing Loan in the manner described above in
Section 1.2, so long as (a) US Agent believed in good faith that
all conditions to making the subject US Swing Loan were satisfied
at the time such US Swing Loan was made, or (b) if the conditions
to such US Swing Loan were not satisfied, the satisfaction of
such conditions have been waived in a writing by Required Lenders
in accordance with the provisions of this Agreement
(collectively, the "Refinancing Conditions"). The proceeds of
the Refinancing Loans made pursuant to the preceding sentence
shall be paid to US Agent (and not to US Borrower) and applied to
the payment of principal of the outstanding US Swing Loans. If
and to the extent any Lender shall not so make its Refinancing
Loan, such Lender and US Borrower severally agree to pay to US
Agent (for delivery to US Swing Lender) within three days after
demand the amount of such Refinancing Loan together with interest
thereon, for each day from the date such Refinancing Loan was
required to be made until the date such amount is paid to US
Agent, with interest at (1) the Federal Funds Rate, if such
Lender is making such payment; provided that US Agent gave notice
of the terms of the Borrowing Notice to such Lender in accordance
with the terms of this Section 1.2, and (2) the interest rate
applicable at the time to the other Refinancing Loans, if US
Borrower is making such repayment. If neither such Lender nor US
Borrower pays to US Agent (for delivery to US Swing Lender) such
amount within such three-day period, US Swing Lender shall in
addition to such amount be entitled to recover from such Lender
and from US Borrower, on demand, interest thereon at the Default
Rate for US Base Rate Loans, calculated from the date such
Refinancing Loan was required to be made. Each Lender's
obligation to make Refinancing Loans pursuant to this Section
shall be absolute and unconditional and shall not be affected by
any circumstances, including, without limitation, (1) any setoff,
counterclaim, recoupment, defense or other right which such
Lender may have against US Agent, US Borrower or anyone else for
any reason whatsoever; (2) the occurrence or continuance of an
Event of Default or Default; (3) any adverse change in the
condition (financial or otherwise) of US Borrower; (4) any breach
of this Agreement by US Borrower, US Agent or any Lender, except
with respect to the Refinancing Conditions; or (5) any other
circumstance, happening or event whatsoever, whether or not
similar to any of the foregoing; provided, that in no event shall
a Lender be obligated to make a Refinancing Loan pursuant to this
Section if, after giving effect thereto, the outstanding
principal balance of such Lender's US Loans would exceed its
Percentage Share of the US Maximum Credit Amount. If any Lender
is prohibited by Law from making a Loan to refinance a US Swing
Loan, such Lender shall purchase from US Swing Lender a
participation in such US Swing Loan in the amount of such
Lender's refinancing obligation hereunder.
ARTICLE II - Letters of Credit
Section 2.1. Letters of Credit. Subject to the terms and
conditions hereof, US Borrower may during the US Facility
Commitment Period request US LC Issuer to issue one or more
Letters of Credit, provided that, after taking such Letter of
Credit into account:
(a) the Tranche A Facility Usage does not exceed the
Tranche A Maximum Credit Amount at such time;
(b) the aggregate amount of US LC Obligations arising from
Letters of Credit issued under this Agreement at such time does
not exceed the US LC Sublimit;
(c) the expiration date of such Letter of Credit is prior
to the end of the US Facility Commitment Period;
(d) such Letter of Credit is to be used for general
corporate purposes of US Borrower;
(e) such Letter of Credit is not directly or indirectly
used to assure payment of or otherwise support any Indebtedness
of any Person other than Indebtedness of any Restricted Person
permitted by this Agreement;
(f) the issuance of such Letter of Credit will be in
compliance with all applicable governmental restrictions,
policies, and guidelines and will not subject US LC Issuer to any
cost which is not reimbursable under Article III;
(g) the form and terms of such Letter of Credit are
acceptable to US LC Issuer in its reasonable discretion; and
(h) all other conditions in this Agreement to the issuance
of such Letter of Credit have been satisfied.
US LC Issuer will honor any such request if the foregoing
conditions (a) through (h) (in the following Section 2.2 called
the "LC Conditions") have been met as of the date of issuance of
such Letter of Credit. US LC Issuer may choose to honor any such
request for any other Letter of Credit but has no obligation to
do so and may refuse to issue any other requested Letter of
Credit for any reason which US LC Issuer in its sole discretion
deems relevant. Upon the execution and delivery of this
Agreement by each of the parties hereto, any letters of credit
issued under the Existing Agreement and outstanding as of the
date hereof shall be deemed Letters of Credit issued hereunder as
of the date hereof and shall be subject to the terms and
conditions hereof, including without limitation US Borrower's
reimbursement obligations under Section 2.3 and Lenders'
participation obligations under Section 2.3.
Section 2.2. Requesting Letters of Credit. US Borrower
must make written application for any Letter of Credit at least
three Business Days before the date on which US Borrower desires
for US LC Issuer to issue such Letter of Credit. By making any
such written application US Borrower shall be deemed to have
represented and warranted that the LC Conditions described in
Section 2.1 will be met as of the date of issuance of such Letter
of Credit. Each such written application for a Letter of Credit
must be made in writing in the form and substance of Exhibit G,
the terms and provisions of which are hereby incorporated herein
by reference (or in such other form as may mutually be agreed
upon by US LC Issuer and US Borrower). Two Business Days after
the LC Conditions for a Letter of Credit have been met as
described in Section 2.1 (or if US LC Issuer otherwise desires to
issue such Letter of Credit), US LC Issuer will issue such Letter
of Credit at US LC Issuer's office in Dallas, Texas. If any
provisions of any LC Application conflict with any provisions of
this Agreement, the provisions of this Agreement shall govern and
control.
Section 2.3. Reimbursement and Participations.
(a) Reimbursement by US Borrower. If the beneficiary of
any Letter of Credit issued hereunder makes a draft or other
demand for payment thereunder then Tranche A Loans that are US
Base Rate Loans shall be made by Lenders to US Borrower in the
amount of such draft or demand notwithstanding the fact that one
or more conditions precedent to the making of such US Base Rate
Loans may not have been satisfied. Such US Base Rate Loans shall
be made concurrently with US LC Issuer's payment of such draft or
demand without any request therefor by US Borrower and shall be
immediately used by US LC Issuer to repay the amount of the
resulting Matured US LC Obligation.
(b) Participation by Lenders. US LC Issuer irrevocably
agrees to grant and hereby grants to each Lender, and to induce
US LC Issuer to issue Letters of Credit hereunder, each Lender
irrevocably agrees to accept and purchase and hereby accepts and
purchases from US LC Issuer, on the terms and conditions
hereinafter stated and for such Lender's own account and risk, an
undivided interest equal to such Lender's Percentage Share of US
LC Issuer's obligations and rights under each Letter of Credit
issued hereunder and the amount of each Matured US LC Obligation
paid by US LC Issuer thereunder. Each Lender unconditionally and
irrevocably agrees with US LC Issuer that, if a Matured US LC
Obligation is paid under any Letter of Credit issued hereunder
for which US LC Issuer is not reimbursed in full, whether
pursuant to Section 2.3(a) above or otherwise, such Lender shall
(in all circumstances and without set-off or counterclaim) pay to
US LC Issuer on demand, in immediately available funds at US LC
Issuer's address for notices hereunder, such Lender's Percentage
Share of such Matured US LC Obligation (or any portion thereof
which has not been reimbursed by US Borrower). Each Lender's
obligation to pay US LC Issuer pursuant to the terms of this
subsection is irrevocable and unconditional. If any amount
required to be paid by any Lender to US LC Issuer pursuant to
this subsection is paid by such Lender to US LC Issuer within
three Business Days after the date such payment is due, US LC
Issuer shall in addition to such amount be entitled to recover
from such Lender, on demand, interest thereon calculated from
such due date at the Federal Funds Rate. If any amount required
to be paid by any Lender to US LC Issuer pursuant to this
subsection is not paid by such Lender to US LC Issuer within
three Business Days after the date such payment is due, US LC
Issuer shall in addition to such amount be entitled to recover
from such Lender, on demand, interest thereon calculated from
such due date at the Default Rate.
(c) Distributions to Participants. Whenever US LC Issuer
has in accordance with this section received from any Lender
payment of such Lender's Percentage Share of any Matured US LC
Obligation, if US LC Issuer thereafter receives any payment of
such Matured US LC Obligation or any payment of interest thereon
(whether directly from US Borrower or by application of LC
Collateral or otherwise, and excluding only interest for any
period prior to US LC Issuer's demand that such Lender make such
payment of its Percentage Share), US LC Issuer will distribute to
such Lender its Percentage Share of the amounts so received by US
LC Issuer; provided, however, that if any such payment received
by US LC Issuer must thereafter be returned by US LC Issuer, such
Lender shall return to US LC Issuer the portion thereof which US
LC Issuer has previously distributed to it.
(d) Calculations. A written advice setting forth in
reasonable detail the amounts owing under this section, submitted
by US LC Issuer to US Borrower or any Lender from time to time,
shall be conclusive, absent manifest error, as to the amounts
thereof.
Section 2.4. Letter of Credit Fees. In consideration of
US LC Issuer's issuance of any Letter of Credit, US Borrower
agrees to pay (a) to US LC Issuer for its own account, a letter
of credit fronting fee at a rate equal to 12.5 Basis Points per
annum multiplied by the face amount of such Letter of Credit,
payable on the date of issuance, and (b) to US Agent, for the
account of all Lenders in accordance with their respective
Percentage Shares, a letter of credit issuance fee calculated by
applying the Applicable Margin to the face amount of all Letters
of Credit outstanding on each day, payable in arrears on the last
day of each Fiscal Quarter.
Section 2.5. No Duty to Inquire.
(a) Drafts and Demands. US LC Issuer is authorized and
instructed to accept and pay drafts and demands for payment under
any Letter of Credit without requiring, and without
responsibility for, any determination as to the existence of any
event giving rise to said draft, either at the time of acceptance
or payment or thereafter. US LC Issuer is under no duty to
determine the proper identity of anyone presenting such a draft
or making such a demand (whether by tested telex or otherwise) as
the officer, representative or agent of any beneficiary under any
Letter of Credit, and payment by US LC Issuer to any such
beneficiary when requested by any such purported officer,
representative or agent is hereby authorized and approved. US
Borrower releases each Lender Party from, and agrees to hold each
Lender Party harmless and indemnified against, any liability or
claim in connection with or arising out of the subject matter of
this section, which indemnity shall apply whether or not any such
liability or claim is in any way or to any extent caused, in
whole or in part, by any negligent act or omission of any kind by
any Lender Party, provided only that no Lender Party shall be
entitled to indemnification for that portion, if any, of any
liability or claim which is proximately caused by its own
individual gross negligence or willful misconduct, as determined
in a final judgment.
(b) Extension of Maturity. If the maturity of any Letter
of Credit is extended by its terms or by Law or governmental
action, if any extension of the maturity or time for presentation
of drafts or any other modification of the terms of any Letter of
Credit is made at the request of any Restricted Person, or if the
amount of any Letter of Credit is increased at the request of any
Restricted Person, this Agreement shall be binding upon all
Restricted Persons with respect to such Letter of Credit as so
extended, increased or otherwise modified, with respect to drafts
and property covered thereby, and with respect to any action
taken by US LC Issuer, US LC Issuer's correspondents, or any
Lender Party in accordance with such extension, increase or other
modification.
(c) Transferees of Letters of Credit. If any Letter of
Credit provides that it is transferable, US LC Issuer shall have
no duty to determine the proper identity of anyone appearing as
transferee of such Letter of Credit, nor shall US LC Issuer be
charged with responsibility of any nature or character for the
validity or correctness of any transfer or successive transfers,
and payment by US LC Issuer to any purported transferee or
transferees as determined by US LC Issuer is hereby authorized
and approved, and US Borrower releases each Lender Party from,
and agrees to hold each Lender Party harmless and indemnified
against, any liability or claim in connection with or arising out
of the foregoing, which indemnity shall apply whether or not any
such liability or claim is in any way or to any extent caused, in
whole or in part, by any negligent act or omission of any kind by
any Lender Party, provided only that no Lender Party shall be
entitled to indemnification for that portion, if any, of any
liability or claim which is proximately caused by its own
individual gross negligence or willful misconduct, as determined
in a final judgment.
Section 2.6. LC Collateral.
(a) US LC Obligations in Excess of US Maximum Credit
Amount. If, after the making of all mandatory prepayments
required under Section 1.6(b), the US LC Obligations outstanding
under the US Agreement will exceed the Tranche A Maximum Credit
Amount, then in addition to prepayment of the entire principal
balance of the US Loans US Borrower will immediately pay to US LC
Issuer an amount equal to such excess. US LC Issuer will hold
such amount as security for the remaining US LC Obligations
outstanding under the US Agreement (all such amounts held as
security for US LC Obligations being herein collectively called
"LC Collateral") and the other US Obligations, and such
collateral may be applied from time to time to any Matured US LC
Obligations or other US Obligations which are due and payable.
Neither this subsection nor the following subsection shall,
however, limit or impair any rights which US LC Issuer may have
under any other document or agreement relating to any Letter of
Credit, LC Collateral or US LC Obligation, including any LC
Application, or any rights which any Lender Party may have to
otherwise apply any payments by US Borrower and any LC Collateral
under Section 3.1.
(b) Acceleration of US LC Obligations. If the US
Obligations or any part thereof become immediately due and
payable pursuant to Section 8.1 then, unless Required Lenders
otherwise specifically elect to the contrary (which election may
thereafter be retracted by Required Lenders at any time), all US
LC Obligations shall become immediately due and payable without
regard to whether or not actual drawings or payments on the
Letters of Credit have occurred, and US Borrower shall be
obligated to pay to US LC Issuer immediately an amount equal to
the aggregate US LC Obligations which are then outstanding.
(c) Investment of LC Collateral. Pending application
thereof, all LC Collateral shall be invested by US LC Issuer in
such Investments as US LC Issuer may choose in its sole
discretion. All interest on (and other proceeds of) such
Investments shall be reinvested or applied to Matured US LC
Obligations or other US Obligations which are due and payable.
When all US Obligations have been satisfied in full, including
all US LC Obligations, all Letters of Credit have expired or been
terminated, and all of US Borrower's reimbursement obligations in
connection therewith have been satisfied in full, US LC Issuer
shall release any remaining LC Collateral. US Borrower hereby
assigns and grants to US LC Issuer a continuing security interest
in all LC Collateral paid by it to US LC Issuer, all Investments
purchased with such LC Collateral, and all proceeds thereof to
secure its Matured US LC Obligations and the other US Obligations
hereunder, each US Note, and the other US Loan Documents. US
Borrower further agrees that US LC Issuer shall have all of the
rights and remedies of a secured party under the Uniform
Commercial Code as adopted in the State of Texas with respect to
such security interest and that an Event of Default under this
Agreement shall constitute a default for purposes of such
security interest. When US Borrower is required to provide LC
Collateral for any reason and fails to do so on the day when
required, US LC Issuer may without notice to US Borrower or any
other Restricted Person provide such LC Collateral (whether by
transfers from other accounts maintained with US LC Issuer, or
otherwise) using any available funds of US Borrower or any other
Person also liable to make such payments.
ARTICLE III - Payments to Lenders
Section 3.1. General Procedures. US Borrower will make
each payment which it owes under the US Loan Documents to US
Agent for the account of the Lender Party to whom such payment is
owed, in lawful money of the United States of America, without
set-off, deduction or counterclaim, and in immediately available
funds. Each such payment must be received by US Agent not later
than 11:00 a.m., Dallas, Texas time, on the date such payment
becomes due and payable. Any payment received by US Agent after
such time will be deemed to have been made on the next following
Business Day. Should any such payment become due and payable on
a day other than a Business Day, the maturity of such payment
shall be extended to the next succeeding Business Day, and, in
the case of a payment of principal or past due interest, interest
shall accrue and be payable thereon for the period of such
extension as provided in the US Loan Document under which such
payment is due. Each payment under a US Loan Document shall be
due and payable at the place provided therein and, if no specific
place of payment is provided, shall be due and payable at the
place of payment of US Agent's US Note. When US Agent collects
or receives money on account of the US Obligations, US Agent
shall distribute all money so collected or received by 2:00 p.m.
Dallas, Texas time on the Business Day received, if received by
11:00 a.m. Dallas, Texas time, otherwise on the day of deemed
receipt, and each Lender Party shall apply all such money so
distributed, as follows:
(a) first, for the payment of all US Obligations which are
then due (and if such money is insufficient to pay all such US
Obligations, first to any reimbursements due US Agent under
Section 6.9 or 10.4, then to any reimbursement due any other
Lender Party under Section 10.4, and then to the partial payment
of all other US Obligations then due in proportion to the amounts
thereof, or as Lender Parties shall otherwise agree);
(b) then for the prepayment of amounts owing under the US
Loan Documents (other than principal on the US Notes) if so
specified by US Borrower;
(c) then for the prepayment of principal on the US Notes,
together with accrued and unpaid interest on the principal so
prepaid; and
(d) last, for the payment or prepayment of any other US
Obligations.
All payments applied to principal or interest on any US Note
shall be applied first to any interest then due and payable, then
to principal then due and payable, and last to any prepayment of
principal and interest in compliance with Sections 1.6 and 2.1.
All distributions of amounts described in any of subsections (b),
(c) or (d) above shall be made by US Agent pro rata to each
Lender Party then owed US Obligations described in such
subsection in proportion to all amounts owed to all Lender
Parties which are described in such subsection; provided that if
any Lender then owes payments to US LC Issuer for the purchase of
a participation under Section 2.3(b) or to US Agent under Section
9.9, any amounts otherwise distributable under this section to
such Lender shall be deemed to belong to US LC Issuer, or US
Agent, respectively, to the extent of such unpaid payments, and
US Agent shall apply such amounts to make such unpaid payments
rather than distribute such amounts to such Lender.
Section 3.2. Increased Cost and Reduced Return.
(a) If, after the date hereof, the adoption of any
applicable Law, rule, or regulation, or any change in any
applicable Law, rule, or regulation, or any change in the
interpretation or administration thereof by any Governmental
Authority, central bank, or comparable agency charged with the
interpretation or administration thereof, or compliance by any
Lender Party (or its Applicable Lending Office) with any request
or directive (whether or not having the force of Law) of any such
Governmental Authority, central bank, or comparable agency:
(i) shall subject such Lender Party (or its Applicable
Lending Office) to any tax, duty, or other charge with
respect to any US Dollar Eurodollar Loans or Competitive Bid
Loans, or its obligation to make US Dollar Eurodollar Loans,
or change the basis of taxation of any amounts payable to
such Lender Party (or its Applicable Lending Office) under
this Agreement or its Note in respect of any US Dollar
Eurodollar Loans or Competitive Bid Loans (other than taxes
(including franchise taxes) imposed on the overall net
income of such Lender Party by the jurisdiction in which
such Lender Party has its principal office or such
Applicable Lending Office);
(ii) shall impose, modify, or deem applicable any
reserve, special deposit, assessment, or similar requirement
(other than the Reserve Requirement utilized in the
determination of the Adjusted US Dollar Eurodollar Rate)
relating to any extensions of credit or other assets of, or
any deposits with or other liabilities or commitments of,
such Lender Party (or its Applicable Lending Office),
including the commitment of such Lender Party hereunder; or
(iii) shall impose on such Lender Party (or its
Applicable Lending Office) or the London interbank market
any other condition affecting this Agreement or its US Notes
or any of such extensions of credit or liabilities or
commitments;
and the result of any of the foregoing is to increase the cost to
such Lender Party (or its Applicable Lending Office) of making,
converting into, continuing, or maintaining any US Dollar
Eurodollar Loans or Competitive Bid Loans or to reduce any sum
received or receivable by such Lender Party (or its Applicable
Lending Office) under this Agreement or its US Notes with respect
to any US Dollar Eurodollar Loans or Competitive Bid Loans, then
US Borrower shall pay to such Lender Party on demand such amount
or amounts as will compensate such Lender Party for such
increased cost or reduction. If any Lender Party requests
compensation by US Borrower under this Section 3.2(a), US
Borrower may, by notice to such Lender Party (with a copy to US
Agent), suspend the obligation of such Lender Party to make or
continue US Loans of the Type with respect to which such
compensation is requested, or to convert US Loans of any other
Type into US Loans of such Type, until the event or condition
giving rise to such request ceases to be in effect (in which case
the provisions of Section 3.5 shall be applicable); provided that
such suspension shall not affect the right of such Lender Party
to receive the compensation so requested.
(b) If, after the date hereof, any Lender Party shall have
determined that the adoption of any applicable Law, rule, or
regulation regarding capital adequacy or any change therein or in
the interpretation or administration thereof by any Governmental
Authority, central bank, or comparable agency charged with the
interpretation or administration thereof, or any request or
directive regarding capital adequacy (whether or not having the
force of Law) of any such Governmental Authority, central bank,
or comparable agency, has or would have the effect of reducing
the rate of return on the capital of such Lender Party or any
corporation controlling such Lender Party as a consequence the
obligations of such Lender Party hereunder to a level below that
which such Lender Party or such corporation could have achieved
but for such adoption, change, request, or directive (taking into
consideration its policies with respect to capital adequacy),
then from time to time upon demand US Borrower shall pay such
Lender Party such additional amount or amounts as will compensate
such Lender Party for such reduction, but only to the extent that
such Lender Party has not been compensated therefor by any
increase in the Adjusted US Dollar Eurodollar Rate; provided that
if such Lender Party fails to give notice to US Borrower of any
additional costs within ninety (90) days after it has actual
knowledge thereof, such Lender Party shall not be entitled to
compensation for such additional costs incurred more than ninety
(90) days prior to the date on which notice is given by such
Lender Party.
(c) US LC Issuer and each Lender Party shall promptly
notify US Borrower and US Agent of any event of which it has
knowledge, occurring after the date hereof, which will entitle US
LC Issuer or such Lender Party to compensation pursuant to this
Section and will designate a different Applicable Lending Office
if such designation will avoid the need for, or reduce the amount
of, such compensation and will not, in the judgment of such
Lender Party, be otherwise disadvantageous to it. US LC Issuer
or any Lender Party claiming compensation under this Section
shall furnish to US Borrower and US Agent a statement setting
forth the additional amount or amounts to be paid to it hereunder
which shall be conclusive in the absence of manifest error. In
determining such amount, US LC Issuer or such Lender Party shall
act in good faith and may use any reasonable averaging and
attribution methods.
Section 3.3. Limitation on Types of US Loans. If on or
prior to the first day of any Eurodollar Interest Period for any
US Dollar Eurodollar Loan:
(a) US Agent determines (which determination shall be
conclusive) that by reason of circumstances affecting the
relevant market, adequate and reasonable means do not exist for
ascertaining the US Dollar Eurodollar Rate for such Eurodollar
Interest Period; or
(b) the Required Lenders determine (which determination
shall be conclusive) and notify US Agent that the Adjusted US
Dollar Eurodollar Rate will not adequately and fairly reflect the
cost to the Lenders of funding US Dollar Eurodollar Loans or for
such Eurodollar Interest Period;
then US Agent shall give US Borrower prompt notice thereof
specifying the relevant amounts or periods, and so long as such
condition remains in effect, the Lender Parties shall be under no
obligation to make additional US Dollar Eurodollar Loans,
continue US Dollar Eurodollar Loans or convert US Base Rate Loans
into US Dollar Eurodollar Loans, and US Borrower shall, on the
last day(s) of the then current Eurodollar Interest Period(s) for
the outstanding US Dollar Eurodollar Loans, either prepay such US
Loans or convert such US Loans into US Base Rate Loans in
accordance with the terms of this Agreement.
Section 3.4. Illegality. Notwithstanding any other
provision of this Agreement, in the event that it becomes
unlawful for any Lender Party or its Applicable Lending Office to
make, maintain, or fund US Dollar Eurodollar Loans hereunder,
then such Lender Party shall promptly notify US Borrower thereof
and such Lender Party's obligation to make or continue US Dollar
Eurodollar Loans and to convert US Base Rate Loans into US Dollar
Eurodollar Loans shall be suspended until such time as such
Lender Party may again make, maintain, and fund US Dollar
Eurodollar Loans (in which case the provisions of Section 3.5
shall be applicable).
Section 3.5. Treatment of Affected US Loans. If the
obligation of any Lender Party to make a particular Type of Loan
or to continue, or to convert US Loans of any other Type into, US
Loans of a particular Type shall be suspended pursuant to
Sections 3.2, 3.3 or 3.4 hereof (US Loans of such Type being
herein called "Affected Loans" and such Type being herein called
the "Affected Type"), such Lender Party's Affected Loans shall be
automatically converted into US Base Rate Loans on the last
day(s) of the then current Interest Period(s) for Affected Loans
(or, in the case of a Conversion required by Section 3.4 hereof,
on such earlier date as such Lender Party may specify to US
Borrower with a copy to US Agent) and, unless and until such
Lender Party gives notice as provided below that the
circumstances specified in Sections 3.2, 3.3 or 3.4 hereof that
gave rise to such Conversion no longer exist:
(a) to the extent that such Lender Party's Affected Loans
have been so converted, all payments and prepayments of principal
that would otherwise be applied to such Lender Party's Affected
Loans shall be applied instead to its US Base Rate Loans; and
(b) all US Loans that would otherwise be made or continued
by such Lender Party as US Loans of the Affected Type shall be
made or continued instead as US Base Rate Loans, and all US Loans
of such Lender Party that would otherwise be converted into US
Loans of the Affected Type shall be converted instead into (or
shall remain as) US Base Rate Loans.
If such Lender Party gives notice to US Borrower (with a copy to
US Agent) that the circumstances specified in Section 3.2, 3.3 or
3.4 hereof that gave rise to the Conversion of such Lender
Party's Affected Loans pursuant to this Section no longer exist
(which such Lender Party agrees to do promptly upon such
circumstances ceasing to exist) at a time when US Loans of the
Affected Type made by other Lender Parties are outstanding, such
Lender Party's US Base Rate Loans shall be automatically
converted, on the first day(s) of the next succeeding Interest
Period(s) for such outstanding US Loans of the Affected Type, to
the extent necessary so that, after giving effect thereto, all US
Loans held by the Lender Parties holding US Loans of the Affected
Type and by such Lender Party are held pro rata (as to principal
amounts, Types, and Interest Periods) in accordance with their
Percentage Shares of the US Maximum Credit Amount.
Section 3.6. Compensation. Upon the request of any Lender
Party, US Borrower shall pay to such Lender Party such amount or
amounts as shall be sufficient (in the reasonable opinion of such
Lender Party) to compensate it for any loss, cost, or expense
(including loss of anticipated profits) incurred by it as a
result of:
(a) any payment, prepayment, or Conversion of a US Dollar
Eurodollar Loan for any reason (including, without limitation,
the acceleration of the US Loans pursuant to Section 8.1) on a
date other than the last day of the Interest Period for such US
Loan; or
(b) any failure by US Borrower for any reason (including,
without limitation, the failure of any condition precedent
specified in Article IV to be satisfied) to borrow, convert,
continue, or prepay a US Dollar Eurodollar Loan on the date for
such borrowing, Conversion, Continuation, or prepayment specified
in the relevant notice of borrowing, prepayment, Continuation, or
Conversion under this Agreement.
Section 3.7. Change of Applicable Lending Office. Each
Lender Party agrees that, upon the occurrence of any event giving
rise to the operation of Sections 3.2 through 3.5 with respect to
such Lender Party, it will, if requested by US Borrower, use
reasonable efforts (subject to overall policy considerations of
such Lender Party) to designate another Applicable Lending
Office, provided that such designation is made on such terms that
such Lender Party and its Applicable Lending Office suffer no
economic, legal or regulatory disadvantage, with the object of
avoiding the consequence of the event giving rise to the
operation of any such section. Nothing in this section shall
affect or postpone any of the obligations of US Borrower or the
rights of any Lender Party provided in Sections 3.2 through 3.5.
Section 3.8. Replacement of Lenders. If any Lender Party
seeks reimbursement for increased costs under Sections 3.2
through 3.5, or if a US Borrower is required to increase any such
payment under Section 3.9, then within ninety days thereafter --
provided no Event of Default then exists -- US Borrower shall
have the right (unless such Lender Party withdraws its request
for additional compensation) to replace such Lender Party by
requiring such Lender Party to assign its US Loans, US Notes, US
LC Obligations, Canadian Advances, Canadian Notes, Canadian LC
Obligations and its commitments hereunder and under the Canadian
Agreement to an Eligible Transferee reasonably acceptable to all
Borrowers, provided that: (a) all Obligations of Borrowers owing
to such Lender Party being replaced (including such increased
costs, but excluding principal and accrued interest on the US
Notes and the Canadian Notes being assigned) shall be paid in
full to such Lender Party concurrently with such assignment, and
(b) the replacement Eligible Transferee shall purchase the
foregoing by paying to such Lender Party a price equal to the
principal amount thereof plus accrued and unpaid interest
thereon. In connection with any such assignment US Borrower, US
Agent, such Lender Party and the replacement Eligible Transferee
shall otherwise comply with Section 10.5. Notwithstanding the
foregoing rights of US Borrower under this section, however, US
Borrower may not replace any Lender Party which seeks
reimbursement for increased costs under Section 3.2 through 3.5
unless US Borrower is at the same time replacing all Lender
Parties which are then seeking such compensation. In connection
with any such replacement of a Lender Party, US Borrower shall
pay all costs that would have been due to such Lender Party
pursuant to Section 3.6 if such Lender Party's US Loans had been
prepaid at the time of such replacement.
Section 3.9. Taxes. (a) Any and all payments by US
Borrower to or for the account of any Lender Party, US Agent or
US LC Issuer hereunder or under any other US Loan Document shall
be made free and clear of and without deduction for any and all
present or future taxes, duties, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect
thereto, excluding, in the case of each Lender Party, taxes
imposed on its income, and franchise taxes imposed on it, by the
jurisdiction under the Laws of which such Lender Party (or its
Applicable Lending Office) is organized or is a resident for tax
purposes or any political subdivision thereof (all such non-
excluded taxes, duties, levies, imposts, deductions, charges,
withholdings, and liabilities being hereinafter in this section
3.9 referred to as "Taxes"). If US Borrower shall be required by
Law to deduct any Taxes from or in respect of any sum payable
under this Agreement or any other US Loan Document to any Lender
Party, (i) the sum payable shall be increased as necessary so
that after making all required deductions (including deductions
applicable to additional sums payable under this section) such
Lender Party receives an amount equal to the sum it would have
received had no such deductions been made, (ii) US Borrower shall
make such deductions, and (iii) US Borrower shall pay the full
amount deducted to the relevant taxation authority or other
authority in accordance with applicable Law.
(b) In addition, US Borrower agrees to pay any and all
present or future stamp or documentary taxes and any other excise
or property taxes or charges or similar levies which arise from
any payment made under this Agreement or any other US Loan
Document or from the execution or delivery of, or otherwise with
respect to, this Agreement or any other US Loan Document
(hereinafter in this Section 3.9 referred to as "Other Taxes").
(c) US Borrower agrees to indemnify each Lender Party, US
Agent and US LC Issuer for the full amount of Taxes and Other
Taxes (including, without limitation, any Taxes or Other Taxes
imposed or asserted by any jurisdiction on amounts payable under
this section) paid by such Lender Party or US Agent (as the case
may be) and any liability (including penalties, interest, and
expenses) arising therefrom or with respect thereto.
(d) Each Lender Party organized under the Laws of a
jurisdiction outside the United States, on or prior to the date
of its execution and delivery of this Agreement in the case of
each Lender Party listed on the signature pages hereof and on or
prior to the date on which it becomes a Lender Party in the case
of each other Lender Party, and from time to time thereafter if
requested in writing by US Borrower or US Agent (but only so long
as such Lender Party remains lawfully able to do so), shall
provide US Borrower and US Agent with a properly executed
(i) Internal Revenue Service Form 1001 or 4224, as appropriate,
or any successor form prescribed by the Internal Revenue Service,
certifying that such Lender Party is entitled to benefits under
an income tax treaty to which the United States is a party which
reduces the rate of withholding tax on payments of interest or
certifying that the income receivable pursuant to this Agreement
is effectively connected with the conduct of a trade or business
in the United States, (ii0 Internal Revenue Service Form W-8 or W-
9, as appropriate, or any successor form prescribed by the
Internal Revenue Service, and (iii) any other form or certificate
required by any taxing authority (including any certificate
required by Sections 871(h) and 881(c) of the Internal Revenue
Code), certifying that such Lender Party is entitled to an
exemption from or a reduced rate of tax on payments pursuant to
this Agreement or any of the other US Loan Documents.
(e) For any period with respect to which a Lender Party has
failed to provide US Borrower and US Agent with the appropriate
form pursuant to Section 3.9(d) (unless such failure is due to a
change in treaty, Law, or regulation occurring subsequent to the
date on which a form originally was required to be provided),
such Lender Party shall not be entitled to indemnification under
Sections 3.9(a), 3.9(b) or 3.9(c) with respect to Taxes imposed
by the United States; provided, however, that should a Lender
Party, which is otherwise exempt from or subject to a reduced
rate of withholding tax, become subject to Taxes because of its
failure to deliver a form required hereunder, US Borrower shall
take such steps as such Lender Party shall reasonably request to
assist such Lender Party to recover such Taxes. Further, US
Borrower shall not be required to indemnify such Lender Party for
any withholding taxes which US Borrower is required to withhold
and remit in respect of any principal, interest or other amount
paid or payable by US Borrower to or for account of any Lender
Party hereunder or under any other US Loan Document.
(f) If US Borrower is required to pay additional amounts to
or for the account of any Lender Party pursuant to this Section,
then such Lender Party will agree to use reasonable efforts to
change the jurisdiction of its Applicable Lending Office so as to
eliminate or reduce any such additional payment which may
thereafter accrue if such change, in the judgment of such Lender
Party, is not otherwise disadvantageous to such Lender Party and
in the event Lender Party is reimbursed for an amount paid by US
Borrower pursuant to this Section, it shall promptly return such
amount to US Borrower.
(g) Within thirty (30) days after the date of any payment
of Taxes, US Borrower shall furnish to US Agent the original or a
certified copy of a receipt evidencing such payment.
(h) Without prejudice to the survival of any other
agreement of US Borrower hereunder, the agreements and
obligations of US Borrower contained in this section shall
survive the termination of the US Facility Commitment Period and
the payment in full of the US Notes.
Section 3.10. Currency Conversion and Currency Indemnity.
(a) Restricted Persons shall make payment relative to any
US Obligation in the currency (the "Agreed Currency") in which
the US Obligation was incurred. If any payment is received on
account of any US Obligation in any currency (the "Other
Currency") other than the Agreed Currency (whether voluntarily or
pursuant to an order or judgment or the enforcement thereof or
the realization of any security or the liquidation of such
Restricted Person or otherwise howsoever), such payment shall
constitute a discharge of the liability of a Restricted Person
hereunder and under the other US Loan Documents in respect of
such US Obligation only to the extent of the amount of the Agreed
Currency which the relevant Lender Parties are able to purchase
with the amount of the Other Currency received by it on the
Business Day next following such receipt in accordance with its
normal procedures and after deducting any premium and costs of
exchange.
(b) If, for the purpose of obtaining or enforcing judgment
in any court in any jurisdiction, it becomes necessary to convert
into a particular currency (the "Judgment Currency") any amount
due in the Agreed Currency then the conversion shall be made on
the basis of the rate of exchange prevailing on the next Business
Day following the date such judgment is given and in any event
each Restricted Person shall be obligated to pay the Lender
Parties any deficiency in accordance with Section 3.10(c). For
the foregoing purposes "rate of exchange" means the rate at which
the relevant Lender Parties, as applicable, in accordance with
their normal banking procedures are able on the relevant date to
purchase the Agreed Currency with the Judgment Currency after
deducting any premium and costs of exchange.
(c) If (i) any Lender Party receives any payment or
payments on account of the liability of a Restricted Person
hereunder pursuant to any judgment or order in any Other
Currency, and (ii) the amount of the Agreed Currency which the
relevant Lender Party is able to purchase on the Business Day
next following such receipt with the proceeds of such payment or
payments in accordance with its normal procedures and after
deducting any premiums and costs of exchange is less than the
amount of the Agreed Currency due in respect of such US
Obligations immediately prior to such judgment or order, then US
Borrower on demand shall, and US Borrower hereby agrees to,
indemnify and save such Lender Party harmless from and against
any loss, cost or expense arising out of or in connection with
such deficiency. The agreement of indemnity provided for in this
Section 3.10(c) shall constitute an obligation separate and
independent from all other obligations contained in this
Agreement, shall give rise to a separate and independent cause of
action, shall apply irrespective of any indulgence granted by the
Lender Parties or any of them from time to time, and shall
continue in full force and effect notwithstanding any judgment or
order for a liquidated sum in respect of an amount due hereunder
or under any judgment or order.
ARTICLE IV - Conditions Precedent to Lending
Section 4.1. Documents to be Delivered. No Lender has any
obligation to make its first US Loan, and US LC Issuer has no
obligation to issue the first Letter of Credit, unless US Agent
shall have received all of the following, at US Agent's office in
Dallas, Texas, duly executed and delivered and in form, substance
and date satisfactory to US Agent:
(a) This Agreement and any other documents that Lenders are
to execute in connection herewith.
(b) Each US Note.
(c) Certain certificates of US Borrower including:
(i) An "Omnibus Certificate" of the Secretary or
Assistant Secretary and of the Chairman of the Board,
President, or Senior Vice President - Finance of US
Borrower, which shall contain the names and signatures of
the officers of US Borrower authorized to execute US Loan
Documents and which shall certify to the truth, correctness
and completeness of the following exhibits attached thereto:
(1) a copy of resolutions duly adopted by the Board of
Directors of US Borrower and in full force and effect at the
time this Agreement is entered into, authorizing the
execution of this Agreement and the other US Loan Documents
delivered or to be delivered in connection herewith and the
consummation of the transactions contemplated herein and
therein, (2) a copy of the charter documents of US Borrower
and all amendments thereto, certified by the appropriate
official of the State of Delaware, and (3) a copy of the
bylaws of US Borrower; and
(ii) A "Compliance Certificate" of the Senior Vice
President - Finance and of the Treasurer or Vice President -
Accounting of US Borrower, of even date with such US Loan or
such Letter of Credit, in which such officers certify to the
satisfaction of the conditions set out in subsections (a),
(b), and (c) of Section 4.3.
(d) certificate (or certificates) of the due formation,
valid existence and good standing of US Borrower in the State of
Delaware, issued by the appropriate official of such State.
(e) A favorable opinion of McAfee & Taft, a professional
corporation, counsel for Restricted Persons, substantially in the
form set forth in Exhibit E and a favorable opinion of Thompson &
Knight L.L.P. covering the matters requested by US Agent.
(f) The Initial Financial Statements.
Section 4.2. Additional Conditions Precedent to First US
Loan or First Letter of Credit. No Lender has any obligation to
make its first US Loan, and US LC Issuer has no obligation to
issue the first Letter of Credit, unless on the date thereof:
(a) All commitment, facility, agency, legal and other fees
required to be paid or
reimbursed to any Lender pursuant to any US Loan Documents or
any commitment agreement heretofore entered into shall have been
paid.
(b) No event which would reasonably be expected to have a
Material Adverse Effect shall have occurred since June 30, 1999.
(c) US Borrower shall have certified to US Agent and
Lenders that the Initial Financial Statements fairly present US
Borrower's Consolidated financial position at the respective
dates thereof and the Consolidated results of US Borrower's
operations and US Borrower's Consolidated cash flows for the
respective periods thereof.
(d) US Borrower shall have certified to US Agent and
Lenders that no Restricted Person has any outstanding Liabilities
of any kind (including contingent obligations, tax assessments,
and unusual forward or long-term commitments) which are, in the
aggregate, material to US Borrower or material with respect to US
Borrower's Consolidated financial condition and not shown in the
Initial Financial Statements or disclosed in the Disclosure
Schedule.
(e) All legal matters relating to the US Loan Documents and
the consummation of the transactions contemplated thereby shall
be satisfactory to Thompson & Knight L.L.P., counsel to US Agent.
Section 4.3. Additional Conditions Precedent to all US
Loan and Letters of Credit. No Lender has any obligation to make
any US Loan (including its first), and US LC Issuer has no
obligation to issue any Letter of Credit (including its first),
unless the following conditions precedent have been satisfied:
(a) All representations and warranties made by any
Restricted Person in any US Loan Document shall be true on and as
of the date of such US Loan or the date of issuance of such
Letter of Credit (except to the extent that the facts upon which
such representations are based have been changed by the extension
of credit hereunder) as if such representations and warranties
had been made as of the date of such US Loan or the date of
issuance of such Letter of Credit.
(b) No Default shall exist at the date of such US Loan or
the date of issuance of such Letter of Credit.
(c) The making of such US Loan or the issuance of such
Letter of Credit shall not be prohibited by any Law and shall not
subject any Lender or any US LC Issuer to any material penalty
under or pursuant to any such Law.
ARTICLE V - Representations and Warranties
To confirm each Lender's understanding concerning Restricted
Persons and Restricted Persons' businesses, properties and
obligations and to induce each Lender to enter into this
Agreement and to extend credit hereunder, US Borrower represents
and warrants to each Lender that:
Section 5.1. No Default. No event has occurred and is
continuing which constitutes a Default.
Section 5.2. Organization and Good Standing. Each
Restricted Person is duly organized, validly existing and in good
standing under the Laws of its jurisdiction of organization,
having all powers required to carry on its business and enter
into and carry out the transactions contemplated hereby. Each
Restricted Person is duly qualified, in good standing, and
authorized to do business in all other jurisdictions within the
United States wherein the character of the properties owned or
held by it or the nature of the business transacted by it makes
such qualification necessary except where failure to so qualify
would not have a Material Adverse Effect. Each Restricted Person
has taken all actions and procedures customarily taken in order
to enter, for the purpose of conducting business or owning
property, each jurisdiction outside the United States wherein the
character of the properties owned or held by it or the nature of
the business transacted by it makes such actions and procedures
desirable except where failure to so qualify would not have a
Material Adverse Effect.
Section 5.3. Authorization. US Borrower and Canadian
Borrowers have duly taken all action necessary to authorize the
execution and delivery by it of the Loan Documents to which it is
a party and to authorize the consummation of the transactions
contemplated thereby and the performance of its obligations
thereunder. US Borrower is duly authorized to borrow funds
hereunder.
Section 5.4. No Conflicts or Consents. The execution and
delivery by the various Restricted Persons of the Loan Documents
to which each is a party, the performance by each of its
obligations under such Loan Documents, and the consummation of
the transactions contemplated by the various Loan Documents, do
not and will not (i) conflict with any provision of (A) any Law,
(B) the organizational documents of any Restricted Person, or (C)
any agreement, judgment, license, order or permit applicable to
or binding upon any Restricted Person unless such conflict would
not reasonably be expected to have a Material Adverse Effect, or
(ii) result in the acceleration of any Indebtedness owed by any
Restricted Person which would reasonably be expected to have a
Material Adverse Effect, or (iii) result in or require the
creation of any Lien upon any assets or properties of any
Restricted Person which would reasonably be expected to have a
Material Adverse Effect, except as expressly contemplated or
permitted in the Loan Documents. Except as expressly
contemplated in the Loan Documents no consent, approval,
authorization or order of, and no notice to or filing with, any
Tribunal or third party is required in connection with the
execution, delivery or performance by any Restricted Person of
any Loan Document or to consummate any transactions contemplated
by the Loan Documents, unless failure to obtain such consent
would not reasonably be expected to have a Material Adverse
Effect.
Section 5.5. Enforceable Obligations. This Agreement is,
and the other Loan Documents when duly executed and delivered
will be, legal, valid and binding obligations of each Restricted
Person which is a party hereto or thereto, enforceable in
accordance with their terms except as such enforcement may be
limited by bankruptcy, insolvency or similar Laws of general
application relating to the enforcement of creditors' rights.
Section 5.6. Full Disclosure. No certificate, statement
or other information delivered herewith or heretofore by any
Restricted Person to any Lender in connection with the
negotiation of this Agreement or in connection with any
transaction contemplated hereby contains any untrue statement of
a material fact or omits to state any material fact known to any
Restricted Person (other than industry-wide risks normally
associated with the types of businesses conducted by Restricted
Persons) necessary to make the statements contained herein or
therein not misleading as of the date made or deemed made. There
is no fact known to any Restricted Person (other than
industry-wide risks normally associated with the types of
businesses conducted by Restricted Persons) that has not been
disclosed to each Lender in writing which would reasonably be
expected to have a Material Adverse Effect.
Section 5.7. Litigation. Except as disclosed in the
Initial Financial Statements or in the Disclosure Schedule:
(a) there are no actions, suits or legal, equitable, arbitrative
or administrative proceedings pending, or to the knowledge of any
Restricted Person threatened, against any Restricted Person
before any Tribunal which would reasonably be expected to have a
Material Adverse Effect, and (b) there are no outstanding
judgments, injunctions, writs, rulings or orders by any such
Tribunal against any Restricted Person which would reasonably be
expected to have a Material Adverse Effect.
Section 5.8. ERISA Plans and Liabilities. All currently
existing ERISA Plans are listed in the Disclosure Schedule.
Except as disclosed in the Initial Financial Statements or in the
Disclosure Schedule, no Termination Event has occurred with
respect to any ERISA Plan and all ERISA Affiliates are in
compliance with ERISA in all material respects. No ERISA
Affiliate is required to contribute to, or has any other absolute
or contingent liability in respect of, any "multiemployer plan"
as defined in Section 4001 of ERISA. Except as set forth in the
Disclosure Schedule: (a) no "accumulated funding deficiency" (as
defined in Section 412(a) of the Internal Revenue Code) exists
with respect to any ERISA Plan, whether or not waived by the
Secretary of the Treasury or his delegate, and (b) the current
value of each ERISA Plan's benefits does not exceed the current
value of such ERISA Plan's assets available for the payment of
such benefits by more than US $50,000,000.
Section 5.9. Environmental and Other Laws. Except as
disclosed in the Disclosure Schedule: (a) Restricted Persons are
conducting their businesses in material compliance with all
applicable Laws, including Environmental Laws, and have and are
in compliance with all licenses and permits required under any
such Laws, unless failure to so comply would not reasonably be
expected to have a Material Adverse Effect; (b) none of the
operations or properties of any Restricted Person is the subject
of federal, state or local investigation evaluating whether any
material remedial action is needed to respond to a release of any
Hazardous Materials into the environment or to the improper
storage or disposal (including storage or disposal at offsite
locations) of any Hazardous Materials, unless such remedial
action would not reasonably be expected to have a Material
Adverse Effect; and (c) no Restricted Person (and to the best
knowledge of US Borrower, no other Person) has filed any notice
under any Law indicating that any Restricted Person is
responsible for the improper release into the environment, or the
improper storage or disposal, of any material amount of any
Hazardous Materials or that any Hazardous Materials have been
improperly released, or are improperly stored or disposed of,
upon any property of any Restricted Person, unless such failure
to so comply would not reasonably be expected to have a Material
Adverse Effect.
Section 5.10. Names and Places of Business. No Restricted
Person has, during the preceding five years, had, been known by,
or used any other trade or fictitious name, except as disclosed
in the Disclosure Schedule. Except as otherwise indicated in the
Disclosure Schedule, the chief executive office and principal
place of business of each Restricted Person are (and for the
preceding five years have been) located at the address of US
Borrower set out on the signature pages hereto. Except as
indicated in the Disclosure Schedule, no Restricted Person has
any other office or place of business.
Section 5.11. US Borrower's Subsidiaries. US Borrower does
not presently have any Subsidiary or own any stock in any other
corporation or association except those listed in the Disclosure
Schedule. Neither US Borrower nor any Restricted Person is a
member of any general or limited partnership, limited liability
company, joint venture formed under the laws of the United States
or any State thereof or association of any type whatsoever except
those listed in the Disclosure Schedule and associations, joint
ventures or other relationships (a) which are established
pursuant to a standard form operating agreement or similar
agreement or which are partnerships for purposes of federal
income taxation only, (b) which are not corporations or
partnerships (or subject to the Uniform Partnership Act) under
applicable state Law, and (c) whose businesses are limited to the
exploration, development and operation of oil, gas or mineral
properties, pipelines or gathering systems and interests owned
directly by the parties in such associations, joint ventures or
relationships. US Borrower owns, directly or indirectly, the
equity interest in each of its Subsidiaries which is indicated in
the Disclosure Schedule.
Section 5.12. Title to Properties; Licenses. Each
Restricted Person has good and defensible title to all of its
material properties and assets, free and clear of all Liens other
than Permitted Liens and of all impediments to the use of such
properties and assets in such Restricted Person's business except
to the extent failure to have such title would not have a
Material Adverse Effect. Each Restricted Person possesses all
licenses, permits, franchises, patents, copyrights, trademarks
and trade names, and other intellectual property (or otherwise
possesses the right to use such intellectual property without
violation of the rights of any other Person) which are necessary
to carry out its business as presently conducted and as presently
proposed to be conducted hereafter, and no Restricted Person is
in violation in any material respect of the terms under which it
possesses such intellectual property or the right to use such
intellectual property except to the extent failure to possess
such licenses, permits, franchises, and intellectual property
would not have a Material Adverse Effect.
Section 5.13. Government Regulation. Neither US Borrower
nor any other Restricted Person owing Obligations is subject to
regulation under the Public Utility Holding Company Act of 1935,
the Federal Power Act, the Investment Company Act of 1940 (as any
of the preceding acts have been amended) or any other Law which
regulates the incurring by such Person of Indebtedness, including
Laws relating to common contract carriers or the sale of
electricity, gas, steam, water or other public utility services.
Section 5.14. Insider. Except as disclosed on the
Disclosure Schedule, no Restricted Person, nor any Person having
"control" (as that term is defined in 12 U.S.C. 375b(9) or in
regulations promulgated pursuant thereto) of any Restricted
Person, is a "director" or an "executive officer" or "principal
shareholder" (as those terms are defined in 12 U.S.C. 375b(8)
or (9) or in regulations promulgated pursuant thereto) of any
Lender, of a bank holding company of which any Lender is a
Subsidiary or of any Subsidiary of a bank holding company of
which any Lender is a Subsidiary.
Section 5.15. Solvency. Upon giving effect to the issuance
of the US Notes, the execution of the US Loan Documents by US
Borrower and the consummation of the transactions contemplated
hereby, US Borrower will be solvent (as such term is used in
applicable bankruptcy, liquidation, receivership, insolvency or
similar Laws).
Section 5.16. Year 2000 Compliance. US Borrower has
(a) initiated a review and assessment of all areas within its and
each of its Subsidiaries' business and operations (including
those affected by suppliers and vendors) that could be adversely
affected by the "Year 2000 Problem" (that is, the risk that
computer applications used by US Borrower and its Subsidiaries
may be unable to recognize and perform properly date-sensitive
functions involving certain dates prior to and any date after
December 31, 1999), (b) developed a plan and timeline for
addressing the Year 2000 Problem on a timely basis, and (c) to
date, implemented that plan in accordance with that timetable.
US Borrower reasonably believes that all computer applications
(including those of its suppliers and vendors) that are material
to its or any of its Subsidiaries' business and operations will
on a timely basis be able to perform properly date-sensitive
functions for all dates before and after January 1, 2000 (that
is, be "Year 2000 compliant"), except to the extent that a
failure to do so would not reasonably be expected to have a
Material Adverse Effect.
ARTICLE VI - Affirmative Covenants of US Borrower
To conform with the terms and conditions under which each
Lender is willing to have credit outstanding to US Borrower, and
to induce each Lender to enter into this Agreement and extend
credit hereunder, US Borrower warrants, covenants and agrees that
until the full and final payment of the Obligations and the
termination of this Agreement, unless Required Lenders have
previously agreed otherwise:
Section 6.1. Payment and Performance. US Borrower will
pay all amounts due under the US Loan Documents in accordance
with the terms thereof and will observe, perform and comply with
every covenant, term and condition expressed or implied in the US
Loan Documents. US Borrower will cause each other Restricted
Person to observe, perform and comply with every such term,
covenant and condition in any Loan Document.
Section 6.2. Books, Financial Statements and Reports.
Each Restricted Person will at all times maintain full and
accurate books of account and records. US Borrower will maintain
and will cause its Subsidiaries to maintain a standard system of
accounting, will maintain its Fiscal Year, and will furnish the
following statements and reports to each Lender Party at US
Borrower's expense:
(a) As soon as available, and in any event within ninety
(90) days after the end of each Fiscal Year, complete
Consolidated financial statements of US Borrower together with
all notes thereto, prepared in reasonable detail in accordance
with US GAAP, together with an unqualified opinion, based on an
audit using generally accepted auditing standards, by KPMG Peat
Marwick L.L.P., or other independent certified public accountants
selected by US Borrower and acceptable to US Agent, stating that
such Consolidated financial statements have been so prepared.
These financial statements shall contain a Consolidated balance
sheet as of the end of such Fiscal Year and Consolidated
statements of earnings, of cash flows, and of changes in owners'
equity for such Fiscal Year, each setting forth in comparative
form the corresponding figures for the preceding Fiscal Year. In
addition, within ninety (90) days after the end of each Fiscal
Year US Borrower will furnish to US Agent and each Lender a
certificate in the form of Exhibit D signed by the President,
Senior Vice President - Finance, Treasurer or Vice President -
Accounting of US Borrower, stating that such financial statements
are accurate and complete, stating that such Person has reviewed
the US Loan Documents, containing all calculations required to be
made to show compliance or non-compliance with the provisions of
Sections 7.8 and 7.9, and further stating that there is no
condition or event at the end of such Fiscal Year or at the time
of such certificate which constitutes a Default and specifying
the nature and period of existence of any such condition or
event.
(b) As soon as available, and in any event within forty-
five (45) days after the end of each Fiscal Quarter, US
Borrower's Consolidated and consolidating balance sheet and
income statement as of the end of such Fiscal Quarter and a
Consolidated statement of cash flows for the period from the
beginning of the then current Fiscal Year to the end of such
Fiscal Quarter, all in reasonable detail and prepared in
accordance with US GAAP, subject to changes resulting from normal
year-end adjustments. In addition US Borrower will, together
with each such set of financial statements, furnish a certificate
in the form of Exhibit D signed by the President, Senior Vice
President - Finance, Treasurer or Vice President - Accounting of
US Borrower stating that such financial statements are accurate
and complete (subject to normal year-end adjustments), stating
that such Person has reviewed the US Loan Documents, containing
all calculations required to be made by US Borrower to show
compliance or non-compliance with the provisions of Sections 7.8
and 7.9 and further stating that there is no condition or event
at the end of such Fiscal Quarter or at the time of such
certificate which constitutes a Default and specifying the nature
and period of existence of any such condition or event.
(c) Promptly upon their becoming available, copies of all
financial statements, reports, notices and proxy statements sent
by any Restricted Person to its stockholders and all registration
statements, periodic reports and other statements and schedules
filed by any Restricted Person with any securities exchange, the
Securities and Exchange Commission or any similar Governmental
Authority, including any information or estimates with respect to
US Borrower's oil and gas business (including its exploration,
development and production activities) which are required to be
furnished in US Borrower's annual report pursuant to Sections 13
or 15(d) of the Securities Exchange Act of 1934, as amended.
Section 6.3. Other Information and Inspections. Each
Restricted Person will furnish to each Lender any information
which US Agent may from time to time reasonably request
concerning any covenant, provision or condition of the Loan
Documents or any matter in connection with Restricted Persons'
businesses and operations. Each Restricted Person will permit
representatives appointed by US Agent (including independent
accountants, auditors, agents, attorneys, appraisers and any
other Persons) to visit and inspect upon prior written notice
during normal business hours any of such Restricted Person's
property, including its books of account, other books and
records, and any facilities or other business assets, and to make
extra copies therefrom and photocopies and photographs thereof,
and to write down and record any information such representatives
obtain, and each Restricted Person shall permit US Agent or its
representatives to investigate and verify the accuracy of the
information furnished to US Agent or any Lender in connection
with the Loan Documents and to discuss all such matters with its
officers, employees and representatives.
Section 6.4. Notice of Material Events and Change of
Address. US Borrower will promptly notify each Lender in
writing, stating that such notice is being given pursuant to this
Agreement, of:
(a) the occurrence of any event which would have a Material
Adverse Effect,
(b) the occurrence of any Default,
(c) the acceleration of the maturity of any Indebtedness
owed by any Restricted Person having a principal balance of more
than US $50,000,000, or of any default by any Restricted Person
under any indenture, mortgage, agreement, contract or other
instrument to which any of them is a party or by which any of
them or any of their properties is bound, if such default would
have a Material Adverse Effect,
(d) the occurrence of any Termination Event,
(e) any claim of US $50,000,000 or more, any notice of
potential liability under any Environmental Laws which might
exceed such amount, or any other material adverse claim asserted
against any Restricted Person or with respect to any Restricted
Person's properties, and
(f) the filing of any suit or proceeding against any
Restricted Person in which an adverse decision would have a
Material Adverse Effect.
US Borrower will also notify US Agent and US Agent's counsel in
writing promptly in the event that any Restricted Person changes
its name or the location of its chief executive office.
Section 6.5. Maintenance of Properties. Each Restricted
Person will maintain, preserve, protect, and keep all property
used or useful in the conduct of its business in good condition,
and will from time to time make all repairs, renewals and
replacements needed to enable the business and operations carried
on in connection therewith to be promptly and advantageously
conducted at all times except to the extent failure to do so
would not reasonably be expected to have a Material Adverse
Effect.
Section 6.6. Maintenance of Existence and Qualifications.
Each Restricted Person will maintain and preserve its existence
and its rights and franchises in full force and effect and will
qualify to do business in all states or jurisdictions where
required by applicable Law, except where the failure so to
qualify will not have a Material Adverse Effect.
Section 6.7. Payment of Trade Liabilities, Taxes, etc.
Each Restricted Person will (a) timely file all required tax
returns; (b) timely pay all taxes, assessments, and other
governmental charges or levies imposed upon it or upon its
income, profits or property; and (c) maintain appropriate
accruals and reserves for all of the foregoing in accordance with
US GAAP. Each Restricted Person may, however, delay paying or
discharging any of the foregoing so long as it is in good faith
contesting the validity thereof by appropriate proceedings and
has set aside on its books adequate reserves therefor.
Section 6.8. Insurance. Each Restricted Person will keep
or cause to be kept insured in accordance with industry standards
by financially sound and reputable insurers, its surface
equipment and other property of a character usually insured by
similar Persons engaged in the same or similar businesses.
Section 6.9. Performance on US Borrower's Behalf. If any
Restricted Person fails to pay any taxes, insurance premiums,
expenses, attorneys' fees or other amounts it is required to pay
under any US Loan Document, US Agent may pay the same, and shall
use its best efforts to give at least five (5) Business Days
notice to US Borrower prior to making any such payment; provided,
however, that any failure by US Agent to so notify US Borrower
shall not limit or otherwise impair US Agent's ability to make
any such payment. US Borrower shall immediately reimburse US
Agent for any such payments and each amount paid by US Agent
shall constitute an US Obligation owed hereunder which is due and
payable on the date such amount is paid by US Agent.
Section 6.10. Interest. US Borrower hereby promises to
each Lender Party to pay interest at the Default Rate applicable
to Base Rate Loans on all US Obligations (including US
Obligations to pay fees or to reimburse or indemnify any Lender)
which US Borrower has in this Agreement promised to pay to such
Lender Party and which are not paid when due. Such interest
shall accrue from the date such US Obligations become due until
they are paid.
Section 6.11. Compliance with Law. Each Restricted Person
will conduct its business and affairs in compliance with all Laws
applicable thereto except to the extent failure to do so would
not reasonably be expected to have a Material Adverse Effect.
Section 6.12. Environmental Matters.
(a) Each Restricted Person will comply in all material
respects with all Environmental Laws now or hereafter applicable
to such Restricted Person, as well as all contractual obligations
and agreements with respect to environmental remediation or other
environmental matters, and shall obtain, at or prior to the time
required by applicable Environmental Laws, all environmental,
health and safety permits, licenses and other authorizations
necessary for its operations and will maintain such
authorizations in full force and effect, unless such failure to
so comply would not reasonably be expected to have a Material
Adverse Effect.
(b) will promptly furnish to US Agent all written notices
of violation, orders, claims, citations, complaints, penalty
assessments, suits or other proceedings received by US Borrower,
or of which it has notice, pending or threatened against US
Borrower, by any Governmental Authority with respect to any
alleged violation of or non-compliance with any Environmental
Laws or any permits, licenses or authorizations in connection
with its ownership or use of its properties or the operation of
its business which involve a potential liability or claim in
excess of US $50,000,000.
Section 6.13. Bank Accounts; Offset. To secure the
repayment of the Obligations US Borrower hereby grants to each
Lender a right of offset, each of which shall be in addition to
all other interests, liens, and rights of any Lender at common
Law, under the Loan Documents, or otherwise, and each of which
shall be upon and against (a) any and all moneys, securities or
other property (and the proceeds therefrom) of US Borrower now or
hereafter held or received by or in transit to any Lender from or
for the account of US Borrower, whether for safekeeping, custody,
pledge, transmission, collection or otherwise, (b) any and all
deposits (general or special, time or demand, provisional or
final) of US Borrower with any Lender, and (c) any other credits
and claims of US Borrower at any time existing against any
Lender, including claims under certificates of deposit. At any
time and from time to time after the occurrence of any Default,
each Lender is hereby authorized to offset against the
Obligations then due and payable (in either case without notice
to US Borrower), any and all items herein above referred to. To
the extent that US Borrower has accounts designated as royalty or
joint interest owner accounts, the foregoing right of offset
shall not extend to funds in such accounts which belong to, or
otherwise arise from payments to US Borrower for the account of,
third party royalty or joint interest owners.
Section 6.14. Year 2000 Compliance. US Borrower will
promptly notify US Agent in the event US Borrower discovers or
determines that any computer application (including those of its
suppliers and vendors) that is material to its or any of its
Subsidiaries' business and operations that will not be Year 2000
compliant on a timely basis, except to the extent that such
failure would not reasonably be expected to have a Material
Adverse Effect.
ARTICLE VII - Negative Covenants of US Borrower
To conform with the terms and conditions under which each
Lender is willing to have credit outstanding to US Borrower, and
to induce each Lender to enter into this Agreement and make the
US Loans, US Borrower warrants, covenants and agrees that until
the full and final payment of the Obligations and the termination
of this Agreement, unless Required Lenders have previously agreed
otherwise:
Section 7.1. Indebtedness. No Restricted Subsidiary will
in any manner owe or be liable for Indebtedness except:
(a) the Canadian Obligations.
(b) capital lease obligations (excluding oil, gas or
mineral leases) entered into in the ordinary course of such
Restricted Person's business in arm's length transactions at
competitive market rates under competitive terms and conditions
in all respects, provided that such capital lease obligations
required to be paid in any Fiscal Year do not in the aggregate
exceed US $35,000,000 for all Restricted Subsidiaries.
(c) unsecured Liabilities owed among Restricted Persons.
(d) guaranties by one Restricted Person of Liabilities owed
by another Restricted Person, if such Liabilities either (i) are
not Indebtedness, or (ii) are allowed under subsections (a), (b)
or (c) of this Section 7.1.
(e) Indebtedness of the Restricted Persons for plugging and
abandonment bonds or for letters of credit issued by any Lender
in place thereof which are required by regulatory authorities in
the area of operations, and Indebtedness of the Restricted
Persons for other bonds or letters of credit issued by any Lender
which are required by such regulatory authorities with respect to
other normal oil and gas operations.
(f) obligations under the Subordinated Devon Oklahoma
Indenture, the Subordinated Devon Oklahoma Debentures and the
Subordinated Devon Oklahoma Guarantee;
(g) non-recourse Indebtedness as to which no Restricted
Person (i) provides any guaranty or credit support of any kind
(including any undertaking, guarantee, indemnity, agreement or
instrument that would constitute Indebtedness) or (ii) is
directly or indirectly liable (as a guarantor or otherwise);
provided, that after giving effect to such Indebtedness
outstanding from time to time, US Borrower is not in violation of
Section 7.8.
(h) the following long-term institutional Indebtedness of
Northstar Energy:
(i) US $150,000,000 indebtedness to The Prudential
Insurance Company of America pursuant to a Note Agreement
dated as of March 2, 1998 including the following guarantees
of such indebtedness: (1) guarantees both dated March 2,
1998 made by Northstar Energy Partnership and David Limited
Partnership; (2) guarantee dated as of July 31, 1998 made by
728098 Alberta Ltd.; and (3) any other guarantees of
Subsidiaries of Northstar Energy executed after the date
hereof pursuant to the terms of such Note Agreement.
(ii) US $75,000,000 indebtedness to certain
institutional investors pursuant to a Note Agreement dated
as of July 19, 1995, as amended from time to time, including
the following guarantees of such indebtedness: (1)
guarantee dated as of July 31, 1998 made by Northstar Energy
Partnership; (2) guarantee dated as of July 31, 1998 made by
728098 Alberta Ltd.; and (3) any other guarantee of
Subsidiaries of Northstar Energy executed after the date
hereof pursuant to the terms of such Note Agreement.
including any refinancing of the above institutional
indebtedness by Northstar Energy, US Borrower, or any other
Restricted Person on similar terms taking into account
current market conditions.
(i) Indebtedness that is subordinated to the US Obligations
and the Canadian Obligations on terms acceptable to Required
Lenders.
(j) Indebtedness in the approximate amount of C $4,784,000
owed to Indeck Gas Supply Corporation by Northstar Energy
pursuant to a Gas Sales and Purchase Agreement dated as of March
9, 1989, as heretofore or hereafter amended from time to time.
(k) Acquired Debt.
(l) Indebtedness under Hedging Contracts.
(m) Indebtedness relating to the surety bond and letter of
credit obligations listed on Schedule 2.
(n) miscellaneous items of Indebtedness of all Restricted
Persons (other than US Borrower) not described in subsections (a)
through (m) which do not in the aggregate exceed US $100,000,000
in principal amount at any one time outstanding.
Section 7.2. Limitation on Liens. Except for Permitted
Liens, no Restricted Person will create, assume or permit to
exist any Lien upon any of the properties or assets which it now
owns or hereafter acquires. No Restricted Person will allow the
filing or continued existence of any financing statement
describing as collateral any assets or property of such
Restricted Person, other than financing statements which describe
only collateral subject to a Lien permitted under this section
and which name as secured party or lessor only the holder of such
Lien.
Section 7.3. Limitation on Mergers. No Restricted Person
will merge or consolidate with or into any other Person except
that any Subsidiary of US Borrower may be merged into or
consolidated with (a) another Subsidiary of US Borrower, or
(b) US Borrower, so long as US Borrower is the surviving business
entity.
Section 7.4. Limitation on Issuance of Securities by
Subsidiaries of US Borrower.
(a) No Restricted Subsidiary of US Borrower (other than
Devon Trust) will issue any additional shares of its capital
stock, additional partnership interests or other securities or
any options, warrants or other rights to acquire such additional
shares, partnership interests or other securities except to
another Restricted Person which is a wholly-owned direct or
indirect Subsidiary of US Borrower unless such securities are
being issued to acquire a business, directly or indirectly
through the use of the proceeds of such issuance, and such
securities are convertible into the common or similar securities
of US Borrower. In addition, (i) Northstar Energy may issue
"Exchangeable Shares" (as defined in the Restated Articles of
Incorporation of Northstar Energy) upon the terms specified in
the Restated Articles of Incorporation of Northstar Energy as in
effect on the date hereof (in this section called "Exchangeable
Shares"), (ii) Devon Canada may issue exchangeable shares upon
substantially the same terms as such Exchangeable Shares, and
(iii) Northstar Energy may issue stock options to its employees
from time to time to acquire such Exchangeable Shares, provided
that such options are granted under a stock option plan of
Northstar Energy and/or US Borrower. US Borrower shall never own
(directly or indirectly) less than one hundred percent (100%) of
the common shares of each Canadian Borrower.
(b) Devon Trust will not issue any securities except common
securities to Devon Oklahoma and the Devon Trust Securities.
Devon Nevada and Devon Oklahoma will at all times remain a
wholly-owned direct or indirect Subsidiary of US Borrower. Devon
Oklahoma will at all times own all of the outstanding common
securities of Devon Trust.
Section 7.5. Limitation on Restricted Payments. Except as
permitted below in this section, no Restricted Person shall
directly or indirectly (i) make any Restricted Distribution, or
(ii) any Restricted Investment (the above being herein
collectively referred to as "Restricted Payments"), unless the
aggregate amount of Restricted Payments made during any Fiscal
Year never exceeds five percent (5%) of the book value of the
Consolidated Assets of US Borrower.
Section 7.6. Transactions with Affiliates. No Restricted
Person will engage in any material transaction with any of its
Affiliates on terms which are less favorable in any material
respect to it than those which would have been obtainable at the
time in arm's-length dealing with Persons other than such
Affiliates, provided that such restriction shall not apply to
transactions among US Borrower and the other Restricted Persons
that are wholly-owned, directly or indirectly, by US Borrower.
Section 7.7. Prohibited Contracts; ERISA. Except as
expressly provided for in the US Loan Documents and in the
Support Agreement dated December 10, 1998 between the US Borrower
and Northstar Energy, no Restricted Person will, directly or
indirectly, enter into, create, or otherwise allow to exist any
contract or other consensual restriction on the ability of any
Restricted Person that is a Subsidiary of US Borrower: (a) to pay
dividends or make other distributions to US Borrower, (b) to
redeem equity interests held in it by US Borrower, (c) to repay
loans and other indebtedness owing by it to US Borrower, or
(d) to transfer any of its assets to US Borrower. No ERISA
Affiliate will incur any obligation to contribute to any
"multiemployer plan" as defined in Section 4001 of ERISA.
Section 7.8. Funded Debt to Total Capitalization. At the
end of each Fiscal Quarter, the ratio of US Borrower's
Consolidated Total Funded Debt to US Borrower's Total
Capitalization will never exceed sixty-five percent (65%).
Section 7.9. Devon Trust; Devon Trust Securities. Devon
Trust shall exist for the exclusive purposes of (a) issuing the
Devon Trust Securities, (b) investing the gross proceeds of the
Devon Trust Securities in the Subordinated Devon Oklahoma
Debentures and (c) engaging in only those other activities
necessary or incidental thereto. Devon Oklahoma shall exercise
its option to defer interest payments on the Subordinated Devon
Oklahoma Debentures rather than default on such interest
payments. Devon Trust shall not be dissolved without prior
written notice by US Borrower to US Agent. Devon Trust shall not
redeem the Devon Trust Securities prior to their stated maturity,
and Devon Oklahoma shall not prepay or redeem the Subordinated
Devon Oklahoma Debentures prior to their stated maturity, unless
both immediately before and immediately after any such proposed
prepayment or redemption, US Borrower is in compliance with
Section 7.8, and no Default under Section 8.1(a), 8.1(f)
or 8.1(h) is continuing.
ARTICLE VIII - Events of Default and Remedies
Section 8.1. Events of Default. Each of the following
events constitutes an Event of Default under this Agreement:
(a) Any Restricted Person fails to pay any principal
component of any US Obligation when due and payable or fails to
pay any other US Obligation within three (3) days after the date
when due and payable, whether at a date for the payment of a
fixed installment or as a contingent or other payment becomes due
and payable or as a result of acceleration or otherwise;
(b) Any "default" or "event of default" occurs under any US
Loan Document which defines either such term, and the same is not
remedied within the applicable period of grace (if any) provided
in such Loan Document;
(c) Any Restricted Person fails (other than as referred to
in subsections (a) or (b) above) to (i) duly comply with the last
sentence of Section 7.4(a) of the US Agreement or (ii) duly
observe, perform or comply with any other covenant, agreement,
condition or provision of any US Loan Document, and such failure
remains unremedied for a period of thirty (30) days after notice
of such failure is given by US Agent to US Borrower;
(d) Any representation or warranty previously, presently or
hereafter made in writing by or on behalf of any Restricted
Person in connection with any US Loan Document shall prove to
have been false or incorrect in any material respect on any date
on or as of which made provided that if such falsity or lack of
correctness is capable of being remedied or cured within a 30-day
period, US Borrower shall (subject to the other provisions of
this Section 8.1) have a period of 30 days after written notice
thereof has been given to US Borrower by US Agent within which to
remedy or cure such lack of correctness, or this Agreement or any
US Note is asserted to be or at any time ceases to be valid,
binding and enforceable in any material respect as warranted in
Section 5.5 for any reason other than its release or
subordination by US Agent;
(e) Any Restricted Person (i) fails to duly pay any
Indebtedness in excess of US $50,000,000 constituting principal
or interest owed by it with respect to borrowed money or money
otherwise owed under any note, bond, or similar instrument,
including without limitation the Subordinated Devon Oklahoma
Debentures, the Subordinated Devon Oklahoma Indenture, the
Subordinated Devon Oklahoma Guarantee and the Devon Trust
Securities, or (ii) breaches or defaults in the performance of
any agreement or instrument by which any such Indebtedness is
issued, evidenced, governed, or secured, other than a breach or
default described in clause (i) above, and any such failure,
breach or default results in the acceleration of such
Indebtedness;
(f) Either (i) any "accumulated funding deficiency" (as
defined in Section 412(a) of the Internal Revenue Code of 1986,
as amended) in excess of US $50,000,000 exists with respect to
any ERISA Plan, whether or not waived by the Secretary of the
Treasury or his delegate, or (ii) any Termination Event occurs
with respect to any ERISA Plan and the then current value of such
ERISA Plan's benefit liabilities exceeds the then current value
of such ERISA Plan's assets available for the payment of such
benefit liabilities by more than US $50,000,000 (or in the case
of a Termination Event involving the withdrawal of a substantial
employer, the withdrawing employer's proportionate share of such
excess exceeds such amount);
(g) Any Change in Control occurs;
(h) US Borrower or any other Restricted Person having
assets with a book value of at least US $50,000,000:
(i) suffers the entry against it of a judgment, decree
or order for relief by a Tribunal of competent jurisdiction
in an involuntary proceeding commenced under any applicable
bankruptcy, insolvency or other similar Law of any
jurisdiction now or hereafter in effect, including the
federal Bankruptcy Code, as from time to time amended, or
has any such proceeding commenced against it which remains
undismissed for a period of thirty days; or
(ii) commences a voluntary case under any applicable
bankruptcy, insolvency or similar Law now or hereafter in
effect, including the federal Bankruptcy Code, as from time
to time amended; or applies for or consents to the entry of
an order for relief in an involuntary case under any such
Law; or makes a general assignment for the benefit of
creditors; or fails generally to pay (or admits in writing
its inability to pay) its debts as such debts become due; or
takes corporate or other action to authorize any of the
foregoing; or
(iii) suffers the appointment of or taking
possession by a receiver, liquidator, assignee, custodian,
trustee, sequestrator or similar official of all or a
substantial part of its property in a proceeding brought
against or initiated by it, and such appointment or taking
possession is neither made ineffective nor discharged within
thirty days after the making thereof, or such appointment or
taking possession is at any time consented to, requested by,
or acquiesced to by it; or
(iv) suffers the entry against it of a final judgment
for the payment of money in an amount that exceeds (x) the
valid and collectible insurance in respect thereof or (y)
the amount of an indemnity with respect thereto reasonably
acceptable to the Required Lenders by US $50,000,000 or
more, unless the same is discharged within thirty days after
the date of entry thereof or an appeal or appropriate
proceeding for review thereof is taken within such period
and a stay of execution pending such appeal is obtained; or
(v) suffers a writ or warrant of attachment or similar
process to be issued by any Tribunal against all or any part
of its property having a book value of at least US
$50,000,000, and such writ or warrant of attachment or any
similar process is not stayed or released within thirty days
after the entry or levy thereof or after any stay is vacated
or set aside; and
(i) Any "Event of Default" occurs under the Canadian
Agreement.
Upon the occurrence of an Event of Default described in
subsection (h)(i), (h)(ii) or (h)(iii) of this section with
respect to US Borrower, all of the US Obligations shall thereupon
be immediately due and payable, without demand, presentment,
notice of demand or of dishonor and nonpayment, protest, notice
of protest, notice of intention to accelerate, declaration or
notice of acceleration, or any other notice or declaration of any
kind, all of which are hereby expressly waived by US Borrower and
each Restricted Person who at any time ratifies or approves this
Agreement. Upon any such acceleration, any obligation of any
Lender to make any further US Loans, any obligation of US LC
Issuer to issue Letters of Credit hereunder, and any obligation
of US Swing Lender to make any further US Swing Loans shall be
permanently terminated. During the continuance of any other
Event of Default, US Agent at any time and from time to time may
(and upon written instructions from Required Lenders, US Agent
shall), without notice to US Borrower or any other Restricted
Person, do either or both of the following: (1) terminate any
obligation of Lenders to make US Loans hereunder, any obligation
of US LC Issuer to issue Letters of Credit hereunder, and any
obligation of US Swing Lender to make US Swing Loans hereunder,
and (2) declare any or all of the US Obligations immediately due
and payable, and all such US Obligations shall thereupon be
immediately due and payable, without demand, presentment, notice
of demand or of dishonor and nonpayment, protest, notice of
protest, notice of intention to accelerate, declaration or notice
of acceleration, or any other notice or declaration of any kind,
all of which are hereby expressly waived by US Borrower and each
Restricted Person who at any time ratifies or approves this
Agreement.
Section 8.2. Remedies. If any Default shall occur and be
continuing, each Lender Party may protect and enforce its rights
under the US Loan Documents by any appropriate proceedings,
including proceedings for specific performance of any covenant or
agreement contained in any Loan Document, and each Lender Party
may enforce the payment of any US Obligations due it or enforce
any other legal or equitable right which it may have. All
rights, remedies and powers conferred upon Lender Parties under
the US Loan Documents shall be deemed cumulative and not
exclusive of any other rights, remedies or powers available under
the US Loan Documents or at Law or in equity.
ARTICLE IX - US Agent
Section 9.1. Appointment, Powers, and Immunities. Each
Lender hereby irrevocably appoints and authorizes US Agent to act
as its agent under this Agreement and the other US Loan Documents
with such powers and discretion as are specifically delegated to
US Agent by the terms of this Agreement and the other US Loan
Documents, together with such other powers as are reasonably
incidental thereto. US Agent (which term as used in this
sentence and in Section 9.5 and the first sentence of Section 9.6
hereof shall include its Affiliates and its own and its
Affiliates' officers, directors, employees, and agents):
(a) shall not have any duties or responsibilities except those
expressly set forth in this Agreement and shall not be a trustee
or fiduciary for any Lender; (b) shall not be responsible to the
Lenders for any recital, statement, representation, or warranty
(whether written or oral) made in or in connection with any Loan
Document or any certificate or other document referred to or
provided for in, or received by any of them under, any Loan
Document, or for the value, validity, effectiveness, genuineness,
enforceability, or sufficiency of any Loan Document, or any other
document referred to or provided for therein or for any failure
by any Restricted Person or any other Person to perform any of
its obligations thereunder; (c) shall not be responsible for or
have any duty to ascertain, inquire into, or verify the
performance or observance of any covenants or agreements by any
Restricted Person or the satisfaction of any condition or to
inspect the property (including the books and records) of any
Restricted Person or any of its Subsidiaries or Affiliates;
(d) shall not be required to initiate or conduct any litigation
or collection proceedings under any Loan Document; and (e) shall
not be responsible for any action taken or omitted to be taken by
it under or in connection with any Loan Document, except for its
own gross negligence or willful misconduct. US Agent may employ
agents and attorneys-in-fact and shall not be responsible for the
negligence or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care.
Section 9.2. Reliance by US Agent. US Agent shall be
entitled to rely upon any certification, notice, instrument,
writing, or other communication (including, without limitation,
any thereof by telephone or telecopy) believed by it to be
genuine and correct and to have been signed, sent or made by or
on behalf of the proper Person or Persons, and upon advice and
statements of legal counsel (including counsel for any Restricted
Person), independent accountants, and other experts selected by
US Agent. US Agent may deem and treat the payee of any Note as
the holder thereof for all purposes hereof unless and until US
Agent receives and accepts an Assignment and Acceptance executed
in accordance with Section 10.6 hereof. As to any matters not
expressly provided for by this Agreement, US Agent shall not be
required to exercise any discretion or take any action, but shall
be required to act or to refrain from acting (and shall be fully
protected in so acting or refraining from acting) upon the
instructions of the Required Lenders, and such instructions shall
be binding on all of the Lenders; provided, however, that US
Agent shall not be required to take any action that exposes US
Agent to personal liability or that is contrary to any Loan
Document or applicable Law or unless it shall first be
indemnified to its satisfaction by the Lenders against any and
all liability and expense which may be incurred by it by reason
of taking any such action.
Section 9.3. Defaults. US Agent shall not be deemed to
have knowledge or notice of the occurrence of a Default or Event
of Default unless US Agent has received written notice from a
Lender or US Borrower specifying such Default or Event of Default
and stating that such notice is a "Notice of Default". In the
event that US Agent receives such a notice of the occurrence of a
Default or Event of Default, US Agent shall give prompt notice
thereof to the Lenders. US Agent shall (subject to Section 9.1
hereof) take such action with respect to such Default or Event of
Default as shall reasonably be directed by the Required Lenders.
Notwithstanding the foregoing, unless and until US Agent shall
have received such directions, US Agent may (but shall not be
obligated to) take such action, or refrain from taking such
action, with respect to such Default or Event of Default as it
shall deem advisable in the best interest of the Lenders.
Section 9.4. Rights as Lender. With respect to its
Percentage Share of the US Maximum Credit Amount and the US Loans
made by it, US Agent (and any successor acting as US Agent) in
its capacity as a Lender hereunder shall have the same rights and
powers hereunder as any other Lender and may exercise the same as
though it were not acting as US Agent, and the term "Lender" or
"Lenders" shall, unless the context otherwise indicates, include
US Agent in its individual capacity. US Agent (and any successor
acting as US Agent) and its Affiliates may (without having to
account therefor to any Lender) accept deposits from, lend money
to, make Investments in, provide services to, and generally
engage in any kind of lending, trust, or other business with any
Restricted Person or any of its Subsidiaries or Affiliates as if
it were not acting as US Agent, and US Agent (and any successor
acting as US Agent) and its Affiliates may accept fees and other
consideration from any Restricted Person or any of its
Subsidiaries or Affiliates for services in connection with this
Agreement or otherwise without having to account for the same to
the Lenders.
Section 9.5. Indemnification. The Lenders agree to
indemnify US Agent (to the extent not reimbursed under Section
10.4 hereof, but without limiting the obligations of US Borrower
under such section) ratably in accordance with their respective
Percentage Shares, for any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs,
expenses (including attorneys' fees), or disbursements of any
kind and nature whatsoever that may be imposed on, incurred by or
asserted against US Agent (including by any Lender) in any way
relating to or arising out of any Loan Document or the
transactions contemplated thereby or any action taken or omitted
by US Agent under any Loan Document (INCLUDING ANY OF THE
FOREGOING ARISING FROM THE NEGLIGENCE OF US AGENT); provided that
no Lender shall be liable for any of the foregoing to the extent
they arise from the gross negligence or willful misconduct of the
Person to be indemnified. Without limitation of the foregoing,
each Lender agrees to reimburse US Agent promptly upon demand for
its ratable share of any costs or expenses payable by US Borrower
under Section 10.4, to the extent that US Agent is not promptly
reimbursed for such costs and expenses by US Borrower. The
agreements contained in this section shall survive payment in
full of the US Loans and all other amounts payable under this
Agreement.
Section 9.6. Non-Reliance on US Agent and Other Lenders.
Each Lender agrees that it has, independently and without
reliance on US Agent or any other Lender, and based on such
documents and information as it has deemed appropriate, made its
own credit analysis of the US Borrower and its Subsidiaries and
decision to enter into this Agreement and that it will,
independently and without reliance upon US Agent or any other
Lender, and based on such documents and information as it shall
deem appropriate at the time, continue to make its own analysis
and decisions in taking or not taking action under the US Loan
Documents. Except for notices, reports, and other documents and
information expressly required to be furnished to the Lenders by
US Agent hereunder, US Agent shall not have any duty or
responsibility to provide any Lender with any credit or other
information concerning the affairs, financial condition, or
business of any Restricted Person or any of its Subsidiaries or
Affiliates that may come into the possession of US Agent or any
of its Affiliates.
Section 9.7. Rights as Lender. In its capacity as a
Lender, US Agent shall have the same rights and obligations as
any Lender and may exercise such rights as though it were not US
Agent. US Agent may accept deposits from, lend money to, act as
trustee under indentures of, and generally engage in any kind of
business with any Restricted Person or their Affiliates, all as
if it were not US Agent hereunder and without any duty to account
therefor to any other Lender.
Section 9.8. Sharing of Set-Offs and Other Payments. Each
Lender Party agrees that if it shall, whether through the
exercise of rights under US Loan Documents or rights of banker's
lien, set off, or counterclaim against US Borrower or otherwise,
obtain payment of a portion of the aggregate Obligations owed to
it which, taking into account all distributions made by US Agent
under Section 3.1, causes such Lender Party to have received more
than it would have received had such payment been received by US
Agent and distributed pursuant to Section 3.1, then (a) it shall
be deemed to have simultaneously purchased and shall be obligated
to purchase interests in the Obligations as necessary to cause
all Lender Parties to share all payments as provided for in
Section 3.1, and (b) such other adjustments shall be made from
time to time as shall be equitable to ensure that US Agent and
all Lender Parties share all payments of Obligations as provided
in Section 3.1; provided, however, that nothing herein contained
shall in any way affect the right of any Lender Party to obtain
payment (whether by exercise of rights of banker's lien, set-off
or counterclaim or otherwise) of indebtedness other than the
Obligations. US Borrower expressly consents to the foregoing
arrangements and agrees that any holder of any such interest or
other participation in the Obligations, whether or not acquired
pursuant to the foregoing arrangements, may to the fullest extent
permitted by Law exercise any and all rights of banker's lien,
set-off, or counterclaim as fully as if such holder were a holder
of the Obligations in the amount of such interest or other
participation. If all or any part of any funds transferred
pursuant to this section is thereafter recovered from the seller
under this section which received the same, the purchase provided
for in this section shall be deemed to have been rescinded to the
extent of such recovery, together with interest, if any, if
interest is required pursuant to the order of a Tribunal order to
be paid on account of the possession of such funds prior to such
recovery.
Section 9.9. Investments. Whenever US Agent in good faith
determines that it is uncertain about how to distribute to Lender
Parties any funds which it has received, or whenever US Agent in
good faith determines that there is any dispute among Lender
Parties about how such funds should be distributed, US Agent may
choose to defer distribution of the funds which are the subject
of such uncertainty or dispute. If US Agent in good faith
believes that the uncertainty or dispute will not be promptly
resolved, or if US Agent is otherwise required to invest funds
pending distribution to Lender Parties, US Agent shall invest
such funds pending distribution; all interest on any such
Investment shall be distributed upon the distribution of such
Investment and in the same proportion and to the same Persons as
such Investment. All moneys received by US Agent for
distribution to Lender Parties (other than to the Person who is
US Agent in its separate capacity as a Lender Party) shall be
held by US Agent pending such distribution solely as US Agent for
such Lender Parties, and US Agent shall have no equitable title
to any portion thereof.
Section 9.10. Benefit of Article IX. The provisions of
this Article (other than the following Section 9.11) are intended
solely for the benefit of Lender Parties, and no Restricted
Person shall be entitled to rely on any such provision or assert
any such provision in a claim or defense against any Lender.
Lender Parties may waive or amend such provisions as they desire
without any notice to or consent of US Borrower or any Restricted
Person.
Section 9.11. Resignation. US Agent may resign at any time
by giving written notice thereof to Lenders and US Borrower.
Each such notice shall set forth the date of such resignation.
Upon any such resignation, Required Lenders shall have the right
to appoint a successor US Agent and if no Default or Event of
Default has occurred and is continuing, Required Lenders shall
obtain the consent of US Borrower. A successor must be appointed
for any retiring US Agent, and such US Agent's resignation shall
become effective when such successor accepts such appointment.
If, within thirty days after the date of the retiring US Agent's
resignation, no successor US Agent has been appointed and has
accepted such appointment, then the retiring US Agent may appoint
a successor US Agent, which shall be a commercial bank organized
or licensed to conduct a banking or trust business under the Laws
of the United States of America or of any state thereof and if no
Default or Event of Default has occurred and is continuing,
retiring US Agent shall obtain the consent of US Borrower. Upon
the acceptance of any appointment as US Agent hereunder by a
successor US Agent, the retiring US Agent shall be discharged
from its duties and obligations under this Agreement and the
other US Loan Documents. After any retiring US Agent's
resignation hereunder the provisions of this Article IX shall
continue to inure to its benefit as to any actions taken or
omitted to be taken by it while it was US Agent under the US Loan
Documents.
Section 9.12. Lenders to Remain Pro Rata. It is the intent
of all parties hereto that, except for Competitive Bid Loans,
Canadian Swing Loans, US Swing Loans and matters related thereto,
the pro rata share of each Lender in the US Obligations and in
the Canadian Obligations shall be substantially the same at all
times during the term of this Agreement. Accordingly, the
initial Percentage Share of each Lender in the US Maximum Credit
Amount will be the same as the initial Percentage Share of such
Lender in the Canadian Maximum Credit Amount. All subsequent
assignments and adjustments of the interests of the Lenders in
the US Obligations and the Canadian Obligations will be made so
as to maintain such a pro rata arrangement; provided that for the
purposes of determining these pro rata shares, any Percentage
Share held by any Lender's Affiliates shall be included in
determining the interests of such Lender.
ARTICLE X - Miscellaneous
Section 10.1. Waivers and Amendments; Acknowledgments.
(a) Waivers and Amendments. No failure or delay (whether
by course of conduct or otherwise) by any Lender Party in
exercising any right, power or remedy which such Lender Party may
have under any of the US Loan Documents shall operate as a waiver
thereof or of any other right, power or remedy, nor shall any
single or partial exercise by any Lender Party of any such right,
power or remedy preclude any other or further exercise thereof or
of any other right, power or remedy. No waiver of any provision
of any US Loan Document and no consent to any departure therefrom
shall ever be effective unless it is in writing and signed as
provided below in this section, and then such waiver or consent
shall be effective only in the specific instances and for the
purposes for which given and to the extent specified in such
writing. No notice to or demand on any Restricted Person shall
in any case of itself entitle any Restricted Person to any other
or further notice or demand in similar or other circumstances.
This Agreement and the other US Loan Documents set forth the
entire understanding between the parties hereto with respect to
the transactions contemplated herein and therein and supersede
all prior discussions and understandings with respect to the
subject matter hereof and thereof, and no waiver, consent,
release, modification or amendment of or supplement to this
Agreement or the other US Loan Documents shall be valid or
effective against any party hereto unless the same is in writing
and signed by (i) if such party is US Borrower, by US Borrower,
(ii) if such party is US Agent or US LC Issuer, by such party,
and (iii) if such party is a Lender, by such Lender or by US
Agent on behalf of Lenders with the written consent of Required
Lenders (which consent has already been given as to the
termination of the US Loan Documents as provided in Section
10.10). Notwithstanding the foregoing or anything to the
contrary herein, US Agent shall not, without the prior consent of
Majority Lenders, execute and deliver on behalf of such Lender
any waiver or amendment which would increase the US Maximum
Credit Amount hereunder. Notwithstanding the foregoing or
anything to the contrary herein, US Agent shall not, without the
prior consent of each individual Lender, execute and deliver on
behalf of such Lender any waiver or amendment which would: (1)
waive any of the conditions specified in Article IV, (2) increase
the maximum amount which such Lender is committed hereunder to
lend, (3) reduce any fees payable to such Lender hereunder, or
the principal of, or interest on, such Lender's Note, (4)
postpone any date fixed for any payment of any such fees,
principal or interest, (5) amend the definition herein of
"Required Lenders", "Majority Lenders", or otherwise change the
aggregate amount of Percentage Shares which is required for US
Agent, Lenders or any of them to take any particular action under
the US Loan Documents, (6) release US Borrower from its
obligation to pay such Lender's Note, or (7) amend this Section
10.1(a).
(b) Acknowledgments and Admissions. US Borrower hereby
represents, warrants, acknowledges and admits that (i) it has
been advised by counsel in the negotiation, execution and
delivery of the US Loan Documents to which it is a party, (ii) it
has made an independent decision to enter into this Agreement and
the other US Loan Documents to which it is a party, without
reliance on any representation, warranty, covenant or undertaking
by US Agent or any Lender, whether written, oral or implicit,
other than as expressly set out in this Agreement or in another
Loan Document delivered on or after the date hereof, (iii) there
are no representations, warranties, covenants, undertakings or
agreements by any Lender as to the US Loan Documents except as
expressly set out in this Agreement or in another Loan Document
delivered on or after the date hereof, (iv) no Lender has any
fiduciary obligation toward US Borrower with respect to any Loan
Document or the transactions contemplated thereby, (v) the
relationship pursuant to the US Loan Documents between US
Borrower and the other Restricted Persons, on one hand, and each
Lender, on the other hand, is and shall be solely that of debtor
and creditor, respectively, (vi) no partnership or joint venture
exists with respect to the US Loan Documents between any
Restricted Person and any Lender, (vii) US Agent is not US
Borrower's US Agent, but US Agent for Lenders, (viii) without
limiting any of the foregoing, US Borrower is not relying upon
any representation or covenant by any Lender, or any
representative thereof, and no such representation or covenant
has been made, that any Lender will, at the time of an Event of
Default or Default, or at any other time, waive, negotiate,
discuss, or take or refrain from taking any action permitted
under the US Loan Documents with respect to any such Event of
Default or Default or any other provision of the US Loan
Documents, and (ix) all Lender Parties have relied upon the
truthfulness of the acknowledgments in this section in deciding
to execute and deliver this Agreement and to become obligated
hereunder.
(c) Joint Acknowledgment. This written Agreement and the
other US Loan Documents represent the final agreement between the
parties and may not be contradicted by evidence of prior,
contemporaneous, or subsequent oral agreements of the parties.
There are no unwritten oral agreements between the parties.
Section 10.2. Survival of Agreements; Cumulative Nature.
All of Restricted Persons' various representations, warranties,
covenants and agreements in the US Loan Documents shall survive
the execution and delivery of this Agreement and the other US
Loan Documents and the performance hereof and thereof, including
the making or granting of the US Loans and the delivery of the
US Notes and the other US Loan Documents, and shall further
survive until all of the US Obligations are paid in full to each
Lender Party and all of Lender Parties' obligations to US
Borrower are terminated. All statements and agreements contained
in any certificate or other instrument delivered by any
Restricted Person to any Lender Party under any Loan Document
shall be deemed representations and warranties by US Borrower or
agreements and covenants of US Borrower under this Agreement.
The representations, warranties, indemnities, and covenants made
by Restricted Persons in the US Loan Documents, and the rights,
powers, and privileges granted to Lender Parties in the US Loan
Documents, are cumulative, and, except for expressly specified
waivers and consents, no Loan Document shall be construed in the
context of another to diminish, nullify, or otherwise reduce the
benefit to any Lender Party of any such representation, warranty,
indemnity, covenant, right, power or privilege. In particular
and without limitation, no exception set out in this Agreement to
any representation, warranty, indemnity, or covenant herein
contained shall apply to any similar representation, warranty,
indemnity, or covenant contained in any other Loan Document, and
each such similar representation, warranty, indemnity, or
covenant shall be subject only to those exceptions which are
expressly made applicable to it by the terms of the various US
Loan Documents.
Section 10.3. Notices. All notices, requests, consents,
demands and other communications required or permitted under any
Loan Document shall be in writing, unless otherwise specifically
provided in such Loan Document (provided that US Agent may give
telephonic notices to the other Lender Parties), and shall be
deemed sufficiently given or furnished if delivered by personal
delivery, by facsimile or other electronic transmission, by
delivery service with proof of delivery, or by registered or
certified United States mail, postage prepaid, to US Borrower and
Restricted Persons at the address of US Borrower specified on the
signature pages hereto and to each Lender Party at its address
specified on Annex II hereto (unless changed by similar notice in
writing given by the particular Person whose address is to be
changed). Any such notice or communication shall be deemed to
have been given (a) in the case of personal delivery or delivery
service, as of the date of first attempted delivery during normal
business hours at the address provided herein, (b) in the case of
facsimile or other electronic transmission, upon receipt, or
(c) in the case of registered or certified United States mail,
three days after deposit in the mail; provided, however, that no
Borrowing Notice shall become effective until actually received
by US Agent.
Section 10.4. Payment of Expenses; Indemnity.
(a) Payment of Expenses. Whether or not the transactions
contemplated by this Agreement are consummated, US Borrower will
promptly (and in any event, within 30 days after any invoice or
other statement or notice) pay: (i) all reasonable costs and
expenses incurred by or on behalf of US Agent (including without
limitation, attorneys' fees) in connection with (1) the
negotiation, preparation, execution and delivery of the US Loan
Documents, and any and all consents, waivers or other documents
or instruments relating thereto, (2) the filing, recording,
refiling and re-recording of any US Loan Documents and any other
documents or instruments or further assurances required to be
filed or recorded or refiled or re-recorded by the terms of any
Loan Document, (3) the borrowings hereunder and other action
reasonably required in the course of administration hereof,
(4) monitoring or confirming (or preparation or negotiation of
any document related to) US Borrower's compliance with any
covenants or conditions contained in this Agreement or in any
Loan Document, and (ii) all reasonable costs and expenses
incurred by or on behalf of any Lender Party (including without
limitation, attorneys' fees, consultants' fees and accounting
fees) in connection with the defense or enforcement of any of the
US Loan Documents (including this section) or the defense of any
Lender Party's exercise of its rights thereunder.
(b) Indemnity. US Borrower agrees to indemnify each Lender
Party , upon demand, from and against any and all liabilities,
obligations, claims, losses, damages, penalties, fines, actions,
judgments, suits, settlements, costs, expenses or disbursements
(including reasonable fees of attorneys, accountants, experts and
advisors) of any kind or nature whatsoever (in this section
collectively called "liabilities and costs") which to any extent
(in whole or in part) may be imposed on, incurred by, or asserted
against such Lender Party growing out of, resulting from or in
any other way associated with the US Loan Documents and the
transactions and events (including the enforcement or defense
thereof) at any time associated therewith or contemplated therein
(whether arising in contract or in tort or otherwise and
including any violation or noncompliance with any Environmental
Laws by any Lender Party or any other Person or any liabilities
or duties of any Lender Party or any other Person with respect to
Hazardous Materials found in or released into the environment).
The foregoing indemnification shall apply whether or not such
liabilities and costs are in any way or to any extent owed, in
whole or in part, under any claim or theory of strict liability
or caused, in whole or in part by any negligent act or omission
of any kind by any Lender Party,
provided only that no Lender Party shall be entitled under this
section to receive indemnification for that portion, if any, of
any liabilities and costs which is proximately caused by its own
individual gross negligence or willful misconduct, as determined
in a final judgment. If any Person (including US Borrower or any
of its Affiliates) ever alleges such gross negligence or willful
misconduct by any Lender Party, the indemnification provided for
in this section shall nonetheless be paid upon demand, subject to
later adjustment or reimbursement, until such time as a court of
competent jurisdiction enters a final judgment as to the extent
and effect of the alleged gross negligence or willful misconduct.
As used in this section the term "Lender Party" shall refer not
only to each Person designated as such in Section 1.1 but also to
each director, officer, agent, attorney, employee, representative
and Affiliate of such Person.
Section 10.5. Parties in Interest. All grants, covenants
and agreements contained in the US Loan Documents shall bind and
inure to the benefit of the parties thereto and their respective
successors and assigns; provided, however, that no Restricted
Person may assign or transfer any of its rights or delegate any
of its duties or obligations under any Loan Document without the
prior consent of Required Lenders. Neither US Borrower nor any
Affiliates of US Borrower shall directly or indirectly purchase
or otherwise retire any Obligations owed to any Lender nor will
any Lender accept any offer to do so, unless each Lender shall
have received substantially the same offer with respect to the
same Percentage Share of the Obligations owed to it. If US
Borrower or any Affiliate of US Borrower at any time purchases
some but less than all of the Obligations owed to all Lender
Parties, such purchaser shall not be entitled to any rights of
any Lender under the US Loan Documents unless and until US
Borrower or its Affiliates have purchased all of the Obligations.
Section 10.6. Assignments and Participations.
(a) Each Lender may assign to one or more Eligible
Transferees all or a portion of its rights and obligations under
this Agreement (including, without limitation, all or a portion
of its US Loans, its Note, and its Percentage Share of the US
Maximum Credit Amount); provided, however, that
(i) each such assignment shall be to an Eligible
Transferee;
(ii) together with each such assignment of its rights
and obligations under this Agreement, such Lender shall
assign the same Percentage Share of its rights and
obligations under the Canadian Agreement to the same
Eligible Transferee or an Affiliate of such Eligible
Transferee.
(iii) except in the case of such an assignment to
another Lender or an assignment of all of a Lender's rights
and obligations under this Agreement, any partial assignment
of such Lender's rights and obligations under this Agreement
and under the Canadian Agreement shall be in a collective
amount at least equal to US $20,000,000 or an integral
multiple of US $5,000,000 in excess thereof;
(iv) each such assignment by a Lender shall be of a
constant, and not varying, percentage of all of its rights
and obligations under the US Loan Documents;
(v) the parties to such assignment shall execute and
deliver to US Agent for its acceptance an Assignment and
Acceptance in the form of Exhibit F hereto, together with
any Note subject to such assignment and a processing fee of
US $3,500; and
Upon execution, delivery, and acceptance of such Assignment and
Acceptance, the assignee thereunder shall be a party hereto and,
to the extent of such assignment, have the obligations, rights,
and benefits of a Lender hereunder and the assigning Lender
shall, to the extent of such assignment, relinquish its rights
and be released from its obligations under this Agreement. Upon
the consummation of any assignment pursuant to this section, the
assignor, US Agent and US Borrower shall make appropriate
arrangements so that, if required, new US Notes are issued to the
assignor and the assignee. If the assignee is not incorporated
under the Laws of the United States of America or a state
thereof, it shall deliver to US Borrower and US Agent
certification as to exemption from deduction or withholding of
Taxes in accordance with Section 3.10.
(b) US Agent shall maintain at its address referred to in
Section 10.3 a copy of each Assignment and Acceptance delivered
to and accepted by it and a register for the recordation of the
names and addresses of the Lenders and their Percentage Share of
the US Maximum Credit Amount of, and principal amount of the US
Loans owing to, each Lender from time to time (the "Register").
The entries in the Register shall be conclusive and binding for
all purposes, absent manifest error, and US Borrower, US Agent
and the Lenders may treat each Person whose name is recorded in
the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by US
Borrower or any Lender at any reasonable time and from time to
time upon reasonable prior notice.
(c) Upon its receipt of an Assignment and Acceptance
executed by the parties thereto, together with any Note subject
to such assignment and payment of the processing fee, US Agent
shall, if such Assignment and Acceptance has been completed and
is in substantially the form of Exhibit F hereto, (i) accept such
Assignment and Acceptance, (ii) record the information contained
therein in the Register and (iii) give prompt notice thereof to
the parties thereto.
(d) Each Lender may sell participations to one or more
Persons that are Eligible Transferees in all or a portion of its
rights and obligations under this Agreement (including all or a
portion of its US Maximum Credit Amount and its US Loans);
provided, however, that (i) such Lender's obligations under this
Agreement shall remain unchanged, (ii) such Lender shall remain
solely responsible to the other parties hereto for the
performance of such obligations, (iii) the participant shall be
entitled to the benefit of the yield protection provisions
contained in Article III and the right of offset contained in
Section 6.14, and (iv) US Borrower shall continue to deal solely
and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement, and such Lender
shall retain the sole right to enforce the obligations of US
Borrower relating to its US Loans and its Note and to approve any
amendment, modification, or waiver of any provision of this
Agreement (other than amendments, modifications, or waivers
decreasing the amount of principal of or the rate at which
interest is payable on such US Loans or Note, extending any
scheduled principal payment date or date fixed for the payment of
interest on such US Loans or Note, or extending its US Maximum
Credit Amount).
(e) Notwithstanding any other provision set forth in this
Agreement, any Lender may at any time assign and pledge all or
any portion of its US Loans and its Note to any Federal Reserve
Bank as collateral security pursuant to Regulation A and any
Operating Circular issued by such Federal Reserve Bank. No such
assignment shall release the assigning Lender from its
obligations hereunder.
(f) Any Lender may furnish any information concerning US
Borrower or any of its Subsidiaries in the possession of such
Lender from time to time to assignees and participants (including
prospective assignees and participants), subject, however, to the
provisions of Section 10.7 hereof.
Section 10.7. Confidentiality. US Agent and each Lender
(each, a "Lending Party") agrees to keep confidential any
information furnished or made available to it by US Borrower
pursuant to this Agreement that is marked confidential; provided
that nothing herein shall prevent any Lending Party from
disclosing such information (a) to any other Lending Party or any
Affiliate of any Lending Party, or any officer, director,
employee, US Agent, or advisor of any Lending Party or Affiliate
of any Lending Party, (b) to any other Person if reasonably
incidental to the administration of the credit facility provided
herein, (c) as required by any Law, rule, or regulation, (d) upon
the order of any court or administrative agency, (e) upon the
request or demand of any regulatory agency or authority, (f) that
is or becomes available to the public or that is or becomes
available to any Lending Party other than as a result of a
disclosure by any Lending Party prohibited by this Agreement,
(g) in connection with any litigation to which such Lending Party
or any of its Affiliates may be a party, (h) to the extent
necessary in connection with the exercise of any remedy under
this Agreement or any other Loan Document, and (i) subject to
provisions substantially similar to those contained in this
section, to any actual or proposed participant or assignee.
Section 10.8. Governing Law; Submission to Process. Except
to the extent that the law of another jurisdiction is expressly
elected in a Loan Document, the US Loan Documents shall be deemed
contracts and instruments made under the laws of the State of
Texas and shall be construed and enforced in accordance with and
governed by the laws of the State of Texas and the laws of the
United States of America, without regard to principles of
conflicts of law. Chapter 346 of the Texas Finance Code (which
regulates certain revolving credit loan accounts and revolving
tri-party accounts) does not apply to this Agreement or to the US
Notes. US Borrower hereby irrevocably submits itself and each
other Restricted Person to the non-exclusive jurisdiction of the
state and federal courts sitting in the State of Texas and agrees
and consents that service of process may be made upon it or any
Restricted Person in any legal proceeding relating to the US Loan
Documents or the Obligations by any means allowed under Texas or
federal law.
Section 10.9. Limitation on Interest. Lender Parties,
Restricted Persons and any other parties to the US Loan Documents
intend to contract in strict compliance with applicable usury Law
from time to time in effect. In furtherance thereof such Persons
stipulate and agree that none of the terms and provisions
contained in the US Loan Documents shall ever be construed to
create a contract to pay, for the use, forbearance or detention
of money, interest in excess of the maximum amount of interest
permitted to be charged by applicable Law from time to time in
effect. Neither any Restricted Person nor any present or future
guarantors, endorsers, or other Persons hereafter becoming liable
for payment of any Obligation shall ever be liable for unearned
interest thereon or shall ever be required to pay interest
thereon in excess of the maximum amount that may be lawfully
charged under applicable Law from time to time in effect, and the
provisions of this section shall control over all other
provisions of the US Loan Documents which may be in conflict or
apparent conflict herewith. Lender Parties expressly disavow any
intention to charge or collect excessive unearned interest or
finance charges in the event the maturity of any Obligation is
accelerated. If (a) the maturity of any Obligation is
accelerated for any reason, (b) any Obligation is prepaid and as
a result any amounts held to constitute interest are determined
to be in excess of the legal maximum, or (c) any Lender or any
other holder of any or all of the Obligations shall otherwise
collect moneys which are determined to constitute interest which
would otherwise increase the interest on any or all of the
Obligations to an amount in excess of that permitted to be
charged by applicable Law then in effect, then all sums
determined to constitute interest in excess of such legal limit
shall, without penalty, be promptly applied to reduce the then
outstanding principal of the related Obligations or, at such
Lender's or holder's option, promptly returned to US Borrower or
the other payor thereof upon such determination. In determining
whether or not the interest paid or payable, under any specific
circumstance, exceeds the maximum amount permitted under
applicable Law, Lender Parties and Restricted Persons (and any
other payors thereof) shall to the greatest extent permitted
under applicable Law, (i) characterize any non-principal payment
as an expense, fee or premium rather than as interest, (ii)
exclude voluntary prepayments and the effects thereof, and (iii)
amortize, prorate, allocate, and spread the total amount of
interest throughout the entire contemplated term of the
instruments evidencing the Obligations in accordance with the
amounts outstanding from time to time thereunder and the maximum
legal rate of interest from time to time in effect under
applicable Law in order to lawfully charge the maximum amount of
interest permitted under applicable Law. In the event applicable
Law provides for an interest ceiling under Chapter 303 of the
Texas Finance Code (the "Texas Finance Code") as amended, for
that day, the ceiling shall be the "weekly ceiling" as defined in
the Texas Finance Code; provided that if any applicable Law
permits greater interest, the Law permitting the greatest
interest shall apply. As used in this section the term
"applicable Law" means the Laws of the State of Texas or the Laws
of the United States of America, whichever Laws allow the greater
interest, as such Laws now exist or may be changed or amended or
come into effect in the future.
Section 10.10. Termination; Limited Survival. In its sole
and absolute discretion US Borrower may at any time that no
Obligations are owing elect in a written notice delivered to US
Agent to terminate this Agreement. Upon receipt by US Agent of
such a notice, if no Obligations are then owing this Agreement
and all other US Loan Documents shall thereupon be terminated and
the parties thereto released from all prospective obligations
thereunder. Notwithstanding the foregoing or anything herein to
the contrary, any waivers or admissions made by any Restricted
Person in any Loan Document, any Obligations under Sections 3.2
through 3.6, and any obligations which any Person may have to
indemnify or compensate any Lender Party shall survive any
termination of this Agreement or any other Loan Document. At the
request and expense of US Borrower, US Agent shall prepare and
execute all necessary instruments to reflect and effect such
termination of the US Loan Documents. US Agent is hereby
authorized to execute all such instruments on behalf of all
Lenders, without the joinder of or further action by any Lender.
Section 10.11. Severability. If any term or provision of
any Loan Document shall be determined to be illegal or
unenforceable all other terms and provisions of the US Loan
Documents shall nevertheless remain effective and shall be
enforced to the fullest extent permitted by applicable Law.
Section 10.12. Counterparts; Fax. This Agreement may be
separately executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which
when so executed shall be deemed to constitute one and the same
Agreement. This Agreement and the US Loan Documents may be
validly executed and delivered by facsimile or other electronic
transmission.
Section 10.13. Waiver of Jury Trial, Punitive Damages, etc.
US Borrower and each Lender Party hereby knowingly, voluntarily,
intentionally, and irrevocably (a) waives, to the maximum extent
not prohibited by Law, any right it may have to a trial by jury
in respect of any litigation based hereon, or directly or
indirectly at any time arising out of, under or in connection
with the US Loan Documents or any transaction contemplated
thereby or associated therewith, before or after maturity; (b)
waives, to the maximum extent not prohibited by Law, any right it
may have to claim or recover in any such litigation any "Special
Damages", as defined below, (c) certifies that no party hereto
nor any representative or agent or counsel for any party hereto
has represented, expressly or otherwise, or implied that such
party would not, in the event of litigation, seek to enforce the
foregoing waivers, and (d) acknowledges that it has been induced
to enter into this Agreement, the other US Loan Documents and the
transactions contemplated hereby and thereby by, among other
things, the mutual waivers and certifications contained in this
section. As used in this section, "Special Damages" includes all
special, consequential, exemplary, or punitive damages
(regardless of how named), but does not include any payments or
funds which any party hereto has expressly promised to pay or
deliver to any other party hereto.
Section 10.14. Defined Terms. Capitalized terms and phrases
used and not otherwise defined herein shall for all purposes of
this Agreement have the meaning given to such terms and phrases
in Annex I hereto.
Section 10.15. Annex I, Exhibits and Schedules; Additional
Definitions. Annex I, Annex II and all Exhibits and Schedules
attached to this Agreement are a part hereof for all purposes.
Section 10.16. Amendment of Defined Instruments. Unless the
context otherwise requires or unless otherwise provided herein
the terms defined in this Agreement which refer to a particular
agreement, instrument or document also refer to and include all
renewals, extensions, modifications, amendments and restatements
of such agreement, instrument or document, provided that nothing
contained in this section shall be construed to authorize any
such renewal, extension, modification, amendment or restatement.
Section 10.17. References and Titles. All references in
this Agreement to Exhibits, Schedules, articles, sections,
subsections and other subdivisions refer to the Exhibits,
Schedules, articles, sections, subsections and other subdivisions
of this Agreement unless expressly provided otherwise. Titles
appearing at the beginning of any subdivisions are for
convenience only and do not constitute any part of such
subdivisions and shall be disregarded in construing the language
contained in such subdivisions. The words "this Agreement",
"this instrument", "herein", "hereof", "hereby", "hereunder" and
words of similar import refer to this Agreement as a whole and
not to any particular subdivision unless expressly so limited.
The phrases "this section" and "this subsection" and similar
phrases refer only to the sections or subsections hereof in which
such phrases occur. The word "or" is not exclusive, and the word
"including" (in its various forms) means "including without
limitation". Pronouns in masculine, feminine and neuter genders
shall be construed to include any other gender, and words in the
singular form shall be construed to include the plural and vice
versa, unless the context otherwise requires.
Section 10.18. Calculations and Determinations. All
calculations under the US Loan Documents of interest chargeable
with respect to Eurodollar Loans and of fees shall be made on the
basis of actual days elapsed (including the first day but
excluding the last) and a year of 360 days. All other
calculations of interest made under the US Loan Documents shall
be made on the basis of actual days elapsed (including the first
day but excluding the last) and a year of 365 or 366 days, as
appropriate. Each determination by a Lender Party of amounts to
be paid under Article III or any other matters which are to be
determined hereunder by a Lender Party (such as any US Dollar
Eurodollar Rate, Adjusted US Dollar Eurodollar Rate, Business
Day, Interest Period, or Reserve Requirement) shall, in the
absence of manifest error, be conclusive and binding. Unless
otherwise expressly provided herein or unless Required Lenders
otherwise consent all financial statements and reports furnished
to any Lender Party hereunder shall be prepared and all financial
computations and determinations pursuant hereto shall be made in
accordance with US GAAP.
Section 10.19. Construction of Indemnities and Releases. All
indemnification and release provisions of this Agreement shall be
construed broadly (and not narrowly) in favor of the Persons
receiving indemnification from or being released.
Section 10.20. Termination of Existing US Agreement. Upon
the payment in full of all outstanding indebtedness owing under
the Existing US Agreement, the Existing US Agreement and the
other loan documents executed pursuant thereto shall be
terminated and the parties thereto shall have no further
obligations or liabilities, covenants, or representations
thereunder; provided, however, the indemnification obligations
provided in the Existing US Agreement shall not be terminated and
shall survive the termination of the Existing US Agreement.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, this Agreement is executed as of the
date first written above.
DEVON ENERGY CORPORATION
US Borrower
By:
William T. Vaughn
Senior Vice President - Finance
Address:
20 North Broadway, Suite 1500
Oklahoma City, Oklahoma 73102
Attention: Senior Vice
President - Finance
Telephone: (405) 235-3611
Fax: (405) 552-8120
BANK OF AMERICA, N.A.,
Administrative Agent, US LC
Issuer and Lender
By:
Denise A. Smith
Managing Director
Address:
901 Main Street, 64th Floor
Dallas, Texas 75202
Attention: Denise A. Smith
Telephone: (214) 508-1261
Fax: (214) 508-1285
BANK OF MONTREAL
Lender
By:
Name:
Title:
BANK ONE, NA
Lender
By:
Name:
Title:
THE CHASE MANHATTAN BANK
Lender
By:
Name:
Title:
UMB OKLAHOMA BANK
Lender
By:
Name:
Title:
FIRST UNION NATIONAL BANK
Lender
By:
Name:
Title:
TORONTO-DOMINION (TEXAS), INC.
Lender
By:
Name:
Title:
WESTDEUTSCHE LANDESBANK
GIROZENTRALE
Lender
By:
Name:
Title:
By:
Name:
Title:
THE BANK OF NEW YORK
Lender
By:
Name:
Title:
ROYAL BANK OF CANADA
Lender
By:
Name:
Title:
SUNTRUST BANK, ATLANTA
Lender
By:
Name:
Title:
By:
Name:
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
Lender
By:
Name:
Title:
CITIBANK, N.A.
Lender
By:
Name:
Title:
DEUTSCHE BANK AG
Lender
By:
Name:
Title:
CIBC, INC.
Lender
By:
Name:
Title:
CANADIAN CREDIT AGREEMENT
_______________________________________________________
NORTHSTAR ENERGY CORPORATION
and
DEVON ENERGY CANADA CORPORATION
as Canadian Borrowers
BANK OF AMERICA CANADA
as Administrative Agent
BANC OF AMERICA SECURITIES LLC
as Lead Arranger
BANC ONE CAPITAL MARKETS, INC.
as Syndication Agent
THE CHASE MANHATTAN BANK
as Documentation Agent
FIRST UNION NATIONAL BANK
as Co-Documentation Agent
and CERTAIN FINANCIAL INSTITUTIONS
as Lenders
_______________________________________________________
US $275,000,000
October 15, 1999
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TABLE OF CONTENTS
Page
CREDIT AGREEMENT 1
Section 1.1. Commitments to Make Advances; Canadian Notes 1
Section 1.2. Requests for New Canadian Advances 2
Section 1.3. Continuations and Conversions of Existing
Canadian Advances 4
Section 1.4. Repayments 5
Section 1.5. Interest Rates and Fees. 7
Section 1.6. Extension of Conversion Date. 9
Section 1.7. Conversion to Canadian Term Loan 10
Section 1.8. Non-Accepting Lender 10
Section 1.9. Competitive Bid Loans 11
Section 1.10. Use of Proceeds 13
Section 1.11. Refinancings of Canadian Swing Loans 14
ARTICLE II - Bankers' Acceptances and Letters of Credit 15
Section 2.1. Creation of Bankers' Acceptances 15
Section 2.2. Terms of Acceptance by the Canadian Resident
Lenders 15
Section 2.3. General Procedures for Bankers' Acceptances 18
Section 2.4. Execution of Bankers' Acceptances 19
Section 2.5. Escrowed Funds 19
Section 2.6. Letters of Credit 20
Section 2.7. Requesting Letters of Credit 21
Section 2.8. Reimbursement and Participations 21
Section 2.9. Letter of Credit Fees 21
Section 2.10. No Duty to Inquire 22
Section 2.11. LC Collateral 23
ARTICLE III - Payments to Lenders 24
Section 3.1. General Procedures 24
Section 3.2. Change in Law; Gross Up; Increased Cost and
Reduced Return 25
Section 3.3. Limitation on Types of Canadian Loans 27
Section 3.4. Illegality 28
Section 3.5. Treatment of Affected Loans 28
Section 3.6. Compensation 29
Section 3.7. Change of Applicable Lending Office 29
Section 3.8. Replacement of Lenders 29
Section 3.9. Other Taxes 30
Section 3.10. Currency Conversion and Currency Indemnity 30
ARTICLE IV - Conditions Precedent to Advances 31
Section 4.1. Documents to be Delivered 31
Section 4.2. Additional Conditions Precedent to First
Canadian Loan or First Letter of Credit 32
Section 4.3. Additional Conditions Precedent to all
Canadian Loans and Letters of Credit 33
ARTICLE V - Representations and Warranties 33
Section 5.1. No Default 34
Section 5.2. Organization and Good Standing 34
Section 5.3. Authorization 34
Section 5.4. No Conflicts or Consents 34
Section 5.5. Enforceable Obligations 35
Section 5.6. Full Disclosure 35
Section 5.7. Litigation 35
Section 5.8. Environmental and Other Laws 35
Section 5.9. Names and Places of Business 36
Section 5.10. Canadian Borrowers' Subsidiaries 36
Section 5.11. Title to Properties; Licenses 36
Section 5.12. Solvency 37
Section 5.13. Year 2000 Compliance 37
ARTICLE VI - Affirmative Covenants of Canadian Borrowers 37
Section 6.1. Payment and Performance 37
Section 6.2. Books, Financial Statements and Reports 37
Section 6.3. Other Information and Inspections 38
Section 6.4. Notice of Material Events and Change of
Address 39
Section 6.5. Maintenance of Properties 39
Section 6.6. Maintenance of Existence and Qualifications 40
Section 6.7. Payment of Trade Liabilities, Taxes, etc. 40
Section 6.8. Insurance 40
Section 6.9. Performance on Canadian Borrowers' Behalf 40
Section 6.10. Interest 40
Section 6.11. Compliance with Law 40
Section 6.12. Environmental Matters 41
Section 6.13. Bank Accounts; Offset. 41
Section 6.14. Year 2000 Compliance 41
ARTICLE VII - Negative Covenants of Canadian Borrowers 42
Section 7.1. Indebtedness 42
Section 7.2. Limitation on Liens 43
Section 7.3. Limitation on Mergers 44
Section 7.4. Limitation on Issuance of Securities by
Subsidiaries of US Borrower 44
Section 7.5. Limitation on Restricted Payments 44
Section 7.6. Transactions with Affiliates 44
Section 7.7. Funded Debt to Total Capitalization 44
ARTICLE VIII - Events of Default and Remedies 45
Section 8.1. Events of Default 45
Section 8.2. Remedies 47
ARTICLE IX - Canadian Agent 47
Section 9.1. Appointment, Powers, and Immunities 47
Section 9.2. Reliance by Canadian Agent 48
Section 9.3. Defaults 48
Section 9.4. Rights as Lender 48
Section 9.5. Indemnification 49
Section 9.6. Non-Reliance on Canadian Agent and Other
Lenders 49
Section 9.7. Rights as Lender 49
Section 9.8. Sharing of Set-Offs and Other Payments 50
Section 9.9. Investments 50
Section 9.10. Benefit of Article IX 50
Section 9.11. Resignation 51
Section 9.12. Lenders to Remain Pro Rata 51
ARTICLE X - Miscellaneous 51
Section 10.1. Waivers and Amendments; Acknowledgments 51
Section 10.2. Survival of Agreements; Cumulative Nature 53
Section 10.3. Notices 54
Section 10.4. Payment of Expenses; Indemnity 54
Section 10.5. Parties in Interest 55
Section 10.6. Assignments and Participations 55
Section 10.7. Confidentiality 57
Section 10.8. Governing Law; Submission to Process 58
Section 10.9. Waiver of Judgment Interest Act (Alberta) 58
Section 10.10. Deemed Reinvestment Not Applicable 58
Section 10.11. Limitation on Interest. 58
Section 10.12. Termination; Limited Survival 59
Section 10.13. Severability 60
Section 10.14. Counterparts; Fax 60
Section 10.15. Waiver of Jury Trial, Punitive Damages, etc. 60
Section 10.16. Defined Terms 60
Section 10.17. Annex I, Exhibits and Schedules; Additional
Definitions 60
Section 10.18. Amendment of Defined Instruments 60
Section 10.19. References and Titles 61
Section 10.20. Calculations and Determinations 61
Section 10.21. Construction of Indemnities and Releases 61
Section 10.22. Separate Obligations 61
Section 10.23. Termination of Existing Canadian Agreement 61
Schedules and Exhibits:
Annex I - Defined Terms
Annex II - Lenders Schedule
Schedule 1 - Disclosure Schedule
Schedule 2 - Surety Bonds & Letters of Credit
Exhibit A-1 - Promissory Note
Exhibit A-2 - Canadian Swing Promissory Note
Exhibit B - Borrowing Notice
Exhibit C - Continuation/Conversion Notice
Exhibit D - Certificate Accompanying Financial Statements
Exhibit E - Opinion of Counsel for Restricted Persons
Exhibit F - Assignment and Acceptance Agreement
Exhibit G - [Reserved]
Exhibit H - [Reserved]
Exhibit I - Competitive Bid Request
Exhibit J - Invitation to Bid
Exhibit K - Competitive Bid
Exhibit L - Competitive Bid Accept/Reject Letter
Exhibit M - Competitive Bid Note
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CREDIT AGREEMENT
THIS CREDIT AGREEMENT is made as of October 15, 1999, by and
among Northstar Energy Corporation, an Alberta corporation, and
Devon Energy Canada Corporation, an Alberta corporation (herein
collectively, called "Canadian Borrowers"), Bank of America
Canada, individually and as administrative agent (herein called
"Canadian Agent") and the undersigned Lenders. In consideration
of the mutual covenants and agreements contained herein the
parties hereto agree as follows:
ARTICLE I - Canadian Advances
Section 1.1. Commitments to Make Advances; Canadian Notes.
(a) Canadian Loans. Subject to the terms and conditions
hereof, each Lender agrees to extend credit to each Canadian
Borrower by advancing funds to the applicable Canadian Borrower
specified in a Borrowing Notice (herein called such Lender's
"Canadian Revolving Loans" and, with reference to Canadian
Resident Lenders only, accepting or purchasing drafts of Bankers'
Acceptances issued under this Agreement by the applicable
Canadian Borrower specified in a Borrowing Notice (herein called
such Lender's "Bankers' Acceptances"; each Lender's Canadian
Revolving Loans, Canadian Term Loans, and Bankers' Acceptances
are herein collectively called such Lender's "Canadian Advances")
upon Canadian Borrower's request from time to time during the
Canadian Revolving Period, provided that (i) subject to Sections
2.1, 2.2., 3.3, 3.4 and 3.5, all Lenders are requested to make
Canadian Advances of the same Type in accordance with their
respective Percentage Shares and as part of the same Borrowing
and (ii) such Lender's Percentage Share of the Canadian Facility
Usage shall never exceed such Lender's Percentage Share of the
Canadian Maximum Credit Amount. The aggregate amount of all
Canadian Loans in any Borrowing must be an integral multiple of
$100,000 in the Applicable Currency which equals or exceeds
$1,000,000 in the Applicable Currency or must equal the
unadvanced portion of the Canadian Maximum Credit Amount. Each
Canadian Borrower may have no more than ten Borrowings of
Eurodollar Loans outstanding at any time. The obligation of each
Canadian Borrower to repay to each Lender the aggregate amount of
all Canadian Loans (excluding Canadian Swing Loans) made by such
Lender to such Borrower, together with interest accruing in
connection therewith, shall be evidenced by a separate promissory
note (herein called such Lender's "Canadian Note") made, by each
Canadian Borrower payable to the order of such Lender in the form
of Exhibit A-1 with appropriate insertions. The amount of
principal owing on any Lender's Canadian Note at any given time
shall be the aggregate amount of all Canadian Loans theretofore
made by such Lender minus all payments of principal theretofore
received by such Lender on such Canadian Note. Interest on each
Canadian Note shall accrue and be due and payable as provided
herein and therein. Each Lender's Canadian Note shall be due and
payable as provided herein and therein and shall be due and
payable in full on the Canadian Facility Maturity Date.
(b) Swing Line Loans. Subject to the terms and conditions
hereof, Canadian Swing Lender agrees to make loans to each
Canadian Borrower (herein called "Canadian Swing Loans") upon the
applicable Canadian Borrower's request from time to time during
the Canadian Revolving Period, provided that (i) the Canadian
Facility Usage shall never exceed the Canadian Maximum Credit
Amount, and (ii) the aggregate amount of Canadian Swing Loans
outstanding shall never exceed the Canadian Swing Sublimit. The
aggregate amount of all Canadian Swing Loans in any Borrowing
must be an integral multiple of C $100,000 which equals or
exceeds C $1,000,000 or must equal the unadvanced portion of the
Canadian Maximum Credit Amount. The obligation of each Canadian
Borrower to repay to Canadian Swing Lender the aggregate amount
of all Canadian Swing Loans made by Canadian Swing Lender,
together with interest accruing in connection therewith, shall be
evidenced by a separate promissory note (herein called each
Canadian Borrower's "Canadian Swing Note") made by each Canadian
Borrower payable to the order of Canadian Swing Lender in the
form of Exhibit A-2 with appropriate insertions. The amount of
principal owing on each Canadian Swing Note at any given time
shall be the aggregate amount of all Canadian Swing Loans
theretofore made by Canadian Swing Lender minus all payments of
principal theretofore received by Canadian Swing Lender on such
Canadian Swing Note (including as a result of any refinancing
pursuant to Section 1.11). Interest on each Canadian Swing Note
shall accrue and be due and payable as provided herein and
therein. Each Canadian Swing Note shall be due and payable as
provided herein and therein, and shall be due and payable in full
on the Conversion Date. Subject to the terms and conditions
hereof, each Canadian Borrower may borrow, repay, and reborrow
Canadian Swing Loans under the Canadian Agreement during the
Canadian Revolving Period.
Section 1.2. Requests for New Canadian Advances. The
applicable Canadian Borrower must give to Canadian Agent written
notice (or telephonic notice promptly confirmed in writing) of
any requested Borrowing of new Canadian Loans and any requested
Borrowing by way of new Bankers' Acceptances. Each such notice
constitutes a "Borrowing Notice" hereunder and must:
(a) specify (i) the aggregate amount of any such Borrowing
of new Canadian Base Rate Loans and the date on which such
Canadian Base Rate Loans are to be advanced, (ii) the aggregate
amount of any such Borrowing of Canadian Prime Rate Loans and the
date on which such Canadian Prime Rate Loans are to be advanced,
(iii) the aggregate amount of any such Borrowing of new US Dollar
Eurodollar Loans, the date on which such US Dollar Eurodollar
Loans are to be advanced (which shall be the first day of the
Eurodollar Interest Period which is to apply thereto), and the
length of the applicable Eurodollar Interest Period, (iv) the
aggregate amount of any such Borrowing of new Canadian Dollar
Eurodollar Loans, the date on which such Canadian Dollar
Eurodollar Loans are to be advanced (which shall be the first day
of the Eurodollar Interest Period which is to apply thereto), and
the length of the applicable Eurodollar Interest Period, (v) the
aggregate amount of any such Borrowing by way of Bankers'
Acceptances (subject to Section 2.2(f)), and the date on which
such Bankers' Acceptances are to be accepted and the maturity of
such Bankers' Acceptances, or (vi) the aggregate amount of any
such Borrowing of new Canadian Swing Loans and the date on which
such Canadian Swing Loans are to be advanced; and
(b) be received by Canadian Agent (i) in the case of
Canadian Advances other than Canadian Swing Loans, not later than
11:00 a.m., Toronto, Ontario time, on (1) on the Business Day
preceding the day on which any such Canadian Base Rate Loans or
Canadian Prime Rate Loans are to be made, (2) the third Business
Day preceding the day on which any such Eurodollar Loans are to
be made or (3) the third Business Day before such Bankers'
Acceptances are to be issued and (ii) in the case of Canadian
Advances that are Canadian Swing Loans, not later than 2:00 p.m.,
Toronto, Ontario time on the Business Day on which any such
Canadian Swing Loans are to be made.
Each such written request or confirmation must be made in the
form and substance of the "Borrowing Notice" attached hereto as
Exhibit B, duly completed. Each such telephonic request shall be
deemed a representation, warranty, acknowledgment and agreement
by the applicable Canadian Borrower as to the matters which are
required to be set out in such written confirmation. Upon
receipt of any such Borrowing Notice, Canadian Agent shall give
each Lender prompt notice of the terms thereof (excluding
Canadian Swing Loans) not later than 5:00 p.m. Toronto, Ontario
time on the day it receives such Borrowing Notice from the
applicable Canadian Borrower if it receives such Borrowing Notice
by 11:00 a.m., Toronto, Ontario time, otherwise on the next
Business Day. If all conditions precedent to such new Canadian
Advances have been met, (i) each Lender will on the date
requested promptly remit to Canadian Agent by 1:00 p.m. Toronto,
Ontario time its Canadian Advances made in Canadian Dollars to
Canadian Agent's office in Toronto, Canada and its Canadian
Advances made in United States Dollars to the US Account in New
York, New York) in immediately available funds, and upon receipt
of such funds, unless to its actual knowledge any conditions
precedent to such Canadian Advances have been neither met nor
waived as provided herein, Canadian Agent shall promptly make
such Canadian Advances available to the applicable Canadian
Borrower or (ii) each Canadian Resident Lender will accept drafts
of Bankers' Acceptances on the date requested in accordance with
Sections 2.1 through 2.3. Unless Canadian Agent shall have
received prompt notice from a Lender that such Lender will not
make available to Canadian Agent such Lender's new Canadian
Advance, Canadian Agent may in its discretion assume that such
Lender has made such Canadian Advance available to Canadian Agent
in accordance with this section and Canadian Agent may if it
chooses, in reliance upon such assumption, make such Canadian
Advance available to the applicable Canadian Borrower. If and to
the extent such Lender shall not so make its new Canadian Advance
available to Canadian Agent, such Lender and the applicable
Canadian Borrower severally agree to pay or repay to Canadian
Agent within three days after demand the amount of such Canadian
Advance together with interest thereon, for each day from the
date such amount was made available to the applicable Canadian
Borrower until the date such amount is paid or repaid to Canadian
Agent, with interest at (1) the Canadian Prime Rate, if such
Lender is making such payment and (2) the interest rate
applicable at the time to the other new Canadian Advances made on
such date, if a Canadian Borrower is making such repayment;
provided that Canadian Agent gave notice of the terms of the
Borrowing Notice to such Lender in accordance with the terms of
this Section 1.2. If neither such Lender nor such Canadian
Borrower pays or repays to Canadian Agent such amount within such
three-day period, Canadian Agent shall in addition to such amount
be entitled to recover from such Lender and from the applicable
Canadian Borrower, on demand, interest on such Canadian Advance
at the Default Rate applicable thereto, calculated from the date
such amount was made available to such Canadian Borrower. The
failure of any Lender to make any new Canadian Advance to be made
by it hereunder shall not relieve any other Lender of its
obligation hereunder, if any, to make its new Canadian Advance,
but no Lender shall be responsible for the failure of any other
Lender to make any new Canadian Advance to be made by such other
Lender.
Section 1.3. Continuations and Conversions of Existing
Canadian Advances. Subject to the terms of Section 2.3 with
respect to Bankers' Acceptances, the applicable Canadian Borrower
may make the following elections with respect to Canadian
Advances and Canadian Swing Loans already outstanding under this
Agreement: (i) to convert any Type of Canadian Advance to any
other Type of Canadian Advance, provided that any such Conversion
of any Eurodollar Loan must be made on the last day of the
Eurodollar Interest Period applicable thereto and any such
Conversion of a Bankers' Acceptance must be made on the date of
maturity thereof; (ii) to continue Eurodollar Loans beyond the
expiration of such Eurodollar Interest Period by designating a
new Eurodollar Interest Period to take effect at the time of such
expiration, and to rollover any existing Bankers' Acceptance by
designating the new maturity date applicable thereto; and (iii)
to convert Canadian Swing Loans to any Type of Canadian Advances
as a refinancing of such Canadian Swing Loans pursuant to Section
1.11. In making such elections, the applicable Canadian Borrower
may combine existing Canadian Advances made pursuant to separate
Borrowings into one new Borrowing or divide existing Canadian
Advances made pursuant to one Borrowing into separate new
Borrowings, provided that Canadian Borrowers may have no more
than ten Borrowings of US Dollar Eurodollar Loans outstanding at
any time and no more than ten Borrowings of Canadian Dollar
Eurodollar Loans outstanding at any time. To make any such
election, the applicable Canadian Borrower must give to Canadian
Agent written notice (or telephonic notice promptly confirmed in
writing) of any such Conversion or Continuation of existing
Canadian Advances, with a separate notice given for each new
Borrowing. Each such notice constitutes a
"Continuation/Conversion Notice" hereunder and must:
(a) specify the existing Canadian Advances made under this
Agreement which are to be continued or converted;
(b) specify (i) the aggregate amount of any Borrowing of
Canadian Base Rate Loans or Canadian Prime Rate Loans into which
such existing Canadian Advances are to be continued or converted
and the date on which such Continuation or Conversion is to
occur, or (ii) the aggregate amount of any Borrowing of
Eurodollar Loans into which such existing Canadian Advances are
to be continued or converted, the date on which such Continuation
or Conversion is to occur (which shall be the first day of the
Eurodollar Interest Period which is to apply to such Eurodollar
Loans), and the length of the applicable Eurodollar Interest
Period, or (iii) the amount of any Borrowing of Bankers'
Acceptances into which such existing Canadian Advances are to be
continued or converted, the date on which such Continuation or
Conversion is to occur, and the maturity of such Bankers'
Acceptances; and
(c) be received by Canadian Agent not later than 11:00
a.m., Toronto, Ontario time, on (i) the first Business Day
preceding the day on which any such Continuation or Conversion to
Canadian Base Rate Loans or Canadian Prime Rate Loans is to
occur, or (ii) the third Business Day preceding the day on which
any such Continuation or Conversion to Eurodollar Loans is to
occur, or (iii) on the third Business Day preceding the day on
which any such Continuation or Conversion to Bankers' Acceptances
is to occur.
Each such written request or confirmation must be made in the
form and substance of the "Continuation/Conversion Notice"
attached hereto as Exhibit C, duly completed. Each such
telephonic request shall be deemed a representation, warranty,
acknowledgment and agreement by the applicable Canadian Borrower
as to the matters which are required to be set out in such
written confirmation. Upon receipt of any such
Continuation/Conversion Notice, Canadian Agent shall give each
Lender prompt notice of the terms thereof. Each
Continuation/Conversion Notice shall be irrevocable and binding
on the applicable Canadian Borrower. During the continuance of
any Default, Canadian Borrowers may not make any election to
convert existing Canadian Advances or Canadian Swing Loans made
under this Agreement into Eurodollar Loans or Bankers'
Acceptances or continue existing Eurodollar Loans made under this
Agreement as Eurodollar Loans or to rollover existing Bankers'
Acceptances into new Bankers' Acceptances. If (due to the
existence of a Default or for any other reason) the applicable
Canadian Borrower fails to timely and properly give or are
prevented hereunder from giving any Continuation/Conversion
Notice with respect to a Borrowing of existing Eurodollar Loans
or Bankers' Acceptances at least three days prior to the end of
the Eurodollar Interest Period applicable thereto or maturity of
the Bankers' Acceptance, such Eurodollar Loans and Bankers'
Acceptances shall automatically be converted into Canadian Base
Rate Loans (in the case of US Dollar Eurodollar Loans) or
Canadian Prime Rate Loans (in the case of Canadian Dollar
Eurodollar Loans and Bankers' Acceptances) at the end of such
Eurodollar Interest Period. No new funds shall be repaid by the
applicable Canadian Borrower or advanced by any Lender in
connection with any Continuation or Conversion of existing
Canadian Advances pursuant to this section, and no such
Continuation or Conversion shall be deemed to be a new advance of
funds for any purpose; such Continuations and Conversions merely
constitute a change in terms of already outstanding Advances and
the interest rate applicable thereto.
Section 1.4. Repayments.
(a) During Canadian Revolving Period. Subject to the terms
and conditions hereof, either Canadian Borrower may borrow,
repay, and reborrow hereunder during the Canadian Revolving
Period, so long as (i) the applicable Canadian Borrower gives
notice to Canadian Agent by 2:00 p.m., Toronto, Ontario time on
the Business Day immediately preceding the date of prepayment
(and Canadian Agent shall give each Lender notice thereof by 4:30
p.m. Toronto, Ontario time on the date such notice is received
from the applicable Borrower if it receives such Borrowing Notice
by 11:00 a.m., Toronto, Ontario time, otherwise on the next
Business Day) all partial prepayments of principal concurrently
paid on the Canadian Loans are increments of $100,000 in the
Applicable Currency and in an aggregate amount greater than or
equal to $1,000,000 in the Applicable Currency and (ii) the
applicable Canadian Borrower pays all amounts owing in connection
with the prepayment of any Eurodollar Loan owing under
Section 3.6.
(b) During Canadian Term Period.
(i) Optional Prepayments. Either Canadian Borrower
may, upon giving notice to Canadian Agent by 2:00 p.m.,
Toronto, Ontario time on the Business Day immediately
preceding the date of prepayment (and Canadian Agent shall
give each Lender notice thereof by 5:00 p.m. Toronto,
Ontario time on the date such notice is received from the
applicable Canadian Borrower if it receives such notice by
11:00 a.m., Toronto, Ontario time, otherwise on the next
Business Day), from time to time during the Term Period and
without premium or penalty, prepay the Canadian Loans
including Competitive Bid Notes, in whole or in part, so
long as all partial prepayments of principal concurrently
paid on the Canadian Loans are in increments of $100,000 in
the Applicable Currency and in an aggregate amount greater
than or equal to $1,000,000 in the Applicable Currency and
so long as Canadian Borrowers pay all amounts owing in
connection with the prepayment of any Eurodollar Loan owing
under Section 3.6, and provided that no Bankers' Acceptance
may be prepaid prior to its stated maturity date except in
accordance with Section 2.5. Each prepayment of principal
under this section shall be accompanied by all interest then
accrued and unpaid on the principal so prepaid, shall be in
addition to, and not in lieu of, all payments otherwise
required to be paid under the Canadian Loan Documents at the
time of such prepayment, and shall first reduce the semi-
annual scheduled installments (other than the final
installment) during the Term Period in respect of Canadian
Loans that are not Competitive Bid Loans, then reduce the
final installment in respect of Canadian Loans that are not
Competitive Bid Loans, and then, unless otherwise designated
by Canadian Borrowers, reduce the outstanding Competitive
Bid Loans in order of shortest maturity.
(ii) Scheduled Repayments of Principal. Subject to
Section 1.4(b)(iii) during the Term Period, Borrower shall
repay the principal of the Canadian Loans that are not
Competitive Bid Loans in equal semi-annual installments,
each in an amount equal to two and one-half percent (2.5%)
of the outstanding principal balance of the Canadian
Advances on the Conversion Date. Such installments shall be
due and payable on each June 30 and December 31 each year
and in a final installment due and payable on the Canadian
Facility Maturity Date in an amount equal to the entire
unpaid principal balance of such Loans outstanding on the
Canadian Facility Maturity Date.
(iii) Income Tax Act (Canada). Except as otherwise
provided in Section 8.1, in no event shall either Canadian
Borrower be required to repay more than 25% of the principal
amount (as defined in the Income Tax Act (Canada)) of the
Canadian Advances made to it prior to five years and a day
after the Conversion Date, including, but not limited to
payments under Section1.4(b)(ii), 1.4(c) and 1.4(d).
(c) Mandatory Prepayments. Except to the extent permitted
by Section 1.4(d), and subject to Section 1.4(e), if the
aggregate principal amount of the outstanding Canadian
Obligations ever exceeds the Canadian Maximum Credit Amount,
Canadian Borrowers shall immediately prepay the principal of the
Canadian Loans outstanding under the Canadian Agreement in an
amount at least equal to such excess. Each prepayment of
principal under this section shall be accompanied by all interest
then accrued and unpaid on the principal so prepaid. Any
principal or interest prepaid pursuant to this section shall be
in addition to, and not in lieu of, all payments otherwise
required to be paid under the Canadian Loan Documents at the time
of such prepayment.
(d) Currency Fluctuations. Notwithstanding any other
provision of this Agreement, if any Canadian Loan outstanding is
denominated in C$, Canadian Agent shall have the right to
calculate the outstanding Canadian Obligations for all purposes
including making a determination from time to time of the
available undrawn portion of the Canadian Maximum Credit Amount.
If following such calculation, Canadian Agent determines that the
outstanding Canadian Obligations are greater than 105% of the
Canadian Advances permitted hereby to be outstanding at such
time, then Canadian Agent shall so advise Canadian Borrowers and,
subject to Section 1.4(e), Canadian Borrowers shall repay, on the
later of five Business Days after such advice and the next
applicable Interest Payment Date immediately following such date
of calculation, an amount sufficient to eliminate the excess over
and above the aggregate amount of the Canadian Loans permitted
hereby to be outstanding at such time, together with all accrued
interest on the amount so paid.
(e) Application of Prepayment. Any mandatory prepayment of
any principal amount (for the purposes of this Section, as
defined in the Income Tax Act (Canada)) made by a Canadian
Borrower pursuant to Sections 1.4(c) and 1.4(d) or otherwise in
respect of a particular loan, shall reduce the semi-annual
scheduled installments (other than the final installment) during
the Term Period in respect of that loan in inverse order of
maturity. Such mandatory prepayments shall be applied to the
Canadian Loans (other than Bankers' Acceptances and Competitive
Bid Loans) pro rata based on outstanding principal; provided that
if such prepayment of Canadian Loans does not eliminate such
mandatory prepayment obligation, the further repayments shall
apply first to Competitive Bid Loans in order of shortest
maturity, and second to an escrow fund maintained in accordance
with Section 2.5.
Section 1.5. Interest Rates and Fees.
(a) Interest Rates. The Canadian Loans shall bear interest
payable by the applicable Canadian Borrower as follows and all
accrued and unpaid interest on the Canadian Loans shall be due
and payable on the applicable Interest Payment Date at the place
set forth in the Canadian Notes:
(i) Each Canadian Base Rate Loan shall bear interest
on each day outstanding at the Canadian US Dollar Base Rate
in effect on such day.
(ii) Each Canadian Prime Rate Loan shall bear interest
on each day outstanding at the Canadian Prime Rate in effect
on such day.
(iii) Each US Dollar Eurodollar Loan shall bear
interest on each day during the related Eurodollar Interest
Period at the related Adjusted US Dollar Eurodollar Rate in
effect on such day.
(iv) Each Canadian Dollar Eurodollar Loan shall bear
interest on each day during the related Eurodollar Interest
Period at the related Adjusted Canadian Dollar Eurodollar
Rate in effect on such day.
(v) Each Canadian Swing Loan shall bear interest on
each day outstanding at the Canadian Swing Rate for such
Canadian Swing Loan in effect on such day.
(vi) Notwithstanding the foregoing, if an Event of
Default has occurred and is continuing, each Canadian Loan
shall bear interest on each day outstanding at the
applicable Default Rate. Past due payments of principal and
interest shall bear interest at the rates and in the manner
set forth in the Canadian Notes.
(b) Facility Fees. In consideration of each Lender's
commitment to make Canadian Advances under this Agreement,
Canadian Borrowers will pay to Canadian Agent for the account of
each Lender a facility fee determined on a daily basis by
applying (i) the Facility Fee Rate to such Lender's Percentage
Share of the Canadian Maximum Credit Amount on each day during
the Canadian Revolving Period and (ii) the Facility Fee Rate to
such Lender's Percentage Share of the Canadian Facility Usage on
each day from the Conversion Date until the Canadian Facility
Maturity Date. This facility fee shall be due and payable in
arrears on the last day of each Fiscal Quarter and on the
Canadian Facility Maturity Date.
(c) Utilization Fees. In consideration of each Lender's
commitment to make Canadian Advances under this Agreement,
Canadian Borrowers will pay to Canadian Agent for the account of
each Lender a utilization fee determined on a daily basis by
applying (i) a rate of 7.5 Basis Points per annum to such
Lender's Percentage Share of the Canadian Facility Usage on each
day during the term of this Agreement that the Canadian Facility
Usage exceeds thirty-three percent (33%) of the Canadian Maximum
Credit Amount, and (ii) a rate of 15 Basis Points per annum to
such Lender's Percentage Share of the Canadian Facility Usage on
each day during the term of this Agreement that the Canadian
Facility Usage exceeds sixty-six percent (66%) of the Canadian
Maximum Credit Amount. This utilization fee shall be due and
payable in arrears on each Interest Payment Date for Canadian US
Dollar Base Rate Loans and on the date all Canadian Obligations
are repaid in full.
(d) Stamping Fees. In consideration of each Canadian
Resident Lender's commitment to accept or participate in Bankers'
Acceptances under this Agreement, the applicable Canadian
Borrower will pay to Canadian Agent for the account of such
Lender the Stamping Fee Rate multiplied by the face amount of
each Bankers' Acceptance accepted by such Lender under this
Agreement calculated for the number of days in the term of such
Bankers' Acceptance. Such fee shall be due and payable on the
date on which such Bankers' Acceptances are accepted and if such
Canadian Resident Lender is purchasing such Bankers' Acceptance,
such fee shall be deducted from the Discount Proceeds paid to the
applicable Canadian Borrower.
(e) Canadian Agent's Fees. In addition to all other
amounts due to Canadian Agent under the Canadian Loan Documents,
Canadian Borrowers will pay fees to Canadian Agent as described
in a letter agreement dated as of September 16, 1999 between US
Agent, Bank of America Securities LLC, and US Borrower.
Section 1.6. Extension of Conversion Date.
(a) Canadian Borrowers may, at their option and from time
to time during the Canadian Revolving Period, request an offer to
extend the Canadian Revolving Period by delivering to Canadian
Agent a Request for an Offer of Extension not more than ninety
days and not less than forty-five days prior to the then current
Conversion Date. Canadian Agent shall forthwith provide a copy
of the Request for an Offer of Extension to each of the Lenders.
Upon receipt from Canadian Agent of an executed Request for an
Offer of Extension, each Lender shall, within thirty days after
the date of such Lender's receipt of such request from Canadian
Agent, either:
(i) notify Canadian Agent of its acceptance of the
Request for an Offer of Extension, and the terms and
conditions, if any, upon which such Lender is prepared to
extend the Conversion Date; or
(ii) notify Canadian Agent that the Request for an
Offer of Extension has been denied, such notice to forthwith
be forwarded by Canadian Agent to Canadian Borrowers to
allow Canadian Borrowers to seek a replacement lender
pursuant to Section 1.8 (any Lender giving notice of such
denial is herein called a "Non-Accepting Lender"). The
failure of a Lender to so notify Canadian Agent within such
thirty day period shall be deemed to be notification by such
Lender to Canadian Agent that such Lender has denied
Canadian Borrowers' Request for an Offer of Extension.
(b) Provided that all Lenders provide notice to Canadian
Agent under Section 1.6(a) that they accept the Request for an
Offer of Extension, or if there are Non-Accepting Lenders, such
Lenders shall have been repaid pursuant to Section 1.8 or
replacement lenders shall have become parties hereto pursuant to
Section 1.8 and shall have accepted the Request for an Offer of
Extension, such acceptance having common terms and conditions,
Canadian Agent shall deliver to Canadian Borrowers an Offer of
Extension incorporating the said terms and conditions. Such
offer shall be open for acceptance by Canadian Borrowers until
the fifth Business Day immediately preceding the then current
Conversion Date. Upon written notice by Canadian Borrowers to
Canadian Agent accepting an outstanding Offer of Extension and
agreeing to the terms and conditions, if any, specified therein
(the date of such notice of acceptance in Section 1.6 and 1.8
being called the "Extension Date"), the Conversion Date shall be
extended to the date 364 days from the Extension Date and the
terms and conditions specified in such Offer of Extension shall
be immediately effective.
(c) Canadian Borrowers understand that the consideration of
any Request for an Offer of Extension constitutes an independent
credit decision which each Lender retains the absolute and
unfettered discretion to make and that no commitment in this
regard is hereby given by a Lender and that any offer to extend
the Conversion Date may be on such terms and conditions in
addition to those set out herein as the extending Lenders
stipulate.
Section 1.7. Conversion to Canadian Term Loan. Unless
there is an extension of the Canadian Revolving Period in
accordance with Section 1.6, effective at 11:59 p.m. Toronto,
Ontario time on the day immediately preceding the Conversion
Date, and provided that no Event of Default shall have occurred
and be continuing, (i) each Lender's obligation to make new
Canadian Advances, Canadian Swing Lender's obligation to make new
Canadian Swing Loans, and Canadian LC Issuer's obligation to
issue Letters of Credit hereunder shall be canceled
automatically, and (ii) each Lender's Canadian Loans shall become
term Canadian Loans ("Canadian Term Loans") maturing on the
Canadian Facility Maturity Date.
Section 1.8. Non-Accepting Lender. Provided that Lenders
whose Percentage Shares represent more than 50% but less than
100% of the Canadian Maximum Credit Amount provide notice to
Agent under Section 1.6(a) that they accept the Request for an
Offer of Extension, on notice of Canadian Borrowers to Agent,
Canadian Borrowers shall be entitled to choose any of the
following in respect of each Non-Accepting Lender prior to the
expiration of the Canadian Revolving Period, provided that if
Canadian Borrowers do not make an election prior to the
expiration of the Canadian Revolving Period, Canadian Borrowers
shall be deemed to have irrevocably elected to exercise the
provisions of Section 1.8(b)(ii):
(a) (i) the Non-Accepting Lender's obligations to make
Canadian Advances shall be canceled as of the Extension Date, the
Canadian Maximum Credit Amount shall be reduced by the amount so
canceled, and on or prior to the Extension Date the Canadian
Borrowers shall repay in full all Obligations then outstanding to
the Non-Accepting Lender (as defined in Section 1.6(a)(ii)) , or
(ii) replace the Non-Accepting Lender by reaching satisfactory
arrangements with one or more existing Lenders or new Lenders,
for the purchase, assignment and assumption of all Canadian
Obligations and US Obligations of the Non-Accepting Lender,
provided that any new Lender, with, if necessary, any Affiliate,
shall take a pro rata assignment of both Canadian Obligations and
US Obligations, and such Non-Accepting Lender shall be obligated
to sell such Obligations in accordance with such satisfactory
arrangements; or
(b) Canadian Borrowers may elect to revoke and cancel the
Request for an Offer of Extension by giving notice of such
revocation and cancellation to Agent (which shall promptly notify
the Lenders thereof), and concurrently therewith, shall have the
option to (i) cancel the obligations of Lenders under the
Canadian Agreement and, subject to the notice requirements set
forth in Section 1.6(a) and to the provisions of Article III,
repay in full all Canadian Obligations, or (ii) have the
outstanding Canadian Loans that are not Competitive Bid Loans on
the Conversion Date become term loans as provided in Section 1.7.
In connection with any such replacement of a Lender Party
pursuant to this Section 1.8, the applicable Canadian Borrower
shall pay all costs that would have been due to such Lender Party
pursuant to Section 3.6 if such Lender Party's Canadian Advances
had been prepaid at the time of such replacement.
Section 1.9. Competitive Bid Loans.
(a) Either Canadian Borrower may request that each Canadian
Resident Lender submit Competitive Bids (on a several basis) for
requested maturities of thirty days or more to the applicable
Canadian Borrower on any Business Day during the Canadian
Revolving Period, provided that all Canadian Resident Lenders are
requested to make a Competitive Bid on the same basis at the same
time. In order to request Competitive Bids, the applicable
Canadian Borrower shall deliver by hand or facsimile to Canadian
Agent a Competitive Bid Request, to be received by Canadian Agent
not later than 9:00 a.m., Toronto, Ontario time one Business Day
before the date specified for a proposed Competitive Bid Loan. A
Competitive Bid Request that does not conform substantially to
the format of Exhibit I may be rejected in Canadian Agent's sole
discretion, and Canadian Agent shall promptly notify the
applicable Canadian Borrower of such rejection by facsimile.
After receiving an acceptable Competitive Bid Request, Canadian
Agent shall no later than 12:00 noon, Toronto, Ontario time on
the date such Competitive Bid Request is received by Canadian
Agent, by facsimile deliver to Canadian Resident Lenders an
Invitation to Bid substantially in the form of Exhibit J with
respect thereto.
(b) Each Canadian Resident Lender may, in its sole
discretion, make one or more Competitive Bids to Canadian Agent
responsive to each Competitive Bid Request given by the
applicable Canadian Borrower. Each Competitive Bid by a Canadian
Resident Lender must be received by Canadian Agent by facsimile
not later than 9:00 a.m., Toronto, Ontario time on the date
specified for a proposed Competitive Bid Loan. Multiple bids may
be accepted by Canadian Agent. Competitive Bids that do not
conform substantially to the format of Exhibit K may be rejected
by Canadian Agent after conferring with, and upon the instruction
of, the applicable Canadian Borrower, and Canadian Agent shall
notify the bidding Canadian Resident Lender of such rejection as
soon as practicable. If any Canadian Resident Lender shall elect
not to make a Competitive Bid, such Canadian Resident Lender
shall so notify Canadian Agent by facsimile not later than 9:00
a.m., Toronto, Ontario time, on the date specified for a
Competitive Bid Loan; provided, however, that failure by any
Canadian Resident Lender to give such notice shall not cause such
Canadian Resident Lender to be obligated to make any Competitive
Bid Loan and by such failure such Lender shall be deemed to have
rejected such Competitive Bid. A Competitive Bid submitted by a
Canadian Resident Lender shall be irrevocable.
(c) Promptly, and in no event later than 9:30 a.m.,
Toronto, Ontario time, on the date specified for a proposed
Competitive Bid Loan, Canadian Agent shall notify the applicable
Canadian Borrower by facsimile of all the Competitive Bids made,
the Competitive Bid Rate and the principal amount of each
Competitive Bid Loan in respect of which a Competitive Bid was
made, and the identity of each Canadian Resident Lender that made
each Competitive Bid. Canadian Agent shall send a copy of all
Competitive Bids to the applicable Canadian Borrower for its
records as soon as practicable after completion of the bidding
process.
(d) The applicable Canadian Borrower may, subject only to
the provisions hereof, accept or reject any Competitive Bid. The
applicable Canadian Borrower shall notify Canadian Agent by
facsimile pursuant to a Competitive Bid Accept/Reject Letter
whether and to what extent the applicable Canadian Borrower has
decided to accept or reject any or all of the Competitive Bids,
not later than 10:00 a.m., Toronto, Ontario time, on the date
specified for a proposed Competitive Bid Loan; provided, however,
that:
(i) the failure by the applicable Canadian Borrower to
accept or reject any Competitive Bid within the time period
specified herein shall be deemed to be a rejection of such
Competitive Bid,
(ii) the aggregate amount of the Competitive Bids
accepted by the applicable Canadian Borrower shall not
exceed the principal amount specified in the Competitive Bid
Request,
(iii) the aggregate amount of all outstanding
Canadian Loans and Canadian LC Obligations shall never
exceed the Canadian Maximum Credit Amount,
(iv) if the applicable Canadian Borrower shall accept a
Competitive Bid or Competitive Bids made at a particular
Competitive Bid Rate, but the amount of such Competitive Bid
or Competitive Bids shall cause the total amount of
Competitive Bids to be accepted by the applicable Canadian
Borrower to exceed the amount specified in the Competitive
Bid Request, then the applicable Canadian Borrower shall
accept a portion of such Competitive Bid or Competitive Bids
in an amount equal to the amount specified in the
Competitive Bid Request less the amount of all other
Competitive Bids accepted with respect to such Competitive
Bid Request, which acceptance, in the case of multiple
Competitive Bids at such Competitive Bid Rate, shall be made
pro rata in accordance with the amount of each such
Competitive Bid at such Competitive Bid Rate, and
(v) no Competitive Bid shall be accepted for a
Competitive Bid Loan unless such Competitive Bid Loan is in
a minimum principal amount of C $ 5,000,000 or a higher
integral multiple of C $1,000,000; provided, however, that
if a Competitive Bid Loan must be in an amount less than C
$5,000,000 because of the provisions of clause (iv) above,
such Competitive Bid Loan may be for a minimum of C
$1,000,000 or any higher integral multiple thereof, and in
calculating the pro rata allocation of acceptances or
portions of multiple bids at a particular Competitive Bid
Rate pursuant to clause (iv), the amounts shall be rounded
to integral multiples of C $1,000,000 in a manner which
shall be in the sole and absolute discretion of the
applicable Canadian Borrower.
(e) Promptly on each date the applicable Canadian Borrower
accepts a Competitive Bid, Canadian Agent shall notify each
Canadian Resident Lender whether or not its Competitive Bid has
been accepted (and if so, in what amount and at what Competitive
Bid Rate) by facsimile transmission sent by Canadian Agent, and
each successful bidder will thereupon become bound, subject to
the other applicable conditions hereof, to make the Competitive
Bid Loan in respect of which its Competitive Bid has been
accepted. After completing the notifications referred to in the
immediately preceding sentence, Canadian Agent shall notify each
Canadian Resident Lender of the aggregate principal amount of all
Competitive Bids accepted. Each Canadian Resident Lender which
is to make a Competitive Bid Loan shall, before 11:00 a.m.,
Toronto, Ontario time, on the borrowing date specified in the
Competitive Bid Request applicable thereto, make available to
Canadian Agent in immediately available funds the amount of each
Competitive Bid Loan to be made by such Canadian Resident Lender,
and Canadian Agent shall promptly deposit such funds to an
account designated by the applicable Canadian Borrower. As soon
as practicable thereafter, Canadian Agent shall notify each
Canadian Resident Lender of the aggregate amount of Competitive
Bid Loans advanced, the respective Competitive Bid Interest
Periods thereof and Competitive Bid Rate applicable thereto.
(f) The obligation of the applicable Canadian Borrower to
repay to each Canadian Resident Lender the aggregate amount of
all Competitive Bid Loans made by such Canadian Resident Lender,
together with interest accruing in connection therewith, shall be
evidenced by promissory notes (respectively, such Canadian
Resident Lender's "Competitive Bid Note") made by the applicable
Canadian Borrower payable to the order of such Canadian Resident
Lender in the form of Exhibit M, with appropriate insertions.
The amount of principal owing on any Canadian Resident Lender's
Competitive Bid Note at any given time shall be the aggregate
amount of all Competitive Bid Loans theretofore made by such
Canadian Resident Lender thereunder minus all payments of
principal theretofore received by such Canadian Resident Lender
thereon. Interest on each Competitive Bid Note shall accrue and
be due and payable as provided herein and therein. The
applicable Canadian Borrower shall repay on the final day of the
Competitive Bid Interest Period of each Competitive Bid Loan
(such date being that specified by the applicable Canadian
Borrower for repayment of such Competitive Bid Loan in the
related Competitive Bid Request and such date being no later than
six months after the date of the Competitive Bid Loan) the then
unpaid principal amount of such Competitive Bid Loan. Subject to
Section 1.4(b) and the payment of amounts described in Section
3.6, the applicable Canadian Borrower shall have the right to
prepay any principal amount of any Competitive Bid Loan.
(g) No Competitive Bid Loan shall be made within five
Business Days after the date of any other Competitive Bid Loan,
unless the applicable Canadian Borrower and Canadian Agent shall
mutually agree otherwise. If Canadian Agent shall at any time
elect to submit a Competitive Bid in its capacity as a Canadian
Resident Lender, it shall submit such bid directly to the
applicable Canadian Borrower requesting such Competitive Bid one
quarter of an hour earlier than the latest time at which the
other Canadian Resident Lenders are required to submit their bids
to Canadian Agent.
Section 1.10. Use of Proceeds. Canadian Borrowers shall
use all Canadian Advances and Canadian Swing Loans to pay in full
on the Closing Date all indebtedness outstanding under the
Existing Canadian Agreement and thereafter (i) to finance capital
expenditures, (ii) to refinance Matured Canadian LC Obligations
outstanding under this Agreement, (iii) at Northstar Energy's
option, to repay existing institutional indebtedness listed in
Section 7.1(h), and (iv) to provide working capital for its
operations and for other general business purposes. Canadian
Borrowers shall use all Letters of Credit for its general
corporate purposes. In no event shall the funds from any Canadian
Loan or any Letter of Credit be used directly or indirectly by
any Person for personal, family, household or agricultural
purposes or for the purpose, whether immediate, incidental or
ultimate, of purchasing, acquiring or carrying any "margin stock"
(as such term is defined in Regulation U promulgated by the Board
of Governors of the Federal Reserve System) or to extend credit
to others directly or indirectly for the purpose of purchasing or
carrying any such margin stock. Each Canadian Borrower
represents and warrants that such Canadian Borrower is not
engaged principally, or as one of such Canadian Borrower's
important activities, in the business of extending credit to
others for the purpose of purchasing or carrying such margin
stock.
Section 1.11. Refinancings of Canadian Swing Loans.
Canadian Agent, at any time in its sole and absolute discretion
may (and on the Conversion Date Canadian Agent shall), upon
notice given to each Lender by not later than 11:30 a.m.,
Toronto, Ontario time, on any Business Day, request that each
Lender make a Canadian Prime Rate Loan (or another Type of
Canadian Advance if requested by the applicable Canadian Borrower
in accordance with Section 1.2) in an aggregate amount equal to
its Percentage Share of the aggregate unpaid principal amount of
any outstanding Canadian Swing Loans for the purpose of
refinancing such Canadian Swing Loans (in this section called a
"Refinancing Advance"). In any event, not later than 11:30 a.m.,
Toronto, Ontario time, on the penultimate Business Day of each
calendar month, Canadian Agent will notify each Lender of the
aggregate amount of Canadian Swing Loans which are then
outstanding and the amount of the Refinancing Advance required to
be made by each Lender to refinance such outstanding Canadian
Swing Loans (the aggregate amount of such Refinancing Advance to
be made by each Lender shall equal such Lender's Percentage Share
of such outstanding Canadian Swing Loans). Upon the giving of
notices by Canadian Agent described above, each Lender shall
promptly remit to Canadian Agent such Refinancing Advance in the
manner described above in Section 1.2, so long as (a) Canadian
Agent believed in good faith that all conditions to making the
subject Canadian Swing Loan were satisfied at the time such
Canadian Swing Loan was made, or (b) if the conditions to such
Canadian Swing Loan were not satisfied, the satisfaction of such
conditions have been waived in writing by Required Lenders in
accordance with the provisions of this Agreement (collectively,
the "Refinancing Conditions"). The proceeds of the Refinancing
Advances made pursuant to the preceding sentence shall be paid to
Canadian Agent (and not to either Canadian Borrower) and applied
to the payment of principal of the outstanding Canadian Swing
Loans. If and to the extent any Lender shall not so make its
Refinancing Advance, such Lender and the applicable Canadian
Borrower severally agree to pay to Canadian Agent (for delivery
to Canadian Swing Lender) within three days after demand the
amount of such Refinancing Advance together with interest
thereon, for each day from the date such Refinancing Advance was
required to be made until the date such amount is paid to
Canadian Agent, with interest at (1) the Canadian Prime Rate, if
such Lender is making such payment and (2) the interest rate
applicable at the time to the other new Refinancing Advances, if
a Canadian Borrower is making such repayment; provided that
Canadian Agent gave notice of the terms of the refinancing to
such Lender in accordance with the terms of this Section 1.11.
If neither such Lender nor such Canadian Borrower pays to
Canadian Agent (for delivery to Canadian Swing Lender) such
amount within such three-day period, Canadian Swing Lender shall
in addition to such amount be entitled to recover from such
Lender and from the applicable Canadian Borrower, on demand,
interest on such Refinancing Advance at the Default Rate
applicable thereto, calculated from the date such Refinancing
Advance was required to be made. Each Lender's obligation to
make Refinancing Advances pursuant to this Section shall be
absolute and unconditional and shall not be affected by any
circumstances, including, without limitation, (1) any setoff,
counterclaim, recoupment, defense or other right which such
Lender may have against Canadian Agent, Canadian Borrowers or
anyone else for any reason whatsoever; (2) the occurrence or
continuance of an Event of Default or Default; (3) any adverse
change in the condition (financial or otherwise) of either
Canadian Borrower; (4) any breach of this Agreement by either
Canadian Borrower, Canadian Agent or any Lender, except with
respect to the Refinancing Conditions; or (5) any other
circumstance, happening or event whatsoever, whether or not
similar to any of the foregoing; provided, that in no event shall
a Lender be obligated to make a Refinancing Advance pursuant to
this Section if, after giving effect thereto, the outstanding
principal balance of such Lender's Canadian Advances would exceed
its Percentage Share of the Canadian Maximum Credit Amount.
ARTICLE II - Bankers' Acceptances and Letters of Credit
Section 2.1. Creation of Bankers' Acceptances. Upon
receipt of a Borrowing Notice and subject to the provisions of
this Agreement, each Canadian Resident Lender shall accept, in
accordance with its Percentage Share of the requested Borrowing
from time to time such Bankers' Acceptances as Canadian Borrowers
shall request provided that:
(a) Bankers' Acceptances shall be issued on a Business Day;
(b) each Bankers' Acceptance shall have a term of 30, 60,
90 or 180 days (excluding days of grace), as selected by Canadian
Borrowers in the relevant Borrowing Notice provided that each
Bankers' Acceptance shall mature on a Business Day;
(c) the face amount of each Bankers' Acceptance shall be
not less than C$100,000 and in multiples of C$100,000 for any
amounts in excess thereof; and
(d) each Bankers' Acceptance shall be in a form acceptable
to the Canadian Resident Lenders.
Section 2.2. Terms of Acceptance by the Canadian Resident
Lenders.
(a) Delivery and Payment. Subject to Sections 2.3 and 2.4
and only if a valid appointment pursuant to Section 2.2(e) is not
in place, Canadian Borrowers shall pre-sign and deliver to each
Canadian Resident Lender bankers' acceptance drafts in sufficient
quantity to meet Canadian Borrowers' requirements for anticipated
Borrowings by way of Bankers' Acceptances. The applicable
Canadian Borrower shall, at its option, provide for payment to
Canadian Agent for the benefit of Canadian Resident Lenders of
each Bankers' Acceptance on the date on which a Bankers'
Acceptance matures, either by payment of the full face amount
thereof or through utilization of a Conversion to another Type of
Borrowing in accordance with this Agreement, or through a
combination thereof. Each Canadian Borrower waives presentment
for payment of Bankers' Acceptances by Canadian Resident Lenders
and shall not claim from Canadian Resident Lenders any days of
grace for the payment at maturity of Bankers' Acceptances. Any
amount owing by Canadian Borrowers in respect of any Bankers'
Acceptance which is not paid in accordance with the foregoing,
shall, as and from the date on which such Bankers' Acceptance
matures, be deemed to be outstanding hereunder as a Canadian
Prime Rate Loan.
(b) No Liability. Canadian Agent and Canadian Resident
Lenders shall not be liable for any damage, loss or improper use
of any bankers' acceptance draft endorsed in blank except for any
loss arising by reason of Canadian Agent or a Canadian Resident
Lender failing to use the same standard of care in the custody of
such bankers' acceptance drafts as Canadian Agent or such
Canadian Resident Lender use in the custody of their own property
of a similar nature.
(c) Bankers' Acceptances Purchased by Canadian Resident
Lenders. Where the applicable Canadian Borrower so elects in the
Borrowing Notice or Continuation/Conversion Notice, a Canadian
Resident Lender shall purchase Bankers' Acceptances accepted by
it for an amount equal to the Discount Proceeds.
(d) Marketing. Where the applicable Canadian Borrower so
elects in the Borrowing Notice or Continuation/Conversion Notice,
it shall be responsible for, and shall make its own arrangements
with respect to, the marketing of Bankers' Acceptances.
(e) Power of Attorney. To facilitate the procedures
contemplated in this Agreement, each Canadian Borrower appoints
each Canadian Resident Lender from time to time as the attorney-
in-fact of such Canadian Borrower to execute, endorse and deliver
on behalf of such Canadian Borrower drafts or depository bills in
the form or forms prescribed by such Canadian Resident Lender for
Bankers' Acceptances denominated in Canadian Dollars. Each
Bankers' Acceptance executed and delivered by a Canadian Resident
Lender on behalf of a Canadian Borrower shall be as binding upon
such Canadian Borrower as if it had been executed and delivered
by a duly authorized officer of such Canadian Borrower. The
foregoing appointment shall cease to be effective, in respect of
any Canadian Resident Lender regarding a Canadian Borrower, three
Business Days following receipt by such Canadian Resident Lender
of a written notice from such Canadian Borrower revoking such
appointment (which notice shall be copied to the Canadian Agent);
provided that any such revocation shall not affect Bankers'
Acceptances previously executed and delivered by such Canadian
Resident Lender pursuant to such appointment.
(f) Non-resident Lenders Participation in Borrowing of
Bankers' Acceptances by Making Canadian Dollar Eurodollar Loans.
As part of each Borrowing by way of Bankers' Acceptances from
Canadian Resident Lenders, each Non-resident Lender shall, with
respect to its obligations to fund such Borrowing, make a
Canadian Dollar Eurodollar Loan by advancing Canadian Dollars in
the amount of its Percentage Share of such Borrowing having a
Eurodollar Interest Period that is substantially the same as the
period to maturity of the Bankers' Acceptances that are accepted
in such Borrowing by Canadian Resident Lenders in order that all
Borrowings other than Competitive Bid Loans shall remain pro rata
during the term of this Agreement. Such Canadian Dollar
Eurodollar Loan shall otherwise be made on the terms set forth in
Article I with respect to such Type of Loan.
(g) Canadian Dollars Unavailable to Non-resident Lenders.
In the event that (i) either Canadian Borrower has requested a
Borrowing in Canadian Prime Rate Loans or (ii) the Loans in any
Borrowing are automatically converted to Canadian Prime Rate
Loans, and a Non-resident Lender is unable to obtain Canadian
Dollars with which to fund its Percentage Share of such
Borrowing, such Non-resident Lender may, with respect to its
obligations to fund such Borrowing, make a Canadian Base Rate
Loan in an amount equal to the US Dollar Exchange Equivalent of
its Percentage Share of such Borrowing.
(h) Pro-Rata Treatment of Canadian Advances.
(i) Each Canadian Advance shall be made available by
each Lender and all repayments and reductions in respect
thereof shall be made and applied in a manner so that the
Canadian Advances outstanding hereunder to each Lender will,
to the extent possible, thereafter be pro rata in accordance
with such Lender's Percentage Share. The Canadian Agent is
authorized by each Canadian Borrower and each Lender to
determine, in its sole and unfettered discretion, the
portion of each Canadian Advance and each Type of Canadian
Advance to be made available by each Lender and the
application of repayments and reductions of Canadian
Advances to give effect to the provisions of this Section,
provided that no Lender shall, as a result of any such
determination, have a Percentage Share of the Canadian
Advances which is in excess of its Percentage Share of the
Canadian Maximum Credit Amount.
(ii) In the event it is not practicable to allocate
Bankers' Acceptances to each Lender such that the aggregate
amount of Bankers' Acceptances required to be purchased by
such Lender hereunder is in a whole multiple of C $100,000,
the Canadian Agent is authorized by each Canadian Borrower
and each Lender to make such allocation as the Canadian
Agent determines in its sole and unfettered discretion may
be equitable in the circumstances and, if the aggregate
amount of such Bankers' Acceptances is not a whole multiple
of C $100,000, then the Canadian Agent may allocate (on a
basis considered by it to be equitable) the excess of such
Canadian Advance over the next lowest whole multiple of C
$100,000 to one Lender, which shall purchase a Bankers'
Acceptance with a face amount equal to the excess and having
the same term as the corresponding Bankers' Acceptances. In
no event shall the portion of the outstanding Borrowings by
way of Bankers' Acceptances of a Lender exceed such Lenders'
Percentage Share of the Aggregate Borrowings by way of
Bankers' Acceptances by more than C $100,000 as a result of
such exercise of discretion by the Canadian Agent.
(i) If during the term of any Bankers' Acceptance accepted
by a Lender hereunder the
Applicable Margin changes or an Event of Default occurs and is
continuing, the fee paid to such Lender by the applicable
Borrower pursuant to Section 1.5(d) (in this paragraph called the
"Initial Fee") with respect to such Bankers' Acceptance shall be
recalculated based upon such change in the Applicable Margin or
the existence of such Event of Default for the number of days
during the term of such Bankers' Acceptance that such change is
applicable or such Event of Default exists. If such recalculated
amount is in excess of the Initial Fee then such Canadian
Borrower shall pay to such Lender the amount of such excess, and
if such recalculated amount is less than the Initial Fee, then
the amount of such reduction shall be credited to other amounts
payable by such Canadian Borrower to such Lender.
Section 2.3. General Procedures for Bankers' Acceptances.
(a) Notice. Canadian Borrowers may in the Borrowing Notice
or in a Continuation/Conversion Notice request a Borrowing by way
of Bankers' Acceptances and, if the Canadian Borrower is
responsible for marketing of such Bankers' Acceptances under
Section 2.2(d), by subsequent notice to Canadian Agent provide
Canadian Agent, which shall in turn notify each Canadian Resident
Lender, with information as to the discount proceeds payable by
the purchasers of the Bankers' Acceptances and the party to whom
delivery of the Bankers' Acceptances by each Canadian Resident
Lender is to be made against delivery to each Canadian Resident
Lender of the applicable discount proceeds, but if it does not do
so, Canadian Borrowers shall initiate a telephone call to
Canadian Agent by 10:00 a.m. Toronto, Ontario time on the date of
advance, or the date of the Continuation or Conversion, as
applicable, and provide such information to Canadian Agent. Such
discount proceeds less the fee calculated in accordance with
Section 1.5(d) shall promptly be delivered to the Canadian Agent.
Any such telephone advice shall be subject to Section 1.2 and
shall be confirmed by a written notice of Canadian Borrowers to
Canadian Agent prior to 2:00 p.m. Toronto, Ontario time on the
same day.
(b) Continuations. In the case of a Continuation of
maturing Bankers' Acceptances, issued by a Canadian Resident
Lender, such Canadian Resident Lender, in order to satisfy the
continuing liability of Canadian Borrowers to the Canadian
Resident Lender for the face amount of the maturing Bankers'
Acceptances, shall retain for its own account the Net Proceeds of
each new Bankers' Acceptance issued by it in connection with such
Continuation; and Canadian Borrowers shall, on the maturity date
of the maturing Bankers' Acceptances, pay to Canadian Agent for
the benefit of Canadian Resident Lenders an amount equal to the
difference between the face amount of the maturing Bankers'
Acceptances and the aggregate Net Proceeds of the new Bankers'
Acceptances.
(c) Conversion from Canadian Prime Rate Loans and Canadian
Dollar Eurodollar Loans. In the case of a Conversion from a
Borrowing of Canadian Prime Rate Loans or Canadian Dollar
Eurodollar Loans into a Borrowing by way of Bankers' Acceptances
to be accepted by a Canadian Resident Lender pursuant to Sections
2.1, 2.2 and 2.3, such Canadian Resident Lender, in order to
satisfy the continuing liability of Canadian Borrowers to it for
the principal amount of the Canadian Prime Rate Loans or Canadian
Dollar Eurodollar Loans being converted, shall retain for its own
account the Discount Proceeds of each new Bankers' Acceptance
issued by it in connection with such Conversion; and Canadian
Borrowers shall, on the date of issuance of the Bankers'
Acceptances, pay to Canadian Agent for the benefit of Canadian
Resident Lenders an amount equal to the difference between the
aggregate principal amount of the Canadian Prime Rate Loans or
Canadian Dollar Eurodollar Loans being converted owing to the
Canadian Resident Lenders and the aggregate Discount Proceeds of
such Bankers' Acceptances.
(d) Conversions to Canadian Loans in Canadian Dollars. In
the case of a Conversion of a Borrowing by way of Bankers'
Acceptances into Canadian Loans, each Canadian Resident Lender,
in order to satisfy the liability of the applicable Canadian
Borrower to it for the face amount of the maturing Bankers'
Acceptances, shall record the obligation of the applicable
Canadian Borrower to it as a Canadian Prime Rate Loan, unless the
applicable Canadian Borrower provide for payment to Canadian
Agent for the benefit of Canadian Resident Lenders of the face
amount of the maturing Bankers' Acceptance in some other manner
acceptable to Canadian Resident Lenders, including Conversion to
another Type of Canadian Loan pursuant to a
Continuation/Conversion Notice.
(e) Conversion from or to Canadian Loans in U.S. Dollars.
In the case of a conversion of Bankers' Acceptances from or to a
Canadian Base Rate Loans or US Dollar Eurodollar Loans, the
parties to which this Section applies shall follow the notice
procedures set out in Section 1.3 and the funding procedures set
out in Section 2.3 (c) and (d) without netting of funds.
(f) Authorization. Canadian Borrowers hereby authorize
each Canadian Resident Lender to complete, stamp, hold, sell,
rediscount or otherwise dispose of all Bankers' Acceptances
accepted by it pursuant to this Section in accordance with the
instructions provided by Canadian Borrowers pursuant to Section
1.3, as applicable.
(g) Depository Notes. The parties agree that in the
administering of Bankers' Acceptances, each Lender may avail
itself of the debt clearing services offered by a clearing house
for depository notes pursuant to the Depository Bills and Notes
Act (Canada) and that the procedures set forth in Article II be
deemed amended to the extent necessary to comply with the
requirements of such debt clearing services.
Section 2.4. Execution of Bankers' Acceptances. The
signatures of any authorized signatory on Bankers' Acceptances
may, at the option of Canadian Borrowers, be reproduced in
facsimile and such Bankers' Acceptances bearing such facsimile
signatures shall be binding on Canadian Borrowers as if they had
been manually signed by such authorized signatory.
Notwithstanding that any person whose signature appears on any
Bankers' Acceptance as a signatory may no longer be an authorized
signatory of Canadian Borrowers at the date of issuance of a
Bankers' Acceptance, and notwithstanding that the signature
affixed may be a reproduction only, such signature shall
nevertheless be valid and sufficient for all purposes as if such
authority had remained in force at the time of such issuance and
as if such signature had been manually applied, and any such
Bankers' Acceptance so signed shall be binding on Canadian
Borrowers.
Section 2.5. Escrowed Funds. Upon the occurrence of an
Event of Default and an acceleration of the Canadian Obligations
under Section 8.1 or upon a prepayment permitted under Section
1.4, Canadian Borrowers shall forthwith pay to Canadian Agent for
deposit into an escrow account maintained by and in the name of
Canadian Agent for the benefit of Canadian Resident Lenders in
accordance with their Percentage Shares an amount equal to the
Canadian Resident Lenders' maximum potential liability (as
determined by Canadian Agent) under then outstanding Bankers'
Acceptances (the "Escrow Funds"). The Escrow Funds shall be held
by Canadian Agent for set-off against future Canadian Obligations
of Canadian Borrowers and pending such application shall bear
interest at the rate declared by Canadian Agent from time to time
as that payable by it in respect of deposits for such amount and
for such period relative to the maturity date of the Bankers'
Acceptances, as applicable. If such Event of Default is either
waived or cured in compliance with the terms of this Agreement,
then the Escrow Funds, together with any accrued interest to the
date of release, shall be forthwith released to Canadian
Borrowers.
Section 2.6. Letters of Credit. Subject to the terms and
conditions hereof, any Canadian Borrower may during the Canadian
Revolving Period request Canadian LC Issuer to issue one or more
Letters of Credit denominated in either Canadian Dollars or US
Dollars, provided that, after taking such Letter of Credit into
account:
(a) the Canadian Facility Usage does not exceed the
Canadian Maximum Credit Amount at such time;
(b) the aggregate amount of Canadian LC Obligations arising
from Letters of Credit issued under this Agreement at such time
does not exceed the Canadian LC Sublimit;
(c) the expiration date of such Letter of Credit is prior
to the end of the Canadian Revolving Period;
(d) such Letter of Credit is to be used for general
corporate purposes of such Canadian Borrower;
(e) such Letter of Credit is not directly or indirectly
used to assure payment of or otherwise support any Indebtedness
of any Person other than Indebtedness of any Restricted Person
permitted by this Agreement;
(f) the issuance of such Letter of Credit will be in
compliance with all applicable governmental restrictions,
policies, and guidelines and will not subject Canadian LC Issuer
to any cost which is not reimbursable under Article III;
(g) the form and terms of such Letter of Credit are
acceptable to Canadian LC Issuer in its reasonable discretion;
and
(h) all other conditions in this Agreement to the issuance
of such Letter of Credit have been satisfied.
Canadian LC Issuer will honor any such request if the foregoing
conditions (a) through (h) (in this Section 2.6 called the "LC
Conditions") have been met as of the date of issuance of such
Letter of Credit. Canadian LC Issuer may choose to honor any
such request for any other Letter of Credit but has no obligation
to do so and may refuse to issue any other requested Letter of
Credit for any reason which Canadian LC Issuer in its sole
discretion deems relevant.
Section 2.7. Requesting Letters of Credit. The applicable
Canadian Borrower must make written application for any Letter of
Credit at least three Business Days before the date on which the
applicable Canadian Borrower desires for Canadian LC Issuer to
issue such Letter of Credit. By making any such written
application the applicable Canadian Borrower shall be deemed to
have represented and warranted that the LC Conditions described
in Section 2.6 will be met as of the date of issuance of such
Letter of Credit. Each such written application for a Letter of
Credit must be made in writing on Canadian LC Issuer's standard
form of Letter of Credit Application, the terms and provisions of
which are hereby incorporated herein by reference (or in such
other form as may mutually be agreed upon by Canadian LC Issuer
and the applicable Canadian Borrower). Three Business Days after
the LC Conditions for a Letter of Credit have been met as
described in Section 2.6 (or if Canadian LC Issuer otherwise
desires to issue such Letter of Credit), Canadian LC Issuer will
issue such Letter of Credit at Canadian LC Issuer's office in
Toronto, Ontario. If any provisions of any LC Application
conflict with any provisions of this Agreement, the provisions of
this Agreement shall govern and control.
Section 2.8. Reimbursement and Participations.
(a) Reimbursement by Canadian Borrowers. Each Matured
Canadian LC Obligation arising from a Letter of Credit issued
under the Canadian Agreement shall constitute Canadian Prime Rate
Loans made by Canadian LC Issuer to the applicable Canadian
Borrower even if any condition precedent to the making of such a
Loan shall not have been satisfied. Each Lender shall (in all
circumstances and without set-off or counterclaim) purchase from
Canadian LC Issuer its Percentage Share of such Canadian Prime
Rate Loans and pay to Canadian LC Issuer on demand on the date on
which such Matured LC Obligation arises, in immediately available
funds at Canadian LC Issuer's address for notices hereunder, such
Lender's Percentage Share of such Matured Canadian LC Obligation.
Each Lender's obligation to pay Canadian LC Issuer pursuant to
the terms of this subsection is irrevocable and unconditional.
If any amount required to be paid by any Lender to Canadian LC
Issuer pursuant to this subsection is paid by such Lender to
Canadian LC Issuer within three Business Days after the date such
payment is due, Canadian LC Issuer shall in addition to such
amount be entitled to recover from such Lender, on demand,
interest thereon calculated from such due date at the Canadian
Prime Rate. If any amount required to be paid by any Lender to
Canadian LC Issuer pursuant to this subsection is not paid by
such Lender to Canadian LC Issuer within three Business Days
after the date such payment is due, Canadian LC Issuer shall in
addition to such amount be entitled to recover from such Lender,
on demand, interest thereon calculated from such due date at the
Default Rate.
(b) Calculations. A written advice setting forth in
reasonable detail the amounts owing under this section, submitted
by Canadian LC Issuer to Canadian Borrowers or any Lender from
time to time, shall be conclusive, absent manifest error, as to
the amounts thereof.
Section 2.9. Letter of Credit Fees. In consideration of
Canadian LC Issuer's issuance of any Letter of Credit, the
applicable Canadian Borrower agrees to pay (a) to Canadian LC
Issuer for its own account, a letter of credit fronting fee at a
rate equal to 12.5 Basis Points per annum multiplied by the face
amount of such Letter of Credit, payable on the date of issuance,
and (b) to Canadian Agent, for the account of all Lenders in
accordance with their respective Percentage Shares, a letter of
credit issuance fee calculated by applying the Applicable Margin
to the face amount of all Letters of Credit outstanding on each
day, payable in arrears on the last day of each Fiscal Quarter.
In addition, the applicable Canadian Borrower will pay to LC
Issuer its standard drawing and other processing fees upon any
drawing under a Letter of Credit.
Section 2.10. No Duty to Inquire.
(a) Drafts and Demands. Canadian LC Issuer is authorized
and instructed to accept and pay drafts and demands for payment
under any Letter of Credit without requiring, and without
responsibility for, any determination as to the existence of any
event giving rise to said draft, either at the time of acceptance
or payment or thereafter. Canadian LC Issuer is under no duty to
determine the proper identity of anyone presenting such a draft
or making such a demand (whether by tested telex or otherwise) as
the officer, representative or agent of any beneficiary under any
Letter of Credit, and payment by Canadian LC Issuer to any such
beneficiary when requested by any such purported officer,
representative or agent is hereby authorized and approved.
Canadian Borrowers release each Lender Party from, and agree to
hold each Lender Party harmless and indemnified against, any
liability or claim in connection with or arising out of the
subject matter of this section, which indemnity shall apply
whether or not any such liability or claim is in any way or to
any extent caused, in whole or in part, by any negligent act or
omission of any kind by any Lender Party, provided only that no
Lender Party shall be entitled to indemnification for that
portion, if any, of any liability or claim which is proximately
caused by its own individual gross negligence or willful
misconduct, as determined in a final judgment.
(b) Extension of Maturity. If the maturity of any Letter
of Credit is extended by its terms or by Law or governmental
action, if any extension of the maturity or time for presentation
of drafts or any other modification of the terms of any Letter of
Credit is made at the request of any Restricted Person, or if the
amount of any Letter of Credit is increased at the request of any
Restricted Person, this Agreement shall be binding upon all
Restricted Persons with respect to such Letter of Credit as so
extended, increased or otherwise modified, with respect to drafts
and property covered thereby, and with respect to any action
taken by Canadian LC Issuer, Canadian LC Issuer's correspondents,
or any Lender Party in accordance with such extension, increase
or other modification.
(c) Transferees of Letters of Credit. If any Letter of
Credit provides that it is transferable, Canadian LC Issuer shall
have no duty to determine the proper identity of anyone appearing
as transferee of such Letter of Credit, nor shall Canadian LC
Issuer be charged with responsibility of any nature or character
for the validity or correctness of any transfer or successive
transfers, and payment by Canadian LC Issuer to any purported
transferee or transferees as determined by Canadian LC Issuer is
hereby authorized and approved, and Canadian Borrowers release
each Lender Party from, and agree to hold each Lender Party
harmless and indemnified against, any liability or claim in
connection with or arising out of the foregoing, which indemnity
shall apply whether or not any such liability or claim is in any
way or to any extent caused, in whole or in part, by any
negligent act or omission of any kind by any Lender Party,
provided only that no Lender Party shall be entitled to
indemnification for that portion, if any, of any liability or
claim which is proximately caused by its own individual gross
negligence or willful misconduct, as determined in a final
judgment.
Section 2.11. LC Collateral.
(a) Canadian LC Obligations in Excess of Canadian Maximum
Credit Amount. If, after the making of all mandatory prepayments
required under Section 1.4(c), the outstanding Canadian LC
Obligations will exceed Canadian Maximum Credit Amount, then in
addition to prepayment of the entire principal balance of the
Canadian Loans, Canadian Borrowers will immediately pay to
Canadian LC Issuer an amount equal to such excess. Canadian LC
Issuer will hold such amount to apply against the remaining
Canadian LC Obligations outstanding under the Canadian Agreement
(all such amounts held for Canadian LC Obligations being herein
collectively called "LC Collateral") and the other Canadian
Obligations, and such collateral may be applied from time to time
to any Matured Canadian LC Obligations or other Canadian
Obligations which are due and payable. Neither this subsection
nor the following subsection shall, however, limit or impair any
rights which Canadian LC Issuer may have under any other document
or agreement relating to any Letter of Credit, LC Collateral or
Canadian LC Obligation, including any LC Application, or any
rights which any Lender Party may have to otherwise apply any
payments by Canadian Borrowers and any LC Collateral under
Section 3.1.
(b) Acceleration of Canadian LC Obligations. If the
Canadian Obligations or any part thereof become immediately due
and payable pursuant to Section 8.1 then, unless Required Lenders
otherwise specifically elect to the contrary (which election may
thereafter be retracted by Required Lenders at any time), all
Canadian LC Obligations shall become immediately due and payable
without regard to whether or not actual drawings or payments on
the Letters of Credit have occurred, and the applicable Canadian
Borrower in respect of such Canadian LC Obligations shall be
obligated to pay to Canadian LC Issuer immediately an amount
equal to the aggregate Canadian LC Obligations which are then
outstanding.
(c) Investment of LC Collateral. Pending application
thereof, all LC Collateral shall be invested by Canadian LC
Issuer in such Investments as Canadian LC Issuer may choose in
its sole discretion. All interest on (and other proceeds of)
such Investments shall be reinvested or applied to Matured
Canadian LC Obligations or other Canadian Obligations which are
due and payable. When all Canadian Obligations have been
satisfied in full, including all Canadian LC Obligations, all
Letters of Credit have expired or been terminated, and all of
Canadian Borrowers's reimbursement obligations in connection
therewith have been satisfied in full, Canadian LC Issuer shall
release any remaining LC Collateral. Canadian Borrowers hereby
assign and grant to Canadian LC Issuer a continuing security
interest in all LC Collateral paid by it to Canadian LC Issuer,
all Investments purchased with such LC Collateral, and all
proceeds thereof to secure its Matured Canadian LC Obligations
and the other Canadian Obligations hereunder, each Canadian Note,
and the other US Loan Documents. Canadian Borrowers further
agree that Canadian LC Issuer shall have all of the rights and
remedies of a secured party under the Personal Property Security
Act (Alberta) with respect to such security interest and that an
Event of Default under this Agreement shall constitute a default
for purposes of such security interest. When Canadian Borrowers
are required to provide LC Collateral for any reason and fail to
do so on the day when required, Canadian LC Issuer may without
notice to Canadian Borrowers or any other Restricted Person
provide such LC Collateral (whether by transfers from other
accounts maintained with Canadian LC Issuer, or otherwise) using
any available funds of Canadian Borrowers or any other Person
also liable to make such payments.
ARTICLE III - Payments to Lenders
Section 3.1. General Procedures. Each Canadian Borrower
will make each payment which it owes under the Canadian Loan
Documents to Canadian Agent in Toronto, Canada, if such payment
is being made in Canadian Dollars, or to the US Account, if such
payment is being made in US Dollars, in each case for the account
of the Lender Party to whom such payment is owed, without
set-off, deduction or counterclaim, and in immediately available
funds, provided that any such payment may be made net of any
deduction or withholding for or on account of any withholding tax
which such Canadian Borrower is required at Law to withhold or
deduct except as otherwise provided in Section 3.2(d). Each such
payment must be received by Canadian Agent not later than 11:00
a.m., Toronto, Ontario time, on the date such payment becomes due
and payable. Any payment received by Canadian Agent after such
time will be deemed to have been made on the next following
Business Day. Should any such payment become due and payable on
a day other than a Business Day, the maturity of such payment
shall be extended to the next succeeding Business Day, and, in
the case of a payment of principal or past due interest, interest
shall accrue and be payable thereon for the period of such
extension as provided in the Canadian Loan Document under which
such payment is due. Each payment under a Canadian Loan Document
shall be due and payable at the place provided therein and, if no
specific place of payment is provided, shall be due and payable
at the place of payment of Canadian Agent's Canadian Note. When
Canadian Agent collects or receives money on account of the
Canadian Obligations, Canadian Agent shall distribute all money
so collected or received by 2:00 p.m. Toronto, Ontario time on
the Business Day received, if received by 11:00 a.m. Toronto,
Ontario time, otherwise on the day of deemed receipt, and each
Lender Party shall apply all such money so distributed, as
follows:
(a) first, for the payment of all Canadian Obligations
which are then due (and if such money is insufficient to pay all
such Canadian Obligations, first to any reimbursements due
Canadian Agent under Section 6.9 or 10.4, then to any
reimbursement due any other Lender Party under Section 10.4, and
then to the partial payment of all other Canadian Obligations
then due in proportion to the amounts thereof, or as Lender
Parties shall otherwise agree);
(b) then for the prepayment of amounts owing under the
Canadian Loan Documents (other than principal on the Canadian
Notes) if so specified by Canadian Borrowers;
(c) then for the prepayment of principal on the Canadian
Notes that are not Competitive Bid Notes, together with accrued
and unpaid interest on the principal so prepaid; and
(d) last, for the payment or prepayment of any other
Canadian Obligations.
All payments applied to principal or interest on any Canadian
Note shall be applied first to any interest then due and payable,
then to principal then due and payable, and last to any
prepayment of principal and interest in compliance with Sections
1.4 and 2.6. All distributions of amounts described in any of
subsections (b), (c) or (d) above shall be made by Canadian Agent
pro rata to each Lender Party then owed Canadian Obligations
described in such subsection in proportion to all amounts owed to
all Lender Parties which are described in such subsection;
provided that if any Lender then owes payments to Canadian LC
Issuer for the purchase of a participation under Section 2.8(a)
or to Canadian Agent under Section 9.9, any amounts otherwise
distributable under this section to such Lender shall be deemed
to belong to Canadian LC Issuer, or Canadian Agent, respectively,
to the extent of such unpaid payments, and Canadian Agent shall
apply such amounts to make such unpaid payments rather than
distribute such amounts to such Lender.
Section 3.2. Change in Law; Gross Up; Increased Cost and
Reduced Return.
(a) If, after the date hereof, the adoption of any
applicable Law, rule, or regulation, or any change in any
applicable Law, rule, or regulation, or any change in the
interpretation or administration thereof by any Governmental
Authority, central bank, or comparable agency charged with the
interpretation or administration thereof, or compliance by any
Lender Party (or its Applicable Lending Office) with any request
or directive (whether or not having the force of Law) of any such
Governmental Authority, central bank, or comparable agency (the
occurrence of any of the foregoing events being herein referred
to as a "Change in Law"):
(i) shall subject such Lender Party (or its Applicable
Lending Office) to any tax, duty, deduction or any other
charge (other than with respect to Withholding Tax as
defined in Section 3.2(d)) with respect to any Eurodollar
Loans, Bankers' Acceptances or Competitive Bid Loans, or its
obligation to make Eurodollar Loans, accept Bankers'
Acceptances or issue Letters of Credit, or change the basis
of taxation of any amounts payable to such Lender Party (or
its Applicable Lending Office) under this Agreement or its
Canadian Note in respect of any Eurodollar Loans, Bankers'
Acceptances or Competitive Bid Loans other than taxes
(including franchise taxes) imposed on the overall net
income or capital of such Lender Party by the jurisdiction
under the Laws of which such Lender Party (or its Applicable
Lending Office) is organized or is a resident for tax
purposes or any political subdivision thereof;
(ii) shall impose, modify, or deem applicable any
reserve, special deposit, assessment, or similar requirement
(other than the Reserve Requirement utilized in the
determination of the Adjusted US Dollar Eurodollar Rate and
Adjusted Canadian Dollar Eurodollar Rate) relating to any
extensions of credit or other assets of, or any deposits
with or other liabilities or commitments of, such Lender
Party (or its Applicable Lending Office), including the
commitment of such Lender Party hereunder; or
(iii) shall impose on such Lender Party (or its
Applicable Lending Office) or the London interbank market
any other condition affecting this Agreement or its Canadian
Notes or any of such extensions of credit or liabilities or
commitments;
and the result of any of the foregoing is to increase the cost to
such Lender Party (or its Applicable Lending Office) of making,
converting into, continuing, or maintaining any Eurodollar Loans,
Bankers' Acceptances or Competitive Bid Loans or to reduce any
sum received or receivable by such Lender Party (or its
Applicable Lending Office) under this Agreement or its Canadian
Notes with respect to any Eurodollar Loans, Bankers' Acceptances
or Competitive Bid Loans, then the applicable Canadian Borrower
shall pay to such Lender Party on demand such amount or amounts
as will compensate such Lender Party for such increased cost or
reduction. If any Lender Party requests compensation by Canadian
Borrowers under this Section 3.2(a), Canadian Borrowers may, by
notice to such Lender Party (with a copy to Canadian Agent),
suspend the obligation of such Lender Party to make or continue
Canadian Advances of the Type with respect to which such
compensation is requested, or to convert Canadian Advances of any
other Type into Canadian Advances of such Type, until the event
or condition giving rise to such request ceases to be in effect
(in which case the provisions of Section 3.5 shall be
applicable); provided that such suspension shall not affect the
right of such Lender Party to receive the compensation so
requested.
(b) If, after the date hereof, Canadian LC Issuer or any
Lender Party shall have determined that the adoption of any
applicable Law, rule, or regulation regarding capital adequacy or
any change therein or in the interpretation or administration
thereof by any Governmental Authority, central bank, or
comparable agency charged with the interpretation or
administration thereof, or any request or directive regarding
capital adequacy (whether or not having the force of Law) of any
such Governmental Authority, central bank, or comparable agency,
has or would have the effect of reducing the rate of return on
the capital of such Lender Party or any corporation controlling
such Lender Party as a consequence of the obligations of such
Lender Party hereunder to a level below that which such Lender
Party or such corporation could have achieved but for such
adoption, change, request, or directive (taking into
consideration its policies with respect to capital adequacy),
then from time to time upon demand the applicable Canadian
Borrower shall pay to such Lender Party such additional amount or
amounts as will compensate such Lender Party for such reduction,
but only to the extent that such Lender Party has not been
compensated therefor by any increase in the Adjusted US Dollar
Eurodollar Rate or the Adjusted Canadian Dollar Eurodollar Rate;
provided that if such Lender Party fails to give notice to
Canadian Borrowers of any additional costs within ninety (90)
days after it has actual knowledge thereof, such Lender Party
shall not be entitled to compensation for such additional costs
incurred more than ninety (90) days prior to the date on which
notice is given by such Lender Party.
(c) Each Lender Party shall promptly notify Canadian
Borrowers and Canadian Agent of any event of which it has
knowledge, occurring after the date hereof, which will entitle
such Lender Party to compensation pursuant to this Section and
will designate a different Applicable Lending Office if such
designation will avoid the need for, or reduce the amount of,
such compensation and will not, in the judgment of such Lender
Party, be otherwise disadvantageous to it. Any Lender Party
claiming compensation under this Section shall furnish to
Canadian Borrowers and Canadian Agent a statement setting forth
the additional amount or amounts to be paid to it hereunder which
shall be conclusive in the absence of manifest error. In
determining such amount, such Lender Party shall act in good
faith and may use any reasonable averaging and attribution
methods.
(d) If by reason of a Change in Law, Canadian Borrowers
shall be required to withhold and remit withholding taxes in
respect of any principal, interest, or other amount paid or
payable by it to or for the account of any Lender Party hereunder
or under any other Canadian Loan Document (a "Withholding Tax"),
(i) the sum payable shall be increased as necessary so that after
making all required deductions (including deductions applicable
to additional sums payable under this Section 3.2) such Lender
Party receives an amount equal to the sum it would have received
had no such deductions been made, (ii) the applicable Canadian
Borrower shall make such deductions, and (iii) the applicable
Canadian Borrower shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with
applicable Law.
(e) Except as provided in paragraph (d) of this Section
3.2, no Canadian Borrower shall be required to compensate any
Lender Party for any Withholding Taxes which such Canadian
Borrower is required to withhold and remit in respect of any
principal, interest, or other amount paid or payable by it to or
for the account of any Lender Party hereunder or under any other
Canadian Loan Document.
Section 3.3. Limitation on Types of Canadian Loans. If on
or prior to the first day of any Eurodollar Interest Period for
any Eurodollar Loan:
(a) Canadian Agent determines (which determination shall be
conclusive) that by reason of circumstances affecting the
relevant market, adequate and reasonable means do not exist for
ascertaining the US Dollar Eurodollar Rate or the Canadian Dollar
Eurodollar Rate, as applicable, for such Eurodollar Interest
Period; or
(b) the Required Lenders determine (which determination
shall be conclusive) and notify Canadian Agent that the Adjusted
US Dollar Eurodollar Rate or the Adjusted Canadian Dollar
Eurodollar Rate, as applicable, will not adequately and fairly
reflect the cost to the Lenders of funding Eurodollar Loans or
for such Eurodollar Interest Period;
then Canadian Agent shall give Canadian Borrowers prompt notice
thereof specifying the relevant amounts or periods, and so long
as such condition remains in effect, the Lender Parties shall be
under no obligation to make additional Canadian Loans, continue
Eurodollar Loans or convert Canadian Base Rate Loans or Canadian
Dollar Prime Rate Loans into Eurodollar Loans, and Canadian
Borrowers shall, on the last day(s) of the then current
Eurodollar Interest Period(s) for the outstanding Eurodollar
Loans, either prepay such Canadian Loans or convert such Canadian
Loans into Canadian Base Rate Loans, Canadian Prime Rate Loans,
or Bankers' Acceptances in accordance with the terms of this
Agreement.
Section 3.4. Illegality. Notwithstanding any other
provision of this Agreement, in the event that it becomes
unlawful for any Lender Party or its Applicable Lending Office to
make, maintain, or fund Eurodollar Loans hereunder, then such
Lender Party shall promptly notify Canadian Borrowers thereof and
such Lender Party's obligation to make or continue Eurodollar
Loans and to convert BA's, Canadian Base Rate Loans, Canadian
Prime Rate Loans, or Bankers' Acceptances into Eurodollar Loans
shall be suspended until such time as such Lender Party may again
make, maintain, and fund Eurodollar Loans (in which case the
provisions of Section 3.5 shall be applicable).
Section 3.5. Treatment of Affected Loans. If the
obligation of any Lender Party to make a particular Type of Loan
or to continue, or to convert Canadian Loans of any other Type
into, Canadian Loans of a particular Type shall be suspended
pursuant to Sections 3.2 and 3.4 hereof (Canadian Loans of such
Type being herein called "Affected Loans" and such Type being
herein called the "Affected Type"), such Lender Party's Affected
Loans shall be automatically converted into Canadian Base Rate
Loans with respect to US $ Loans or to Canadian Prime Rate Loans
with respect to C $ Loans on the last day(s) of the then current
Interest Period(s) for Affected Loans (or, in the case of a
Conversion required by Section 3.4 hereof, on such earlier date
as such Lender Party may specify to Canadian Borrowers with a
copy to Canadian Agent) and, unless and until such Lender Party
gives notice as provided below that the circumstances specified
in Sections 3.2 or 3.4 hereof that gave rise to such Conversion
no longer exist:
(a) to the extent that such Lender Party's Affected Loans
have been so converted, all payments and prepayments of principal
that would otherwise be applied to such Lender Party's Affected
Loans shall be applied instead to its Canadian Base Rate Loans or
Canadian Prime Rate Loans, as applicable; and
(b) all Canadian Loans that would otherwise be made or
continued by such Lender Party as Canadian Loans of the Affected
Type shall be made or continued instead as Canadian Base Rate
Loans or Canadian Prime Rate Loans, as applicable, and all
Canadian Loans of such Lender Party that would otherwise be
converted into Canadian Loans of the Affected Type shall be
converted instead into (or shall remain as) Canadian Base Rate
Loans or Canadian Prime Rate Loans, as applicable.
If such Lender Party gives notice to Canadian Borrowers (with a
copy to Canadian Agent) that the circumstances specified in
Section 3.2 or 3.4 hereof that gave rise to the Conversion of
such Lender Party's Affected Loans pursuant to this Section no
longer exist (which such Lender Party agrees to do promptly upon
such circumstances ceasing to exist) at a time when Canadian
Loans of the Affected Type made by other Lender Parties are
outstanding, such Lender Party's Canadian Base Rate Loans or
Canadian Prime Rate Loans, as applicable, shall be automatically
converted, on the first day(s) of the next succeeding Interest
Period(s) for such outstanding Canadian Loans of the Affected
Type, to the extent necessary so that, after giving effect
thereto, all Canadian Loans held by the Lender Parties holding
Canadian Loans of the Affected Type and by such Lender Party are
held pro rata (as to principal amounts, Types, and Interest
Periods) in accordance with their Percentage Shares of the
Canadian Maximum Credit Amount.
Section 3.6. Compensation. Upon the request of any Lender
Party, Canadian Borrowers shall pay to such Lender Party such
amount or amounts as shall be sufficient (in the reasonable
opinion of such Lender Party) to compensate it for any loss,
cost, or expense (including loss of anticipated profits) incurred
by it as a result of:
(i) any payment, prepayment, or Conversion of a
Eurodollar Loan or Competitive Bid Loan for any reason
(including, without limitation, the acceleration of the
Canadian Loans pursuant to Section 8.1) on a date other than
the last day of the Interest Period for such Loan; or
(ii) any failure by Canadian Borrowers for any reason
(including, without limitation, the failure of any condition
precedent specified in Article IV to be satisfied) to
borrow, convert, continue, or prepay a Eurodollar Loan on
the date for such borrowing, Conversion, Continuation, or
prepayment specified in the relevant notice of borrowing,
prepayment, Continuation, or Conversion under this
Agreement.
Section 3.7. Change of Applicable Lending Office. Each
Lender Party agrees that, upon the occurrence of any event giving
rise to the operation of Sections 3.2 through 3.5 with respect to
such Lender Party, it will, if requested by Canadian Borrowers,
use reasonable efforts (subject to overall policy considerations
of such Lender Party) to designate another Applicable Lending
Office, provided that such designation is made on such terms that
such Lender Party and its Applicable Lending Office suffer no
economic, legal or regulatory disadvantage, with the object of
avoiding the consequence of the event giving rise to the
operation of any such section. Nothing in this section shall
affect or postpone any of the obligations of Canadian Borrowers
or the rights of any Lender Party provided in Sections 3.2
through 3.5.
Section 3.8. Replacement of Lenders. If any Lender Party
seeks reimbursement for increased costs under Sections 3.2
through 3.5, or if a Canadian Borrower is required to increase
any sum payable under Section 3.2(d), then within ninety (90)
days thereafter -- provided no Event of Default then exists --
Canadian Borrowers shall have the right (unless such Lender Party
withdraws its request for additional compensation) to replace
such Lender Party by requiring such Lender Party to assign its
Canadian Advances, Canadian Notes, Canadian LC Obligations, US
Loans, US Notes, US LC Obligations and its commitments hereunder
and under the US Agreement to an Eligible Transferee reasonably
acceptable to all Borrowers, provided that: all Obligations of
Borrowers owing to such Lender Party being replaced (including
such increased costs, but excluding principal and accrued
interest on the Canadian Notes and the US Notes being assigned)
shall be paid in full to such Lender Party concurrently with such
assignment, and the replacement Eligible Transferee shall
purchase the foregoing by paying to such Lender Party a price
equal to the principal amount thereof plus accrued and unpaid
interest thereon. In connection with any such assignment
Canadian Borrowers, Canadian Agent, US Borrower, US Agent, such
Lender Party and the replacement Eligible Transferee shall
otherwise comply with Section 10.6. Notwithstanding the
foregoing rights of Canadian Borrowers under this section,
however, Canadian Borrowers may not replace any Lender Party
which seeks reimbursement for increased costs under Section 3.2
through 3.5, or to which Canadian Borrowers are required to
increase any sums payable under Section 3.2(d), unless Canadian
Borrowers are at the same time replacing all Lender Parties which
are then seeking such compensation or to which such sums payable
must be increased. In connection with any such replacement of a
Lender Party, the applicable Canadian Borrower shall pay all
costs that would have been due to such Lender Party pursuant to
Section 3.6 if such Lender Party's Canadian Advances had been
prepaid at the time of such replacement.
Section 3.9. Other Taxes.
(a) Canadian Borrowers agree to pay any and all present or
future stamp or documentary taxes and any other excise or
property taxes or charges or similar levies which arise from any
payment made under this Agreement or any other Canadian Loan
Document or from the execution or delivery of, or otherwise with
respect to, this Agreement or any other Canadian Loan Document
(hereinafter referred to as "Other Taxes").
(b) Canadian Borrowers agree to indemnify each Lender Party
for the full amount of Other Taxes (including, without
limitation, any Other Taxes imposed or asserted by any
jurisdiction on amounts payable under this section) paid by such
Lender Party or Canadian Agent (as the case may be) and any
liability (including penalties, interest, and expenses) arising
therefrom or with respect thereto.
(c) If Canadian Borrowers are required to pay additional
amounts to or for the account of any Lender Party pursuant to
this Section 3.9, then such Lender Party will agree to use
reasonable efforts to change the jurisdiction of its Applicable
Lending Office so as to eliminate or reduce any such additional
payment which may thereafter accrue if such change, in the
judgment of such Lender Party, is not otherwise disadvantageous
to such Lender Party.
(d) If a Lender Party is reimbursed for an amount paid by
Canadian Borrowers pursuant to this Section 3.9, it shall
promptly return such amount to Canadian Borrowers.
(e) Within thirty (30) days after the date of any payment
of Other Taxes, Canadian Borrowers shall furnish to Canadian
Agent the original or a certified copy of a receipt evidencing
such payment.
(f) Without prejudice to the survival of any other
agreement of Canadian Borrowers hereunder, the agreements and
obligations of Canadian Borrowers contained in this section shall
survive the termination of this Agreement and the payment in full
of the Canadian Notes.
Section 3.10. Currency Conversion and Currency Indemnity.
(a) Canadian Borrowers and Canadian Guarantor
(collectively, for purposes of this Section 3.10 herein referred
to as "Obligors") shall make payment relative to any Obligation
in the currency (the "Agreed Currency") in which the Obligation
was incurred. If any payment is received on account of any
Obligation in any currency (the "Other Currency") other than the
Agreed Currency (whether voluntarily or pursuant to an order or
judgment or the enforcement thereof or the realization of any
security or the liquidation of such Obligor or otherwise
howsoever), such payment shall constitute a discharge of the
liability of an Obligor hereunder and under the other Canadian
Loan Documents in respect of such Obligation only to the extent
of the amount of the Agreed Currency which the relevant Lender
Parties are able to purchase with the amount of the Other
Currency received by it on the Business Day next following such
receipt in accordance with its normal procedures and after
deducting any premium and costs of exchange.
(b) If, for the purpose of obtaining or enforcing judgment
in any court in any jurisdiction, it becomes necessary to convert
into a particular currency (the "Judgment Currency") any amount
due in the Agreed Currency then the conversion shall be made on
the basis of the rate of exchange prevailing on the next Business
Day following the date such judgment is given and in any event
each Obligor shall be obligated to pay the Lender Parties any
deficiency in accordance with Section 3.10(c). For the foregoing
purposes "rate of exchange" means the rate at which the relevant
Lender Parties, as applicable, in accordance with their normal
banking procedures are able on the relevant date to purchase the
Agreed Currency with the Judgment Currency after deducting any
premium and costs of exchange.
(c) If any Lender Party receives any payment or payments on
account of the liability of an Obligor hereunder pursuant to any
judgment or order in any Other Currency, and the amount of the
Agreed Currency which the relevant Lender Party is able to
purchase on the Business Day next following such receipt with the
proceeds of such payment or payments in accordance with its
normal procedures and after deducting any premiums and costs of
exchange is less than the amount of the Agreed Currency due in
respect of such Obligations immediately prior to such judgment or
order, then Canadian Borrowers on demand shall, and Canadian
Borrowers hereby agree to, indemnify and save such Lender Party
harmless from and against any loss, cost or expense arising out
of or in connection with such deficiency. The agreement of
indemnity provided for in this Section 3.10(c) shall constitute
an obligation separate and independent from all other obligations
contained in this Agreement, shall give rise to a separate and
independent cause of action, shall apply irrespective of any
indulgence granted by the Lender Parties or any of them from time
to time, and shall continue in full force and effect
notwithstanding any judgment or order for a liquidated sum in
respect of an amount due hereunder or under any judgment or
order.
ARTICLE IV - Conditions Precedent to Advances
Section 4.1. Documents to be Delivered. No Lender has any
obligation to make its first Canadian Loan, and Canadian LC
Issuer has no obligation to issue the first Letter of Credit,
unless Canadian Agent shall have received all of the following,
duly executed and delivered and in form, substance and date
satisfactory to Canadian Agent:
(a) This Agreement and any other documents that Lenders are
to execute in connection herewith.
(b) Each Canadian Note.
(c) The Guaranty of Canadian Guarantor.
(d) Certain certificates of Canadian Borrowers including:
(i) An "Omnibus Certificate" of the Secretary or
Assistant Secretary and of the Chairman of the Board,
President, or Vice President - Finance of each Canadian
Borrower, which shall contain the names and signatures of
the officers of such Canadian Borrower authorized to execute
Canadian Loan Documents and which shall certify to the
truth, correctness and completeness of the following
exhibits attached thereto: (1) a copy of resolutions duly
adopted by the Board of Directors of such Canadian Borrower
and in full force and effect at the time this Agreement is
entered into, authorizing the execution of this Agreement
and the other Canadian Loan Documents delivered or to be
delivered in connection herewith and the consummation of the
transactions contemplated herein and therein, (2) a copy of
the charter documents of such Canadian Borrower and all
amendments thereto, certified by the appropriate official of
its jurisdiction of organization, and (3) a copy of any
bylaws of such Canadian Borrower; and
(ii) A "Compliance Certificate" of the Chairman of the
Board or President and of the Vice President - Finance of
each Canadian Borrower, of even date with such Canadian Loan
or such Letter of Credit, in which such officers certify to
the satisfaction of the conditions set out in subsections
(a), (b) and (c) of Section 4.3.
(e) certificate (or certificates) of the due formation,
valid existence and good standing of each Canadian Borrower in
its jurisdiction of organization, issued by the appropriate
official of such jurisdiction.
(f) A favorable opinion of Bennett Jones, counsel for
Restricted Persons, substantially in the form set forth in
Exhibit E and a favorable opinion of Blake, Cassels & Graydon
covering the matters requested by Canadian Agent.
(g) The Initial Financial Statements.
Section 4.2. Additional Conditions Precedent to First
Canadian Loan or First Letter of Credit. No Lender has any
obligation to make its first Canadian Loan, and Canadian LC
Issuer has no obligation to issue the first Letter of Credit,
unless on the date thereof:
(a) All commitment, facility, agency, legal and other fees
required to be paid or
reimbursed to any Lender pursuant to any Canadian Loan Documents
or any commitment agreement heretofore entered into shall have
been paid.
(b) No event which would reasonably be expected to have a
Material Adverse Effect shall have occurred since June 30, 1999.
(c) US Borrower shall have certified to Canadian Agent and
Lenders that the Initial Financial Statements fairly present US
Borrower's Consolidated financial position at the respective
dates thereof and the Consolidated results of US Borrower's
operations and US Borrower's Consolidated cash flows for the
respective periods thereof.
(d) US Borrower shall have certified to Canadian Agent and
Lenders that no Restricted Person has any outstanding Liabilities
of any kind (including contingent obligations, tax assessments,
and unusual forward or long-term commitments) which are, in the
aggregate, material to US Borrower or material with respect to US
Borrower's Consolidated financial condition and not shown in the
Initial Financial Statements or disclosed in the Disclosure
Schedule.
(e) All legal matters relating to the Canadian Loan
Documents and the consummation of the transactions contemplated
thereby shall be satisfactory to Thompson & Knight L.L.P., US
counsel to Canadian Agent, and Blake, Cassels & Graydon, Canadian
counsel to Canadian Agent.
Section 4.3. Additional Conditions Precedent to all
Canadian Loans and Letters of Credit. No Lender has any
obligation to make any Canadian Loan (including its first), and
Canadian LC Issuer has no obligation to issue any Letter of
Credit (including its first), unless the following conditions
precedent have been satisfied:
(a) All representations and warranties made by any
Restricted Person in any Canadian Loan Document shall be true on
and as of the date of such Canadian Loan or the date of issuance
of such Letter of Credit (except to the extent that the facts
upon which such representations are based have been changed by
the extension of credit hereunder) as if such representations and
warranties had been made as of the date of such Canadian Loan or
the date of issuance of such Letter of Credit.
(b) No Default shall exist at the date of such Canadian
Loan or the date of issuance of such Letter of Credit.
(c) The making of such Canadian Loan or the issuance of
such Letter of Credit shall not be prohibited by any Law and
shall not subject any Lender or any LC Issuer to any material
penalty under or pursuant to any such Law.
ARTICLE V - Representations and Warranties
To confirm each Lender's understanding concerning Restricted
Persons and Restricted Persons' businesses, properties and
obligations and to induce each Lender to enter into this
Agreement and to extend credit hereunder, each Canadian Borrower
represents and warrants to each Lender that:
Section 5.1. No Default. No event has occurred and is
continuing which constitutes a Default.
Section 5.2. Organization and Good Standing. Each
Canadian Borrower and each Subsidiary of a Canadian Borrower that
is a Restricted Person is duly organized, validly existing and in
good standing under the Laws of its jurisdiction of organization,
having all powers required to carry on its business and enter
into and carry out the transactions contemplated hereby. Each
Canadian Borrower and each Subsidiary of a Canadian Borrower that
is a Restricted Person is duly qualified, in good standing, and
authorized to do business in all other jurisdictions within
Canada wherein the character of the properties owned or held by
it or the nature of the business transacted by it makes such
qualification necessary except where failure to so qualify would
not have a Material Adverse Effect. Each Canadian Borrower and
each Subsidiary of a Canadian Borrower that is a Restricted
Person has taken all actions and procedures customarily taken in
order to enter, for the purpose of conducting business or owning
property, each jurisdiction outside Canada wherein the character
of the properties owned or held by it or the nature of the
business transacted by it makes such actions and procedures
desirable except where failure to so qualify would not have a
Material Adverse Effect.
Section 5.3. Authorization. Each Canadian Borrower has
duly taken all action necessary to authorize the execution and
delivery by it of the Canadian Loan Documents to which it is a
party and to authorize the consummation of the transactions
contemplated thereby and the performance of its obligations
thereunder. Each Canadian Borrower is duly authorized to borrow
funds hereunder.
Section 5.4. No Conflicts or Consents. The execution and
delivery by each Canadian Borrower and each Subsidiary of a
Canadian Borrower that is a Restricted Person of the Canadian
Loan Documents to which each is a party, the performance by each
of its obligations under such Canadian Loan Documents, and the
consummation of the transactions contemplated by the various
Canadian Loan Documents, do not and will not (i) conflict with
any provision of (A) any Law, (B) the organizational documents or
any unanimous shareholders agreement of any Restricted Person, or
(C) any agreement, judgment, license, order or permit applicable
to or binding upon any Restricted Person unless such conflict
would not reasonably be expected to have a Material Adverse
Effect, or (ii) result in the acceleration of any Indebtedness
owed by any Restricted Person which would reasonably be expected
to have a Material Adverse Effect, or (iii) result in or require
the creation of any Lien upon any assets or properties of any
Restricted Person which would reasonably be expected to have a
Material Adverse Effect, except as expressly contemplated or
permitted in the Canadian Loan Documents. Except as expressly
contemplated in the Canadian Loan Documents no consent, approval,
authorization or order of, and no notice to or filing with, any
Tribunal or third party is required in connection with the
execution, delivery or performance by any Restricted Person of
any Canadian Loan Document or to consummate any transactions
contemplated by the Canadian Loan Documents, unless failure to
obtain such consent would not reasonably be expected to have a
Material Adverse Effect.
Section 5.5. Enforceable Obligations. This Agreement is,
and the other Canadian Loan Documents when duly executed and
delivered will be, legal, valid and binding obligations of each
Restricted Person which is a party hereto or thereto, enforceable
in accordance with their terms except as such enforcement may be
limited by bankruptcy, insolvency or similar Laws of general
application relating to the enforcement of creditors' rights.
Section 5.6. Full Disclosure. No certificate, statement
or other information delivered herewith or heretofore by any
Canadian Borrower or any Subsidiary of a Canadian Borrower that
is a Restricted Person to any Lender in connection with the
negotiation of this Agreement or in connection with any
transaction contemplated hereby contains any untrue statement of
a material fact or omits to state any material fact known to any
such Person (other than industry-wide risks normally associated
with the types of businesses conducted by Restricted Persons)
necessary to make the statements contained herein or therein not
misleading as of the date made or deemed made. There is no fact
known to any such Person (other than industry-wide risks normally
associated with the types of businesses conducted by Restricted
Persons) that has not been disclosed to each Lender in writing
which would reasonably be expected to have a Material Adverse
Effect.
Section 5.7. Litigation. Except as disclosed in the
Initial Financial Statements or in the Disclosure Schedule:
(a) there are no actions, suits or legal, equitable, arbitrative
or administrative proceedings pending, or to the knowledge of any
Canadian Borrower threatened, against any Canadian Borrower or
any Subsidiary of a Canadian Borrower that is a Restricted Person
before any Tribunal which would reasonably be expected to have a
Material Adverse Effect, and (b) there are no outstanding
judgments, injunctions, writs, rulings or orders by any such
Tribunal against any Canadian Borrower which would reasonably be
expected to have a Material Adverse Effect.
Section 5.8. Environmental and Other Laws. Except as
disclosed in the Disclosure Schedule: (a) Canadian Borrowers and
each Subsidiary of a Canadian Borrower that is a Restricted
Person are conducting their businesses in material compliance
with all applicable Laws, including Environmental Laws, and have
and are in compliance with all licenses and permits required
under any such Laws, unless failure to so comply would not
reasonably be expected to have a Material Adverse Effect;
(b) none of the operations or properties of any Canadian
Borrowers and each Subsidiary of a Canadian Borrower that is a
Restricted Person is the subject of federal, provincial or local
investigation evaluating whether any material remedial action is
needed to respond to a release of any Hazardous Materials into
the environment or to the improper storage or disposal (including
storage or disposal at offsite locations) of any Hazardous
Materials, unless such remedial action would not reasonably be
expected to have a Material Adverse Effect; and (c) neither any
Canadian Borrower nor any Subsidiary of a Canadian Borrower that
is a Restricted Person (and to the best knowledge of Canadian
Borrowers, no other Person) has filed any notice under any Law
indicating that any such Person is responsible for the improper
release into the environment, or the improper storage or
disposal, of any material amount of any Hazardous Materials or
that any Hazardous Materials have been improperly released, or
are improperly stored or disposed of, upon any property of any
such Person, unless such failure to so comply would not
reasonably be expected to have a Material Adverse Effect.
Section 5.9. Names and Places of Business. Neither
Canadian Borrower has, during the preceding five years, had, been
known by, or used any other trade or fictitious name, except as
disclosed in the Disclosure Schedule. Except as otherwise
indicated in the Disclosure Schedule, the chief executive office
and principal place of business of each Canadian Borrower is (and
for the preceding five years have been) located at the address of
such Canadian Borrower set out on the signature pages hereto.
Except as indicated in the Disclosure Schedule, no Canadian
Borrower or any Subsidiary of a Canadian Borrower that is a
Restricted Person has any other office or place of business.
Section 5.10. Canadian Borrowers' Subsidiaries. No
Canadian Borrower presently has any Subsidiary or owns any stock
in any other corporation or association except those listed in
the Disclosure Schedule. Neither any Canadian Borrower nor any
of its Restricted Subsidiaries is a member of any general or
limited partnership, limited liability company, joint venture or
association of any type whatsoever except (a) those listed in the
Disclosure Schedule, (b) associations, joint ventures or other
relationships (i) which are established pursuant to a standard
form operating agreement or similar agreement or which are
partnerships for purposes of federal income taxation only,
(ii) which are not corporations or partnerships (or subject to
the Uniform Partnership Act) under applicable state Law, and
(iii) whose businesses are limited to the exploration,
development and operation of oil, gas or mineral properties,
pipelines or gathering systems, transportation and related
facilities and interests owned directly by the parties in such
associations, joint ventures or relationships, and (c)
associations, joint ventures or other relationships (i) which are
not corporations or partnerships under applicable provincial Law,
and (ii) whose businesses are limited to the exploration,
development and operation of oil, gas or mineral properties,
pipelines or gathering systems, transportation and related
facilities and interests owned directly by the parties in such
associations, joint ventures or relationships. Each Canadian
Borrower owns, directly or indirectly, the equity interest in
each of its Subsidiaries which is indicated in the Disclosure
Schedule.
Section 5.11. Title to Properties; Licenses. Each Canadian
Borrower and each Subsidiary of a Canadian Borrower that is a
Restricted Person has good and defensible title to all of its
material properties and assets, free and clear of all Liens other
than Permitted Liens and of all impediments to the use of such
properties and assets in such Person's business except to the
extent failure to have such title would not have a Material
Adverse Effect. Each Canadian Borrower and each Subsidiary of a
Canadian Borrower that is a Restricted Person possesses all
licenses, permits, franchises, patents, copyrights, trademarks
and trade names, and other intellectual property (or otherwise
possesses the right to use such intellectual property without
violation of the rights of any other Person) which are necessary
to carry out its business as presently conducted and as presently
proposed to be conducted hereafter, and no such Person is in
violation in any material respect of the terms under which it
possesses such intellectual property or the right to use such
intellectual property except to the extent failure to possess
such licenses, permits, franchises, and intellectual property
would not have a Material Adverse Effect.
Section 5.12. Solvency. Upon giving effect to the issuance
of the Canadian Notes, the execution of the Canadian Loan
Documents by Canadian Borrowers and the consummation of the
transactions contemplated hereby, each Canadian Borrower will be
solvent (as such term is used in applicable bankruptcy,
liquidation, receivership, insolvency or similar Laws).
Section 5.13. Year 2000 Compliance. Each Canadian Borrower
has (a) initiated a review and assessment of all areas within its
and each of its Subsidiaries' business and operations (including
those affected by suppliers and vendors) that could be adversely
affected by the "Year 2000 Problem" (that is, the risk that
computer applications used by such Canadian Borrower and its
Subsidiaries may be unable to recognize and perform properly date-
sensitive functions involving certain dates prior to and any date
after December 31, 1999), (b) developed a plan and timeline for
addressing the Year 2000 Problem on a timely basis, and (c) to
date, implemented that plan in accordance with that timetable.
Each Canadian Borrower reasonably believes that all computer
applications (including those of its suppliers and vendors) that
are material to its or any of its Subsidiaries' business and
operations will on a timely basis be able to perform properly
date-sensitive functions for all dates before and after January
1, 2000 (that is, be "Year 2000 compliant"), except to the extent
that a failure to do so would not reasonably be expected to have
a Material Adverse Effect.
ARTICLE VI - Affirmative Covenants of Canadian Borrowers
To conform with the terms and conditions under which each
Lender is willing to have credit outstanding to each Canadian
Borrower, and to induce each Lender to enter into this Agreement
and extend credit hereunder, each Canadian Borrower warrants,
covenants and agrees that until the full and final payment of the
Obligations and the termination of this Agreement, unless
Required Lenders have previously agreed otherwise:
Section 6.1. Payment and Performance. Each Canadian
Borrower will pay all amounts due by it under the Canadian Loan
Documents in accordance with the terms thereof and will observe,
perform and comply with every covenant, term and condition
expressed or implied in the Canadian Loan Documents to be binding
upon it. Each Canadian Borrower will cause each of its
Subsidiaries which is a Restricted Person to observe, perform and
comply with every such term, covenant and condition in any Loan
Document.
Section 6.2. Books, Financial Statements and Reports.
Each Canadian Borrower will at all times maintain full and
accurate books of account and records. Each Canadian Borrower
will maintain and will cause its Subsidiaries to maintain a
standard system of accounting, will maintain its Fiscal Year, and
will furnish (or will cause to be furnished) the following
statements and reports to each Lender Party at Canadian
Borrowers' expense:
(a) As soon as available, and in any event within ninety
(90) days after the end of each Fiscal Year, complete
Consolidated financial statements of US Borrower together with
all notes thereto, prepared in reasonable detail in accordance
with US GAAP, together with an unqualified opinion, based on an
audit using generally accepted auditing standards, by KPMG Peat
Marwick L.L.P., or other independent certified public accountants
selected by US Borrower and acceptable to US Agent, stating that
such Consolidated financial statements have been so prepared.
These financial statements shall contain a Consolidated balance
sheet as of the end of such Fiscal Year and Consolidated
statements of earnings, of cash flows, and of changes in owners'
equity for such Fiscal Year, each setting forth in comparative
form the corresponding figures for the preceding Fiscal Year. In
addition, within ninety (90) days after the end of each Fiscal
Year each Canadian Borrower will furnish to Canadian Agent and
each Lender a certificate in the form of Exhibit D signed by the
President, Senior Vice President - Finance, Treasurer or Vice
President - Accounting of US Borrower, stating that such
financial statements are accurate and complete, stating that such
Person has reviewed the Canadian Loan Documents, containing all
calculations required to be made to show compliance or non-
compliance with the provisions of Sections 7.7 and 7.8, and
further stating that there is no condition or event at the end of
such Fiscal Year or at the time of such certificate which
constitutes a Default and specifying the nature and period of
existence of any such condition or event.
(b) As soon as available, and in any event within forty-
five (45) days after the end of each Fiscal Quarter, US
Borrower's Consolidated and consolidating balance sheet and
income statement as of the end of such Fiscal Quarter and a
Consolidated statement of cash flows for the period from the
beginning of the then current Fiscal Year to the end of such
Fiscal Quarter, all in reasonable detail and prepared in
accordance with US GAAP, subject to changes resulting from normal
year-end adjustments. In addition each Canadian Borrower will,
together with each such set of financial statements, furnish a
certificate in the form of Exhibit D signed by the President,
Senior Vice President - Finance, Treasurer or Vice President -
Accounting of such US Borrower stating that such financial
statements are accurate and complete (subject to normal year-end
adjustments), stating that such Person has reviewed the Canadian
Loan Documents, containing all calculations required to be made
to show compliance or non-compliance with the provisions of
Sections 7.7 and 7.8 and further stating that there is no
condition or event at the end of such Fiscal Quarter or at the
time of such certificate which constitutes a Default and
specifying the nature and period of existence of any such
condition or event.
(c) Promptly upon their becoming available, copies of all
financial statements, reports, notices and proxy statements sent
by US Borrower or any of its Subsidiaries that is a Restricted
Person to its shareholders and all registration statements,
prospectuses, periodic reports and other statements and schedules
filed by any such Person with any exchange, any securities
commission or any similar Governmental Authority, including any
information or estimates with respect to US Borrower's oil and
gas business (including its exploration, development and
production activities) which are required to be furnished in such
Canadian Borrower's annual report pursuant to securities
legislation or the rules, policies and requirements of any
Governmental Authority.
Section 6.3. Other Information and Inspections. Each
Canadian Borrower and each Subsidiary of a Canadian Borrower that
is a Restricted Person will furnish to each Lender any
information which Canadian Agent may from time to time reasonably
request concerning any covenant, provision or condition of the
Loan Documents or any matter in connection with such Persons'
businesses and operations. Each Canadian Borrower and each
Subsidiary of a Canadian Borrower that is a Restricted Person
will permit representatives appointed by Canadian Agent
(including independent accountants, auditors, agents, lawyers,
appraisers and any other Persons) to visit and inspect upon prior
written notice during normal business hours any of such
Restricted Person's property, including its books of account,
other books and records, and any facilities or other business
assets, and to make extra copies therefrom and photocopies and
photographs thereof, and to write down and record any information
such representatives obtain, and each Canadian Borrower and each
Subsidiary of a Canadian Borrower that is a Restricted Person
shall permit Canadian Agent or its representatives to investigate
and verify the accuracy of the information furnished to Canadian
Agent or any Lender in connection with the Loan Documents and to
discuss all such matters with its officers, employees and
representatives.
Section 6.4. Notice of Material Events and Change of
Address. Canadian Borrowers will promptly notify each Lender in
writing, stating that such notice is being given pursuant to this
Agreement, of:
(a) the occurrence of any event which would have a Material
Adverse Effect,
(b) the occurrence of any Default,
(c) the acceleration of the maturity of any Indebtedness
owed by any of Canadian Borrowers or any of their Subsidiaries
that are Restricted Persons having a principal balance of more
than US $50,000,000, or of any default by any such Person under
any indenture, mortgage, agreement, contract or other instrument
to which any of them is a party or by which any of them or any of
their properties is bound, if such default would have a Material
Adverse Effect,
(d) the occurrence of any Termination Event,
(e) any claim of US $50,000,000 or more, any notice of
potential liability under any Environmental Laws which might
exceed such amount, or any other material adverse claim asserted
against any of Canadian Borrowers or any of their Subsidiaries
that are Restricted Persons or with respect to any such Person's
properties, and
(f) the filing of any suit or proceeding against any
Canadian Borrowers or any of their Subsidiaries that are
Restricted Person in which an adverse decision would have a
Material Adverse Effect.
Canadian Borrowers will also notify Canadian Agent and Canadian
Agent's counsel in writing promptly in the event that any
Canadian Borrower or any of their Subsidiaries that is a
Restricted Person changes its name or the location of its chief
executive office.
Section 6.5. Maintenance of Properties. Each Canadian
Borrower and each Subsidiary of a Canadian Borrower that is a
Restricted Person will maintain, preserve, protect, and keep all
property used or useful in the conduct of its business in good
condition, and will from time to time make all repairs, renewals
and replacements needed to enable the business and operations
carried on in connection therewith to be promptly and
advantageously conducted at all times except to the extent
failure to do so would not reasonably be expected to have a
Material Adverse Effect.
Section 6.6. Maintenance of Existence and Qualifications.
Each Canadian Borrower and each Subsidiary of a Canadian Borrower
that is a Restricted Person will maintain and preserve its
existence and its rights and franchises in full force and effect
and will qualify to do business in all states or jurisdictions
where required by applicable Law, except where the failure so to
qualify will not have a Material Adverse Effect.
Section 6.7. Payment of Trade Liabilities, Taxes, etc.
Each Canadian Borrower and each Subsidiary of a Canadian Borrower
that is a Restricted Person will (a) timely file all required tax
returns; (b) timely pay all taxes, assessments, and other
governmental charges or levies imposed upon it or upon its
income, profits or property; and (c) maintain appropriate
accruals and reserves for all of the foregoing in accordance with
US GAAP. Such Restricted Person may, however, delay paying or
discharging any of the foregoing so long as it is in good faith
contesting the validity thereof by appropriate proceedings and
has set aside on its books adequate reserves therefor.
Section 6.8. Insurance. Each Canadian Borrower and each
Subsidiary of a Canadian Borrower that is a Restricted Person
will keep or cause to be kept insured in accordance with industry
standards by financially sound and reputable insurers, its
surface equipment and other property of a character usually
insured by similar Persons engaged in the same or similar
businesses.
Section 6.9. Performance on Canadian Borrowers' Behalf.
If either Canadian Borrower or any Subsidiary of a Canadian
Borrower that is a Restricted Person fails to pay any taxes,
insurance premiums, expenses, lawyers' fees or other amounts it
is required to pay under any Canadian Loan Document, Canadian
Agent may pay the same, and shall use its best efforts to give at
least five (5) Business Days notice to Canadian Borrowers prior
to making any such payment; provided, however, that any failure
by Canadian Agent to so notify Canadian Borrowers shall not limit
or otherwise impair Canadian Agent's ability to make any such
payment. Northstar Energy shall immediately reimburse Canadian
Agent for any such payments and each amount paid by Canadian
Agent shall constitute a Canadian Obligation owed hereunder which
is due and payable on the date such amount is paid by Canadian
Agent.
Section 6.10. Interest. Each Canadian Borrower hereby
promises to each Lender Party to pay interest at the Default Rate
applicable to Canadian Base Rate Loans on all Canadian
Obligations (including Canadian Obligations to pay fees or to
reimburse or indemnify any Lender) which such Canadian Borrower
has in this Agreement promised to pay to such Lender Party and
which are not paid when due. Such interest shall accrue from the
date such Canadian Obligations become due until they are paid.
Section 6.11. Compliance with Law. Each Canadian Borrower
and each Subsidiary of a Canadian Borrower that is a Restricted
Person will conduct its business and affairs in compliance with
all Laws applicable thereto except to the extent failure to do so
would not reasonably be expected to have a Material Adverse
Effect.
Section 6.12. Environmental Matters.
(a) Each Canadian Borrower and each Subsidiary of a
Canadian Borrower that is a Restricted Person will comply in all
material respects with all Environmental Laws now or hereafter
applicable to such Restricted Person, as well as all contractual
obligations and agreements with respect to environmental
remediation or other environmental matters, and shall obtain, at
or prior to the time required by applicable Environmental Laws,
all environmental, health and safety permits, licenses and other
authorizations necessary for its operations and will maintain
such authorizations in full force and effect, unless such failure
to so comply would not reasonably be expected to have a Material
Adverse Effect.
(b) will promptly furnish to Canadian Agent all written
notices of violation, orders, claims, citations, complaints,
penalty assessments, suits or other proceedings received by such
Canadian Borrower, or of which it has notice, pending or
threatened against such Canadian Borrower, by any Governmental
Authority with respect to any alleged violation of or non-
compliance with any Environmental Laws or any permits, licenses
or authorizations in connection with its ownership or use of its
properties or the operation of its business which involve a
potential liability or claim in excess of US $50,000,000.
Section 6.13. Bank Accounts; Offset. To secure the
repayment of the Obligations each Canadian Borrower hereby grants
to each Lender a right of offset, each of which shall be in
addition to all other interests, liens, and rights of any Lender
at common Law, under the Loan Documents, or otherwise, and each
of which shall be upon and against (a) any and all moneys,
securities or other property (and the proceeds therefrom) of such
Canadian Borrower now or hereafter held or received by or in
transit to any Lender from or for the account of such Canadian
Borrower, whether for safekeeping, custody, pledge, transmission,
collection or otherwise, (b) any and all deposits (general or
special, time or demand, provisional or final) of such Canadian
Borrower with any Lender, and (c) any other credits and claims of
such Canadian Borrower at any time existing against any Lender,
including claims under certificates of deposit. At any time and
from time to time after the occurrence of any Default, each
Lender is hereby authorized to offset against the Obligations
then due and payable (in either case without notice to such
Canadian Borrower), any and all items herein above referred to.
To the extent that such Canadian Borrower has accounts designated
as royalty or joint interest owner accounts, the foregoing right
of offset shall not extend to funds in such accounts which belong
to, or otherwise arise from payments to such Canadian Borrower
for the account of, third party royalty or joint interest owners.
Section 6.14. Year 2000 Compliance. Each Canadian Borrower
will promptly notify Canadian Agent in the event such Canadian
Borrower discovers or determines that any computer application
(including those of its suppliers and vendors) that is material
to its or any of its Subsidiaries' business and operations that
will not be Year 2000 compliant on a timely basis, except to the
extent that such failure would not reasonably be expected to have
a Material Adverse Effect.
ARTICLE VII - Negative Covenants of Canadian Borrowers
To conform with the terms and conditions under which each
Lender is willing to have credit outstanding to each Canadian
Borrower, and to induce each Lender to enter into this Agreement
and make the Canadian Loans, each Canadian Borrower warrants,
covenants and agrees that until the full and final payment of the
Obligations and the termination of this Agreement, unless
Required Lenders have previously agreed otherwise:
Section 7.1. Indebtedness. Neither any Canadian Borrower
nor any Subsidiary of a Canadian Borrower that is a Restricted
Subsidiary will in any manner owe or be liable for Indebtedness
except:
(a) the Canadian Obligations.
(b) capital lease obligations (excluding oil, gas or
mineral leases) entered into in the ordinary course of such
Restricted Person's business in arm's length transactions at
competitive market rates under competitive terms and conditions
in all respects, provided that such capital lease obligations
required to be paid in any Fiscal Year do not in the aggregate
exceed US $35,000,000 for all Restricted Subsidiaries, whether or
not Subsidiaries of any Canadian Borrower.
(c) unsecured Liabilities owed among Restricted Persons.
(d) guaranties by one Restricted Person of Liabilities owed
by another Restricted Person, if such Liabilities either (i) are
not Indebtedness, or (ii) are allowed under subsections (a), (b)
or (c) of this Section 7.1.
(e) Indebtedness of the Restricted Persons for plugging and
abandonment bonds or for letters of credit issued by any Lender
in place thereof which are required by regulatory authorities in
the area of operations, and Indebtedness of the Restricted
Persons for other bonds or letters of credit issued by any Lender
which are required by such regulatory authorities with respect to
other normal oil and gas operations.
(f) obligations under the Subordinated Devon Oklahoma
Indenture, the Subordinated Devon Oklahoma Debentures and the
Subordinated Devon Oklahoma Guarantee;
(g) non-recourse Indebtedness as to which no Restricted
Person (i) provides any guaranty or credit support of any kind
(including any undertaking, guarantee, indemnity, agreement or
instrument that would constitute Indebtedness) or (ii) is
directly or indirectly liable (as a guarantor or otherwise);
provided, that after giving effect to such Indebtedness
outstanding from time to time, US Borrower is not in violation of
Section 7.7.
(h) the following long-term institutional Indebtedness of
Northstar Energy:
(i) US $150,000,000 indebtedness to The Prudential
Insurance Company of America pursuant to a Note Agreement
dated as of March 2, 1998 including the following guarantees
of such indebtedness: (1) guarantees both dated March 2,
1998 made by Northstar Energy Partnership and David Limited
Partnership; (2) guarantee dated as of July 31, 1998 made by
728098 Alberta Ltd.; and (3) any other guarantees of
Subsidiaries of Northstar Energy executed after the date
hereof pursuant to the terms of such Note Agreement.
(ii) US $75,000,000 indebtedness to certain
institutional investors pursuant to a Note Agreement dated
as of July 19, 1995, as amended from time to time, including
the following guarantees of such indebtedness: (1)
guarantee dated as of July 31, 1998 made by Northstar Energy
Partnership; (2) guarantee dated as of July 31, 1998 made by
728098 Alberta Ltd.; and (3) any other guarantee of
Subsidiaries of Northstar Energy executed after the date
hereof pursuant to the terms of such Note Agreement.
including any refinancing of the above institutional
indebtedness by Northstar Energy, US Borrower or any other
Restricted Person on similar terms taking into account
current market conditions.
(i) Indebtedness that is subordinated to the US Obligations
and the Canadian Obligations on terms acceptable to Required
Lenders.
(j) Indebtedness in the approximate amount of C $4,784,000
owed to Indeck Gas Supply Corporation by Northstar Energy
pursuant to a Gas Sales and Purchase Agreement dated as of March
9, 1989, as heretofore or hereafter amended from time to time.
(k) Acquired Debt.
(l) Indebtedness under Hedging Contracts.
(m) Indebtedness relating to the surety bond and letter of
credit obligations listed on Schedule 2.
(n) miscellaneous items of Indebtedness of all Restricted
Persons (other than US Borrower) not described in subsections (a)
through (m) which do not in the aggregate exceed US $100,000,000
in principal amount at any one time outstanding.
Section 7.2. Limitation on Liens. Except for Permitted
Liens, neither any Canadian Borrower nor any Subsidiary of a
Canadian Borrower that is a Restricted Person will create, assume
or permit to exist any Lien upon any of the properties or assets
which it now owns or hereafter acquires. Neither any Canadian
Borrower nor any Subsidiary of a Canadian Borrower that is a
Restricted Person will allow the filing or continued existence of
any financing statement describing as collateral any assets or
property of such Restricted Person, other than financing
statements which describe only collateral subject to a Lien
permitted under this section and which name as secured party or
lessor only the holder of such Lien.
Section 7.3. Limitation on Mergers. Neither any Canadian
Borrower nor any Subsidiary of a Canadian Borrower that is a
Restricted Person will merge or consolidate with or into any
other Person except that any Subsidiary of US Borrower may be
merged into or consolidated with (a) another Subsidiary of US
Borrower, or (b) US Borrower, so long as US Borrower is the
surviving business entity.
Section 7.4. Limitation on Issuance of Securities by
Subsidiaries of US Borrower. Neither any Canadian Borrower nor
any Subsidiary of a Canadian Borrower that is a Restricted Person
will issue any additional shares of its capital stock, additional
partnership interests or other securities or any options,
warrants or other rights to acquire such additional shares,
partnership interests or other securities except to another
Restricted Person which is a wholly-owned direct or indirect
Subsidiary of US Borrower unless such securities are being issued
to acquire a business, directly or indirectly through the use of
the proceeds of such issuance, and such securities are
convertible into the common shares or similar securities of US
Borrower. In addition, (i) Northstar Energy may issue
"Exchangeable Shares" (as defined in the Restated Articles of
Incorporation of Northstar Energy) upon the terms specified in
the Restated Articles of Incorporation of Northstar Energy as in
effect on the date hereof (in this section called "Exchangeable
Shares"), (ii) Devon Canada may issue exchangeable shares upon
substantially the same terms as such Exchangeable Shares, and
(iii) Northstar Energy may issue stock options to its employees
from time to time to acquire such Exchangeable Shares, provided
that such options are granted under a stock option plan of
Northstar Energy and/or US Borrower. US Borrower shall never own
(directly or indirectly) less than one hundred percent (100%) of
the common shares of each Canadian Borrower.
Section 7.5. Limitation on Restricted Payments. Except as
permitted below in this section, neither any Canadian Borrower
nor any Subsidiary of a Canadian Borrower that is a Restricted
Person shall directly or indirectly (i) make any Restricted
Distribution, or (ii) any Restricted Investment (the above being
herein collectively referred to as "Restricted Payments"), unless
the aggregate amount of Restricted Payments made during any
Fiscal Year never exceeds five percent (5%) of the book value of
the Consolidated Assets of US Borrower.
Section 7.6. Transactions with Affiliates. Neither any
Canadian Borrower nor any Subsidiary of a Canadian Borrower that
is a Restricted Person will engage in any material transaction
with any of its Affiliates on terms which are less favorable in
any material respect to it than those which would have been
obtainable at the time in arm's-length dealing with Persons other
than such Affiliates, provided that such restriction shall not
apply to transactions among such Restricted Persons that are
wholly-owned, directly or indirectly, by US Borrower.
Section 7.7. Funded Debt to Total Capitalization. At the
end of each Fiscal Quarter, the ratio of US Borrower's
Consolidated Total Funded Debt to US Borrower's Total
Capitalization will never exceed sixty-five percent (65%).
ARTICLE VIII - Events of Default and Remedies
Section 8.1. Events of Default. Each of the following
events constitutes an Event of Default under this Agreement:
(a) Any Restricted Person fails to pay any principal
component of any Canadian Obligation when due and payable or
fails to pay any other Canadian Obligation within three (3) days
after the date when due and payable, whether at a date for the
payment of a fixed installment or as a contingent or other
payment becomes due and payable or as a result of acceleration or
otherwise;
(b) Any "default" or "event of default" occurs under any
Canadian Loan Document which defines either such term, and the
same is not remedied within the applicable period of grace (if
any) provided in such Loan Document;
(c) Any Restricted Person fails (other than as referred to
in subsections (a) or (b) above) to (i) duly comply with the
last sentence of Section 7.4 of the Canadian Agreement or (ii)
duly observe, perform or comply with any other covenant,
agreement, condition or provision of any Canadian Loan Document,
and such failure remains unremedied for a period of thirty (30)
days after notice of such failure is given by Canadian Agent to
Canadian Borrower;
(d) Any representation or warranty previously, presently or
hereafter made in writing by or on behalf of any Restricted
Person in connection with any Canadian Loan Document shall prove
to have been false or incorrect in any material respect on any
date on or as of which made; provided, that if such falsity or
lack of correctness is capable of being remedied or cured within
a 30-day period, Canadian Borrowers shall (subject to the other
provisions of this Section 8.1) have a period of 30 days after
written notice thereof has been given to Canadian Borrowers by
Canadian Agent within which to remedy or cure such lack of
correctness, or this Agreement, any Canadian Note, or the
Guaranty executed by Canadian Guarantor is asserted to be or at
any time ceases to be valid, binding and enforceable in any
material respect as warranted in Section 5.5 for any reason other
than its release or subordination by Canadian Agent;
(e) Any Restricted Person (i) fails to duly pay any
Indebtedness in excess of US $50,000,000 constituting principal
or interest owed by it with respect to borrowed money or money
otherwise owed under any note, bond, or similar instrument,
including without limitation the Subordinated Devon Oklahoma
Debentures, the Subordinated Devon Oklahoma Indenture, the
Subordinated Devon Oklahoma Guarantee and the Devon Trust
Securities, or (ii) breaches or defaults in the performance of
any agreement or instrument by which any such Indebtedness is
issued, evidenced, governed, or secured, other than a breach or
default described in clause (i) above, and any such failure,
breach or default results in the acceleration of such
Indebtedness;
(f) Any Change in Control occurs;
(g) Any "Event of Default" occurs under the US Agreement;
and
(h) Any Canadian Borrower or any other Restricted Person
having assets with a book value of at least US $50,000,000:
(i) suffers the entry against it of a judgment, decree
or order for relief by a Tribunal of competent jurisdiction
in an involuntary proceeding commenced under any applicable
bankruptcy, insolvency or other similar Law of any
jurisdiction now or hereafter in effect, including the
Bankruptcy and Insolvency Act (Canada) and the Companies'
Creditors Arrangement Act (Canada), as each are from time to
time amended, or has any such proceeding commenced against
it which remains undismissed for a period of thirty days; or
(ii) commences a voluntary case under any applicable
bankruptcy, insolvency or similar Law now or hereafter in
effect, including the Bankruptcy and Insolvency Act (Canada)
and the Companies' Creditors Arrangement Act (Canada), as
each are from time to time amended; or applies for or
consents to the entry of an order for relief in an
involuntary case under any such Law; or makes a general
assignment for the benefit of creditors; or fails generally
to pay (or admits in writing its inability to pay) its debts
as such debts become due; or takes corporate or other action
to authorize any of the foregoing; or
(iii) suffers the appointment of or taking
possession by a receiver, receiver-manager, liquidator,
assignee, custodian, trustee, sequestrator or similar
official of all or a substantial part of its property in a
proceeding brought against or initiated by it, and such
appointment or taking possession is neither made ineffective
nor discharged within thirty days after the making thereof,
or such appointment or taking possession is at any time
consented to, requested by, or acquiesced to by it; or
(iv) suffers the entry against it of a final judgment
for the payment of money in an amount that exceeds (x) the
valid and collectible insurance in respect thereof or (y)
the amount of an indemnity with respect thereto reasonably
acceptable to the Required Lenders by US $50,000,000 or
more, unless the same is discharged within thirty days after
the date of entry thereof or an appeal or appropriate
proceeding for review thereof is taken within such period
and a stay of execution pending such appeal is obtained; or
(v) suffers a levy of distress or execution or
possession, or a writ or warrant of attachment or any
similar process to be issued by any Tribunal against all or
any part of its property having a book value of at least US
$50,000,000, and such writ or warrant of attachment or any
similar process is not stayed or released within thirty days
after the entry or levy thereof or after any stay is vacated
or set aside.
Upon the occurrence of an Event of Default described in
subsection (h)(i), (h)(ii) or (h)(iii) of this section with
respect to Canadian Borrowers, all of the Canadian Obligations
shall thereupon be immediately due and payable, without demand,
presentment, notice of demand or of dishonor and nonpayment,
protest, notice of protest, notice of intention to accelerate,
declaration or notice of acceleration, or any other notice or
declaration of any kind, all of which are hereby expressly waived
by Canadian Borrowers and each Restricted Person who at any time
ratifies or approves this Agreement. Upon any such acceleration,
any obligation of any Lender to make any further Canadian
Advances, any obligation of Canadian LC Issuer to issue Letters
of Credit hereunder, and any obligation of Canadian Swing Lender
to make any further Canadian Swing Loans shall be permanently
terminated. During the continuance of any other Event of
Default, Canadian Agent at any time and from time to time may
(and upon written instructions from Required Lenders, Canadian
Agent shall), without notice to Canadian Borrowers or any other
Restricted Person, do either or both of the following:
(1) terminate any obligation of Lenders to make Canadian Advances
hereunder, any obligation of Canadian LC Issuer to issue Letters
of Credit hereunder, and any obligation of Canadian Swing Lender
to make Canadian Swing Loans hereunder, and (2) declare any or
all of the Canadian Obligations immediately due and payable, and
all such Canadian Obligations shall thereupon be immediately due
and payable, without demand, presentment, notice of demand or of
dishonor and nonpayment, protest, notice of protest, notice of
intention to accelerate, declaration or notice of acceleration,
or any other notice or declaration of any kind, all of which are
hereby expressly waived by Canadian Borrowers and each Restricted
Person who at any time ratifies or approves this Agreement.
Section 8.2. Remedies. If any Default shall occur and be
continuing, each Lender Party may protect and enforce its rights
under the Canadian Loan Documents by any appropriate proceedings,
including proceedings for specific performance of any covenant or
agreement contained in any Canadian Loan Document, and each
Lender Party may enforce the payment of any Canadian Obligations
due it or enforce any other legal or equitable right which it may
have. All rights, remedies and powers conferred upon Lender
Parties under the Canadian Loan Documents shall be deemed
cumulative and not exclusive of any other rights, remedies or
powers available under the Canadian Loan Documents or at Law or
in equity.
ARTICLE IX - Canadian Agent
Section 9.1. Appointment, Powers, and Immunities. Each
Lender hereby irrevocably appoints and authorizes Canadian Agent
to act as its agent under this Agreement and the other Canadian
Loan Documents with such powers and discretion as are
specifically delegated to Canadian Agent by the terms of this
Agreement and the other Canadian Loan Documents, together with
such other powers as are reasonably incidental thereto. Canadian
Agent (which term as used in this sentence and in Section 9.5 and
the first sentence of Section 9.6 hereof shall include its
Affiliates and its own and its Affiliates' officers, directors,
employees, and agents): (a) shall not have any duties or
responsibilities except those expressly set forth in this
Agreement and shall not be a trustee or fiduciary for any Lender;
(b) shall not be responsible to the Lenders for any recital,
statement, representation, or warranty (whether written or oral)
made in or in connection with any Canadian Loan Document or any
certificate or other document referred to or provided for in, or
received by any of them under, any Canadian Loan Document, or for
the value, validity, effectiveness, genuineness, enforceability,
or sufficiency of any Canadian Loan Document, or any other
document referred to or provided for therein or for any failure
by any Restricted Person or any other Person to perform any of
its obligations thereunder; (c) shall not be responsible for or
have any duty to ascertain, inquire into, or verify the
performance or observance of any covenants or agreements by any
Restricted Person or the satisfaction of any condition or to
inspect the property (including the books and records) of any
Restricted Person or any of its Subsidiaries or Affiliates;
(d) shall not be required to initiate or conduct any litigation
or collection proceedings under any Canadian Loan Document; and
(e) shall not be responsible for any action taken or omitted to
be taken by it under or in connection with any Canadian Loan
Document, except for its own gross negligence or willful
misconduct. Canadian Agent may employ agents and attorneys-in-
fact and shall not be responsible for the negligence or
misconduct of any such agents or attorneys-in-fact selected by it
with reasonable care.
Section 9.2. Reliance by Canadian Agent. Canadian Agent
shall be entitled to rely upon any certification, notice,
instrument, writing, or other communication (including, without
limitation, any thereof by telephone or telecopy) believed by it
to be genuine and correct and to have been signed, sent or made
by or on behalf of the proper Person or Persons, and upon advice
and statements of legal counsel (including counsel for any
Restricted Person), independent accountants, and other experts
selected by Canadian Agent. Canadian Agent may deem and treat
the payee of any Canadian Note as the holder thereof for all
purposes hereof unless and until Canadian Agent receives and
accepts an Assignment and Acceptance executed in accordance with
Section 10.6 hereof. As to any matters not expressly provided
for by this Agreement, Canadian Agent shall not be required to
exercise any discretion or take any action, but shall be required
to act or to refrain from acting (and shall be fully indemnified
and protected in so acting or refraining from acting) upon the
instructions of the Required Lenders, and such instructions shall
be binding on all of the Lenders; provided, however, that
Canadian Agent shall not be required to take any action that
exposes Canadian Agent to personal liability or that is contrary
to any Canadian Loan Document or applicable Law or unless it
shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred
by it by reason of taking any such action.
Section 9.3. Defaults. Canadian Agent shall not be deemed
to have knowledge or notice of the occurrence of a Default or
Event of Default unless Canadian Agent has received written
notice from a Lender or Canadian Borrowers specifying such
Default or Event of Default and stating that such notice is a
"Notice of Default". In the event that Canadian Agent receives
such a notice of the occurrence of a Default or Event of Default,
Canadian Agent shall give prompt notice thereof to the Lenders.
Canadian Agent shall (subject to Section 9.1 hereof) take such
action with respect to such Default or Event of Default as shall
reasonably be directed by the Required Lenders. Notwithstanding
the foregoing, unless and until Canadian Agent shall have
received such directions, Canadian Agent may (but shall not be
obligated to) take such action, or refrain from taking such
action, with respect to such Default or Event of Default as it
shall deem advisable in the best interest of the Lenders.
Section 9.4. Rights as Lender. With respect to its
Percentage Share of the Canadian Maximum Credit Amount and the
Canadian Loans made by it, Canadian Agent (and any successor
acting as Canadian Agent) in its capacity as a Lender hereunder
shall have the same rights and powers hereunder as any other
Lender and may exercise the same as though it were not acting as
Canadian Agent, and the term "Lender" or "Lenders" shall, unless
the context otherwise indicates, include Canadian Agent in its
individual capacity. Canadian Agent (and any successor acting as
Canadian Agent) and its Affiliates may (without having to account
therefor to any Lender) accept deposits from, lend money to, make
Investments in, provide services to, and generally engage in any
kind of lending, trust, or other business with any Restricted
Person or any of its Subsidiaries or Affiliates as if it were not
acting as Canadian Agent, and Canadian Agent (and any successor
acting as Canadian Agent) and its Affiliates may accept fees and
other consideration from any Restricted Person or any of its
Subsidiaries or Affiliates for services in connection with this
Agreement or otherwise without having to account for the same to
the Lenders.
Section 9.5. Indemnification. The Lenders agree to
indemnify Canadian Agent (to the extent not reimbursed under
Section 10.4 hereof, but without limiting the obligations of
Canadian Borrowers under such section) ratably in accordance with
their respective Percentage Shares, for any and all liabilities,
obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses (including legal fees), or disbursements
of any kind and nature whatsoever that may be imposed on,
incurred by or asserted against Canadian Agent (including by any
Lender) in any way relating to or arising out of any Canadian
Loan Document or the transactions contemplated thereby or any
action taken or omitted by Canadian Agent under any Canadian Loan
Document (INCLUDING ANY OF THE FOREGOING ARISING FROM THE
NEGLIGENCE OF CANADIAN AGENT); provided that no Lender shall be
liable for any of the foregoing to the extent they arise from the
gross negligence or willful misconduct of the Person to be
indemnified. Without limitation of the foregoing, each Lender
agrees to reimburse Canadian Agent promptly upon demand for its
ratable share of any costs or expenses payable by Canadian
Borrower under Section 10.4, to the extent that Canadian Agent is
not promptly reimbursed for such costs and expenses by Canadian
Borrowers. The agreements contained in this section shall
survive payment in full of the Canadian Loans and all other
amounts payable under this Agreement.
Section 9.6. Non-Reliance on Canadian Agent and Other
Lenders. Each Lender agrees that it has, independently and
without reliance on Canadian Agent or any other Lender, and based
on such documents and information as it has deemed appropriate,
made its own credit analysis of the Canadian Borrowers and their
Subsidiaries and decision to enter into this Agreement and that
it will, independently and without reliance upon Canadian Agent
or any other Lender, and based on such documents and information
as it shall deem appropriate at the time, continue to make its
own analysis and decisions in taking or not taking action under
the Canadian Loan Documents. Except for notices, reports, and
other documents and information expressly required to be
furnished to the Lenders by Canadian Agent hereunder, Canadian
Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the
affairs, financial condition, or business of any Restricted
Person or any of its Subsidiaries or Affiliates that may come
into the possession of Canadian Agent or any of its Affiliates.
Section 9.7. Rights as Lender. In its capacity as a
Lender, Canadian Agent shall have the same rights and obligations
as any Lender and may exercise such rights as though it were not
Canadian Agent. Canadian Agent may accept deposits from, lend
money to, act as trustee under indentures of, and generally
engage in any kind of business with any Restricted Person or
their Affiliates, all as if it were not Canadian Agent hereunder
and without any duty to account therefor to any other Lender.
Section 9.8. Sharing of Set-Offs and Other Payments. Each
Lender Party agrees that if it shall, whether through the
exercise of rights under Canadian Loan Documents or rights of
banker's lien, set off, or counterclaim against Canadian
Borrowers or otherwise, obtain payment of a portion of the
aggregate Obligations owed to it which, taking into account all
distributions made by Canadian Agent under Section 3.1, causes
such Lender Party to have received more than it would have
received had such payment been received by Canadian Agent and
distributed pursuant to Section 3.1, then (a) it shall be deemed
to have simultaneously purchased and shall be obligated to
purchase interests in the Obligations as necessary to cause all
Lender Parties to share all payments as provided for in Section
3.1, and (b) such other adjustments shall be made from time to
time as shall be equitable to ensure that Canadian Agent and all
Lender Parties share all payments of Obligations as provided in
Section 3.1; provided, however, that nothing herein contained
shall in any way affect the right of any Lender Party to obtain
payment (whether by exercise of rights of banker's lien, set-off
or counterclaim or otherwise) of indebtedness other than the
Obligations. Canadian Borrowers expressly consent to the
foregoing arrangements and agree that any holder of any such
interest or other participation in the Obligations, whether or
not acquired pursuant to the foregoing arrangements, may to the
fullest extent permitted by Law exercise any and all rights of
banker's lien, set-off, or counterclaim as fully as if such
holder were a holder of the Obligations in the amount of such
interest or other participation. If all or any part of any funds
transferred pursuant to this section is thereafter recovered from
the seller under this section which received the same, the
purchase provided for in this section shall be deemed to have
been rescinded to the extent of such recovery, together with
interest, if any, if interest is required pursuant to the order
of a Tribunal order to be paid on account of the possession of
such funds prior to such recovery.
Section 9.9. Investments. Whenever Canadian Agent in good
faith determines that it is uncertain about how to distribute to
Lender Parties any funds which it has received, or whenever
Canadian Agent in good faith determines that there is any dispute
among Lender Parties about how such funds should be distributed,
Canadian Agent may choose to defer distribution of the funds
which are the subject of such uncertainty or dispute. If
Canadian Agent in good faith believes that the uncertainty or
dispute will not be promptly resolved, or if Canadian Agent is
otherwise required to invest funds pending distribution to Lender
Parties, Canadian Agent shall invest such funds pending
distribution; all interest on any such Investment shall be
distributed upon the distribution of such Investment and in the
same proportion and to the same Persons as such Investment. All
moneys received by Canadian Agent for distribution to Lender
Parties (other than to the Person who is Canadian Agent in its
separate capacity as a Lender Party) shall be held by Canadian
Agent pending such distribution solely as Canadian Agent for such
Lender Parties, and Canadian Agent shall have no equitable title
to any portion thereof.
Section 9.10. Benefit of Article IX. The provisions of
this Article (other than the following Section 9.11) are intended
solely for the benefit of Lender Parties, and no Restricted
Person shall be entitled to rely on any such provision or assert
any such provision in a claim or defense against any Lender.
Lender Parties may waive or amend such provisions as they desire
without any notice to or consent of Canadian Borrower or any
Restricted Person.
Section 9.11. Resignation. Canadian Agent may resign at
any time by giving written notice thereof to Lenders and Canadian
Borrowers. Each such notice shall set forth the date of such
resignation. Upon any such resignation, Required Lenders shall
have the right to appoint a successor Canadian Agent and if no
Default or Event of Default has occurred and is continuing,
Required Lenders shall obtain the consent of Canadian Borrowers.
A successor must be appointed for any retiring Canadian Agent,
and such Canadian Agent's resignation shall become effective when
such successor accepts such appointment. If, within thirty days
after the date of the retiring Canadian Agent's resignation, no
successor Canadian Agent has been appointed and has accepted such
appointment, then the retiring Canadian Agent may appoint a
successor Canadian Agent, which shall be a commercial bank
organized or licensed to conduct a banking or trust business
under the Laws of Canada or of any province thereof and if no
Default or Event of Default has occurred and is continuing,
retiring Canadian Agent shall obtain the consent of Canadian
Borrowers. Upon the acceptance of any appointment as Canadian
Agent hereunder by a successor Canadian Agent, the retiring
Canadian Agent shall be discharged from its duties and
obligations under this Agreement and the other Canadian Loan
Documents. After any retiring Canadian Agent's resignation
hereunder the provisions of this Article IX shall continue to
inure to its benefit as to any actions taken or omitted to be
taken by it while it was Canadian Agent under the Canadian Loan
Documents.
Section 9.12. Lenders to Remain Pro Rata. It is the intent
of all parties hereto that, except for Competitive Bid Loans,
Canadian Swing Loans, US Swing Loans and matters related thereto,
the pro rata share of each Lender in the US Obligations and the
Canadian Obligations shall be substantially the same at all times
during the term of this Agreement. Accordingly, the initial
Percentage Share of each Lender in the US Maximum Credit Amount
will be the same as the initial Percentage Share of such Lender
in the Canadian Maximum Credit Amount. All subsequent
assignments and adjustments of the interests of the Lenders in
the US Obligations and the Canadian Obligations will be made so
as to maintain such a pro rata arrangement; provided that for the
purposes of determining these pro rata shares, any Percentage
Share held by any Lender's Affiliates shall be included in
determining the interests of such Lender.
ARTICLE X - Miscellaneous
Section 10.1. Waivers and Amendments; Acknowledgments.
(a) Waivers and Amendments. No failure or delay (whether
by course of conduct or otherwise) by any Lender Party in
exercising any right, power or remedy which such Lender Party may
have under any of the Canadian Loan Documents shall operate as a
waiver thereof or of any other right, power or remedy, nor shall
any single or partial exercise by any Lender Party of any such
right, power or remedy preclude any other or further exercise
thereof or of any other right, power or remedy. No waiver of any
provision of any Canadian Loan Document and no consent to any
departure therefrom shall ever be effective unless it is in
writing and signed as provided below in this section, and then
such waiver or consent shall be effective only in the specific
instances and for the purposes for which given and to the extent
specified in such writing. No notice to or demand on any
Restricted Person shall in any case of itself entitle any
Restricted Person to any other or further notice or demand in
similar or other circumstances. This Agreement and the other
Canadian Loan Documents set forth the entire understanding
between the parties hereto with respect to the transactions
contemplated herein and therein and supersede all prior
discussions and understandings with respect to the subject matter
hereof and thereof, and no waiver, consent, release, modification
or amendment of or supplement to this Agreement or the other
Canadian Loan Documents shall be valid or effective against any
party hereto unless the same is in writing and signed by (i) if
such party is Canadian Borrowers, by Canadian Borrowers, (ii) if
such party is Canadian Agent or Canadian LC Issuer, by such
party, and (iii) if such party is a Lender, by such Lender or by
Canadian Agent on behalf of Lenders with the written consent of
Required Lenders (which consent has already been given as to the
termination of the Canadian Loan Documents as provided in Section
10.10). Notwithstanding the foregoing or anything to the
contrary herein, Canadian Agent shall not, without the prior
consent of Majority Lenders, execute and deliver on behalf of
such Lender any waiver or amendment which would increase the
Canadian Maximum Credit Amount hereunder. Notwithstanding the
foregoing or anything to the contrary herein, Canadian Agent
shall not, without the prior consent of each individual Lender,
execute and deliver on behalf of such Lender any waiver or
amendment which would: (1) waive any of the conditions specified
in Article IV, (2) increase the maximum amount which such Lender
is committed hereunder to lend, (3) reduce any fees payable to
such Lender hereunder, or the principal of, or interest on, such
Lender's Note, (4) postpone any date fixed for any payment of any
such fees, principal or interest, (5) amend the definition herein
of "Required Lenders", "Majority Lenders", or otherwise change
the aggregate amount of Percentage Shares which is required for
Canadian Agent, Lenders or any of them to take any particular
action under the Canadian Loan Documents, (6) release Canadian
Borrowers from their obligation to pay such Lender's Note or
Canadian Guarantor from its guaranty of such payment, or (7)
amend this Section 10.1(a).
(b) Acknowledgments and Admissions. Canadian Borrower
hereby represents, warrants, acknowledges and admits that (i) it
has been advised by counsel in the negotiation, execution and
delivery of the Canadian Loan Documents to which it is a party,
(ii) it has made an independent decision to enter into this
Agreement and the other Canadian Loan Documents to which it is a
party, without reliance on any representation, warranty, covenant
or undertaking by Canadian Agent or any Lender, whether written,
oral or implicit, other than as expressly set out in this
Agreement or in another Canadian Loan Document delivered on or
after the date hereof, (iii) there are no representations,
warranties, covenants, undertakings or agreements by any Lender
as to the Canadian Loan Documents except as expressly set out in
this Agreement or in another Canadian Loan Document delivered on
or after the date hereof, (iv) no Lender has any fiduciary
obligation toward such Canadian Borrower with respect to any
Canadian Loan Document or the transactions contemplated thereby,
(v) the relationship pursuant to the Canadian Loan Documents
between such Canadian Borrower and the other Restricted Persons,
on one hand, and each Lender, on the other hand, is and shall be
solely that of debtor and creditor, respectively, (vi) no
partnership or joint venture exists with respect to the Canadian
Loan Documents between any Restricted Person and any Lender,
(vii) Canadian Agent is not such Canadian Borrower's Canadian
Agent, but Canadian Agent for Lenders, (viii) without limiting
any of the foregoing, Canadian Borrower is not relying upon any
representation or covenant by any Lender, or any representative
thereof, and no such representation or covenant has been made,
that any Lender will, at the time of an Event of Default or
Default, or at any other time, waive, negotiate, discuss, or take
or refrain from taking any action permitted under the Canadian
Loan Documents with respect to any such Event of Default or
Default or any other provision of the Canadian Loan Documents,
and (ix) all Lender Parties have relied upon the truthfulness of
the acknowledgments in this section in deciding to execute and
deliver this Agreement and to become obligated hereunder.
(c) Joint Acknowledgment. This written Agreement and the
other Canadian Loan Documents represent the final agreement
between the parties and may not be contradicted by evidence of
prior, contemporaneous, or subsequent oral agreements of the
parties.
(d) Annual Rates of Interest. For the purposes of the
Interest Act (Canada), whenever interest payable pursuant to this
Agreement is calculated on the basis of a period other than a
calendar year (the "Interest Period"), each rate of interest
determined pursuant to such calculation expressed as an annual
rate is equivalent to such rate as so determined multiplied by
the actual number of days in the calendar year in which the same
is to be ascertained and divided by the number of days in the
Interest Period.
There are no unwritten oral agreements between the parties.
Section 10.2. Survival of Agreements; Cumulative Nature.
All of Restricted Persons' various representations, warranties,
covenants and agreements in the Canadian Loan Documents shall
survive the execution and delivery of this Agreement and the
other Canadian Loan Documents and the performance hereof and
thereof, including the making or granting of the Canadian Loans
and the delivery of the Canadian Notes and the other Canadian
Loan Documents, and shall further survive until all of the
Canadian Obligations are paid in full to each Lender Party and
all of Lender Parties' obligations to Canadian Borrowers are
terminated. All statements and agreements contained in any
certificate or other instrument delivered by any Restricted
Person to any Lender Party under any Canadian Loan Document shall
be deemed representations and warranties by each Canadian
Borrower or agreements and covenants of Canadian Borrower under
this Agreement. The representations, warranties, indemnities,
and covenants made by Restricted Persons in the Canadian Loan
Documents, and the rights, powers, and privileges granted to
Lender Parties in the Canadian Loan Documents, are cumulative,
and, except for expressly specified waivers and consents, no
Canadian Loan Document shall be construed in the context of
another to diminish, nullify, or otherwise reduce the benefit to
any Lender Party of any such representation, warranty, indemnity,
covenant, right, power or privilege. In particular and without
limitation, no exception set out in this Agreement to any
representation, warranty, indemnity, or covenant herein contained
shall apply to any similar representation, warranty, indemnity,
or covenant contained in any other Canadian Loan Document, and
each such similar representation, warranty, indemnity, or
covenant shall be subject only to those exceptions which are
expressly made applicable to it by the terms of the various
Canadian Loan Documents.
Section 10.3. Notices. All notices, requests, consents,
demands and other communications required or permitted under any
Canadian Loan Document shall be in writing, unless otherwise
specifically provided in such Canadian Loan Document (provided
that Canadian Agent may give telephonic notices to the other
Lender Parties), and shall be deemed sufficiently given or
furnished if delivered by personal delivery, by facsimile or
other electronic transmission, by delivery service with proof of
delivery, or by registered Canadian mail, postage prepaid, to
each Canadian Borrower and Restricted Persons at the address of
each Canadian Borrower specified on the signature pages hereto
and to Canadian Agent at its address specified on the signature
pages hereto and to each Lender Party at the address specified on
Annex II (unless changed by similar notice in writing given by
the particular Person whose address is to be changed). Any such
notice or communication shall be deemed to have been given (a) in
the case of personal delivery or delivery service, as of the date
of first attempted delivery during normal business hours at the
address provided herein, (b) in the case of facsimile or other
electronic transmission, upon receipt, or (c) in the case of
registered Canadian mail, five Business Days after deposit in the
mail; provided, however, that no Borrowing Notice shall become
effective until actually received by Canadian Agent.
Section 10.4. Payment of Expenses; Indemnity.
(a) Payment of Expenses. Whether or not the transactions
contemplated by this Agreement are consummated, Northstar Energy
will promptly (and in any event, within 30 days after any invoice
or other statement or notice) pay: (i) all reasonable costs and
expenses incurred by or on behalf of Canadian Agent (including
without limitation, legal fees) in connection with (1) the
negotiation, preparation, execution and delivery of the Canadian
Loan Documents, and any and all consents, waivers or other
documents or instruments relating thereto, (2) the filing,
recording, refiling and re-recording of any Canadian Loan
Documents and any other documents or instruments or further
assurances required to be filed or recorded or refiled or
re-recorded by the terms of any Canadian Loan Document, (3) the
borrowings hereunder and other action reasonably required in the
course of administration hereof, (4) monitoring or confirming (or
preparation or negotiation of any document related to) Canadian
Borrowers' compliance with any covenants or conditions contained
in this Agreement or in any Canadian Loan Document, and (ii) all
reasonable costs and expenses incurred by or on behalf of any
Lender Party (including without limitation, legal fees,
consultants' fees and accounting fees) in connection with the
defense or enforcement of any of the Canadian Loan Documents
(including this section) or the defense of any Lender Party's
exercise of its rights thereunder.
(b) Indemnity. Northstar Energy agrees to indemnify each
Lender Party, upon demand, from and against any and all
liabilities, obligations, claims, losses, damages, penalties,
fines, actions, judgments, suits, settlements, costs, expenses or
disbursements, excluding principal and interest owing by Devon
Canada with respect to Canadian Advances made to Devon Canada,
but including reasonable fees of legal counsel, accountants,
experts and advisors) of any kind or nature whatsoever (in this
section collectively called "liabilities and costs") which to any
extent (in whole or in part) may be imposed on, incurred by, or
asserted against such Lender Party growing out of, resulting from
or in any other way associated with the Canadian Loan Documents
and the transactions and events (including the enforcement or
defense thereof) at any time associated therewith or contemplated
therein (whether arising in contract or in tort or otherwise and
including any violation or noncompliance with any Environmental
Laws by any Lender Party or any other Person or any liabilities
or duties of any Lender Party or any other Person with respect to
Hazardous Materials found in or released into the environment).
The foregoing indemnification shall apply whether or not such
liabilities and costs are in any way or to any extent owed, in
whole or in part, under any claim or theory of strict liability
or caused, in whole or in part by any negligent act or omission
of any kind by any Lender Party,
provided only that no Lender Party shall be entitled under this
section to receive indemnification for that portion, if any, of
any liabilities and costs which is proximately caused by its own
individual gross negligence or willful misconduct, as determined
in a final judgment. If any Person (including Canadian Borrowers
or any of their Affiliates) ever alleges such gross negligence or
willful misconduct by any Lender Party, the indemnification
provided for in this section shall nonetheless be paid upon
demand, subject to later adjustment or reimbursement, until such
time as a court of competent jurisdiction enters a final judgment
as to the extent and effect of the alleged gross negligence or
willful misconduct. As used in this section the term "Lender
Party" shall refer not only to each Person designated as such in
Section 1.1 but also to each director, officer, agent, attorney,
employee, representative and Affiliate of such Person.
Section 10.5. Parties in Interest. All grants, covenants
and agreements contained in the Canadian Loan Documents shall
bind and inure to the benefit of the parties thereto and their
respective successors and assigns; provided, however, that no
Restricted Person may assign or transfer any of its rights or
delegate any of its duties or obligations under any Canadian Loan
Document without the prior consent of Required Lenders. No
Canadian Borrower nor any Affiliates of any Canadian Borrower
shall directly or indirectly purchase or otherwise retire any
Obligations owed to any Lender nor will any Lender accept any
offer to do so, unless each Lender shall have received
substantially the same offer with respect to the same Percentage
Share of the Obligations owed to it. If Canadian Borrower or any
Affiliate of any Canadian Borrower at any time purchases some but
less than all of the Obligations owed to all Lender Parties, such
purchaser shall not be entitled to any rights of any Lender under
the Canadian Loan Documents unless and until Canadian Borrowers
or their Affiliates have purchased all of the Obligations.
Section 10.6. Assignments and Participations.
(a) Each Lender may assign to one or more Eligible
Transferees all or a portion of its rights and obligations under
this Agreement (including, without limitation, all or a portion
of its Canadian Loans, its Note, and its Percentage Share of the
Canadian Maximum Credit Amount); provided, however, that
(i) each such assignment shall be to an Eligible
Transferee;
(ii) together with each such assignment of its rights
and obligations under this Agreement, such Lender shall
assign the same Percentage Share of its rights and
obligations under the US Agreement to the same Eligible
Transferee or an Affiliate of such Eligible Transferee;
(iii) except in the case of such an assignment to
another Lender or an assignment of all of a Lender's rights
and obligations under this Agreement, any partial assignment
of such Lender's rights and obligations under this Agreement
and under the US Agreement shall be in a collective amount
at least equal to US $20,000,000 or an integral multiple of
US $5,000,000 in excess thereof;
(iv) each such assignment by a Lender shall be of a
constant, and not varying, percentage of all of its rights
and obligations under the Canadian Loan Documents; and
(v) the parties to such assignment shall execute and
deliver to Canadian Agent for its acceptance an Assignment
and Acceptance in the form of Exhibit F hereto, together
with any Canadian Note subject to such assignment and a
processing fee of US$3,500.
Upon execution, delivery, and acceptance of such Assignment and
Acceptance, the assignee thereunder shall be a party hereto and,
to the extent of such assignment, have the obligations, rights,
and benefits of a Lender hereunder and the assigning Lender
shall, to the extent of such assignment, relinquish its rights
and be released from its obligations under this Agreement. Upon
the consummation of any assignment pursuant to this section, the
assignor, Canadian Agent and Canadian Borrowers shall make
appropriate arrangements so that, if required, new Canadian Notes
are issued to the assignor and the assignee. If the assignee is
not incorporated under the Laws of Canada or a province thereof,
it shall deliver to Canadian Borrowers and Canadian Agent
certification as to exemption from deduction or withholding of
Taxes in accordance with Section 3.9 of the US Agreement.
(b) Canadian Agent shall maintain at its address referred
to in Section 10.3 a copy of each Assignment and Acceptance
delivered to and accepted by it and a register for the
recordation of the names and addresses of the Lenders and their
Percentage Share of the Canadian Maximum Credit Amount of, and
principal amount of the Canadian Loans owing to, each Lender from
time to time (the "Register"). The entries in the Register shall
be conclusive and binding for all purposes, absent manifest
error, and Canadian Borrowers, Canadian Agent and the Lenders may
treat each Person whose name is recorded in the Register as a
Lender hereunder for all purposes of this Agreement. The
Register shall be available for inspection by Canadian Borrowers
or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
(c) Upon its receipt of an Assignment and Acceptance
executed by the parties thereto, together with any Canadian Note
subject to such assignment and payment of the processing fee,
Canadian Agent shall, if such Assignment and Acceptance has been
completed and is in substantially the form of Exhibit F hereto,
(i) accept such Assignment and Acceptance, (ii) record the
information contained therein in the Register and (iii) give
prompt notice thereof to the parties thereto.
(d) Each Lender may sell participations to one or more
Persons that are Eligible Transferees in all or a portion of its
rights and obligations under this Agreement (including all or a
portion of the Canadian Maximum Credit Amount and its Canadian
Loans); provided, however, that (i) such Lender's obligations
under this Agreement shall remain unchanged, (ii) such Lender
shall remain solely responsible to the other parties hereto for
the performance of such obligations, (iii) the participant shall
be entitled to the benefit of the yield protection provisions
contained in Article III and the right of offset contained in
Section 6.13, and (iv) Canadian Borrowers shall continue to deal
solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement, and such
Lender shall retain the sole right to enforce the obligations of
Canadian Borrowers relating to its Canadian Loans and its
Canadian Note and to approve any amendment, modification, or
waiver of any provision of this Agreement (other than amendments,
modifications, or waivers decreasing the amount of principal of
or the rate at which interest is payable on such Canadian Loans
or Canadian Note, extending any scheduled principal payment date
or date fixed for the payment of interest on such Canadian Loans
or Canadian Note, or extending its Canadian Maximum Credit
Amount).
(e) Notwithstanding any other provision set forth in this
Agreement, any Lender residing in the United States may at any
time assign and pledge all or any portion of its Canadian
Advances and its Canadian Note to any Federal Reserve Bank as
collateral security pursuant to Regulation A and any Operating
Circular issued by such Federal Reserve Bank. No such assignment
shall release the assigning Lender from its obligations
hereunder.
(f) Any Lender may furnish any information concerning
Canadian Borrowers or any of its Subsidiaries in the possession
of such Lender from time to time to assignees and participants
(including prospective assignees and participants), subject,
however, to the provisions of Section 10.7 hereof.
Section 10.7. Confidentiality. Canadian Agent and each
Lender (each, a "Lending Party") agrees to keep confidential any
information furnished or made available to it by Canadian
Borrowers pursuant to this Agreement that is marked confidential;
provided that nothing herein shall prevent any Lending Party from
disclosing such information (a) to any other Lending Party or any
Affiliate of any Lending Party, or any officer, director,
employee, agent, or advisor of any Lending Party or Affiliate of
any Lending Party, (b) to any other Person if reasonably
incidental to the administration of the credit facility provided
herein, (c) as required by any Law, rule, or regulation, (d) upon
the order of any Tribunal, (e) upon the request or demand of any
regulatory agency or authority, (f) that is or becomes available
to the public or that is or becomes available to any Lending
Party other than as a result of a disclosure by any Lending Party
prohibited by this Agreement, (g) in connection with any
litigation to which such Lending Party or any of its Affiliates
may be a party, (h) to the extent necessary in connection with
the exercise of any remedy under this Agreement or any other
Canadian Loan Document, and (i) subject to provisions
substantially similar to those contained in this section, to any
actual or proposed participant or assignee.
Section 10.8. Governing Law; Submission to Process. Except
to the extent that the law of another jurisdiction is expressly
elected in a Canadian Loan Document, the Canadian Loan Documents
shall be deemed contracts and instruments made under the laws of
the Province of Alberta and shall be construed and enforced in
accordance with and governed by the laws of the Province of
Alberta and the laws of Canada applicable thereto, without regard
to principles of conflicts of law. Each of the parties hereby
agrees that any legal action or proceeding against such Canadian
Borrower with respect to this Agreement, the Canadian Notes or
any of the Canadian Loan Documents may be brought in the courts
of the Province of Alberta and each party submits and attorns to,
the non-exclusive jurisdiction of the aforesaid courts. Each
party waives any right to stay or to dismiss any action or
proceeding brought before said courts on the basis of forum non
conveniens. Nothing herein shall affect the right of Lender
Parties to serve process in any other manner permitted by law or
shall limit the right of Lender Parties to bring proceedings
against Canadian Borrowers in the courts of any other
jurisdiction.
Section 10.9. Waiver of Judgment Interest Act (Alberta).
To the extent permitted by Law, the provisions of the Judgment
Interest Act (Alberta) shall not apply to the Canadian Loan
Documents and are hereby expressly waived by Canadian Borrowers.
Section 10.10. Deemed Reinvestment Not Applicable. For the
purposes of the Interest Act (Canada), the principle of deemed
reinvestment of interest shall not apply to any interest
calculation under the Canadian Loan Documents, and the rates of
interest stipulated in this Agreement are intended to be nominal
rates and not effective rates or yields.
Section 10.11. Limitation on Interest. Lender Parties,
Restricted Persons and any other parties to the Canadian Loan
Documents intend to contract in strict compliance with applicable
usury Law from time to time in effect. In furtherance thereof
such Persons stipulate and agree that none of the terms and
provisions contained in the Canadian Loan Documents shall ever be
construed to create a contract to pay, for the use, forbearance
or detention of money, interest in excess of the maximum amount
of interest permitted to be charged by applicable Law from time
to time in effect. Neither any Restricted Person nor any present
or future guarantors, endorsers, or other Persons hereafter
becoming liable for payment of any Obligation shall ever be
liable for unearned interest thereon or shall ever be required to
pay interest thereon in excess of the maximum amount that may be
lawfully charged under applicable Law from time to time in
effect, and the provisions of this section shall control over all
other provisions of the Canadian Loan Documents which may be in
conflict or apparent conflict herewith. Lender Parties expressly
disavow any intention to charge or collect excessive unearned
interest or finance charges in the event the maturity of any
Obligation is accelerated. If (a) the maturity of any Obligation
is accelerated for any reason, (b) any Obligation is prepaid and
as a result any amounts held to constitute interest are
determined to be in excess of the legal maximum, or (c) any
Lender or any other holder of any or all of the Obligations shall
otherwise collect moneys which are determined to constitute
interest which would otherwise increase the interest on any or
all of the Obligations to an amount in excess of that permitted
to be charged by applicable Law then in effect, then all sums
determined to constitute interest in excess of such legal limit
shall, without penalty, be promptly applied to reduce the then
outstanding principal of the related Obligations or, at such
Lender's or holder's option, promptly returned to Canadian
Borrowers or the other payor thereof upon such determination. In
determining whether or not the interest paid or payable, under
any specific circumstance, exceeds the maximum amount permitted
under applicable Law, Lender Parties and Restricted Persons (and
any other payors thereof) shall to the greatest extent permitted
under applicable Law, and in accordance with generally accepted
actuarial practices and principles, (i) characterize any
non-principal payment as an expense, fee or premium rather than
as interest, (ii) exclude voluntary prepayments and the effects
thereof, and (iii) amortize, prorate, allocate, and spread the
total amount of interest throughout the entire contemplated term
of the instruments evidencing the Obligations in accordance with
the amounts outstanding from time to time thereunder and the
maximum legal rate of interest from time to time in effect under
applicable Law in order to lawfully charge the maximum amount of
interest permitted under applicable Law. In no event shall the
aggregate "interest" (as defined in section 347 of the Criminal
Code (Canada)) payable under the Canadian Loan Documents exceed
the maximum effective annual rate of interest on the "credit
advanced" (as defined in that section) permitted under that
section and, if any payment, collection or demand pursuant to
this Agreement in respect of "interest" (as defined in that
section) is determined to be contrary to the provisions of that
section, such payment, collection or demand shall be deemed to
have been made by mutual mistake of Canadian Borrowers, Canadian
Agent and Lenders and the amount of such excess payment or
collection shall be refunded to Canadian Borrowers. For purposes
of the Canadian Loan Documents, the effective annual rate of
interest shall be determined in accordance with generally
accepted actuarial practices and principles over the term
applicable to the Canadian Obligations on the basis of annual
compounding of the lawfully permitted rate of interest and, in
the event of dispute, a certificate of a Fellow of the Canadian
Institute of Actuaries appointed by Canadian Agent shall be prima
facie evidence, for the purposes of such determination.
Section 10.12. Termination; Limited Survival. In their sole
and absolute discretion, Canadian Borrowers may at any time that
no Obligations are owing elect in a written notice delivered to
Canadian Agent to terminate this Agreement. Upon receipt by
Canadian Agent of such a notice, if no Obligations are then owing
this Agreement and all other Canadian Loan Documents shall
thereupon be terminated and the parties thereto released from all
prospective obligations thereunder. Notwithstanding the
foregoing or anything herein to the contrary, any waivers or
admissions made by any Restricted Person in any Canadian Loan
Document, any Obligations under Sections 3.2 through 3.6, and any
obligations which any Person may have to indemnify or compensate
any Lender Party shall survive any termination of this Agreement
or any other Canadian Loan Document. At the request and expense
of Canadian Borrowers, Canadian Agent shall prepare and execute
all necessary instruments to reflect and effect such termination
of the Canadian Loan Documents. Canadian Agent is hereby
authorized to execute all such instruments on behalf of all
Lenders, without the joinder of or further action by any Lender.
Section 10.13. Severability. If any term or provision of
any Canadian Loan Document shall be determined to be illegal or
unenforceable all other terms and provisions of the Canadian Loan
Documents shall nevertheless remain effective and shall be
enforced to the fullest extent permitted by applicable Law.
Section 10.14. Counterparts; Fax. This Agreement may be
separately executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which
when so executed shall be deemed to constitute one and the same
Agreement. This Agreement and the Canadian Loan Documents may be
validly executed and delivered by facsimile or other electronic
transmission.
Section 10.15. Waiver of Jury Trial, Punitive Damages, etc.
Each Canadian Borrower and each Lender Party hereby knowingly,
voluntarily, intentionally, and irrevocably (a) waives, to the
maximum extent not prohibited by Law, any right it may have to a
trial by jury in respect of any litigation based hereon, or
directly or indirectly at any time arising out of, under or in
connection with the Canadian Loan Documents or any transaction
contemplated thereby or associated therewith, before or after
maturity; (b) waives, to the maximum extent not prohibited by
Law, any right it may have to claim or recover in any such
litigation any "Special Damages", as defined below, (c) certifies
that no party hereto nor any representative or agent or counsel
for any party hereto has represented, expressly or otherwise, or
implied that such party would not, in the event of litigation,
seek to enforce the foregoing waivers, and (d) acknowledges that
it has been induced to enter into this Agreement, the other
Canadian Loan Documents and the transactions contemplated hereby
and thereby by, among other things, the mutual waivers and
certifications contained in this section. As used in this
section, "Special Damages" includes all special, consequential,
exemplary, or punitive damages (regardless of how named), but
does not include any payments or funds which any party hereto has
expressly promised to pay or deliver to any other party hereto.
Section 10.16. Defined Terms. Capitalized terms and phrases
used and not otherwise defined herein shall for all purposes of
this Agreement have the meaning given to such terms and phrases
in Annex I hereto.
Section 10.17. Annex I, Exhibits and Schedules; Additional
Definitions. Annex I, Annex II, and all Exhibits and Schedules
attached to this Agreement are a part hereof for all purposes.
Section 10.18. Amendment of Defined Instruments. Unless the
context otherwise requires or unless otherwise provided herein
the terms defined in this Agreement which refer to a particular
agreement, instrument or document also refer to and include all
renewals, extensions, modifications, amendments and restatements
of such agreement, instrument or document, provided that nothing
contained in this section shall be construed to authorize any
such renewal, extension, modification, amendment or restatement.
Section 10.19. References and Titles. All references in
this Agreement to Exhibits, Schedules, articles, sections,
subsections and other subdivisions refer to the Exhibits,
Schedules, articles, sections, subsections and other subdivisions
of this Agreement unless expressly provided otherwise. Titles
appearing at the beginning of any subdivisions are for
convenience only and do not constitute any part of such
subdivisions and shall be disregarded in construing the language
contained in such subdivisions. The words "this Agreement",
"this instrument", "herein", "hereof", "hereby", "hereunder" and
words of similar import refer to this Agreement as a whole and
not to any particular subdivision unless expressly so limited.
The phrases "this section" and "this subsection" and similar
phrases refer only to the sections or subsections hereof in which
such phrases occur. The word "or" is not exclusive, and the word
"including" (in its various forms) means "including without
limitation". Pronouns in masculine, feminine and neuter genders
shall be construed to include any other gender, and words in the
singular form shall be construed to include the plural and vice
versa, unless the context otherwise requires.
Section 10.20. Calculations and Determinations. All
calculations under the Canadian Loan Documents of interest
chargeable with respect to Eurodollar Loans and of fees shall be
made on the basis of actual days elapsed (including the first day
but excluding the last) and a year of 360 days. All other
calculations of interest made under the Canadian Loan Documents
shall be made on the basis of actual days elapsed (including the
first day but excluding the last) and a year of 365 or 366 days,
as appropriate. Each determination by a Lender Party of amounts
to be paid under Article III or any other matters which are to be
determined hereunder by a Lender Party (such as any US Dollar
Eurodollar Rate, Canadian Dollar Eurodollar Rate, Adjusted US
Dollar Eurodollar Rate, Adjusted Canadian Dollar Eurodollar Rate,
Business Day, Interest Period, or Reserve Requirement) shall, in
the absence of manifest error, be conclusive and binding. Unless
otherwise expressly provided herein or unless Required Lenders
otherwise consent all financial statements and reports furnished
to any Lender Party hereunder shall be prepared and all financial
computations and determinations pursuant hereto shall be made in
accordance with US GAAP.
Section 10.21. Construction of Indemnities and Releases.
All indemnification and release provisions of this Agreement
shall be construed broadly (and not narrowly) in favor of the
Persons receiving indemnification from or being released.
Section 10.22. Separate Obligations. All obligations of
Northstar Energy and Devon Canada under this Agreement and the
other Canadian Loan Documents are separate and individual
obligations of Northstar Energy and Devon Canada, respectively,
and Northstar Energy shall not have any liabilities in respect of
Canadian Advances made by the Lenders to Devon Canada nor shall
Devon Canada have any liabilities in respect of Canadian Advances
made to Northstar Energy.
Section 10.23. Termination of Existing Canadian Agreement.
Upon the payment in full of all outstanding indebtedness owing
under the Existing Canadian Agreement, the Existing Canadian
Agreement and the other loan documents executed pursuant thereto
shall be terminated and the parties thereto shall have no further
obligations or liabilities, covenants, or representations
thereunder; provided, however, the indemnification obligations
provided in the Existing Canadian Agreement shall not be
terminated and shall survive the termination of the Existing
Canadian Agreement.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, this Agreement is executed as of the
date first written above.
NORTHSTAR ENERGY CORPORATION
Canadian Borrower
By:
Paul Brereton
Vice President - Finance
Address:
3000, 400-3 Avenue SW
Calgary, AB T2P 4H2
Attention: Vice President -
Finance
Telephone: (403) 213-8151
Fax: (403) 213-8190
DEVON ENERGY CANADA CORPORATION
Canadian Borrower
By:
Paul Brereton
Vice President - Finance
Address:
3000, 400-3 Avenue SW
Calgary, AB T2P 4H2
Attention: Vice President -
Finance
Telephone: (403) 213-8151
Fax: (403) 213-8190
BANK OF AMERICA CANADA
Administrative Agent, Canadian
LC Issuer and Lender
By:
Richard J. Hall
Vice President
Address:
200 Front Street West, Suite
2700
Toronto, Canada M5V 3L2
Attention: Richard J. Hall
Telephone: (416)349-4008
Fax: (416) 349-4283
BANK ONE CANADA
Lender
By:
Name:
Title:
BANK OF MONTREAL
Lender
By:
Name:
Title:
THE CHASE MANHATTAN BANK
Lender
By:
Name:
Title:
UMB OKLAHOMA BANK
Lender
By:
Name:
Title:
FIRST UNION NATIONAL BANK
Lender
By:
Name:
Title:
TORONTO-DOMINION BANK
Lender
By:
Name:
Title:
WESTDEUTSCHE LANDESBANK
GIROZENTRALE
Lender
By:
Name:
Title:
By:
Name:
Title:
THE BANK OF NEW YORK
Lender
By:
Name:
Title:
ROYAL BANK OF CANADA
Lender
By:
Name:
Title:
SUNTRUST BANK, ATLANTA
Lender
By:
Name:
Title:
By:
Name:
Title:
J.P. MORGAN CANADA
Lender
By:
Name:
Title:
CITIBANK CANADA
Lender
By:
Name:
Title:
DEUTSCHE BANK AG
Lender
By:
Name:
Title:
CANADIAN IMPERIAL BANK OF
COMMERCE
Lender
By:
Name:
Title:
By:
Name:
Title:
DEVON ENERGY CORPORATION
SEVERANCE AGREEMENT
(Effective: May 19, 1999)
J. Larry Nichols
(3 x AP)
<PAGE>
SEVERANCE AGREEMENT
SEVERANCE AGREEMENT (the "Agreement") entered into among
DEVON ENERGY CORPORATION (NEVADA) a Nevada corporation ("Devon
Nevada"), DEVON ENERGY CORPORATION, an Oklahoma corporation
("Devon Energy"), DEVON DELAWARE CORPORATION, a Delaware
corporation ("Devon Delaware"), and J. Larry Nichols, an
individual (the "Executive"), dated the 19th day of May, 1999 (the
"Effective Date").
WHEREAS, Devon Energy and Devon Delaware have entered into
that certain Amended and Restated Agreement and Plan of Merger by
and among Devon Energy Corporation, Devon Delaware Corporation,
Devon Oklahoma Corporation and PennzEnergy Company, dated as of
May 19, 1999 (the "Merger Agreement"); and
WHEREAS, for purposes of this Agreement, the term "Company"
shall mean Devon Energy, Devon Nevada, or Devon Delaware or any of
their Affiliates; provided, for purposes of the definition of
"Change of Control Date," from and after the closing of the
transactions contemplated under the Merger Agreement, the term
"Company" shall mean Devon Delaware; and
WHEREAS, the Company deems the services of the Executive to
be of great and unique value to the business of the Company and
the Company desires to assure both itself of continuity of
management and the Executive of continued employment; and
WHEREAS, the Executive is a key management employee of the
Company and is presently making and is expected to continue making
substantial contributions to the Company; and
WHEREAS, it is in the best interests of the Company and its
shareholders to induce the Executive to remain in the employ of
the Company; and
WHEREAS, the Executive presently is serving in his capacity
as President and Chief Executive Officer of the Company; and
WHEREAS, the Executive and the Company previously entered
into that certain Severance Agreement ("Prior Agreement") which
provided additional amounts of compensation in the event of his
termination of employment following "change of control date" or an
"acquisition date" (each as defined in the Prior Agreement); and
WHEREAS, this Agreement shall be considered as an amendment
and restatement of the Prior Agreement; and
WHEREAS, the Company desires to induce the Executive to
remain in the employ of the Company by providing to him additional
amounts of compensation in the event of his termination of
employment following a Change of Control Date or an Acquisition
Date (each as defined herein) for the reasons specified herein.
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter set forth and for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
Executive and the Company hereby agree as provided below.
1. Operation of Agreement. The purpose of this Agreement
is to provide to the Executive additional amounts of compensation
in the event of the termination of his employment following a
Change of Control Date or an Acquisition Date for the reasons
specified herein. Accordingly, the Company and the Executive have
entered into this Agreement in accordance with the terms and
provisions herein to provide such protection to the Executive.
For the purposes of this Agreement, where the following
capitalized words and phrases appear in this Agreement, they shall
have the meanings set forth below unless a different context is
clearly expressed herein.
(a) Acquisition Date. "Acquisition Date" shall mean
the date on which the Company or any of its affiliates (as defined
in Rule 12b-2 as promulgated under the Securities Exchange Act of
1934) ("Affiliates") completes the acquisition of oil and gas
properties, or assets, or a business entity owning such properties
or assets under a contract ("Acquisition Contract") which results
in a 20% or more increase in the total oil and gas reserves or
total assets of the Company. For purposes of determining whether
a 20% or more increase in total oil and gas reserves or total
assets of the Company has occurred, the Company's ownership
interest, both direct and indirect, in the oil and gas reserves or
the total assets of any other business enterprise which is or
becomes an Affiliate will be included; provided, such
determination shall be made in accordance with generally accepted
accounting principles. In the case of a Business Combination
where the Company is not the surviving ultimate parent in the
Business Combination, then, the term "Company" shall refer to the
ultimate parent entity surviving in the Business Combination.
(i) For purposes of determining if the 20%
increase in total oil and gas reserves has occurred, the
acquisition must result in a 20% or more increase in the total oil
and gas reserves of the Company when compared to the Company's pre-
acquisition reserves. The Company's pre-acquisition reserves will
be the estimated reserve volumes expressed in barrels of oil
equivalent ("BOE's") contained in the most recent annual report
filed with the United States Securities and Exchange Commission on
Form 10-K, adjusted to the Acquisition Date for subsequent
production, drilling, purchases and sales of reserves (other than
the subject acquisition). In each instance, 6 thousand cubic feet
of natural gas will be equal to one barrel of oil.
(ii) For purposes of determining if the 20% or more
increase in the total assets of the Company has occurred, the
gross purchase or acquisition price paid (including any debt or
other liabilities assumed) for the assets or the business entity
owning the assets (as determined pursuant to the final Acquisition
Contract) must equal 20% or more of the sum of (1) Total
Liabilities and Stockholder's Equity minus (2) the Total
Shareholder's Equity and any other securities convertible to
common stock not included in Total Shareholder's Equity plus (3)
the market value of the Company's outstanding common and preferred
stock and any other securities convertible to common stock not
included in Total Shareholder's Equity (the "Market
Capitalization"). For the purpose of this determination, the
foregoing items included in (1) and (2) above shall be based upon
the Company's consolidated financial statement as of the last day
of the month immediately preceding the month in which such
purchase or acquisition occurs; and, for the purpose of
determining the Market Capitalization, the Company's outstanding
common and preferred stock and any other securities convertible to
common stock not included in Total Shareholder's Equity shall be
valued at the weighted average closing price of such stock for the
ten trading days preceding the public announcement of the terms of
the transaction.
(b) Change of Control Date. "Change of Control Date"
shall mean the date on which one of the following events occurs:
(i) The acquisition by any individual entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 30%
or more of either (1) the then outstanding shares of common stock
of the Company (the "Outstanding Company Common Stock") or (2) the
combined voting power of the then outstanding voting securities of
the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); provided,
however, that the following acquisitions shall not constitute an
event causing a Change of Control Date: (1) any acquisition
directly from the Company, (2) any acquisition by the Company, (3)
any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation
controlled by the Company, or (4) any acquisition by any
corporation pursuant to a transaction which complies with clauses
(1), (2), and (3) of subsection (iii) below; or
(ii) Individuals who, as of the date hereof,
constitute the board of the Company (the "Incumbent Board") cease
for any reason to constitute at least a majority of the Board;
provided however, that any individual becoming a director
subsequent to the date hereof whose election, appointment or
nomination for election by the Company's shareholders was approved
by a vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered as though such individual
were a member of the Incumbent Board, but excluding, for purposes
of this definition, any such individual whose initial assumption
of office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or
other actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board; or
(iii) Approval by the shareholders of
the Company of a reorganization, share exchange, merger or
consolidation (a "Business Combination"), in each case, unless
following such Business Combination, (1) all or substantially all
of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly,
more than 50% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from
such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company
through one or more subsidiaries) in substantially the same
proportions as their ownership immediately prior to such Business
Combination of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (2) no
Person (excluding any employee benefit plan (or related trust) of
the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 30% or
more of, respectively, the then outstanding shares of common stock
of the corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of
such corporation except to the extent that such ownership existed
prior to the Business Combination, and (3) at least a majority of
the members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent Board
at the time of the execution of the initial agreement, or of the
action of the Incumbent Board providing for such Business
Combination, or were elected, appointed, or nominated by the
Incumbent Board; or
(iv) Approval by the shareholders of the Company of
(1) a complete liquidation or dissolution of the Company or, (2)
the sale or other disposition of all or substantially all of the
assets of the Company, other than to a corporation with respect to
which following such sale or other disposition, (A) more than 50%
of, respectively, the then outstanding shares of common stock of
such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
sale or other disposition in substantially the same proportion as
their ownership immediately prior to such sale or other
disposition of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (B)
less than 30% of, respectively, the then outstanding shares of
common stock of such corporation and the combined voting power of
the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by any Person
(excluding any employee benefit plan (or related trust) of the
Company or such corporation), except to the extent that such
Person owned 30% or more of the Outstanding Company Common Stock
or Outstanding Company Voting Securities prior to the sale or
disposition, and (C) at least a majority of the members of the
board of directors of such corporation were members of the
Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Incumbent Board providing for
such sale or other disposition of assets of the Company, or were
elected, appointed, or nominated by the Incumbent Board.
Provided, in the event the Acquisition Date or the Change of
Control Date occurs, and there is a subsequent occurrence of an
Acquisition Date or Change of Control Date, then, for purposes of
calculating the applicable 24 month period as provided under
Section 5 hereof, such calculation shall be made from the most
recent Change of Control Date or Acquisition Date and the fact
that there has been a prior occurrence of a Change of Control Date
or Acquisition Date (including those which may have occurred under
the Prior Agreement) shall not in any manner reduce the total
period as provided under Section 5 hereof when the Company may
have obligations to the Executive upon his termination of
employment.
(c) Good Reason. "Good Reason" shall mean:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position
(including status, office, titles and reporting requirements),
authority, duties, or responsibilities as contemplated by this
Agreement, or any other action by the Company which results in a
diminution in such position, compensation, authority, duties or
responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and
which is remedied by the Company promptly after receipt of notice
thereof given by the Executive;
(ii) any failure by the Company to comply with any
of the provisions of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith
and which is remedied by the Company promptly after receipt of
notice thereof given by the Executive;
(iii) the Company's requiring the Executive to
be based at any office or location other than that which he
occupied at the Effective Date, or within 25 miles of such
location, except for periodic travel reasonably required in the
performance of the Executive's responsibilities;
(iv) any purported termination by the Company of
the Executive's employment otherwise than as expressly permitted
by this Agreement;
(v) any failure by the Company to comply with and
satisfy Section 11(a) of this Agreement.
2. Agreement Not Employment Contract. This Agreement shall
be considered solely as a "severance agreement" obligating the
Company to pay to the Executive certain amounts of compensation in
the event and only in the event of his termination of employment
after the Change of Control Date or the Acquisition Date for the
reasons and at the times specified herein. Apart from the
obligation of the Company to provide the amounts of additional
compensation as provided in this Agreement, the Company shall at
all times retain the right to terminate the employment of the
Executive since the obligation of the Company to the Executive
shall only be considered as an employment relationship which
exists between the Company and the Executive which may be
terminated at will be either party subject to the obligation of
the Company to make payment as provided in this Agreement.
3. Termination of Agreement. Except as provided in Section
5 hereof, this Agreement shall terminate upon the first to occur
of the following events.
(a) Death. The date of death of the Executive.
(b) Cause. The termination of the Executive's
employment by the Company for "Cause." For purposes of this
Agreement, termination of the Executive's employment by the
Company for Cause shall mean termination for one of the following
reasons: (i) the conviction of the Executive of a felony by a
federal or state court of competent jurisdiction; (ii) an act or
acts of dishonesty taken by the Executive and intended to result
in substantial personal enrichment of the Executive at the expense
of the Company or its shareholders; or (iii) the Executive's
"willful" failure to follow a direct lawful written order from his
supervisor, within the reasonable scope of the Executive's duties,
which failure is not cured by the Executive within 30 days after
the receipt of written notice thereof given by the Company.
Further, for purposes of this Section (b):
(1) No act, or failure to act, on the Executive's
part shall be deemed "willful" unless done, or omitted to be
done, by the Executive not in good faith and without reasonable
belief that the Executive's action or omission was in the best
interest of the Company.
(2) The Executive shall not be deemed to have been
terminated for Cause unless and until there shall have been
delivered to the Executive a copy of the resolution duly adopted
by the affirmative vote of not less than three-fourths (3/4ths) of
the entire membership of the Board of Directors of the Company
(the "Board") at a meeting of the Board called and held for such
purpose (after reasonable notice to the Executive and an
opportunity for the Executive, together with the Executive's
counsel, to be heard before the Board), finding that in the good
faith opinion of the Board the Executive was guilty of conduct set
forth in clauses (i), (ii), or (iii) above and specifying the
particulars thereof in detail.
(c) Voluntary Termination. The Executive voluntarily
terminates employment other than for Good Reason.
(d) Notice. Two years after the Company has provided the
Executive with written notice of the Company's desire to terminate
the Agreement; provided, if a Change of Control Date or
Acquisition Date occurs at any time during such two year period,
then, this Agreement may not be terminated under this Section 3(d)
until the expiration of the applicable 24 month period described
in Section 5 below.
4. Notice of Termination of Employment. Any termination of
employment by the Company for Cause or by the Executive for Good
Reason shall be communicated by Notice of Termination to the other
party hereto given in accordance with Section 13 of this
Agreement. For purposes of this Agreement, a "Notice of
Termination" means a written notice which (i) indicates the
specific termination provision in this Agreement relied upon, (ii)
sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's
employment under the provision so indicated and (iii) if the
termination date of the Executive's employment is other than the
date of receipt of such notice, specifies the termination date
(which date shall be not more than 15 days after the giving of
such notice).
5. Obligations of the Company Upon Termination Following
Change of Control Date or the Acquisition Date. If within 24
months of the Change of Control Date or 24 months following the
Acquisition Date (i) the Company shall terminate the Executive's
employment for any reason other than for Cause or death, or (ii)
the employment of the Executive shall be terminated by the
Executive for Good Reason, then the Company shall pay to the
Executive in a lump sum, in cash, within 30 days after the date of
termination of employment, an amount equal to 3 times the
Executive's highest annual Actual Compensation, paid or accrued
during the three calendar years preceding the year in which the
Executive's employment was terminated. Provided, if the Executive
has attained his normal retirement date of age 65 ("Normal
Retirement Date") and is not otherwise entitled to receive payment
under this Agreement due to his termination of employment as of
his Normal Retirement Date, then, the Executive shall not be
entitled to payment under this Agreement. For purposes of this
Section 5, "Actual Compensation" shall mean the Executive's annual
wages, salaries, bonuses and fees for personal services actually
rendered in the course of employment with the Company, excluding
the following: (i) amounts realized from the exercise of a
nonqualified stock option, or when restricted stock (or property)
held by the Executive either becomes freely transferable or is no
longer subject to a substantial risk of forfeiture; (ii) amounts
realized from the sale, exchange or other disposition of stock
acquired under a qualified stock option; and (iii) other amounts
which received special tax benefits (whether or not the amounts
are actually excludable from the gross income of the Executive).
6. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any
payment or distribution to or for the benefit of the Executive,
whether paid or payable or distributed or distributable pursuant
to the terms of this Agreement or otherwise, including, by way of
example and not by way of limitation, acceleration of the date of
vesting, payment, rate of payment or right to future payment under
any plan, program or arrangement of the Company (a "Payment"),
would be subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code") or any
interest or penalties with respect to such excise tax (such excise
tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then
the Executive shall be entitled to receive an additional payment
(a "Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including any Excise Tax,
imposed upon the Gross-Up Payment, the Executive retains an amount
of the Gross-Up Payment equal to the Excise Tax imposed upon the
Payments.
(b) Subject to the provisions of Section 6(c), all determinations
required to be made under this Section 6, including whether a
Gross-Up Payment is required and the amount of such Gross-Up
Payment, shall be made by KPMG LLP (the "Accounting Firm") which
shall provide detailed supporting calculations both to the Company
and the Executive within 15 business days of the receipt of notice
from the Executive that there has been a Payment which would be
subject to the Excise Tax, or such earlier time as is requested by
the Company. The initial Gross-Up Payment, if any, as determined
pursuant to this Section 6(b), shall be paid to the Executive
within five days of the receipt of the Accounting Firm's
determination. If the Accounting Firm determines that no Excise
Tax is payable by the Executive, it shall furnish the Executive
with an opinion that he has substantial authority not to report
any Excise Tax on his federal income tax return. Any
determination by the Accounting Firm shall be binding upon the
Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible
that Gross-Up Payment which will not have been made by the Company
should have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the
Company exhausts its remedies pursuant to Section 6(c) and the
Executive thereafter is required to make a payment of any Excise
Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of the
Executive.
(c) The Executive shall notify the Company in writing
of any claim by the Internal Revenue Service that, if successful,
would require the payment by the Company of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no
later than ten business days after the Executive knows of such
claim, and shall apprise the Company of the nature of such claim
and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the
30-day period following the date on which the Executive gives such
notice to the Company (or such shorter period ending on the date
that any payment of taxes with respect to such claim is due). If
the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim,
the Executive shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with contesting
such claim as the Company shall reasonably request in writing from
time to time, including, without limitation, accepting legal
representation with respect to such claim by an attorney
reasonably selected by the Company,
(iii) cooperate with the Company in good faith
in order effectively to contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly
all costs and expenses (including additional interest and
penalties) incurred in connection with such contest and shall
indemnify and hold the Executive harmless, on an after-tax basis,
for any Excise Tax or income tax, including interest and penalties
with respect thereto, imposed as a result of such representation
and payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 6(c), the Company shall
control all proceedings taken in connection with such contest and,
at its sole option, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option,
either direct the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner. The
Executive agrees to prosecute such contest to a determination
before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company
shall determine; provided, however, that if the Company directs
the Executive to pay such claim and sue for a refund, the Company
shall advance the amount of such payment to the Executive, on an
interest-free basis and shall indemnify and hold the Executive
harmless, on an after-tax basis, from any Excise Tax or income
tax, including interest or penalties with respect thereto, imposed
with respect to such advance or with respect to any imputed income
with respect to such advance; and further provided that any
extension of the statute of limitations relating to payment of
taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to
such contested amount. Furthermore, the Company's control of the
contest shall be limited to issues with respect to which a Gross-
Up Payment would be payable hereunder and the Executive shall be
entitled to settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 6(c), the Executive
becomes entitled to receive any refund with respect to such claim,
the Executive shall (subject to the Company's complying with the
requirements of Section 6(c)) promptly pay to the Company the
amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by
the Executive of an amount advanced by the Company pursuant to
Section 6(c), a determination is made that the Executive shall not
be entitled to any refund with respect to such claim and the
company does not notify the Executive in writing of its intent to
contest such denial of refund prior to the expiration of thirty
days after such determination, then such advance shall be forgiven
and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-
Up Payment required to be paid.
7. Non-exclusivity of Rights. Nothing in this Agreement
shall prevent or limit the Executive's continuing or future
participation in any benefit, bonus, incentive or other plan or
program provided by the Company or any of its affiliated companies
and for which the Executive may qualify, nor shall anything herein
limit or otherwise affect such rights as the Executive may have
under any stock option or other agreements with the Company or any
of its affiliated companies. Amounts which are vested benefits or
which the Executive is otherwise entitled to receive under any
plan or program of the Company or any of its affiliated companies
at or subsequent to the date of termination of employment shall be
payable in accordance with such plan or program.
8. Full Settlement. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform
its obligations hereunder shall not be affected by any
circumstances, including, without limitation, any set-off,
counterclaim, recoupment, defense or other right which the Company
may have against the Executive or others. In no event shall the
Executive be obligated to seek other employment by way of
mitigation of the amounts payable to the Executive under any of
the provisions of this Agreement.
9. Confidential Information.
(a) Requirement of Executive. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data relating to the
Company or any of its affiliated companies, and their respective
businesses, which shall have been obtained by the Executive during
the Executive's employment by the Company or any of its affiliated
companies and which shall not be public knowledge (other than by
acts by the Executive or his representatives in violation of this
Agreement). After termination of the Executive's employment with
the Company, the Executive shall not, without the prior written
consent of the Company, communicate or divulge any such
information, knowledge or data to anyone other than the Company
and those designated by it. In no event shall an asserted
violation of the provisions of this Section 9 constitute a basis
for deferring or withholding any amounts otherwise payable to the
Executive under this Agreement.
(b) Additional Remedies. The Executive agrees that the
remedy at law for any breach or threatened breach of any covenant
contained in this Section 9 may be inadequate, and that the
Company, in addition to such other remedies as may be available to
it, in law or in equity, shall be entitled to injunctive relief
without bond or other security pending arbitration under Section
10.
10. Arbitration; Legal Fees and Expenses. The parties agree that
Executive's employment and this Agreement relate to interstate
commerce, and that any disputes, claims or controversies between
Executive and the Company which may arise out of or relate to the
Executive's employment relationship or this Agreement shall be
settled by arbitration. This agreement to arbitrate shall survive
the termination of this Agreement. Any arbitration shall be in
accordance with the Rules of the American Arbitration Association
and shall be undertaken pursuant to the Federal Arbitration Act.
Arbitration will be held in Oklahoma City, Oklahoma unless the
parties mutually agree on another location. The decision of the
arbitrator(s) will be enforceable in any court of competent
jurisdiction. The parties agree that punitive, liquidated or
indirect damages shall not be awarded by the arbitrator(s).
Nothing in this agreement to arbitrate, however, shall preclude
the Company from obtaining injunctive relief from a court of
competent jurisdiction prohibiting any on-going breaches by
Executive of this Agreement including, without limitation,
violations of Section 9. If any contest or dispute shall arise
between the Company and Executive regarding any provision of this
Agreement, the Company shall reimburse Executive for all legal
fees and expenses reasonably incurred by Executive in connection
with such contest or dispute, but only if Executive is successful
in respect of one or more of Executive's material claims or
defenses brought, raised or pursued in connection with such
contest or dispute. Such reimbursement shall be made as soon as
practicable following the resolution of such contest or dispute to
the extent the Company receives reasonable written evidence of
such fees and expenses.
11. Successors and Binding Effect.
(a) Successor Must Assume Agreement. The Company will
require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company to expressly assume and
agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such
succession had taken place. If the Company fails to obtain such
assumption and agreement prior to the effectiveness of any such
succession, this Agreement shall nevertheless determine the
Executive's entitlement to payment hereunder. As used in this
Agreement, "Company" shall mean the Company as herein before
defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by
operation of law or otherwise.
(b) Binding Effect. This Agreement shall inure to the
benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Executive should die
while any amount would still be payable to the Executive at the
time of his death, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this
Agreement to the Executive's devisee, legatee or other designee
or, if there is no such designee, to the Executive's estate.
12. Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Oklahoma,
without reference to principles of conflict of laws.
13. Notices. All notices and other communications hereunder
shall be in writing and shall be given by hand delivery to the
other party, by registered or certified mail, return receipt
requested, or by overnight express delivery service, postage
prepaid, addressed as follows:
If to the Executive:
J. Larry Nichols
7011 N. Country Club Drive
Oklahoma City, Oklahoma 73116
If to the Company:
Devon Energy Corporation
20 North Broadway, Suite 1500
Oklahoma City, Oklahoma 73102-8260
Attn: J. Larry Nichols
President and Chief Executive Officer
with a copy to:
McAfee & Taft
A Professional Corporation
Tenth Floor
Two Leadership Square
Oklahoma City, Oklahoma 73102
Attn: James Dudley Hyde, Esq.
Jerry A. Warren, Esq.
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
14. Occurrence of Change of Control Date. Upon the
completion of the transactions contemplated by the Merger
Agreement, pursuant to the terms of the Prior Agreement and this
Agreement, there shall be an occurrence of an event which will be
a "change of control date" under the Prior Agreement and a Change
of Control Date under this Agreement. Accordingly, the applicable
provisions of the Prior Agreement with respect to the definition
of "change of control date" shall continue to be applicable with
respect to the Executive and the terms and provisions of this
Agreement shall in no way detract or adversely affect the rights
of the Executive under this Agreement. Accordingly, because a
Change of Control Date under this Agreement and a "change of
control date" under the Prior Agreement has occurred upon the
completion of a transaction contemplated under the Merger
Agreement, therefore, the applicable 24 month period as described
in Section 5 hereof during which the Company may have obligations
to the Executive shall commence as of the closing of the
transaction as contemplated under the Merger Agreement.
15. Alienation. The rights and benefits of, and payments
to, the Executive (or his beneficiary in the event of his death)
under this Agreement may not be anticipated, assigned (either at
law or in equity), alienated or subject to attachment,
garnishment, levy, execution or other legal or equitable process
except as required by law. Any attempt by the Executive to
anticipate, alienate, assign, sell, transfer, pledge, encumber or
charge the same shall be void. The benefits of the Executive
shall not in any manner be subject to the debts, contracts,
liabilities, engagements or torts of the Executive (or his
beneficiary in the event of his death) and payments hereunder
shall not be considered an asset of the Executive (or his
beneficiary in the event of his death) in the event of his
insolvency or bankruptcy.
16. Right as General Creditor. The Executive acknowledges
this Agreement represents the Company's unfunded and unsecured
obligation to pay benefits set forth above. No provision of this
Agreement shall be construed to give the Executive any right
except as a general creditor of the Company.
17. Taxes to be Withheld. The Company may withhold from any
amounts payable under this Agreement such Federal, state or local
taxes as shall be required to be withheld pursuant to any
applicable law or regulation.
18. Joint Obligations. For purposes of this Agreement,
Devon Nevada, Devon Energy and Devon Delaware shall have joint and
several liability for all obligations hereunder.
19. Entire Agreement. This Agreement constitutes the entire
agreement among the parties with respect to the subject matter
hereof and supersedes any and all prior or contemporaneous oral
and prior written agreements and understandings, including any
Severance Agreements previously entered into between the Company
and the Executive. There are no oral promises, conditions,
representations, understandings, interpretations or terms of any
kind as conditions or inducements to the execution hereof or in
effect among the parties.
20. Amendment. This Agreement may not be amended, and no
provision hereof shall be waived, except by a writing signed by
all the parties to this Agreement, or, in the case of a waiver, by
the party waiving compliance therewith, which states that it is
intended to amend or waive a provision of this Agreement. Any
waiver of any rights or failure to act in a specific instance
shall relate only to such instance and shall not be construed as
an agreement to waive any rights or failure to act in any other
instance, whether or not similar.
21. Enforceability. Should any provision of this Agreement
be unenforceable or prohibited by an applicable law, this
Agreement shall be considered divisible as to such provision which
shall be inoperative, and the remainder of this Agreement shall be
valid and binding as though such provision were not included
herein.
22. Counterparts. This Agreement may be executed in two or
more counterparts with the same effect as if the signatures to all
such counterparts were upon the same instrument, and all such
counterparts shall constitute but one instrument.
23. Headings. All headings in this Agreement are for
convenience only and are not intended to affect the meaning of any
provision hereof.
IN WITNESS WHEREOF, the Executive has hereunto set his hand
and, pursuant to the authorization from their respective Boards of
Directors, Devon Nevada, Devon Energy and Devon Delaware have each
caused these presents to be executed in its name on its behalf,
all as of the day and year first above written.
"EXECUTIVE"
J. Larry Nichols
"COMPANY"
DEVON ENERGY CORPORATION (NEVADA), a
Nevada corporation
By
J. Larry Nichols, President and
Chief Executive Officer
DEVON ENERGY CORPORATION, an
Oklahoma corporation
By
J. Larry Nichols, President and
Chief Executive Officer
DEVON DELAWARE CORPORATION, a
Delaware corporation
By
J. Larry Nichols, President and
Chief Executive Officer
DEVON ENERGY CORPORATION
SEVERANCE AGREEMENT
(Effective: May 19, 1999)
Executive
(2 x AP + 1 mos. X yos < 12)
<PAGE>
SEVERANCE AGREEMENT
SEVERANCE AGREEMENT (the "Agreement") entered into among
DEVON ENERGY CORPORATION (NEVADA) a Nevada corporation ("Devon
Nevada"), DEVON ENERGY CORPORATION, an Oklahoma corporation
("Devon Energy"), Devon Delaware Corporation, a Delaware
corporation ("Devon Delaware"), and Executive, an individual (the
"Executive"), dated the 19th day of May, 1999 (the "Effective
Date").
WHEREAS, Devon Energy and Devon Delaware have entered into
that certain Amended and Restated Agreement and Plan of Merger by
and among Devon Energy Corporation, Devon Delaware Corporation,
Devon Oklahoma Corporation and PennzEnergy Company, dated as of
May 19, 1999 (the "Merger Agreement"); and
WHEREAS, for purposes of this Agreement, prior to the closing
of transactions contemplated under the Merger Agreement, the term
"Company" shall mean Devon Energy and from and after the closing
of such transactions under the Merger Agreement, the term
"Company" shall mean Devon Delaware; and
WHEREAS, the Company deems the services of the Executive to
be of great and unique value to the business of the Company and
the Company desires to assure both itself of continuity of
management and the Executive of continued employment; and
WHEREAS, the Executive is a key management employee of the
Company and is presently making and is expected to continue making
substantial contributions to the Company; and
WHEREAS, it is in the best interests of the Company and its
shareholders to induce the Executive to remain in the employ of
the Company; and
WHEREAS, the Executive and the Company previously entered
into that certain Severance Agreement ("Prior Agreement") which
provided additional amounts of compensation in the event of his
termination of employment following "change of control date" or an
"acquisition date" (each as defined in the Prior Agreement); and
WHEREAS, this Agreement shall be considered as an amendment
and restatement of the Prior Agreement; and
WHEREAS, the Company desires to induce the Executive to
remain in the employ of the Company by providing to him additional
amounts of compensation in the event of his termination of
employment following a Change of Control Date or an Acquisition
Date (each as defined herein) for the reasons specified herein.
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter set forth and for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
Executive and the Company hereby agree as provided below.
1. Operation of Agreement. The purpose of this Agreement
is to provide to the Executive additional amounts of compensation
in the event of the termination of his employment following a
Change of Control Date or an Acquisition Date for the reasons
specified herein. Accordingly, the Company and the Executive have
entered into this Agreement in accordance with the terms and
provisions herein to provide such protection to the Executive.
For the purposes of this Agreement, where the following
capitalized words and phrases appear in this Agreement, they shall
have the meanings set forth below unless a different context is
clearly expressed herein.
(a) Acquisition Date. "Acquisition Date" shall mean the
date on which the Company completes the acquisition of oil and gas
properties, or assets, or a business entity owning such properties
or assets under a contract ("Acquisition Contract") results in a
20% or more increase in the total oil and gas reserves or total
assets of the Company. For purposes of determining if the
applicable 20% or more increase in total oil and gas reserves or
total assets of the Company has occurred, such determination will
include the Company's ownership interest, both direct and
indirect, in the oil and gas reserves or the total assets of any
other business enterprise which is or becomes an affiliate of the
Company (as defined in Rule 12b-2 as promulgated under the
Securities Exchange Act of 1934), determined in accordance with
generally accepted accounting principles. In the case of a
Business Combination where the Company does not survive or becomes
a subsidiary of another entity, the term "Company" shall refer to
the survivor of the Business Combination or its parent.
(i) For purposes of determining if the 20%
increase in total oil and gas reserves has occurred, the
acquisition must result in a 20% or more increase in the total oil
and gas reserves of the Company when compared to the Company's pre-
acquisition reserves. The Company's pre-acquisition reserves will
be the estimated reserve volumes expressed in barrels of oil
equivalent ("BOE's") contained in the most recent annual report
filed with the United States Securities and Exchange Commission on
Form 10-K, adjusted to the Acquisition Date for subsequent
production, drilling, purchases and sales of reserves (other than
the subject acquisition). In each instance, 6 thousand cubic feet
of natural gas will be equal to one barrel of oil.
(ii) For purposes of determining if the 20% or more
increase in the total assets of the Company has occurred, the
gross purchase or acquisition price paid (including any debt or
other liabilities assumed) for the assets or the business entity
owning the assets (as determined pursuant to the final Acquisition
Contract) must equal 20% or more of the sum of (1) Total
Liabilities and Stockholder's Equity minus (2) the Total
Shareholder's Equity and any other securities convertible to
common stock not included in Total Shareholder's Equity plus (3)
the market value of the Company's outstanding common and preferred
stock and any other securities convertible to common stock not
included in Total Shareholder's Equity (the "Market
Capitalization"). For the purpose of this determination, the
foregoing items included in (1) and (2) above shall be based upon
the Company's consolidated financial statement as of the last day
of the month immediately preceding the month in which such
purchase or acquisition occurs; and, for the purpose of
determining the Market Capitalization, the Company's outstanding
common and preferred stock and any other securities convertible to
common stock not included in Total Shareholder's Equity shall be
valued at the weighted average closing price of such stock for the
ten trading days preceding the public announcement of the terms of
the transaction.
(b) Change of Control Date. "Change of Control Date"
shall mean the date on which one of the following events occurs:
(i) The acquisition by any individual entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 30%
or more of either (1) the then outstanding shares of common stock
of the Company (the "Outstanding Company Common Stock") or (2) the
combined voting power of the then outstanding voting securities of
the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); provided,
however, that the following acquisitions shall not constitute a
Change of Control: (1) any acquisition directly from the Company,
(2) any acquisition by the Company, (3) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained
by the Company or any corporation controlled by the Company, or
(4) any acquisition by any corporation pursuant to a transaction
which complies with clauses (1), (2), and (3) of subsection (iii)
below; or
(ii) Individuals who, as of the date hereof,
constitute the board of the Company (the "Incumbent Board") cease
for any reason to constitute at least a majority of the Board;
provided however, that any individual becoming a director
subsequent to the date hereof whose election, appointment or
nomination for election by the Company's shareholders was approved
by a vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered as though such individual
were a member of the Incumbent Board, but excluding, for purposes
of this definition, any such individual whose initial assumption
of office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or
other actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board; or
(iii) Approval by the shareholders of
the Company of a reorganization, share exchange, merger or
consolidation (a "Business Combination"), in each case, unless
following such Business Combination, (1) all or substantially all
of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly,
more than 50% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from
such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company
through one or more subsidiaries) in substantially the same
proportions as their ownership immediately prior to such Business
Combination of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (2) no
Person (excluding any employee benefit plan (or related trust) of
the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 30% or
more of, respectively, the then outstanding shares of common stock
of the corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of
such corporation except to the extent that such ownership existed
prior to the Business Combination, and (3) at least a majority of
the members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent Board
at the time of the execution of the initial agreement, or of the
action of the Incumbent Board providing for such Business
Combination, or were elected, appointed, or nominated by the
Incumbent Board; or
(iv) Approval by the shareholders of the Company of
(1) a complete liquidation or dissolution of the Company or, (2)
the sale or other disposition of all or substantially all of the
assets of the Company, other than to a corporation with respect to
which following such sale or other disposition, (A) more than 50%
of, respectively, the then outstanding shares of common stock of
such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
sale or other disposition in substantially the same proportion as
their ownership immediately prior to such sale or other
disposition of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (B)
less than 30% of, respectively, the then outstanding shares of
common stock of such corporation and the combined voting power of
the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by any Person
(excluding any employee benefit plan (or related trust) of the
Company or such corporation), except to the extent that such
Person owned 30% or more of the Outstanding Company Common Stock
or Outstanding Company Voting Securities prior to the sale or
disposition, and (C) at least a majority of the members of the
board of directors of such corporation were members of the
Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Incumbent Board providing for
such sale or other disposition of assets of the Company, or were
elected, appointed, or nominated by the Incumbent Board.
Provided, in the event the Acquisition Date (as defined in Section
1(a) above) or the Change of Control Date (as defined in Section
1(b) above) occurs with respect to either Devon Nevada or Devon
Energy, then, the occurrence of either of such event shall be
deemed that such event has occurred to the Company. Provided
further, in the event the Acquisition Date or the Change of
Control Date occurs, and there is a subsequent occurrence of an
Acquisition Date or Change of Control Date, then, for purposes of
calculating the applicable 24-month period as provided under
Section 5 hereof, such calculation shall be made from the most
recent Change of Control Date or Acquisition Date and the fact
that there has been a prior occurrence of a Change of Control Date
or Acquisition Date (including those which may have occurred under
the Prior Agreement) shall not in any manner reduce the total
period as provided under Section 5 hereof when the Company may
have obligations to the Executive upon his termination of
employment.
(c) Good Reason. "Good Reason" shall mean:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position
(including status, office, titles and reporting requirements),
authority, duties, or responsibilities as contemplated by this
Agreement, or any other action by the Company which results in a
diminution in such position, compensation, authority, duties or
responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and
which is remedied by the Company promptly after receipt of notice
thereof given by the Executive;
(ii) any failure by the Company to comply with any
of the provisions of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith
and which is remedied by the Company promptly after receipt of
notice thereof given by the Executive;
(iii) the Company's requiring the Executive to
be based at any office or location other than that which he
occupied at the Effective Date, or within 25 miles of such
location, except for periodic travel reasonably required in the
performance of the Executive's responsibilities;
(iv) any purported termination by the Company of
the Executive's employment otherwise than as expressly permitted
by this Agreement;
(v) any failure by the Company to comply with and
satisfy Section 11(a) of this Agreement.
2. Agreement Not Employment Contract. This Agreement shall
be considered solely as a "severance agreement" obligating the
Company to pay to the Executive certain amounts of compensation in
the event and only in the event of his termination of employment
after the Change of Control Date or the Acquisition Date for the
reasons and at the times specified herein. Apart from the
obligation of the Company to provide the amounts of additional
compensation as provided in this Agreement, the Company shall at
all times retain the right to terminate the employment of the
Executive since the obligation of the Company to the Executive
shall only be considered as an employment relationship which
exists between the Company and the Executive which may be
terminated at will be either party subject to the obligation of
the Company to make payment as provided in this Agreement.
3. Termination of Agreement. Except as provided in Section
5 hereof, this Agreement shall terminate upon the first to occur
of the following events.
(a) Death. The date of death of the Executive.
(b) Cause. The termination of the Executive's
employment by the Company for "Cause." For purposes of this
Agreement, termination of the Executive's employment by the
Company for Cause shall mean termination for one of the following
reasons: (i) the conviction of the Executive of a felony by a
federal or state court of competent jurisdiction; (ii) an act or
acts of dishonesty taken by the Executive and intended to result
in substantial personal enrichment of the Executive at the expense
of the Company or its shareholders; or (iii) the Executive's
"willful" failure to follow a direct lawful written order from his
supervisor, within the reasonable scope of the Executive's duties,
which failure is not cured by the Executive within 30 days after
the receipt of written notice thereof given by the Company.
Further, for purposes of this Section (b):
(1) No act, or failure to act, on the Executive's
part shall be deemed "willful" unless done, or omitted to be
done, by the Executive not in good faith and without reasonable
belief that the Executive's action or omission was in the best
interest of the Company.
(2) The Executive shall not be deemed to have been
terminated for Cause unless and until there shall have been
delivered to the Executive a copy of the resolution duly adopted
by the affirmative vote of not less than three-fourths (3/4ths) of
the entire membership of the Board of Directors of the Company
(the "Board") at a meeting of the Board called and held for such
purpose (after reasonable notice to the Executive and an
opportunity for the Executive, together with the Executive's
counsel, to be heard before the Board), finding that in the good
faith opinion of the Board the Executive was guilty of conduct set
forth in clauses (i), (ii), or (iii) above and specifying the
particulars thereof in detail.
(c) Voluntary Termination. The Executive voluntarily
terminates employment other than for Good Reason.
(d) Notice. Two years after the Company has provided the
Executive with written notice of the Company's desire to terminate
the Agreement; provided, if a Change of Control Date or
Acquisition Date occurs at any time during such two year period,
then, this Agreement may not be terminated under this Section 3(d)
until the expiration of the applicable 24 month period described
in Section 5 below.
4. Notice of Termination of Employment. Any termination of
employment by the Company for Cause or by the Executive for Good
Reason shall be communicated by Notice of Termination to the other
party hereto given in accordance with Section 13 of this
Agreement. For purposes of this Agreement, a "Notice of
Termination" means a written notice which (i) indicates the
specific termination provision in this Agreement relied upon,
(ii) sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's
employment under the provision so indicated and (iii) if the
termination date of the Executive's employment is other than the
date of receipt of such notice, specifies the termination date
(which date shall be not more than 15 days after the giving of
such notice).
5. Obligations of the Company Upon Termination Following
Change of Control Date or the Acquisition Date. If within 24
months of the Change of Control Date or 24 months following the
Acquisition Date (i) the Company shall terminate the Executive's
employment for any reason other than for Cause or death, or (ii)
the employment of the Executive shall be terminated by the
Executive for Good Reason, then the Company shall pay to the
Executive in a lump sum, in cash, within 30 days after the date of
termination of employment, an amount equal to 2 times the
Executive's highest annual Actual Compensation, paid or accrued
during the three calendar years preceding the year in which the
Executive's employment was terminated, plus One-Twelfth (1/12th)
of the Executive's highest annual Actual Compensation times each
"Year of Credited Service" (not to exceed 12) earned by the
Executive as calculated under the "Retirement Plan for Non-
Bargaining Employees of Devon Energy Corporation (Nevada)" or its
successor. Provided, if the Executive has attained his normal
retirement date of age 65 ("Normal Retirement Date") and is not
otherwise entitled to receive payment under this Agreement due to
his termination of employment as of his Normal Retirement Date,
then, the Executive shall not be entitled to payment under this
Agreement. For purposes of this Section 5, "Actual Compensation"
shall mean the Executive's annual wages, salaries, bonuses and
fees for personal services actually rendered in the course of
employment with the Company, including the following: (i) amounts
realized from the exercise of a nonqualified stock option, or when
restricted stock (or property) held by the Executive either
becomes freely transferable or is no longer subject to a
substantial risk of forfeiture; (ii) amounts realized from the
sale, exchange or other disposition of stock acquired under a
qualified stock option; and (iii) other amounts which received
special tax benefits (whether or not the amounts are actually
excludable from the gross income of the Executive).
6. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any
payment or distribution to or for the benefit of the Executive,
whether paid or payable or distributed or distributable pursuant
to the terms of this Agreement or otherwise, including, by way of
example and not by way of limitation, acceleration of the date of
vesting, payment, rate of payment or right to future payment under
any plan, program or arrangement of the Company (a "Payment"),
would be subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code") or any
interest or penalties with respect to such excise tax (such excise
tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then
the Executive shall be entitled to receive an additional payment
(a "Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including any Excise Tax,
imposed upon the Gross-Up Payment, the Executive retains an amount
of the Gross-Up Payment equal to the Excise Tax imposed upon the
Payments.
(b) Subject to the provisions of Section 6(c), all determinations
required to be made under this Section 6, including whether a
Gross-Up Payment is required and the amount of such Gross-Up
Payment, shall be made by KPMG LLP (the "Accounting Firm") which
shall provide detailed supporting calculations both to the Company
and the Executive within 15 business days of the receipt of notice
from the Executive that there has been a Payment which would be
subject to the Excise Tax, or such earlier time as is requested by
the Company. The initial Gross-Up Payment, if any, as determined
pursuant to this Section 6(b), shall be paid to the Executive
within five days of the receipt of the Accounting Firm's
determination. If the Accounting Firm determines that no Excise
Tax is payable by the Executive, it shall furnish the Executive
with an opinion that he has substantial authority not to report
any Excise Tax on his federal income tax return. Any
determination by the Accounting Firm shall be binding upon the
Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible
that Gross-Up Payment which will not have been made by the Company
should have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the
Company exhausts its remedies pursuant to Section 6(c) and the
Executive thereafter is required to make a payment of any Excise
Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of the
Executive.
(c) The Executive shall notify the Company in writing
of any claim by the Internal Revenue Service that, if successful,
would require the payment by the Company of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no
later than ten business days after the Executive knows of such
claim, and shall apprise the Company of the nature of such claim
and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the
30-day period following the date on which the Executive gives such
notice to the Company (or such shorter period ending on the date
that any payment of taxes with respect to such claim is due). If
the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim,
the Executive shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with contesting
such claim as the Company shall reasonably request in writing from
time to time, including, without limitation, accepting legal
representation with respect to such claim by an attorney
reasonably selected by the Company,
(iii) cooperate with the Company in good faith
in order effectively to contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly
all costs and expenses (including additional interest and
penalties) incurred in connection with such contest and shall
indemnify and hold the Executive harmless, on an after-tax basis,
for any Excise Tax or income tax, including interest and penalties
with respect thereto, imposed as a result of such representation
and payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 6(c), the Company shall
control all proceedings taken in connection with such contest and,
at its sole option, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option,
either direct the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner. The
Executive agrees to prosecute such contest to a determination
before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company
shall determine; provided, however, that if the Company directs
the Executive to pay such claim and sue for a refund, the Company
shall advance the amount of such payment to the Executive, on an
interest-free basis and shall indemnify and hold the Executive
harmless, on an after-tax basis, from any Excise Tax or income
tax, including interest or penalties with respect thereto, imposed
with respect to such advance or with respect to any imputed income
with respect to such advance; and further provided that any
extension of the statute of limitations relating to payment of
taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to
such contested amount. Furthermore, the Company's control of the
contest shall be limited to issues with respect to which a Gross-
Up Payment would be payable hereunder and the Executive shall be
entitled to settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 6(c), the Executive
becomes entitled to receive any refund with respect to such claim,
the Executive shall (subject to the Company's complying with the
requirements of Section 6(c)) promptly pay to the Company the
amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by
the Executive of an amount advanced by the Company pursuant to
Section 6(c), a determination is made that the Executive shall not
be entitled to any refund with respect to such claim and the
company does not notify the Executive in writing of its intent to
contest such denial of refund prior to the expiration of thirty
days after such determination, then such advance shall be forgiven
and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-
Up Payment required to be paid.
7. Non-exclusivity of Rights. Nothing in this Agreement
shall prevent or limit the Executive's continuing or future
participation in any benefit, bonus, incentive or other plan or
program provided by the Company or any of its affiliated companies
and for which the Executive may qualify, nor shall anything herein
limit or otherwise affect such rights as the Executive may have
under any stock option or other agreements with the Company or any
of its affiliated companies. Amounts which are vested benefits or
which the Executive is otherwise entitled to receive under any
plan or program of the Company or any of its affiliated companies
at or subsequent to the date of termination of employment shall be
payable in accordance with such plan or program.
8. Full Settlement. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform
its obligations hereunder shall not be affected by any
circumstances, including, without limitation, any set-off,
counterclaim, recoupment, defense or other right which the Company
may have against the Executive or others. In no event shall the
Executive be obligated to seek other employment by way of
mitigation of the amounts payable to the Executive under any of
the provisions of this Agreement.
9. Confidential Information.
(a) Requirement of Executive. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data relating to the
Company or any of its affiliated companies, and their respective
businesses, which shall have been obtained by the Executive during
the Executive's employment by the Company or any of its affiliated
companies and which shall not be public knowledge (other than by
acts by the Executive or his representatives in violation of this
Agreement). After termination of the Executive's employment with
the Company, the Executive shall not, without the prior written
consent of the Company, communicate or divulge any such
information, knowledge or data to anyone other than the Company
and those designated by it. In no event shall an asserted
violation of the provisions of this Section 9 constitute a basis
for deferring or withholding any amounts otherwise payable to the
Executive under this Agreement.
(b) Additional Remedies. The Executive agrees that the
remedy at law for any breach or threatened breach of any covenant
contained in this Section 9 may ibe inadequate, and that the
Company, in addition to such other remedies as may be available to
it, in law or in equity, shall be entitled to injunctive relief
without bond or other security pending arbitration under Section
10.
10. Arbitration; Legal Fees and Expenses. The parties agree that
Executive's employment and this Agreement relate to interstate
commerce, and that any disputes, claims or controversies between
Executive and the Company which may arise out of or relate to the
Executive's employment relationship or this Agreement shall be
settled by arbitration. This agreement to arbitrate shall survive
the termination of this Agreement. Any arbitration shall be in
accordance with the Rules of the American Arbitration Association
and shall be undertaken pursuant to the Federal Arbitration Act.
Arbitration will be held in Oklahoma City, Oklahoma unless the
parties mutually agree on another location. The decision of the
arbitrator(s) will be enforceable in any court of competent
jurisdiction. The parties agree that punitive, liquidated or
indirect damages shall not be awarded by the arbitrator(s).
Nothing in this agreement to arbitrate, however, shall preclude
the Company from obtaining injunctive relief from a court of
competent jurisdiction prohibiting any on-going breaches by
Executive of this Agreement including, without limitation,
violations of Section 9. If any contest or dispute shall arise
between the Company and Executive regarding any provision of this
Agreement, the Company shall reimburse Executive for all legal
fees and expenses reasonably incurred by Executive in connection
with such contest or dispute, but only if Executive is successful
in respect of one or more of Executive's material claims or
defenses brought, raised or pursued in connection with such
contest or dispute. Such reimbursement shall be made as soon as
practicable following the resolution of such contest or dispute to
the extent the Company receives reasonable written evidence of
such fees and expenses.
11. Successors and Binding Effect.
(a) Successor Must Assume Agreement. The Company will
require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company to expressly assume and
agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such
succession had taken place. If the Company fails to obtain such
assumption and agreement prior to the effectiveness of any such
succession, this Agreement shall nevertheless determine the
Executive's entitlement to payment hereunder. As used in this
Agreement, "Company" shall mean the Company as herein before
defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by
operation of law or otherwise.
(b) Binding Effect. This Agreement shall inure to the
benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Executive should die
while any amount would still be payable to the Executive at the
time of his death, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this
Agreement to the Executive's devisee, legatee or other designee
or, if there is no such designee, to the Executive's estate.
12. Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Oklahoma,
without reference to principles of conflict of laws.
13. Notices. All notices and other communications hereunder
shall be in writing and shall be given by hand delivery to the
other party, by registered or certified mail, return receipt
requested, or by overnight express delivery service, postage
prepaid, addressed as follows:
If to the Executive:
Executive
Executive's Address
If to the Company:
Devon Energy Corporation 20 North Broadway, Suite 1500
Oklahoma City, Oklahoma 73102-8260
Attn: J. Larry Nichols
President and Chief Executive Officer
with a copy to:
McAfee & Taft
A Professional Corporation
Tenth Floor
Two Leadership Square
Oklahoma City, Oklahoma 73102
Attn: James Dudley Hyde, Esq.
Jerry A. Warren, Esq.
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
14. Occurrence of Change of Control Date. Upon the
completion of the transactions contemplated by the Merger
Agreement, pursuant to the terms of the Prior Agreement and this
Agreement, there shall be an occurrence of an event which will be
a "change of control date" under the Prior Agreement and a Change
of Control Date under this Agreement. Accordingly, the applicable
provisions of the Prior Agreement with respect to the definition
of "change of control date" shall continue to be applicable with
respect to the Executive and the terms and provisions of this
Agreement shall in no way detract or adversely affect the rights
of the Executive under this Agreement. Accordingly, because a
Change of Control Date under this Agreement and a "change of
control date" under the Prior Agreement has occurred upon the
completion of a transaction contemplated under the Merger
Agreement, therefore, the applicable 24 month period as described
in Section 5 hereof during which the Company may have obligations
to the Executive shall commence as of the closing of the
transaction as contemplated under the Merger Agreement. Upon
completion of the transaction described in the Merger Agreement,
then, the terms and provisions of the Prior Agreement with respect
to the definition of "change of control date" shall no longer be
applicable with respect to future events occurring under this
Agreement.
15. Alienation. The rights and benefits of, and payments
to, the Executive (or his beneficiary in the event of his death)
under this Agreement may not be anticipated, assigned (either at
law or in equity), alienated or subject to attachment,
garnishment, levy, execution or other legal or equitable process
except as required by law. Any attempt by the Executive to
anticipate, alienate, assign, sell, transfer, pledge, encumber or
charge the same shall be void. The benefits of the Executive
shall not in any manner be subject to the debts, contracts,
liabilities, engagements or torts of the Executive (or his
beneficiary in the event of his death) and payments hereunder
shall not be considered an asset of the Executive (or his
beneficiary in the event of his death) in the event of his
insolvency or bankruptcy.
16. Right as General Creditor. The Executive acknowledges
this Agreement represents the Company's unfunded and unsecured
obligation to pay benefits set forth above. No provision of this
Agreement shall be construed to give the Executive any right
except as a general creditor of the Company.
17. Taxes to be Withheld. The Company may withhold from any
amounts payable under this Agreement such Federal, state or local
taxes as shall be required to be withheld pursuant to any
applicable law or regulation.
18. Joint Obligations. For purposes of this Agreement,
Devon Nevada, Devon Energy and Devon Delaware shall have joint and
several liability for all obligations hereunder.
19. Entire Agreement. This Agreement constitutes the entire
agreement among the parties with respect to the subject matter
hereof and supersedes any and all prior or contemporaneous oral
and prior written agreements and understandings, including any
Severance Agreements previously entered into between the Company
and the Executive. There are no oral promises, conditions,
representations, understandings, interpretations or terms of any
kind as conditions or inducements to the execution hereof or in
effect among the parties.
20. Amendment. This Agreement may not be amended, and no
provision hereof shall be waived, except by a writing signed by
all the parties to this Agreement, or, in the case of a waiver, by
the party waiving compliance therewith, which states that it is
intended to amend or waive a provision of this Agreement. Any
waiver of any rights or failure to act in a specific instance
shall relate only to such instance and shall not be construed as
an agreement to waive any rights or failure to act in any other
instance, whether or not similar.
21. Enforceability. Should any provision of this Agreement
be unenforceable or prohibited by an applicable law, this
Agreement shall be considered divisible as to such provision which
shall be inoperative, and the remainder of this Agreement shall be
valid and binding as though such provision were not included
herein.
22. Counterparts. This Agreement may be executed in two or
more counterparts with the same effect as if the signatures to all
such counterparts were upon the same instrument, and all such
counterparts shall constitute but one instrument.
23. Headings. All headings in this Agreement are for
convenience only and are not intended to affect the meaning of any
provision hereof.
IN WITNESS WHEREOF, the Executive has hereunto set his hand
and, pursuant to the authorization from their respective Boards of
Directors, Devon Nevada, Devon Energy and Devon Delaware have each
caused these presents to be executed in its name on its behalf,
all as of the day and year first above written.
"EXECUTIVE"
Executive
"COMPANY"
DEVON ENERGY CORPORATION (NEVADA), a
Nevada corporation
By
J. Larry Nichols, President and
Chief Executive Officer
DEVON ENERGY CORPORATION, an
Oklahoma corporation
By
J. Larry Nichols, President and
Chief Executive Officer
DEVON DELAWARE CORPORATION, a
Delaware corporation
By
J. Larry Nichols, President and
Chief Executive Officer
